Corporates Prosper as the Environment Changes

Corporate credit unions aren’t just riding out the shift in liquidity—they’ve grown market share in both investments and borrowing.

 
 

With share growth rates lagging demand for loans, credit unions are looking elsewhere for funds. First-quarter data shows a continued trend of decreased credit union investments and increased credit union borrowing.

In digging into the data, it’s notable how corporate credit unions are prospering in this environment. Dynamic business models and increasingly competitive pricing have helped corporates grow market share in both investments and borrowings as liquidity dried up over the past several years.

Although total credit union investments have decreased by $16 billion over the last two years, corporate credit unions’ share of the total investment portfolio has risen steadily from 26.1 percent in 2003 to 28.2 percent in 2005. Although more and more credit unions are forced to sell investments or to redeploy maturities into loans rather than reinvesting them, they are tending to preserve corporate investments more than other types of investments. Total investments are down 7.7 percent from their 2003 high, but investments with corporates are down just 1.9 percent.

On the other side of the equation, credit union borrowing has skyrocketed, nearly doubling from $11.1B in 2003 to $20.1B in 2005. The good news for corporate credit unions is that not only is the pie becoming larger, the corporate slice of the pie is becoming larger as well. In fact, since 2002, corporate market share in CU borrowing has more than tripled to nearly 29 percent.

Changing credit union needs put new demands on corporate credit unions, and in aggregate the corporate system has risen to the challenge. This is largely due to the fact that corporate credit unions have become much more diversified in the services they offer and their rates are more and more competitive. In the sprit of the credit union movement, credit unions are looking first to keep business “in the family” before looking elsewhere. Now that credit unions are seeing the services and rates they want from another branch of the credit union family, they are responding, and the numbers speak for themselves.

 

 

 

June 19, 2006


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