Rise in savings, assets halts capital accumulation

MADISON, Wis. (3/10/09)--While the recession is causing credit union members to save more--increasing credit unions' assets--it is having a halting effect on credit unions' capital accumulation, according to Steve Rick, Credit Union National Association (CUNA) senior economist.

The movement's overall capital-to-asset ratio has decreased to about 10.5% in January from 11.0% in December, according to the January CUNA monthly sample of credit unions.

"The severe recession has brought the era of credit union capital accumulation to an abrupt end," Rick told News Now. "Total credit union capital reached $89.5 billion in January 2009, only 0.6% higher than one year earlier. The credit union movement's capital-to-asset ratio fell to 10.56% in January 2009, from 11.40% in January 2008. The ratio hasn't been this low since July 2004," he said.

"Over the past 12 months, the low capital growth was dwarfed by an 8.5% asset growth," he continued. "The recession reduced credit union earnings while inducing credit union members to save more.

CUNA Chief Economist Bill Hampel predicted a banner year for savings growth. "People aren't spending and they are afraid to put their money anywhere else," Hampel said.

"CUNA's economists are forecasting double digit asset growth in 2009, with little-to-no capital accumulation," Rick said. "This would push capital-to-asset ratios down to the low 9% range by year-end, the lowest since 1994."

January statistics indicate that credit union savings balances increased 1.5%, to $711 billion in January 2009 from $700 billion in December 2008. Share drafts led savings growth, rising 6.2%, followed by money market accounts (2.1%), one-year certificates (1.4%), and individual retirement accounts (0.8%). Regular shares decreased 0.2%.

Credit union loans outstanding went up 0.25% during January, compared with an increase of 0.03% during the same period last year. Adjustable-rate first mortgages led loan growth, rising 2.3%, followed by home equity loans (2.0%) and used-auto loans (0.87%). New-auto loans declined 0.17%, credit card loans decreased 1.0%, unsecured personal loans declined 1.03%, and fixed-rate mortgages dropped 1.7%.

The loans-to-savings ratio decreased slightly, to 82.5% in January from 83.5% in December. The liquidity ratio increased to 17.3% in January from 16% in December.

Regarding asset quality, credit unions' 60-plus-day delinquencies edged up to 1.5% in January from 1.4% in December.

courtesy of cuna.org