23 Million Loans Show Contribution Of Member-Owner Financial Model

Credit unions post growth in consumer lending while banks remain stagnant.
Drew Grossman

Credit unions and banks reported loan growth this quarter, but while the credit union increase was anchored by consumer lending, banks grew loans primarily with high net-worth clients.

Earlier this week, CNBC’s Kayla Tausche reported that although bank loan balances are up this quarter, consumer lending remains flat. Investors are interested in seeing loan volumes rise because it is a sign the economy is improving. Loan growth indicates people are more financially stable, their debt is under control, and they’re making big purchases. But bank loan growth, according to CNBC, is not from consumer-facing banks, it’s largely from high net-worth clients at bank brokerages. Some major banks reported modest loan growth (single-digit percentages) in the second quarter of 2014, but growth was primarily in asset and wealth management, not consumer lending.

Consumer lending at Bank of America is down 3.5% from last year, JPMorgan is stagnant from last quarter, and it’s a similar story at most other major banks, according to CNBC.

Credit union consumer lending, however, tells a different story. Financial cooperatives have increased the number and dollar amount of consumer loans every year since the recession.

Credit Union Consumer Loans
For all U.S. credit unions more than $100M in assets | Data as of 06.30.14
Callahan & Associates | www.creditunions.com

2010 2011 2012 2013 2014
Dollar Amount of Loans $115.7B $131.5B $152.9B $172.0B $191.8B
Number of Loans 14.2M 15.0M 17.3M 19.2M 23.0M

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So far in 2014, credit unions have originated 23 million loans, that’s more than 16% growth from the same point in 2013. Consumer lending numbers highlight the differentiating role credit unions play in our economy. As cooperatives, credit unions were created to address the needs of consumers unmet by for-profit financial institutions. Credit unions exist solely to serve members. Increases in consumer lending during a time when other financial institutions are stagnant is another example of credit unions meeting their mission.

Consumer lending at for-profit financial institutions will come back. It will wax and wane depending on rates, profitability, and risk, but credit unions–because of the cooperative business model they are built on–will always remain dedicated to lending to member/owners.

October 24, 2014

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