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CU CEOs Optimistic that Loan Demand will Rise
Friday, August 30, 2013 6:50 AM

Credit union CEOs’ expectations for increased loan demand have doubled over the last 12 months, based on results of Catalyst Corporate FCU’s most recent CU CEO Confidence Survey. The 2nd Quarter 2013 measurement represents a jump of 4.2 points over the first quarter report and a year-over-year confidence surge regarding lending of almost 13 points.

Catalyst Strategic Solutions’ Director and Chief Strategist Brian Turner offered his analysis of CEOs’ jump in optimism regarding loan demand.

“During the first half of 2013, consumer sentiment improved just enough to see overall annualized loan growth increase to about four percent, aided by a sizeable increase in auto sales during the first quarter,” says Turner. “This helped to push the industry’s vehicle loan growth upward to about nine percent, and mortgage loans increased four percent during the same timeframe. Both increases are welcome improvements over the doldrums of the past three years.”

Most of the loan growth continues to reside in the industry’s largest peer group, $500 million or more in total assets, Turner said.

“This group, which represents about 94 percent of the industry’s assets, but less than seven percent of the number of credit unions, experienced a nine percent increase in loans. This indicates that the remaining 93 percent of the credit unions collectively experienced a six percent decline in loans – mostly from institutions with less than $150 million in assets,” adds Turner. “The good news is that the rate of decline is half the rate experienced during the first quarter of 2013 for these credit unions.”

Turner questioned whether some of the loan growth in the first half of the year might be associated with typical heightened consumer loan demand that traditionally occurs in summer or early fall. “If the association is significant, the four percent annualized growth rate may be unsustainable over the second half of the year. There is early evidence that consumer spending is cooling off again after hitting a three percent increase during the first quarter,” he said.

The overall CU CEO Confidence Index in Catalyst Corporate’s survey remained virtually unchanged for the second quarter in a row, increasing less than 1/4 point over last quarter. Other survey results show a 2.7-point increase in CEOs’ confidence in their members’ future financial condition (in six months) and a 2.6-point decrease in confidence for their own credit union’s future financial condition (in six months). Expectations for share deposit growth fell for the second consecutive quarter by about two points.

Started in 2004, Catalyst Corporate’s quarterly survey measures CEO confidence in the economy from very negative to very positive (-100 to +100) in six key areas. Questions are designed to capture a snapshot of CEOs’ present state of mind, as well as future expectations. The areas CEOs are asked to evaluate are:

  • Current financial condition of members
  • Current financial condition of the credit union
  • Anticipated financial condition of members in six months
  • Anticipated financial condition of the credit union in six months
  • Anticipated loan demand at the credit union in six months
  • Anticipated share deposit growth at the credit union in six months

Questionnaires for the 2nd Quarter 2013 CU CEO Confidence Survey were sent to 1,356 CEOs of Catalyst Corporate member credit unions in July. Responses numbered 201 for a response rate of 14.8 percent. Additional details, including graphs with the survey’s historical data, are available under Links & Forms/Surveys at www.catalystcorp.org.