CUNA News Now: CU savings growth in historic slump

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MADISON, Wis. (10/4/05)--Savings balances at credit unions decreased 0.9% in August, resulting in the slowest 12-month savings growth on record.

Year-to-date savings growth was 1.6%, according to the Monthly Credit Union Estimates from Credit Union National Association (CUNA) Economics and Statistics.

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Savings clocked in at $583.6 billion, compared with $566.9 billion a year ago.

The "super slow savings growth" is due to three things, said Mike Schenk, vice president of economics and statistics. First, American consumers already don't save their money.

Second, credit union pricing on savings is slightly less favorable as banks aggressively increase their certificate rate. However, credit unions are still paying higher rates on savings, he added.

And, third, the increase in market rates changed the yields in money market accounts.

"With almost all of savings growth typically happening in the first half of the year, we don't expect to see a huge savings growth for the rest of the year," said Schenk.

Certificates were the only savings category to increase, with a 1.6% rise to 25% of all credit union savings compared with 22.2% a year earlier.

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Loans outstanding increased 1.7% in August to $462.7 billion--up to 7.9% for the year to date.

New-auto loans led with an increase of 3.3% and accounted for 17.8% of total loans outstanding, compared with 17.1% in August 2004.

"It's a bit of a relief that credit union new-auto loans have grown relatively quickly," Schenk said. "Credit unions are more easily able to compete with loans prices with the large automakers offering employee pricing instead of 0% financing."

Compared with August 2004, loans have increased 10.5% from $418.7 billion. The loan-to-savings ratio increased to 79.3% in August from 77.2% in July.

The last time the loan-to-asset ratio reached 80% was in 2000, and the National Credit Union Administration (NCUA) did take notice, Schenk said.

"We're sort of at the point where they have expressed concern in the past," he said, adding that the loan-to-share ratio runs slightly less than loan-to-asset.

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