Macroeconomics is Shaping Credit Union Balance Sheets

Consumers are saving more than they did five years ago; the increase in deposits is a sign of new lending opportunities.

 
 

Friday’s release of personal income and spending data from the Bureau of Economic Analysis shows April’s savings rate is unchanged from March’s. For the first three months of 2011, Americans saved 5.5%, on average, of their disposable income. The savings rate has slipped since the 2009 high when consumers sought safe, local institutions for their deposits. The personal savings rate does not directly affect the rate of flow of shares into financial institutions, but it is worth noting that the gap between credit unions’ annual share growth and the personal savings rate visible throughout much of the graph below (2005, 2006, 2007, etc.) has narrowed.

Personal Savings Rate & Consumer Deposits

Click on graph to view larger size.

According to the FDIC, all FDIC-insured institutions posted a year-over-year deposit growth of 4.4% as of March 31, 2011. That rate is up from the 2.7% annual growth rate for the same period in 2010. For a better comparison to credit unions, deposits held by individuals, partnerships, and corporations at FDIC-insured institutions increased 3.9% from March 2010. This is a notable acceleration from the 2010 rate of 2.0%. Few institutions need liquidity into today’s environment (remember a year ago when some financial institutions were paying members to take their money elsewhere?). However, a bright side to taking on additional deposits is that these new deposits are also a sign of new customers and new loan opportunities.

 

 

 

May 30, 2011


Comments

 
 
 
  • Lydia, your closing statement to this writing states, "a bright side to taking on additional deposits is that these new deposits are also a sign of new customers and new loan opportunities."

    I am not sure I understand your rationale that taking on additional deposits is a sign of new loans. I would appreciate if you could provide more on this line of thinking as additional savings does in fact provide a larger pool of loanable funds. And this can lead to lower nominal interest rates. But this is not necessarily going to lead to new lending.

    Steve Hennigan