BY JOHN ELLIS, FINANCIAL ADVISOR
Last week the Central Bank of Ireland published its 10th edition of the Financial Conditions of Credit Unions report. It provides an update on the financial performance and position of the sector for the financial year ended September 30, 2023. The publication aims to inform credit union boards in carrying out their own strategic analysis and decision-making.
According to the report. loans issued during the year totalled €3 billion, bringing total loans outstanding to €6.3 billion on September 30, 2023 (up from €5.6 billion in 2022) representing an increase of 12% year on year. House loans increased from €317 million in 2022 to €484 million in 2023. This is an increase of 53%, with the average loan size increasing from around €86k to €105k. Business loans increased from €146 million in 2022 to €162 million in 2023, an increase of 11%, with the average loan size increasing from around €20k to €22k.
Investments are up to €13.8 billion from €13.1 billion in 2022 and the required regulatory minimum of 10% of assets in reserve is exceeded and stands at 16.2%.
On the other side members’ savings increased from €17.0 billion to €17.5 billion showing further capacity amounting to €900 million, increasing to €2.1 billion if all eligible credit unions availed of increased concentration limits available.
The Credit Union Regulatory Lending Framework review is ongoing and is due to be published in June. On foot of this review further changes will be implemented which will permit credit unions to increase lending.
Loans in arrears continues to reduce since Covid yet the total amount of loans in arrears, including early-stage arrears, increased over 2023 reminding us of the pressure that the increased cost of living has brought on people. Credit unions are very aware of this and continue to remain supportive of anyone who is experiencing difficulties. The low increase in arrears is a demonstration of competitive interest rates, available from credit unions hand-in-hand with the work that they do with customers who may run into difficulties repaying their loans.
Commenting on the report, Registrar of Credit Unions Elaine Byrne said: “Given the trends and the economic outlook, this is a time for credit unions to pay particular attention to proactive asset and liability management, arising from the changing maturity profile of their balance sheets, as credit unions seek to diversify their lending. This includes maintaining sufficient liquid assets to meet business requirements and withstand liquidity stress scenarios.”
Now is the time for credit unions to plan to look for new business opportunities within the credit union sector. Through “scale efficiencies, prudent cost management, and greater product standardisation” credit unions can deliver a diverse range of products and services to members in a sustainable manner.
As I wrote recently, the recent legislative reforms enacted in February can be the catalyst for significant expansion in credit union lending activities. From September of this year credit unions will be permitted to collaborate formally with each other, enabling them to extend services such as home loans to members of other credit unions.
This groundbreaking development promises greater accessibility to fairer mortgages for households and prospective homeowners, as credit unions gain the capacity to refer mortgage applications to partner institutions when unable to provide financing directly.
Once again, it’s you the members, and your confidence in your local unions financial management that underpins and enables credit unions to expand on their services and continue to win more of the mortgage and lending market from the Irish banks and non-banks alike.
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