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News Now

CU System
Slow consumer spending brings lower CU loan growth
MADISON, Wis. (8/3/11)--Consumers continue to show a great reluctance to spend, and that is showing up in the lack of loan growth at credit unions, according to a Credit Union National Association (CUNA) economist’s analysis of June’s monthly estimates of credit unions.
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“This is consistent with the Commerce Department’s announcement yesterday that consumer spending fell in June,” Bill Hampel, CUNA chief economist, told News Now Tuesday. “The 0.4% decline in loans outstanding through June is almost as weak as last year’s 1.1% fall. The only good thing about this is that members’ balance sheets are improving as they pay down their debt, but they are unlikely to be willing to substantially increase borrowing for some time.” Credit union loans outstanding increased 0.3% during June, compared with a 0.4% rise in May, according to CUNA’s monthly estimate of credit unions. Home equity loans led loan growth with a 3.2% increase, followed by fixed-rate mortgages (3.1%) and used-auto loans (0.9%). Unsecured personal loans climbed 0.7% and credit card loans rose 0.6%, while new-auto loans and adjustable-rate mortgages declined 0.3% and 3.4%, respectively. Credit union loans totaled $578 billion, compared with $581 billion in June 2010, said the monthly estimates.
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Credit union savings balances increased 0.1% in June compared to a 0.7% decrease during May. Regular shares led savings growth, rising 1.2%, followed by individual retirement accounts (0.6%) and money market accounts (0.3%). One-year certificates and share drafts fell 0.6% and 2.1%, respectively. Credit union savings in June totaled $830.6 billion--or $35.6 billion more than the $795 billion in June 2010. “Savings growth is also quite weak, rising only 3.3% in the year to June, about the same as last year’s growth,” Hampel said. “Members are reluctant to commit funds to accounts paying current very low market rates.” Regarding asset quality, credit unions’ 60-plus-day delinquency rate remained at roughly 1.6%. “Despite the very weak loan growth, the delinquency rate continued to edge down during June, falling to 1.57% from 1.6% in May,” Hampel said. “The delinquency rate has been steadily but slowly declining from its peak of 1.85% in January of last year.” The loan-to-savings ratio increased slightly to 70%. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--increased slightly to 19%. The movement’s overall capital-to-asset ratio remained at 10%. The total dollar amount of capital is $97 billion. “Our monthly sample does not collect net income information; however, the growth of net worth at sample credit unions suggests a return on assets of about 90 basis points in the first half of the year” Hampel said. “That is welcome news following the very low credit union earnings of the past few years.”


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