Bill Cheney: The economic downturn and U.S. CUs

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Bill Cheney, President/CEO ; Credit Union Natl. Assn. (CUNA) at the International Co-operative Alliance Global Conference in Cape Town, November 2013.

Published in: Economy & Finance, Business
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Bill Cheney: The economic downturn and U.S. CUs

  1. 1. The economic downturn and U.S. CUs October, 2013 Bill Cheney President/CEO Credit Union Natl. Assn. (CUNA) bcheney@cuna.coop @BillCheney
  2. 2. TODAY’S TOPICS • How credit unions continued to serve in downturn • Overall impact of downturn on credit unions • Where we are today 2
  3. 3. CU PERFORMANCE IN DOWNTURN 70% • Credit union/co-op advantages • Focus on service (not profits) • Countercyclical lending role 65.8% 60% 50% 40% 30% 20% 10% 0% -10% -20% -13.5% Business loan growth, 2007-12 Credit Unions Banks
  4. 4. CU PERFORMANCE IN DOWNTURN 20% 17.0% 18.0% 15% 10% 5% 10.0% 7.9% 6.2% 3.3% 5.1% 6.5% 0% -5% -1.9% -10% -4.3% -9.3% -15% Business loan growth, by year 2007-12 Credit Unions Banks -1.6%
  5. 5. CU PERFORMANCE IN DOWNTURN • Why did credit unions outperform banks? – Management incentives induce lower risk – Lower risk subjects operations to less volatility – … resulting in continuing lending – (banks curtailed lending, due to damaged balance sheets) 1.2% 1.0% 0.99% 0.8% 0.61% 0.6% 0.4% 0.2% 0.0% Average annual net charge-off rates, 1992-12 Credit Unions Banks Credit union standard deviation: 0.22%; bank standard deviation: 0.62% 5
  6. 6. CU PERFORMANCE IN DOWNTURN • Why did credit unions outperform banks? – Management incentives induce lower risk – Lower risk subjects operations to less volatility – … resulting in continuing lending – (banks curtailed lending, due to damaged balance sheets) 2008, 18. 0% 20.0% 18.0% 16.0% 14.0% 12.0% 2007, 11 % 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 1st mortgage loans, growth at CUs 6
  7. 7. CU PERFORMANCE IN DOWNTURN • Membership growth – Blunder by Bank of America; imposed fee on debit card use – Consumers rebelled; widespread dissatisfaction with big banks – Social media triggers ‘Bank Transfer Day’ 7
  8. 8. CU PERFORMANCE IN DOWNTURN • Significant media attention
  9. 9. CU PERFORMANCE IN DOWNTURN • Membership growth – Millions more joined credit unions – Led to largest one-year growth in 12 years – Significant growth immediately before, after ‘Bank Transfer Day’ 1.8 2 1.7 1.5 1.2 1 1.2 1.4 1.1 1.3 1.2 0.6 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Annual membership # change, in millions 9
  10. 10. CU PERFORMANCE IN DOWNTURN • Downturn downsides for CUs – Collapse of ‘corporate’ credit unions – Smaller credit unions struggling CU ROA, 2009-13(MY), in bp 84 CU member growth by categories, MY '13 3.6% 84 68 50 0.4% 18 -1.1% -2.2% 2009 2013 <$5M >$100M 10
  11. 11. CU PERFORMANCE TODAY • Credit unions are recovering – and thriving – Lending is on the upswing – Nearly 96% are ‘well capitalized’ – Net worth reaching prerecession levels – Membership at 97 million – and growing • On right track – working to stay that way CU loan growth, 2009-13(MY) 4.8% 1.2% 2009 5.5% 1.2% -1.2% 2013 11
  12. 12. WHAT WE’VE COVERED • Because of co-op structure, credit unions continued to serve – Lending, adding members • Recession took its toll … • … but we have recovered – and are moving on to building our CU movement 12
  13. 13. Thank you October, 2013 Bill Cheney President/CEO Credit Union Natl. Assn. (CUNA) bcheney@cuna.coop @BillCheney

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