Credit Union Seminar Working Towards a Viable Business Model ...

Credit Union Seminar Working Towards a Viable Business Model Wednesday 1 June 2016

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Working Towards a Viable Business Model

 Average Loan to Share Ratio 28%  (52% in 2008)  Investment Income Cushion Disappearing Investment Income Cushion Disappearing  Increased Costs  Ageing membership A i b hi  Model has to Change  Own Research

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Working Towards a Viable Business Model Working Towards a Viable Business Model  Irish Credit  Union Model

What the  Regulator Says

Large Credit  Unions Canada  Model

Main Banks  Model

Suggested  Future Model

Viable  Business Business  Model

Strategy  Implementation

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Main Banks Model  Divisions  Overseas  Corporate & Treasury  Retail

 Retail    

Lending – g Mortgages, Business Loans, Consumer Loans g g , , Deposits Current Accounts Oth S i Other Services

 Income   Funds (Lending/Deposits) Income Funds (Lending/Deposits) Income  Non Funds Income   Push to Increase Non Funds Income

80% 20%

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Main Banks Model – Cont’d  Deposit Income – Gone  Non Funds Income     

Loan Application Fee Forex Pensions Insurance Less Volatile Income

 Lending Income     

Dependent on Margin & Quantum of Lending D d t M i &Q t f L di Charge More Interest – Not too  Price Sensitive Consumer Loans  ‐ Lions Share with CU’s Not Growing Fast Enough  New Lending grew by 17% last year

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Main Banks Model – Cont’d  Selling Model     

Morning Huddles M i H ddl All staff focussed on selling Who are we Calling today What is our Target Online / 10 Minute Turnaround / Phone

 Current accounts/ATM’s C t t /ATM’  ATM’s – Don’t Want them – Generating Cash  Current accounts – Charge for g

 Other  Brand  Loan to depositors ratio 109%;  loans to assets 65%  Poor Customer service

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Canadian Credit Union Model  Vancity Credit Union No 1 Vancity Credit Union No 1  Vancouver, $19.8 billion, 59 branches ($335k per Branch)  Retail & Business banking (Deposit taking & Lending)  Mortgage Lending  Other Foreign Exchange / Life Insurance / Visa Credit Cards / Real Estate Developments  /I / Investment Advisory Services t t Ad i S i

 Redefining Wealth & Building Healthy Communities  Loan to Share Ratio 97% L Sh R i 97%  Non Fund Income 20% 

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Canadian Credit Union Model (Cont’d) ( )  Vancity Credit Union No 1 Vancity Credit Union No 1  Loan Book Breakdown  Residential Mortgages  R id ti l M t

65%

 Consumer Loans 

5%

 Commercial Mortgages / Loans  Commercial Mortgages / Loans

30%

 KPI’s  New members New members  Return on Members Equity 

6 – 10%

 Member Well Being

50%

 Value of Community Impact Loans  > 50%  Inclusive Workplace / Opportunity for Disabled 

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Cambrian Credit Union - No 10

 $3 Billion – 12 Branches ($258m per Branch)  Loan to Shares 90%  Non Funds Income 20%  Free Banking – Primary Banking Relationship  Personal Banking 

Current Account  ‐ Loans – Investing – Insurance – Credit Cards

 Business Banking  

Current Account  ‐ Loans – Investing – Insurance – Credit Cards

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Current Irish Credit Union Model  Positives       

Extensive Branch Network Top Ten Brand – Huge Trust  Li Lions Share of Consumer Loan Market Sh fC L M k High Reserves & Provisions  Excellent Customer Service Extensive branch network 

 Challenges  Challenges     

Loan to Share Ratio Average 28% Non Funds Income Ratio  50% Shares – No 1 Focus – all resources to this   > €50m Assets and further Consolidation   Provide New Products / Add on Services through Strategic  Alliances  Alliances  Mortgages  Insurance; Pensions  Online Services

 Increase Non Funds Income to 20%  Staff Focussed on Selling  Utilise the Branch Network  12

Suggested gg Irish Credit Union Model ((Cont’d))

 Technology  On line Applications  On Line Transacting O Li T i

 No of Branches will have to Reduce  Reduce Dividends / Increase Interest rates where necessary  Charge for Services – Death / LPS Insurance / On Line  Give Back to Community in other Ways Maintain Credit Union Ethos and Trust  Maintain Credit Union Ethos and Trust   Leadership

