NECU safely rides global credit crisis

The New England Credit Union has moved to reassure its members that the Credit Union remains strong and secure, despite the impact of the global credit crisis.

CEO Kevin Dupé said NECU had reported a strong performance in the 2007/08 financial year due to the support and growth of its membership base, its extensive branch network and a decision not to offer low documentation and ‘no-deposit’ housing loans. NECU has also avoided using brokers to originate its loans,preferring instead to source business through the Credit Union’s well trained staff and trusted branch network.

“We budgeted for an after tax profit of $3.8 million for the 2008 financial year, and we made $3.7 million,” he said. “With major financial institutions around the world suffering considerable losses, it has been an outstanding achievement to come so close to achieving our target.”

The CEO attributes NECU’s long standing commitment to retaining a relatively large branch network as a vital tool in remaining profitable in these troubled times.

“Some people used to consider holding a large retail banking network as a liability for medium sized credit unions such as NECU,” he said. “But with deposit funds the subject of such intense competition, the loyalty of our members who deal with us through our branch network is our greatest asset.”

While the troubles in world financial markets could largely be tracked to poor lending practices, NECU’s level of bad debts remained at very low levels, he explained. NECU had resisted a trend to offer so called ‘low documentation’ and ‘no-deposit’ housing loans because the board and staff regarded such products as not in the best interests of members.

“It was a sound judgment as it is those risky low end products that have contributed to the situation that American financial institutions now find themselves in,” he said “.

A large majority of our loans are secured by residential property, with the average loan to valuation ratio on home loans slightly below 50%. This differs substantial from the American situation, whereby most of the ‘sub-prime’ loans that triggered the crisis were for almost 100% of the property value. What that means for depositors is that the money NECU lends out is well secured, and their deposits are safe.”

Mr Dupé said NECU’s excess funds were safely invested with other authorised deposit taking institutions in line with the same prudential standards and regulations as the major banks.
“Following reforms made as a result of the Wallis report in the late 1990’s, credit unions and banks are subject to the same legally enforceable standards on capital, liquidity and risk management,” he explained.

“As such, the old saying that your money is as safe as a bank should be changed to bank or credit union.”