Looking Back To See Ahead

on "May 04, 2020 11:12 am"

As an anxious credit union industry mulls questions about what’s ahead, Steven Houle says answers might be found in the past.


CCatalyst NewLogo ColorIn an economic commentary shared with credit unions this week, Houle, Vice President of Advisory Services at Catalyst Strategic Solutions, says that looking back to the recession that started in 2008 may help establish future projections.

“Credit unions finished 2019 with very strong performance ratios and, although there were whispers of a slowing economy, credit unions were poised to turn in another strong year in 2020,” Houle said. “Unfortunately, the rapid spread of COVID-19 has tragically impacted lives, social habits and economies across the globe and, consequently, credit unions.” 

As the ramifications unfold, Houle posits this question: what trends and critical issues can we anticipate in 2020 as credit unions focus on employee and member safety, delivering services and products through remote channels and navigating changing economic conditions?

“Even though the COVID-19 pandemic – which is now being called ‘The Great Lockdown Recession’ – is in its early stages, the global impact has been quick and unprecedented, and the impact to U.S. unemployment and GDP could be worse than during the previous financial crisis,” Houle said.

For perspective, Houle looks back on the economic meltdown that began in 2008 to learn lessons applicable to today’s sharp downturn. Comparing then to now, he covers topics impacting credit unions in such areas as:

  • Loans and share growth
  • Liquidity and cost of funds, and
  • Earnings and net worth

“Earnings compression is expected as loan demand contracts in 2020 and loan yields fall due to historically low benchmark rates,” Houle said, suggesting data indicates loan portfolio yields could fall from 4.89 to 4.20 percent.

In this economic commentary, Houle notes that with strong deposit growth and weaker earnings forecast ahead, “credit unions should have a robust asset/liability management process.”

Read the entire commentary here.

For quick assistance regarding balance sheet management strategies during these challenging times, please contact Catalyst Strategic Solutions Advisory Services.

Catalyst Strategic Solutions is a CUSO that is wholly-owned by Catalyst Corporate Federal Credit Union.