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How to Achieve this  Individual Credit Unions  What are the Building Blocks required?  g q  All about a Clear Strategy and it’s Implementation   8 Key areas to look at  8 Key areas to look at – in particular: in particular:  An Effective Board   An Effective CEO An Effective CEO  Members and Loan Book Growth

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Clear Strategy gy and it’s Implementation p  Time out Annually to review Strategy – Outside view  Loan Book growth is Key Focus  Clear actions and KPI’s  Make sure Realistic and Adequate Resources  Strategic Plan communicated to all Staff   CEO’s Appraisal based on achievement of Strategic Plan   Board Champions each Area  Monthly Board Focus 

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Role/Attributes of the Board  Devise Strategy and Monitor it’s Implementation  Clear Reporting and Monitoring p g g  Move towards Strategy Focus / Delegate Operations to CEO  Required Skill Set, Age Mix , and Energy  Required Skill Set, Age Mix , and Energy  Membership of some Strategy Committees – Clear Briefs   Larger Board Larger Board  Strong business like Charismatic Chair  ACTION ‐ ACTION Review Board and agree actions  R i B d d ti

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CEO  The Key Position – Th K P i i M k i ll H Makes it all Happen  Vision, Implementer, Leader, People person, Communicator, Multi‐disciplined   Have the Right Team in Place   Weekly Meetings – Focussed on KPI’s   Control of the dressing room   ACTION BOARD   Have you confidence in the CEO implementing the CU’s Strategy  Put plan in place – clear objectives   Mentor  ACTION CEO   Have you the right team and resources in place   

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Loan Book & Income Growth  All Bank Branch Staff focussed on Selling  Daily Huddle  Daily Huddle –  

Who will be call today Daily Targets

 Keep Sales very simple – Sell 3 Products  Every Person coming in – Every Person coming in Ask Ask .. Any Interest? Any Interest?  3 Minutes on Phone – Ringing 40 Customers a Day    

Local Credit Union – Competitive rates / Give us a Shout Didn’t Know he Wanted a Loan  Like a Service Call Generating Own market by Making Phone Call

 Training    

   

All Staff Cluster training 10 Point Plan to Grow your Loan Book

Mortgages Business Lending – g Keep Amounts small – p More Riskyy All other Marketing Activity Car Loans    

Bread and Butter Stuff PCP taking Market Share PCP taking Market Share Offer Product  18

Strategy gy Implementation p – Key y Areas

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Board & Governance

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CEO & Team – Effective Team CEO & Team – Effective Team

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Members & Loan Book Growth

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Products & Services – Online, New Products, Non Funds Income Products & Services – Online New Products Non Funds Income

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Infrastructure – Branches right Location, Don’t Over Invest

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Regulation & Compliance – Outsource  Regulation & Compliance – Outsource

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Mergers – Resources, Lessons 

8 8.

Financial – Viability & Sustainability Financial  Viability & Sustainability

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Conclusion  Research – looked at other models  ‐ lessons   Need for further change in the Irish CU model – strong signs of this beginning  to happen   Put building blocks in place for succeeding  Put building blocks in place for succeeding  Clear Strategy  Effective Board   Effective CEO 

 Core Areas to focus on   Team structure & focus    Loan growth   Technology  Non Funds Income  Non Funds Income  Grow younger active member 

 Reach out for help   Keep Reviewing Strategy  and its implementation  20

Thank You! Thank You! 

Colm O’Grady Credit Union Partner Credit Union Partner  Phone:  090 6480600/087 8209158 Email:  [email protected]

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Dealing g with Mergers g  Huge Energy  & Cost & Resource & Focus Huge Energy & Cost & Resource & Focus  Not Delivering to Bottom Line  Difficulties encountered include: 

Small Credit Unions with Small Loan Book and a branch – Not Viable – Sustainable

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Staff hoping for Redundancy

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Ageing Common Bond

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Poor Lending – No Provision Upside

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Poor Staff/Manager – Unable to implement Change

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Branch Building MV O/Stated

 Branch needs to Close / Reduce Opening Hours / Relocate Office  Core Business Issues Neglected  Need to Increase IA Need to Increase IA  Overworked CEO Team   Dis‐function between Executive and Board/Committees  23