The Fastest Growing Part of the Credit Union Business

The share growth at midyear received a lot of press, and rightly so. This was the first double-digit annual share growth (12.2 %) in a very long time. The liquidity came just in time to offset an increasing loan-to-share ratio at yearend. However, it is a footnote to an even bigger trend that points towards the the fastest growing part of the CU business in the past six years.

 
 

The share growth at midyear received a lot of press, and rightly so. This was the first double-digit annual share growth (12.2 %) in a very long time. The liquidity came just in time to offset an increasing loan-to-share ratio at yearend.

However, that is a footnote to an even bigger trend. For the last six years the fastest growing part of credit unions has been non-interest revenue, or income generated primarily by checking account fees and interchange income from debit and credit cards.

Non-interest income grew by 24% compared to the first six months of 2000. For the past six years the rate of growth has exceeded both loan and investment income. Note these latter two sources also have an interest rate effect in that revenue can go up even if balances stay flat when market rates rise. Non-interest income totaled $2.3 billion for the first half of 2001. The growth rate has averaged almost 15% per year since 1995.

An even better indicator of the importance to revenue growth is that the net-interest margin in dollars has grown at a very predictable 4% per year while the non-interest income is over 15%. At June 30, 2001, non-interest income equaled 103% of net income. One year ago the ratio was 86.5%!

We will be writing about some amazing non-interest income results in the weeks ahead on www.creditunions.com, including one credit union that reported non-interest income equal to 4% of average assets! We’ll have to look at that number a little more closely.

The message is that the most successful business you have may be something as simple as a transaction provider. How do you grow this opportunity further? It is a situation that most certainly fits the competitive advantage of most credit unions as local, community-oriented institutions.

 

 

 

Sept. 10, 2001


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