50% fall in profit hits dividend for Ballinlough credit union members

A MORE than 50% drop in profit at a Cork city credit union means members will not receive either a dividend or loan interest rebate in 2011.

Summaries of financial statements for Ballinlough Credit Union (BCU) indicate one of the factors contributing to this decision is a shrinking balance sheet caused largely by a reduction of more than half a million in new loans. In the year to September 30, 2009, 4.5 million loans were granted compared to 4 million for the year to the end of September 2010. A reduction in the number of loans means the amount of interest paid to the credit union also reduces. Credit Unions depend on interest income and returns on investments to cover their operating costs and pay dividends.

Chairman of BCU’s board of directors Tom Scriven said the inability to pay a dividend this year reflected a number of factors, including the falling interest rate on money invested and the growing number of members in arrears due to the country’s current economic woes.

BCU also had to transfer its entire surplus — €306,411 (a 51.5% drop on last year) — to meet the requirement set by the Financial Regulator that all credit unions maintain a reserve of not less than 10% of their assets. BCU, which has approximately 7,000 members, has assets totalling €28.3 million.

Mr Scriven said it was the first time he could remember that the dividend wasn’t paid.

However, he said he was “positive” about the credit union’s future.

“We have ample funds for those who wish to avail of loans.

“We are in a very strong position and we are putting our best foot forward,” Mr Scriven said.

BCU AGM takes place on December 8.

A second Cork city credit union — Gurranabraher Credit Union (GCU) — will tell its members tonight that the dividend they will receive has been reduced from 1.5% in 2009 to 0.5% in 2010 — down from 2.5% in 2008. And because the dividend has dropped below 1%, members will not receive any loan interest rebate. GCU, which has approximately 15,000 members and assets of €88.6m, has had to double its bad debt provision in 2010, from €1.4m in 2009, to €2.8m in 2010. The number of loans to new members also reduced significantly from 16.2 million to 11 million, down by almost five million. GCU meets the regulatory ratio reserve of 10%.

However, the credit union is still involved in a legal wrangle with insurers Royal Sun Alliance in an attempt to recoup more than €1.75m spent on a combination of legal fees and settling cases taken by former employees.

Nine of the cases, which date back almost 10 years, were taken by staff who alleged they were bullied and harassed while working at GCU.

A separate personal injuries case, taken by a former manager and deputy manager, resulted in payouts in 2003 of €150,000 and €100,000 respectively.

GCU AGM takes place tonight at the Parochial Hall at 7.30pm.