COLORADO SPRINGS, Colo.-After withdrawing in many markets, a number of credit unions are expecting to see banks competing more aggressively for loans in 2010.
"What our credit union has seen, and I've talked to some others, is that in the last 90 days we have started to see some rate competition," said Bill Vogeney, SVP/Chief Lending Officer at Ent FCU here. "They really aren't trying to make a lot of money on margin, but what they are trying to do is price to attract the type of loans they want to improve their portfolios."
This phenomenon is especially true on the commercial lending side, Vogeney explained, as banks are targeting "mid-market" borrowers looking for $500,000 to $1.5 million in credit and with very low LTVs.
But there are some signs of life from the banks on the consumer side as well, especially in the auto industry, as banks target "super prime" borrowers-those with FICO scores in excess of 740. Because of the deteriorating credit environment and toxic balance sheets, banks have moved their "line in the sand" from around 680 to 740 benchmark.
"We think once the economy starts showing some signs of life, competition will be back in force, and for that stronger borrower the banks are going to be much more aggressive than they were last year," Vogeney said.
He encouraged CUs to look more towards the "mid prime" borrower with a score of 640-700 as many banks will consider that previously fairly solid class as being too risky for their wounded balance sheets. As for the most trustworthy borrowers, now may be the time to bring out the big guns.
"Our alternative investments are paying almost nothing, so we have the ability to be a little bit more aggressive on rates," said Vogeney. "When CUs are struggling to get 1.5% on their investments, there is strong motivation to cut your pricing on the best in the business."
