Health Check: Credit Unions

Total assets of the credit union sector grew to $2,942 million, an increase of 5.3 percent, as at December 2021. This was primarily reflected in increases in gross loans which grew by $80 million over the period, to reach $1,872 million. Gross loans remained the largest asset component of the balance sheet, accounting for an estimated 64 percent of total assets at the end of the period. The sector also continued to experience steady growth in member savings which rose by 4.8 percent.

At the end of 2021, non-performing loans made up 12.8 percent of all loans, a drop of 0.4 percentage points from the end of 2020. This downward movement was mostly driven by an improvement in both the 3-6 months and the 6-12 months categories of NPLs as well as an overall increase in the total loan portfolio. The twelve months and over category showed an increase of $34 million, with real estate and collateral-backed mortgages making up most of the category.

Credit unions continued to adapt to the IFRS 9 standard of provisioning for losses. For the year ended December 2021, the level of provisioning within the sector grew by approximately $20 million, moving the provision to NPLs ratio up to 31.4 percent, as compared to the 23.4 percent recorded last year.

Since 2010, there has been a steady decline in the loans-to-deposit ratio, as the growth rate of deposits accelerated but in 2021, the ratio remained stable at 73.3 percent.

Profitability in the sector increased marginally, with credit unions recording a return on assets of 0.5 percent. Total income increased by $8 million, reflecting a slight recovery on previously declining loan and investment income. With modest gains in interest and investment earnings and reduced interest expenditures due to lower interest rates, the net income margin reached $114 million at year end.

With the increase in profitability, as at December 2021, the capital-to-assets ratio increased slightly to reach 10.7 percent.

Adapted from the 2021 Financial Stability Report.