A new Central Bank report on the financial conditions of credit unions shows increased levels of lending and saving among members but also an increase in early stage arrears.
Today's report - the 10th on the credit union sector - reveals that house loans increased by 53% from €317m in 2022 to €484m in 2023. The average loan size increased from around €86,000 to €105,000, the Central Bank noted.
Loans issued during the year came to a total of €3 billion, bringing total loans outstanding to €6.3 billion at the end of September last year, up from €5.6 billion in 2022 - an increase of 12%.
Meanwhile, business loans increased by 11% from €146m in 2022 to €162m in 2023, with the average loan size increasing from around €20,000 to €22,000.
The Central Bank noted that while the sectoral average percentage of total loans in arrears has continued to trend downwards post pandemic, the total amount of loans in arrears, including early stage arrears, increased over 2023 as cost of living pressures affected people.
It also said that despite the increases in house and business loans, significant capacity remains within the current lending concentration limits for further lending in these areas.
"This further capacity amounts to €900m, increasing to €2.1 billion if all eligible credit unions availed of increased concentration limits available," the Central Bank stated.
The report today also reveals that members' savings increased from €17 billion at the end of September 2022 to €17.5 billion at the end of September last year.
Meanwhile, investments grew to €13.8 billion, up from €13.1 billion in 2022, with the average level of return increasing to 1.2% in 2023.
Registrar of Credit Unions Elaine Byrne said that given the trends and the economic outlook, this is a time for credit unions to pay particular attention to proactive asset and liability management, arising from the changing maturity profile of their balance sheets, as credit unions seek to diversify their lending.
"This includes maintaining sufficient liquid assets to meet business requirements and withstand liquidity stress scenarios," Ms Byrne said.
The Registrar also noted that the Credit Union Amendment Act 2023, enacted last December, is a significant development and will provide new business opportunities for credit unions.
"In updating strategic plans to reflect new business opportunities, credit unions should consider how to achieve scale efficiencies, cost management within their financial capacities and greater product standardisation in order to deliver a range of products and services to their members in a prudent and sustainable manner," she added.
Deputy Governor of the Central Bank Sharon Donnery told RTÉ's News at One said that the credit union plays a very important role in the financial system here.
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Ms Donnery said there are almost 200 credit unions in Ireland, with about 80 or so offering current accounts.
She said there is potential for credit unions to grow mortgage products in years ahead, adding that the capacity is there as housing markets continue to be very strong.
She also said that the financial sector and market is changing quite a lot and that the Central Bank remains conscious of the competition issue.
On mortgage switching, she said that since interest rates increased, there is potential for saving money by switching whether within firms or across firms.
She also said the Central Bank was focused on working in the public interest when it comes to the financial system. She added that it remains very important that the lessons of the financial crash are learned, and that the Central Bank is focusing still on a stability mandate.
Commenting on today's report, Kevin Johnson, CEO of the Credit Union Development Association, said the loan growth reflects the huge demand for credit union loans and the increased ability of credit unions to meet this demand across multiple channels.
"We expect the scale of credit union lending to significantly increase in the coming months and years - because from September 2024, for the first time, credit unions will be able to offer a service or product such as a home loan to a member of another credit union - under a formal arrangement with that other credit union," Mr Johnson said.
He said that for householders and aspiring homeowners, this means there will be greater access to fairer mortgages as credit unions will be able to refer mortgage applications to other credit unions should they not be in a position to provide a mortgage themselves.
"This effectively means that every credit union in the country will be able to offer mortgages. As a result of these changes, CUDA contends that total new credit union mortgage lending could reach €1 billion per annum by 2027, which could put credit unions in the top five mortgage lenders," he added.
Mr Johnson also said the slight increase in arrears captured in today's report is a "sombre" reminder of the pressure that the increased cost of living has brought on people.
"Credit unions are very cognisant of this and continue to remain supportive of anyone who is experiencing difficulties. We believe the low increase in arrears is testament to the competitive interest rates available from credit unions as well as the work that credit unions do with any customers who may run into difficulties repaying their loans," he added.
David Malone, CEO of the ILCU, said that the overall picture for credit unions across Ireland is a positive one, with the ongoing expansion of services across the sector, enhanced digitalisation, a reputation for excellent customer service and a clear people and community first focus.
"While the report notes that there is capacity within the current lending concentration limits for further lending, it must be noted that lending limits apply to individual credit unions and not to the sector as a whole," Mr Malone said.
He also said that the ILCU, working with the other credit union representative bodies, has made a thorough and detailed submission to the Central Bank to call for a number of targeted changes to the credit union lending framework.
"These changes can future proof the sustainability of the sector, supporting credit unions to grow and develop, thereby providing much needed credit and choice to consumers," he added.
