Credit Union Quarterly Statistics – Q2 2019

The Bank of England publishes aggregate data every quarter based on credit union’s quarterly returns. Due to the time taken for credit unions to submit and the Bank of England’s statistics team to process the information it takes approximately 6 months for the data to be published. The data presented below was published on 31 October 2019 and is for the second quarter of 2019. Below are the headline figures for Great Britain (excluding Northern Ireland), along with charts covering the previous 6 years worth of data.

• Credit unions (returns submitted): 287
• Total Members (including juniors): 1,408,208
• Total Assets: £1.7 billion
• Total shares: £1.44 billion
• Total Capital: £203 million
• Loans: £995 million
• Income (quarter): £31.9 million
• Expenditure (quarter): £27.4 million
• Profit / loss (quarter): £4.5 million

Great Britain – Movement over 6 years (Q2 2013 – Q2 2019) 

ABCUL has plotted every quarters results since 2013 to provide a picture of how things have changed over the last 6 years.

Comment:

The number of credit unions continues to slide. These figures suggested there hasn’t been a failure in the last three quarters, these figures are based on the number of returns submitted which is a good proxy for the number of credit unions but not perfect. Credit unions submitting their returns late or on time when they usually do not can skew these figures and we are aware of several credit unions failing between Q4 2018 – Q2 2019 contrary to this chart.

We expect the number of credit unions to continue to drop then stabilise in the future.

Comment:

Membership growth has been positive at 1% (+13,000) over the previous quarter and 4.4% (+60,000) over the last year.

This means on average, each credit union attracted an extra 208 members over the last year.

Comment:

Loans growth has also been positive this quarter standing at 2.7% or 8.1% since Q2 2018. On average, each credit union lent an additional £260,000 last year.

Comments:

Assets have increased 2.4% (+£39 million) since last quarter and 6.3%(+£100 million) since Q2 2018. This means that the average credit union accumulated an additional £350,000 of assets over the last year.

Comment:

Strong loan growth has meant that the loans to assets ratio has crept up from 58.3% to 58.4% however, loans to assets is up from 57.4% from this time last year. Credit unions have the potential to surpass the 60% mark by the end of 2019, this was last achieved in 2012.

Comment: 

Profit and loss remains characteristically variable from quarter to quarter, however the trend has remained relatively flat since the start of this chart in Q2 2013.

Growth since last quarter:

• Income: +4.4%
• expenditure: +1.3%
• profit: +28%

Growth since last year:

• Income: +9.9%
• Expenditure: +12.8%
• profit: -5%

Comment:

One area dictating profit and loss is the growth of loans versus arrears. This chart shows that the growth in the value of loans has generally outstripped arrears.

Comment:

In percentage terms credit unions are reporting more arrears than at any time in the last 6 years or for any period we have data for. This is likely driven by two factors:

1. A real increase in arrears due to either increased risk tolerance or increased unexpected defaults
2. Credit unions treating arrears more cautiously than before due poor provisioning leading to a number of  credit union failures and the additional regulatory scrutiny on this area over the last couple of years.

At 5.8% arrears to loans ratio does exceed the WOCCU target of 5%, however, credit unions can be run effectively and profitably at higher arrears ratios providing these loans are priced accordingly. The average credit union held just over £200k of arrears at the end of Q2 2019.

Comment:

This graph shows that arrears has more than doubled since Q2 2013 (+109%) whilst loans have only increased by 57% over the same period which explains the significant increase of the loans to arrears ratio above.

Whilst the value of arrears has doubled, the number of loans in arrears has only increased 58%. The average value of each loan in arrears has increased from £783 in 2013 to over £1,035 in 2019.

Comment:

Capital has increased steadily over the last 6 years as the assets of the sector have grown. Credit unions have  generally managed to increased the amount of capital held they hold against their assets since 2013 (below).

Comment: 

Whilst capital has dipped slightly over the last two quarters, the average capital held exceeds the highest capital requirement of 8+2%. This is not evenly distributed in practice with the vast majority of credit unions, particularly smaller credit unions, holding significantly less.

Capital remains a challenge for a number of credit unions but fortunately ABCUL has successfully lobbied the Prudential Regulation Authority to open a consultation paper which could potentially reduce credit union’s capital requirements significantly. For more information about this see our briefing on the consultation here.

Conclusion:

Over the time we’ve looked at, it’s been a strong quarter and year to Quarter 2 for credit unions. Gone is the consistently explosive growth pre-2005, however, the recovery of the loans to assets ratio and the steady growth in membership, assets and capital are encouraging signs for the quarters to come.