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IHuff PostI CUs hang tough see deposits surge
MADISON, Wis. (6/24/10)--U.S. credit unions are outperforming big banks and are quickly gaining market share, said a Huffington Post blogger Tuesday. The Credit Union National Association (CUNA) is featured prominently in the article. “In the perilous aftermath of one of the worst financial disasters in U.S. history, one might expect credit unions--which, after all, are mostly tiny by the standards of the banking industry and operated on a cooperative, not-for-profit basis--to be struggling,” wrote Stacy Mitchell, senior researcher, News Rules Project’s Community Banking Initiative. “But data from the last 18 months show that the country’s 7,600 credit unions are, in fact, outperforming big banks and rapidly expanding their market share,” she added. Credit unions have added more than 1.5 million new members since the start of 2009, and credit union deposits grew by 10% and are on course to grow even more this year, Mitchell noted. “Most remarkable, while big banks slashed lending in 2009, credit unions actually made more loans, particularly to small businesses,” she added. “As giant banks shut off the flow of credit to small business, shrinking their overall business lending by 22%, credit unions expanded lending to small businesses by 10%.” However, challenges do exist for credit unions, especially with the recession impacting low-income neighborhoods and severely affecting some states in the housing market,” Mitchell noted. “We were not involved in the creation of the subprime mess, but we have been collateral damage in some respects,” Mike Schenk, senior economist with CUNA, told Mitchell. “Our asset quality has declined somewhat and our earnings have declined markedly.” Mitchell noted that bankers posit that credit unions enjoy an unfair advantage because they don’t pay federal income taxes. However, credit unions are subject to several restrictions that do not apply to banks: they cannot trade in exotic derivatives, and cannot devote more than about 12% of their lending to business loans. Most notable, they cannot raise capital from investors--or generate profits for them, Mitchell added. “We’ve said to banks: if you think it’s so advantageous, join us and become credit unions,” Mark Wolff, CUNA senior vice president of communications, told Mitchell. “No bank has ever taken us up on the offer.” Mitchell also mentioned Hughes FCU, Tucson, Ariz., and Westerra CU, Denver, in the blog. To read the blog, use the link.
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