After a banner 2010, B.C. credit unions are poised for continued expansion.
Last week, Vancity posted a 44% increase in net income to $77 million, the highest in the institution’s history. A week earlier, Surrey’s Coast Capital Savings reported that its profit had jumped 20.4% to $65.4 million.
Other credit unions with strong results included North Shore Credit Union (NSCU), with a 49% increase in net earnings to $9.7 million, and Prospera Credit Union with a 48% increase in net profit also to $9.7 million.
Tom Webster, CFO of Langley’s First West Credit Union, which has yet to report its results, told Business in Vancouver that the first year of the new institution created from the Envision Financial and Valley First Credit Union merger recorded a 17.3% increase in pre-tax income of $43.6 million.
For most financial institutions, rising interest rates that led to a 75-basis point increase in the prime rate over the summer was a key contributor to their record performance. The increases helped boost margins on most variable-rate lending products, primarily in mortgages.
Despite the increases, interest rates remained near historical lows. That led to substantial drops in deposit costs and better bottom lines.
“Our deposit costs fell by almost $20 million or 20%,” Webster said, “so the combination of interest income growth and falling deposit costs led to increased margin of 37%.”
Most credit unions also posted a strong flow of new deposits, which increased their lending portfolios. Coast Capital, for example, expanded its residential mortgage portfolio by nearly 11% to $6.2 billion, up from $5.6 billion in 2009.
Coast Capital CFO Don Coulter said his credit union generated high loan origination despite the hyper-competitive environment. It also launched its new flexible You’re the Boss mortgage, which he said has continued to drive results and exceed Coast Capital expectations thus far in 2011. Its offerings have helped Coast Capital increase its membership by 18,000 last year alone.
Bill Keen, NSCU’s CFO, said its deposit growth grew by 18%, which is the highest annual rise in more than a decade. “In dollar terms, it was about $252 million in growth, which essentially was the major reason for us to grow our loans by $248 million.”
Few credit unions said they expected this year to replicate last year’s record results. Most are estimating overall growth of between 5% and 7%. But many are targeting niche markets to grow.
Vancity CEO Tamara Vrooman said spending the past few years focusing on the product offering of what is Canada’s largest credit union has started to pay dividends for retail and small-business members.
A key Vancity focus is building a business model based on the triple-bottom line, which also includes supporting other businesses with the same underlying business value set. Vancity’s focus on specialized offerings like its loan program has gathered international interest. Micro-finance and peer lending grew 41% last year. Vancity has also become the latest member of the Global Network of Sustainable Banks – an invitation-only group of sustainability- or mission-based financial institutions.
Keen said NSCU has been focused on deepening its relationships with its current membership of more than 40,000. However, starting this year, it plans to increase that membership and is scheduled to open a second branch in Vancouver on West Broadway in a few months.
For First West, Webster said a significant portion of its growth will come from insurance, auto leasing, wealth management and other non-lending businesses.
Overall, First West plans significant growth this year following completion of its merger last year. “Last year, we put together a lot of the parts. We hired a new CEO; we have new members to the management team. We’re well positioned to implement the strategy of our merger.”