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Double-Digit Loan Growth Expected in 2015 and 2016
Wednesday, July 1, 2015 6:45 AM

CUNA and CUNA Mutual economists jointly predict loan growth of 11 percent in 2015 for the U.S. economy, higher than the 10.4 percent increase in 2014. The baseline forecast for 2016 is 10 percent loan growth.

Perc Pineda, CUNA senior economist, said that with continued economic expansion, they expect to see further improvement in credit quality. The delinquency rate in the first quarter came in lower than their previous forecast; and they now expect the delinquency rate to finish 2015 at 0.7 percent and to finish 2016 at 0.65 percent. Pineda added that the outlook for net charge-off rates remain unchanged at 0.45 percent in both 2015 and 2016.

CUNA and CUNA Mutual Group economists now expect the fed funds rate to be at 0.5 percent by the end of 2015 and at 1.75 percent by the end of 2016.

“This will affect credit union earnings," Pineda said. "Interest margin pressures will become more obvious in 2016 and mortgage refinancing will decline, and we expect the return on average assets to decline slightly from 0.8 percent in 2014 to 0.75 percent this year, then dipping a bit more to 0.7 percent in 2015.”

Overall, Pineda expects the U.S. economy to grow 2.2 percent this year and 3.25 percent next year. “Positives include improved consumer confidence, a related uptick in personal consumption expenditures, and favorable gas prices," he said. "Developments in Greece are a key concern.”

The labor market is reflecting broad improvement. Economists expect the unemployment rate to continue to drop to 5.2 percent and 4.9 percent in 2015 and 2016 respectively.

While the group’s 2015 forecast for core inflation is unchanged at 1.75 percent, it expects headline inflation to rise to 1.5 percent in 2015. “Oil prices are still below historic highs, which should help to keep inflation below the Federal Reserve’s 2 percent target this year and the next,” Pineda said.