Profits at B.C.’s top three credit unions have remained in record territory, despite continued financial turmoil around the world.
Collectively, Vancity, Coast
Capital Savings and First West Credit Union posted more than $186.7 million in net earnings last year.
While each follows a co-operative business model, they’ve all strengthened their financial bottom lines by carving out their own niches in B.C.’s very competitive banking landscape.
Vancity’s profits rose 5.1% last year to $90.7 million. It has banked its growth on strengthening its brand as a progressive, socially and environmentally conscious financial institution. Its latest rebrand, launched last October, has focused on helping customers see the complementary social and environmental benefits of banking at Canada’s largest credit union.
On the new marketing campaign, Rick Sielski, Vancity’s COO, said, “It’s not that what we are doing is that much different, but we’re really connecting the dots for our members. We are continuing to see lots of success in one of our large initiatives on the business lending side, taking a larger percentage of our business loans in areas that make a social impact in our economy: affordable housing, natural organic foods, social enterprises. We’re expecting a lot of growth in that area.”
Another key area of growth for Vancity has been its credit card business. According to its annual financial statement, credit card income rose 18.5% to $35.8 million from $30.2 million in 2010. Part of the attraction of Vancity’s Enviro Visa, said Sielski, is that 5% of Vancity’s profits from the product go toward supporting environmental initiatives through its EnviroFund. Last year, $580,000 was granted to 15 environmental organizations, up from $450,000 for 11 projects in 2010.
“It’s a great success for us,” said Sielski. “We have the largest percentage of members with a Vancity Visa card than we’ve ever had in our history.”
Langley-headquartered First West Credit Union also posted record profits in 2011, a result of expansion of its non-mortgage lines of business and continued operational efficiencies stemming from its creation in 2010 through the merger of Envision Financial and Valley First Credit Union.
The company posted a 7.6% increase in insurance income, which was the result of expanding its insurance business in its Valley First region in the Okanagan and increasing the hours of operation at its insurance offices in the Lower Mainland.
It also posted a 4.6% increase in wealth-management related income last year, the result of increasing the number of licensed investment staff by 135.
Improving operational efficiencies has led to a 9.1% drop in back-office and administrative expenses to $52.6 million from $57.8 million. And total membership grew 8% to 169,000.
“We’re excited with the results we’ve achieved last year,” said Launi Skinner, First West’s CEO. “We are midway in year two of a three-year strategic plan of getting better at keeping our processes simple, leveraging technology so we can focus on building relationships with members.”
Coast Capital had its second best year in its history, posting net income of $62 million from $70.2 million in 2010.
The Surrey-based credit union reported substantial gains in all its key areas of business. Its loan portfolio grew by $1.3 billion last year to $9.8 billion and deposits grew by 6% to $10.3 billion. Income from its wealth management division also grew 17.5% to $23.6 million.
Don Coulter, Coast Capital’s CFO, said, “We had a strong year, financially. Residential mortgages were up 18%, total assets were up 12% and our member base was up 20,000, which is really significant.”
Coulter also noted the credit union’s “Where you’re at money chat” initiative has been a key driver of its wealth management growth. In its newest branches, it has also installed half a dozen iPads with a Coast Capital app that can help members go through various financial scenarios about their savings and investments.
One of the biggest impacts to Coast’s bottom line, however, has been the persistently low interest rate that has remained the same since September 2010. With the Bank of Canada’s overnight rate staying static for so long, margins have continually been under increasing pressure as competition pushes lending rates down and edges deposit rates higher. As a result, Coast’s net interest income from its loans fell to $227.9 million from $242.3 million in 2010.
Net interest income also fell at Vancity and First West Credit Union, although to a lesser extent last year.
In such an environment, all three credit unions said deepening the financial relationship with existing members and continuing to grow its membership base are key drivers of growth.
“If you look at satisfaction scores between credit unions and the big banks, credit unions are much higher,” said Coulter. “The CFIB ranks credit unions at No. 1 in terms of financial institutions small business want to deal with. We think that’s a huge opportunity for us.” •
