90% of credit unions in surplus

THE number of credit unions generating a surplus is likely to be down on 2009 but still close to the 90% figure from that year.

Presenting an overview of the movement’s latest annual performance – for the 12 months to the end of September – the Irish League of Credit Unions (ILCU) said yesterday that the worst of the challenging trading environment should now be behind it and that unions continue to be open for business with €3 billion available for loans in 2011.

In the 12 months to the end of June, more than €2.5bn in loans were granted to customers. In that time, credit union membership grew by 40,000, bringing the number of members to 2.98 million people on the island of Ireland.

However, the ILCU has also warned that the number of credit unions likely to pay out a dividend to members this year will be down on 2009, when 89% of unions did so.

ILCU president Mark Bailey said: “Credit unions have weathered the financial environment well. However, members should prepare for reduced – and in some cases, no – dividend. This will better position credit unions for the future.”

While lending activity remains buoyant (the total loan book was down by €300m to €6.3bn, year-on- year, at the end of June), impairment provisions, for bad loans, across ILCU member unions amounted to €512m (or 8.4% of the total loan book) as of the end of June.

This figure was up from the €334m charge noted in 2009 and is likely to have increased to around €570m in the final quarter of the movement’s financial year to the end of September.

“Based on our latest set of figures it is our estimation the majority of ILCU-affiliated unions will deliver a surplus in 2010. Despite this, our main objective remains constant and that is to strengthen credit unions so they continue to provide competitive loans and services to their membership.

“Given the current economic climate, we must consider the longer-term interests of each union and its membership and ensure sufficient reserves are held to allow for any further deterioration in the general economy which will affect us all,” Mr Bailey added.

Credit union services are set to be significantly expanded over the next two years with the introduction of more mainstream banking products.