Half of credit unions consider merging as costs shoot up

Over the last five years, the number of credit unions in the State had fallen by a quarter. Photo: Collins

Charlie Weston

Up to half of credit unions are planning to merge with another member-owned lender in the next three years, in a bid to deal with rising costs and the regulatory burden on the sector, according to a survey.

There are 205 active credit unions in the State, but 63 of these are small.

The survey was conducted by chartered accountants RBK.

Tie-ups are being contemplating to deal with staff challenges and to create stronger units, the accountancy firm said.

The survey findings come weeks after it emerged that two large Dublin credit unions are in talks about merging, a combination that could create one of largest member-owned lenders in the State.

Core Credit Union, which operates in south Dublin, and Progressive, which covers the vast north county Dublin area from Balbriggan to Ballymun, are discussing a tie up, the Irish Independent has learned.

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The link-up between Core and Progressive, if it works out, would create a large Dublin credit union that would have a membership of close to 100,000, sources have indicated.

Over the last five years, the number of credit unions in the State had fallen by a quarter, RBK said.

In 2017 there were 274 active credit unions, but this was down to 205 last year, according to the most recent figures from the Registrar of Credit Unions, which is based in the Central Bank.

The number of smaller credit unions has been falling sharply. There were 147 credit unions with assets of under €40m in 2017 – that has now fallen to 63.

RBK said driving the trend towards consolidation was a growing awareness of the advantages of scaling up as a means to access additional resources, address concerns about viability and take advantage of opportunities to innovate and develop new products and services.

RBK Partner Ronan Kilbane said: “Last year saw an uptake in merger activity as well as increased collaboration between credit unions in areas like product development.

“We anticipate further consolidation as credit unions join forces to strengthen their ability to take advantage of opportunities and compete more effectively in a rapidly changing macro-financial environment.”

Mr Kilbane said last year credit union assets reached a record high, reserves remained strong, average loan book growth was up and loan-to-asset ratios grew slightly.

“However, inflation is driving up wages and with other costs also rising, careful management will be crucial in the months ahead to protect viability and sustainability,” he added.

Expenses of credit unions rose strongly last year, with higher wage costs one of the main factors behind this, the accountancy firm said.

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