Daily business news releases point clearly to an economic recovery, albeit fragile. The housing inventory in California is at a 5-year low. Manufacturing activity has increased six months straight and is at the highest level since August of 2004. December figures saw modest gains in consumer spending. Fourth quarter GDP, at 5.7%, grew at the fastest rate since 2003. Newly-issued bank bonuses will certainly increase spending and tax revenues. Scott Brown is coming to DC.
The crisis is over. Some parts of the recovery though may be a bit slower to emerge.
- Increased consumer savings will limit the ability of consumer spending to boost GDP.
- Continued record-low investment yields emphasize the importance of lending for the bottom line, yet consumer deleveraging will increase competition for market share.
- As a lagging indicator, unemployment will remain at the forefront of 2010 government plans and may continue to affect asset quality at financial institutions.
In addition to these factors, large financial services firms, after heady partying through most of the decade, face an overwhelming hangover aggravated by government discipline, media attention, and consumer backlash. And an economic hangover will soon be followed by a regulatory one. Some may still even be at the bar.
Credit unions, for the most part, stayed sober. With that advantage many can step ahead of their bank counterparts who are struggling to find a cure more effective than a prairie oyster. In Tuesday’s American Banker, James E. Rohr, chairman & CEO of PNC Financial Services Group, says, “When I look back, 2009 was probably the most difficult economic year that I’ve seen in my 37 years of banking.”
The cure may be simpler than expected and some have emerged ready to fight. John G. Stumpf, chairman & CEO of Wells Fargo, says “In my 28 years at Wells Fargo, I believe 2009 was the best year we ever had in terms of positioning us for future growth.” Credit unions are in the same position. Using the current marketplace to leverage your organization’s marketing and offerings will provide traction for the upcoming battle for market share and loans.
- Consumers are turning to credit unions for savings. Don’t turn your back!
- Good loans will be difficult to come by. Plan for an active recapture strategy by offering deals. Library of Congress FCU ($189M, Washington, DC) is advertising a 75 basis point refund on balance transfers to their 9.75% fixed APR credit card. Credit unions across the country are offering new auto loan rates as low as 2.99%.
- Tell your story – the media is looking to feature institutions that haven’t spent the last decade at the financial equivalent of a college frat party.
While your competition is in a stupor and may be considering a little hair of the dog, shine a light and make some noise about your credit union to delay their recovery.