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December CU CEO Confidence Index drops
FARMERS BRANCH, Texas (1/14/08)--Credit union CEOs are not as confident as they once were regarding their members’ and institutions’ financial futures, according to a recent survey based on Southwest Corporate FCU’s quarterly CU CEO Confidence Index for December 2007. CEOs’ perspectives of their members’ current financial conditions dropped to 13.14 in December from 23.88 in September 2007, and expectations for the future decreased to 11.08, from 31.08 during the same period. Overall confidence dropped to 23.80 in December, from 34.27 in September. While the marker for credit union’s current financial condition fell about 8 points, to 49.48, the drop was twice that amount for credit union’s financial condition in six months. Loan growth anticipation also dropped to 9.54 from 23.51, and share growth 13.92 from 15.30. “Even though CEOs previously had concern over their members’ situations, it didn’t translate into outlook for their institutions,” said Brian Turner, manager of advisory services. “The unrelenting doom-speak about the housing slowdown, impairment exposure and slower job growth apparently is finding its way to CEOs.” The survey’s results also demonstrate a “domino effect” on CEO outlooks. Concern for members translates into lower loan and share growth expectations, and “throw into the mix anticipation for lower market rates, and CEOs worry about the impact lower asset yields and stagnant share rates will have on gross margins,” Turner said. Despite lower confidence levels, share growth at credit unions will increase in the first quarter, stabilizing in the second quarter, Turner said. Loan growth, slow in the first quarter, will improve during the second quarter. Surplus liquidity also will change, and credit unions will see that revenue from investment portfolios will increase as home and vehicle sales remain dormant, Turner added. The yield curve has a traditional shape, which is good for asset yields. Credit unions have room to lower non-term share rates to help support margins, although rising term certificate demands could offset benefits. During the next six months, credit union managers should re-employ monthly loan maturities to the market’s relative value profile and manage the growth in term of share certificates, Turner advised. The Confidence Index survey had a 23% response rate. The number of respondents, 194, was the largest in the survey’s four-year history.
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