PLANO, Tex. (5/17/13)--Credit union CEOs are upbeat about economic conditions for their members, but are more downcast about the operating environment for their own institutions, according to the results of Catalyst Corporate FCU's First Quarter 2013 CEO Confidence Survey.
CEOs' confidence in their members' current and future (six months from now) financial condition increased by 4.13 points and 1.17 points, respectively from the fourth quarter of 2012 survey levels. However, CEOs' confidence in their own institutions' financial condition--both current and future--dropped by 1.99 points and 0.18 points, respectively, from the previous quarter.
"Credit union executives see member finances improving as a result of declining unemployment, a protracted low interest rate environment and practically no inflation," said Brian Turner, Catalyst Strategic Solutions' director and chief strategist. "Although wages remain flat and job growth continues to be weak--keeping job security a concern--consumers have been branching out a little more with their spending, which certainly helps economic growth."
The overall Confidence Index in the most recent survey inched up by half a point over the fourth quarter. Similarly, CEO expectations for loan demand and share deposit growth saw relatively little movement from the previous report.
Tight marginal spreads between asset yields and cost of funds continue to challenge credit unions' net interest margins, Turner said. About 31% of total credit unions experienced loan growth in 2012, according to National Credit Union Administration data.
"That means the remaining 69% have elevated surplus cash and a greater reliance on investment portfolio income to replicate revenue streams--a difficult task to accomplish in this environment," Turner said. "With an outlook that reflects a continuation of the low-rate environment for two to three more years, CEOs don't see these challenges for their institutions going away anytime soon."