Credit Union Quarterly Statistics – Q4 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 around 6 months for the data to be published. The data presented below was published on 30 April 2020 and is for the fourth 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): 280
• Total Members (including juniors): 1,434,208
• Total Assets: £1.8 billion
• Total Shares: £1.5 billion
• Total Capital: £212 million
• Loans: £1.1 billion
• Income (quarter): £36.5 million
• Expenditure (quarter): £32.5 million
• Profit / loss (quarter): £4 million

Great Britain – Movement over 5 years (Q1 2015 – Q4 2019) 

This is very likely to be the last set of quarterly statistics that will be unaffected by the Coronavirus pandemic which will be covered in our future analysis of the quarterly statistics. If you have any questions, comments or suggestions on the below charts please contact Daniel (daniel.arrowsmith@abcul.org / 0161 819 6996)

Comment:

The number of credit unions continues to slide. These figures are based on the number of returns submitted which is a reasonable proxy for the number of credit unions but may not be entirely accurate. Credit unions submitting their returns late or on time when they usually do not can skew these figures.

We expect the number of credit unions to continue to drop owing to both the consolidation of existing credit unions and the lack of new credit unions seeking authorisation.

Comment:

Membership growth has been positive at 1.4% (+20,000) over the previous quarter and 4.2% (+58,000) over the last year.

This means on average, each credit union in Great Britain attracted an additional 207 members over the last year.

Comment:

Loan growth has also been positive this quarter standing at 4.5% or 8.8% since Q4 2018. On average, each credit union lent an additional £304,000 last year.

Comments:

Assets have increased 1.7% (+£29 million) since last quarter and 9.4% (+£153 million) since Q4 2018. This means that the average credit union accumulated an additional £546,000 of assets over the last year.

Comment:

Strong loan growth has meant that the loans to assets ratio has risen from 57.6% to 59.2% however, this is slightly down from 59.6% from the fourth quarter of last year.

Comment: 

Profit and loss remains characteristically variable from quarter to quarter, however, the sector tended to make a surplus of between £3 million and £5 million each quarter.

Growth since last quarter:

• Income: +4.2%
• expenditure: +2.7%
• profit: +18%

Growth since last year:

• Income: +18.1%
• Expenditure: +19.6%
• profit: -7%

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 generally outstripped arrears.

Comment:

However, in percentage terms credit unions are reporting more arrears than at any time in the last 5 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 6.2% 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  £235k of arrears at the end of Q4 2019.

Comment:

This graph shows that arrears has more than doubled since Q1 2015 (+135%) 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 more than doubled, the number of loans in arrears has only increased 64%, as a result the average value of each loan in arrears has increased from £787 at the start of 2015 to over £1,130 at the end of 2019.

Comment:

Capital has increased steadily over the last 5 years as the assets of the sector have grown. Credit unions have  generally managed to increase the amount of capital held they hold against their assets since 2015 (below).

Comment: 

Whilst capital has dipped slightly over the last two quarters, the average capital held exceeds the highest capital requirement 10% (for those credit unions with £50+ million assets). This is not evenly distributed in practice with the vast majority of credit unions, particularly smaller credit unions, holding significantly less.

Of course ABCUL achieved the huge capital lobbying win which was announced at our conference in March. For more information about this see our briefing on the capital changes which were passed as proposed here.

Conclusion:

Overall it was a strong quarter and end to 2019 for credit unions. However, 2020 looks to be an extremely challenging for credit unions and the economy at large. As these figures show, it is still to early to quantify the effects of the pandemic and to predict the length of time it will take the economy to recover. Many credit unions have reported a significant reduction in lending and we expect this to be borne out in the next quarterly statistics.