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Challenging times for credit unions

Increasing funding pressure means credit unions are facing new challenges but they believe their traditional, old school approach offers opportunities to customers.

Tuesday, April 4th 2017, 11:16AM

Nelson Building Society general manager Ken Beams

Credit unions and their close relative, building societies, have been around for more than 100 years and offer a viable lending alternative to the banks.

But KPMG’s recent Financial Institutions Performance Survey noted that the tightening of the credit market has caused a flow-on effect to some participants of the non-bank sector in recent months.

This means that non-bank deposit takers are finding it more challenging to secure the necessary funds they require in the face of strong competition from banks within the local deposit market, the report said.

“This puts credit unions and building societies in a particularly challenging position as their legal structure limits where they are legally able to source funds.

“They can only source funds from mutual parties, which means attracting sufficient funds from the local deposit markets is vital for their growth and profitability. This is increasingly a challenge.”

While those in the sector acknowledge that the current environment is more challenging, they are confident in their ongoing ability to operate highly effectively.

According to the KPMG report, non-bank executives are comfortable with where they are currently sitting in the sector - despite the challenges they face.

“They remain content operating in a niche where they consider themselves good at what they do and in an area where there is still the potential for steady margin and lending growth,” the report said.

“They are focused on growing the business in a way that is sustainable in the long term for all key stakeholders, being selective about who they lend to and where they invest their money, and nurturing lasting relationships with key stakeholders that will, ultimately, drive business.”

Nelson Building Society general manager Ken Beams agreed that it has become more difficult to get funding these days.

“We are fully retail funded. We need to get the money in the door before it goes out again,” he said.

“But the market is getting tougher and tougher because banks are also finding it harder to get funding these days and that puts pressure on the funding side for everyone.”
Despite the tougher funding environment, the NBS is seeing 12-15% growth annually, Beams said.

He is confident that they will continue to see strong organic growth, thanks to the NBS’s existing network and focus on relationships.

It is perhaps a sign of the times that New Zealand’s third largest credit union, Credit Union South, recently announced it was restructuring – which involved closing half its branches and cutting 18 jobs.

However, it’s worth noting that during the Global Financial Crisis no credit union went under or needed to ask for a government handout.

Decades of experience through tough economic times stood credit unions in good stead then and might well do so now too.

Tags: Lending

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Lender Flt 1yr 2yr 3yr
AIA 4.55 3.55 3.89 3.99
AIA Special - 3.05 3.39 3.69
ANZ 4.44 ▼3.29 ▼3.45 ▼3.85
ANZ Special - ▼2.79 ▼2.95 ▼3.35
ASB Bank 4.45 ▼3.35 ▼3.19 ▼3.85
ASB Bank Special - ▼2.85 ▼2.69 ▼3.35
Bluestone 4.44 4.44 4.29 4.34
BNZ - Classic - ▼2.79 ▼2.69 ▼2.99
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 ▼3.39 ▼3.29 ▼3.59
Lender Flt 1yr 2yr 3yr
BNZ - TotalMoney 4.55 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 2.80 3.15 3.19
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union North 6.45 - - -
Credit Union South 5.65 4.75 4.75 -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Lender Flt 1yr 2yr 3yr
Heretaunga Building Society 4.99 4.35 4.45 -
HSBC Premier 4.49 ▼2.80 ▼2.89 3.50
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC ▼4.40 ▼2.95 ▼2.95 ▲3.69
Kainga Ora 4.43 3.55 3.85 4.14
Kiwibank 4.40 3.74 4.14 4.40
Kiwibank - Capped - - - -
Kiwibank - Offset 4.40 - - -
Kiwibank Special - ▼2.65 ▼2.79 ▼3.25
Liberty 5.69 - - -
Lender Flt 1yr 2yr 3yr
Napier Building Society - - - -
Nelson Building Society 4.95 3.75 3.99 -
Pepper Essential 5.18 - 4.98 4.98
Resimac 3.49 3.45 3.39 3.69
RESIMAC Special - - - -
SBS Bank 4.54 4.85 5.05 5.49
SBS Bank Special - 2.99 3.05 3.69
The Co-operative Bank - Owner Occ 4.40 ▼2.79 ▼2.95 ▼3.39
The Co-operative Bank - Standard 4.40 ▼3.29 ▼3.45 ▼3.89
TSB Bank 5.34 ▼3.59 ▼3.79 ▼4.19
TSB Special 4.54 ▼2.79 ▼2.99 ▼3.39
Lender Flt 1yr 2yr 3yr
Wairarapa Building Society 4.99 3.95 3.99 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - ▼2.79 ▼2.79 3.39
Median 4.55 3.37 3.45 3.69

Last updated: 27 May 2020 8:50am

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