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CU loans rise 0.4 in May
MADISON, Wis. (7/5/11)--After experiencing a good month in May, credit union loan portfolios are positioned to record gains in 2011, according to a Credit Union National Association (CUNA) economist’s analysis of May’s monthly estimates of credit unions.
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Credit union loans outstanding increased 0.4% during May, compared with a 0.2% increase in April. Unsecured personal loans led loan growth with a 1.7% gain, followed by credit card loans (1%) and adjustable-rate mortgages (0.9%). Used-auto loans and fixed-rate mortgages grew 0.7% and 0.3% respectively, while home-equity loans and new-auto loans declined 0.2% and 0.6%, respectively. Credit union loans totaled $576.4 billion, compared with $579.7 billion in May 2010, according to the monthly estimates. Loans balances increased for the second consecutive month and the May increase (0.4%) was double the increase CUNA reported in April (0.2%). May loan growth also was about four times faster than the growth posted in May of 2010 (0.1%), Mike Schenk, CUNA vice president of economics and statistics, told News Now. “While this month’s loan growth was relatively weak in the broader scheme of things, the good news is that it appears that momentum is picking up and that portfolios may be back on track to record gains in 2011,” Schenk said. “Having said this, we continue to stress that weak labor markets and a lackluster housing market will keep many consumers focused on paying down debt rather than acquiring more--and that suggests that annual increases will be far below those normally seen in economic recoveries. CUNA economists’ baseline forecast for movement-wide loan growth in 2011 remains at 2%.” Unsecured personal loans (1.7%), credit cards (1.0%), adjustable rate mortgages (0.9%), and used-auto loans (0.7%) reflected the most significant increases in May, he added. “Another interesting development this month is the fact that the loan growth we saw, while small, occurred at the same time that credit unions reported a decline in savings balances, which was -0.67%,” Schenk said. “Because loans grew and savings declined, credit union loan-to-savings ratios increased to 69.5% from 68.7%--the first increase in six months. “This is welcome news if it turns out to be the beginning of a trend because the nation’s credit unions are awash in liquidity, and their large investment portfolios with near-zero yields are putting a significant drag on earnings,” he continued. “Of course, on a seasonal basis, loan growth tends to outpace savings growth in the summer months so further improvement in this ratio is expected.”
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Credit union savings balances decreased 0.7% in May, compared with a 0.7% increase during April. Money-market accounts led savings growth, increasing 0.6%. Regular shares fell 0.1%, followed by individual retirement accounts, which decreased 0.4%. One-year certificates dropped 0.5%, and share drafts declined 4.7%. Credit union savings in May totaled $829.9 billion--or $32 billion more than the $797.9 billion in May 2010. Regarding asset quality, credit unions’ 60-plus-day delinquency rate slightly improved, declining to 1.61% in May from 1.63% in April. “Slowly improving labor markets should help to buoy incomes and fuel further improvement in asset quality as the tepid but sustainable U.S. economic recovery continues,” Schenk said. The loan-to-savings ratio remained at 69%. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--fell slightly to 18%. The movement’s overall capital-to-asset ratio remained at 10%. The total dollar amount of capital is $97 billion.


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