The Fifteenth Annual Analysis of Canada’s Largest Credit Unions based on 2017 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 148 credit unions represent 96.3% of the total movement’s assets compared to 94.4% in the previous year.
- The credit union system membership (not including the Caisses Populaires) has increased by 91,478 members to 5,617,346 in 2017. The membership of largest credit unions in my study represents approximately 93.4% of the total membership.
- The continued consolidation of the movement* has resulted in the 10 largest credit unions accumulating assets of $105.3 billion representing 49% of total assets of the movement.
- The 10 largest credit unions grew at 6.6% which was lower than the largest credit union’s growth of 7.2% and lower than the total movement’s growth of 6.8%.
- The asset growth of the 148 largest credit unions in 2017 was 7.2% compared to 8.8% in the previous year. The growth of the movement’s assets was 6.8% in 2017 compared to 7.5% in the previous year.
- The number of credit unions in the system declined by 11 credit unions primarily due to mergers and amalgamations from 272 in 2015 to 261 in 2017. While, the number of branches increased from 1,732 in 2016 to 1,777 in 2017.
- The movement’s loans increased from $168.5 billion in 2016 to $182.7 billion in 2017, an increase of 8.4% compared to 8.2% in the previous year.
- The largest credit union’s insured mortgage loan portfolio (only 62 credit unions reported these figures), stood at $14.3 billion representing 28% of the residential mortgage portfolio compared to 43.7% for the large Canadian domestic banks. The insured mortgages as a % of total residential mortgages declined in the last year probably due to the new restrictive regulations issued by the Federal government.
- 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 148 largest credit unions remained stable at 0.26% in 2017. The gross impaired loans as a percentage of total loans for the largest credit unions decreased to 0.43% compared to 0.46% 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 from 0.35% to 0.26%. The expectation is that there will be an increase in interest rates in 2018 and that the Canadian economy will be affected by the fluctuating oil prices and pipeline supply constraints, which may result in potential higher level of loan losses.
- Despite near historical low interest rates and decreasing operating costs, the largest credit unions experienced a slightly higher level of profitability in 2017. The return on assets (ROA) increased to 0.47% in 2017 compared to 0.45% in 2016.
- Net interest margin was increased slightly to 2.05% in 2017 compared to 2.04% in 2016 while operating expenses as a % of average assets declined to 2.05% in 2017 compared to 2.12% in 2016. The productivity expense ratio (operating expenses as a % of total operating revenue) declined to 75.4% in 2017 from 77.3% in 2016.
- Credit unions 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 $192.5 million to its members by way of dividends and patronage payments, which represented 22.6% of its net income in 2017 compared to 22.2% in the previous year. Total capital stood at $14.6billion, which represented 7.07% of its assets compared to 7.00% in 2016.
- The largest credit unions total BIS risk adjusted ratio increased to 13.71% in 2017 compared to 13.63% 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.