Credit unions expect to post worst-ever financial year

CREDIT unions are likely to post their worst performance “in living memory” in their current financial year, with dividend payments likely to dwindle significantly, according to the movement’s main representative body.

Despite posting a solid set of results for the 12 months to the end of last September, the Irish League of Credit Unions (ILCU) yesterday said the economic downturn and the fall in investment values will have a negative effect on performance in the current financial year.

“This will be the first tough year in living memory. As with other sectors, there is no way credit unions can be expected to get through the current times unaffected — it would be hard to see how that could happen,” said Kieron Brennan, chief executive of the ILCU.

The newly published figures for 2008 showed a 6.7% increase — to e7 billion — in members’ loans.

The average credit union loan amount increased by 8.7% last year to e8,860. The average loan amount has risen from just over e3,500 in 1998.

However, the value of loans written off during the year, as bad loans unlikely to be paid back, totalled e50m. The organisation has a provision of e230m in place for bad loans — representing 3.75% of the network’s total loan book.

In addition, nearly 60% of credit unions paid dividends of between 2% and 3.99% to members last year, with another 4.4% paying between 4% and 5.25%. In all, only 20 of the 500 credit unions on the island of Ireland didn’t pay a dividend last year. However, Mr Brennan said that figure would likely rise this year.

“It’s impossible to say, at this stage, exactly how many credit unions will be unable to pay a dividend. That ability is a function of the surplus generated at year-end by each individual autonomous credit union.

“We’ll have to await the year-end results of member unions before we know how many are in a position to pay a dividend,” he added.

Credit unions have hit the headlines in recent months, with roughly one-in-three running at a loss and others either being investigated for lending irregularities or in need of financial assistance.

While declining to comment on individual cases, Mr Brennan said that no closures within the Irish credit union network, nor any job losses, are expected this year.

He added that a 0.2% increase in total assets to e13.9bn and a near 3% rise in the movement’s overall loan-to-asset ratio to nearly 51%, “confirms the underlying strength of the movement in terms of capital reserves.”


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