Final- 2016 Full Credit Union Report
The Fourteenth Annual Analysis of Canada’s Largest Credit Unions based on 2016 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 2016 final report includes 147 credit unions compared to 141 credit unions in the final report last year. The 147 credit unions represent 95.3% of the total movement’s assets compared to 94.8% in the previous year.
- The credit union system membership (not including the Caisses Populaires) has increased by 25,414 members to 5,370,306 in 2016, compared to an increase of 40,440 members 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 represent approximately 92.1% of the total membership.
- The continued consolidation of the movement* has resulted in the 10 largest credit unions accumulating assets of $98.7 billion representing 50.0% of total assets of the movement compared to $90.9 billion or 49.9% of the movement in the previous year.
- The 10 largest credit union’s assets grew at 8.6% which was similar to the largest credit union’s growth of 8.7% and greater than the total movement’s growth of 8.2%.
- The asset growth of the 147 largest credit unions in 2016 was 8.7% compared to 9.7% in the previous year. The growth of the movement’s assets was 8.2% in 2016 compared to 7.4% in the previous year.
- The number of credit unions in the system declined by 21 credit unions primarily due to mergers and amalgamations from 292 in 2015 to 271 in 2016. While, the number of branches decreased from 1,747 in 2015 to 1,731 in 2016.
- The movement’s loans increased from $153.0 billion in 2015 to $165.6 billion in 2016, an increase of 8.2% compared to 5.7% in the previous year.
- The largest credit union’s insured mortgage loan portfolio (only 60 credit unions reported these figures), stood at $15.1 billion representing 32.1% of the residential mortgage portfolio compared to 49.7% 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 147 largest credit unions was 0.28% in 2016 compared to 0.26% in 2015. The gross impaired loans as a percentage of total loans for the largest credit unions increased slightly to 0.46% compared to 0.43% in the previous year. The allowance ratio has declined for the last six years and the impaired loans ratio has declined in the last five years. The expectation is that there will be at least two increases in interest rates in 2017 and the Canadian economy has been affected by the decreased oil price, which may result in a higher level of loan losses.
- Despite near historical low interest rates and decreasing operating costs, the largest credit unions experienced a lower level of profitability in 2016. The return on assets (ROA) decreased slightly to 0.46% in 2016 compared to 0.47% in 2015. 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 declined to 2.04% in 2016 compared to 2.13% in 2015 while operating expenses as a % of average assets declined to 2.12% in 2016 compared to 2.17% in 2015. The productivity expense ratio (operating expenses as a % of total operating revenue) declined to 77.3% in 2016 from 77.9% in 2015.
- Credit unions primarily rely on profitability 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 $165.4 million to its members by way of dividends and patronage payments, which represented 22.2% of its net income in 2016 compared to 22.7% in the previous year. Total capital stood at $13.4 billion, which represented 7.00% of its assets compared to 7.04% in 2015.
- The largest credit unions total BIS risk adjusted ratio increased to 13.63% in 2016 compared to 13.24% 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.