The Slow Growth Puzzle

What would your credit union do if savings rates were flat for the next 5-10 years? Ed Callahan and Bucky Sebastian suggest credit unions ought to consider their responses… now.


Excerpted from Callahan's Credit Union Report

Share growth is flat, and it could be flat for a long time. Americans are now spending more than they are earning. This has not happened since two years during the Great Depression. In the 1930s, such spending was at least understandable. Income was miserably low, and people had to use savings just to put food on the table.

Now is different, and because of demographics more troublesome. Americans on the whole are now net spenders, many doing so to maintain a lifestyle. Many people seem to be spending because they feel wealthier on account of their increasing real estate values.

Moreover, people are using HELOCs to borrow against those increased values. This, of course, increases their debt.

The demographics don’t look too good either. Traditionally the largest savers are older people. However, with the Baby Boomers about to reach retirement, it is likely that they will have to use their savings rather than live off the earnings.

All of this spells less savings coming through the doors of financial institutions. That means not only slow, flat, or negative savings growth for credit unions, but it could also presage an aggressive campaign by our competitors for the national savings pool. If banks were to see their own savings growth under pressure, they would cast about for whatever they could snare, including the 8 percent of national retail deposits in credit unions.

Running Too Fat

There are sufficient external reasons to be concerned. But there are internal reasons for concern as well. Credit unions are likely running too fat. They seem to be operating as if there is no tomorrow when they should be operating tighter ships so they can more readily shift when required. They should lower their costs, and they should run with a leaner crew of employees.

A leaner crew has two advantages. It is in the long-run interest of the employees, who benefit when each adds more value per employee to the credit union. It also makes for an organization that is more nimble when it needs to be. We feel that a time for nimbleness is fast approaching.

Reacting as a Movement

There is little any of us can do about the external circumstances. But we can control the internal issues, and we can control how we react as a movement. Aside from running leaner credit unions, we should be taking greater advantage of resources we have at hand. Cooperation can make the whole movement more nimble and better prepared for the challenges we face.

Not every credit union has to have its own IT backroom. Assets can be held in common. Branches can be shared. Far more productivity than we now enjoy can be effected by means of partners and cooperation, by creating networks that deliver value to members.

Asking Questions, Seeking Help

The population and the economy of the country are growing, These facts alone would tend toward incrementally larger savings flowing to institutions. But Boomers are going to be retiring and likely will not be net savers.

You should ask yourselves, what would our credit union do if savings rates were flat for the next 5-10 years? What would we do if the biggest banks in the nation targeted us and our members for the shrinking pool of savings?

If you don’t like what these questions portend, you’d better start thinking of some solutions and start talking with others who may be able to help. We are a cooperative movement, and we can collaborate. Indeed, hanging together and making concerted efforts to help out may be the only way to get through the rough years ahead.




April 24, 2006


  • Excellent points, especially about running fat. Most credit unions hire people for the sake of hiring and don't understand the implication of having too many employees.