LAKE FOREST, Ill.–The “fabric of financial institutions” will continue to change in 2022, according to one person, who said credit union leaders must be prepared for new fintech competition, what rising oil prices will mean, and even a change in the marketplace not seen since the 19th century. MADISON, Wis.–As the year-end 2021 financials for credit unions become clearer, the picture is “mostly good news,” according to CUNA’s chief economist.
Mike Schenk said CUNA’s monthly estimates show credit unions showed loan growth of approximately 6.5% year-to-date through November, while the year-to-date savings growth was 11.3%, slightly below the 12% forecast CUNA’s economists had made.
“It does mean the loan-to-share ratio is at 71%, which is quite low. In fact, it’s down 11 full percentage points since start of (coronavirus) crisis, but just three points in 2021,” said Schenk. “It has been holding steady and we believe the loan-to-share ratio will generally be trending up during 2022. That’s very important as a low ratio means a lot of liquidity and investment portfolios that yield close to zero. And that leads to low margins and low earnings overall.”
Nonetheless, Schenk said CUNA expects, based on the mix, that the average credit union bottom line will improve.
Net Worth Remains Strong
In addition, Schenk said the net worth ratio of credit unions came in at 9.9%, about 40 basis points below the start of 2021 and down about one full percentage point from February of 2020, prior to the pandemic. Schenk said that number is considerably better than what CUNA’s economists had initially expected.
Credit union membership was also up 3.7% year to date through November against a forecast of 3.4%.
“It was stronger than we anticipated,” said Schenk. “We expect an acceleration in that membership growth mostly based on the ideas that we’ll be seeing a lot more new car sales and credit unions will be financing more cars due to indirect financing.”
Those indirect loans will drive the new memberships, he explained.