2015 Canadian Credit Union Report

The Thirteenth Annual Analysis of Canada’s Largest Credit Unions based on 2015 Audited Financial Statements provides extensive financial comparisons between credit unions, chartered banks and financial institutions includes asset growth and profitability, deposit and loan portfolio, operating results, capital ratios. The Analysis provides an overview of the Credit Unions’ participation in the mutual fund and on-line brokerage industries.

The 2015 report includes 141 credit unions compared to 134 credit unions last year. The 131 credit unions represent 94.7% of the total movement’s assets compared to 92.6% in the previous year.
The credit union system’s membership (not including the Caisses Populaires) has increased by 40,440 members to 5,344,892 in 2015, after having decreased slightly by 6,259 in the previous year. The membership had increased in the [2013-2011] period after showing small decreases in 2010 and 2009. The membership of largest credit unions in my study represents approximately 90% of the total membership.
The continued consolidation of the movement* has resulted in the 10 largest credit unions accumulating assets of $90.9 billion representing 49.9% of total assets of the movement compared to $82.1 billion or 48.3% of the movement in the previous year.
The 10 largest credit unions grew at 10.8% which was greater than the largest credit union’s growth of 9.9% and greater than the total movement’s growth of 7.4%.
The asset growth of the 141 largest credit unions in 2015 was 9.9% compared to 7.7% in the previous year. The growth of the movement’s assets was 7.4% in 2015 compared to 6.2% in the previous year.
The number of credit unions in the system declined by 18 credit unions primarily due to mergers and amalgamations from 306 in 2014 to 288 in 2015. While, the number of branches decreased from 1,731 in 2014 to 1,720 in 2015. This is sixth year in row that the number of branches has declined.
The movement’s loans increased from $144.7 billion in 2014 to $153.0 billion in 2015, an increase of 5.7% compared to 6.5% in the previous year.
The largest credit union’s insured mortgage loan portfolio (only 57 credit unions reported these figures), stood at $9.3 billion representing 28.6% of the residential mortgage portfolio compared to 50.3% for the large Canadian domestic banks.
The credit quality of the movement’s loan portfolio (as represented by the largest credit unions) remains very favourable and improving. The allowance as a percentage of gross loans for the 131 largest credit unions decreased from 0.26% in 2014 to 0.24% in 2015.
The gross impaired loans as a percentage of total loans for the largest credit unions increased slightly to 0.43% compared to 0.42% in the previous year. The allowance for doubtful loans ratio has declined for the last six years. The expectation is that there may be an increase in interest rates in 2016 and the Canadian economy has been effected by the decreased oil price, which may result in a higher level of loan losses especially in Western Canada.
Despite near historical low interest rates and decreasing operating costs, the largest credit unions experienced a lower level of profitability in 2015. The return on assets (ROA) decreased to 0.47% in 2015 compared to 0.51% in 2014. This is lowest level of profitability in the last 10 years. This decline in net profitability has primarily been caused by a declining net interest margin.
Net interest margin decreased again from 2.23% in 2014 to 2.13% in 2015 and operating expenses as a % of average assets decreased from 2.23% in 2014 to 2.17% in 2015. The productivity expense ratio (operating expenses as a % of total operating revenue) remained stable at 77.9% in 2015.
Credit unions rely primarily on profitability from operations to grow their capital. The majority of the movement’s total capital is in retained earnings. Capital ratios are affected by balance sheet growth, risk-weighting of growth, and profitability. The movement retains a portion of its annual income to satisfy its capital plans. The remainder of the net earnings are allocated to its members through the movement’s patronage program.
The largest credit unions returned $157.2 million to its members by way of patronage payments, which represented 22.2% of its net income in 2015 compared to 22.9% in the previous year. Total capital stood at $12.2 billion, which represented 7.04% of its assets compared to 6.88% in 2014.
The largest credit unions total BIS risk adjusted ratio increased to 13.24% compared to 12.83% in the previous year.

*Definition: “movement*” or” system*” in this report does not include the financial results of caisses populaires system in Quebec, Ontario, Manitoba and New Brunswick.