CHICAGO-Credit unions are in a better position today than they were last year, but a number of "ongoing torpedoes" still line the waters ahead.
That's the word from CUNA Mutual President Jeff Post, who said those torpedoes include the potential for "wave two employment shock," a second debt/credit crisis, rate spikes, new regulations (and existing regulations whose impact has not yet been felt) as well as an uncertain political situation.
In remarks to NASCUS' annual meeting, Post said that beginning in 2006 CUs began to see a slide in loan growth year over year until it was finally negative in 2010. It has remained negative in 2011.
"Quiz of the morning," said Post. "When was the last time credit union loan growth was negative? We had to dust off a lot of old books and still couldn't find the answer." (As it turns out, he said, it was 1942.)
Post predicted assets will rise in 2011 and through 2014 at an average rate of 4.7%, in part because of lower deposit yields, lower internal accumulation and households paying down their existing debt.
If there is good news it is that Post also forecast that loan growth will rise at CUs through 2014. Growth for 2011 will be miniscule, he suggested, but will rise significantly during the following three years, at an average rate of 4.4%.
But Post cautioned, "If anyone tells you they're certain about their forecasts, they're either delusional or clairvoyant-and it's up to you ... to figure out which."
The near-term risk, said Post, is that the economy continues to grapple with the possibility of rate shocks or a second economic crisis that could affect institutions of all stripes.
A Longer Term Look Ahead
That would come simultaneously with the challenge CUs already face in declining noninterest income and rising compliance costs.
Looking longer term, credit unions must deal with a lack of growth and find a way to diversify their demographics-two issues that won't be solved by an economic turnaround, Post reminded.
In spite of all of that, Post sees a great opportunity for reinvention, particularly in returning to their roots.
The next two to three years have the potential to be "the best competitive environment credit unions have ever seen," said Post, with the caveat that "business as usual can be a prescription for a slow decline."
In short, he said, while the CU movement is by no means through the woods, "I do think we've made a turn and the boat has weathered the storm."
