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VanCity Credit Union woes
June 14, 2024
7:36 am
RetirEd
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Yesterday, Vancouver City Savings Credit Union announced massive layoffs. Just a couple of months ago they announced new fees, particularly a hefty $2.50 per mailed statement.

VanCity is huge and considered the crown jewel of the Credit Union movement in Canada. Are they threatened? I hold shares in them accumulated over 30 years, and they are NOT insured. They've been good earners. Should I panic and cash them in? Maybe it's already too late? Once a run gets started, it's only the first to flee that get out unscathed.

That's sad but true. When confidence is lost, the furniture is next to go.

Anyone know more than I?

RetirEd

June 14, 2024
7:59 am
NorthernRaven
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I'll let Peter move this as desired, but hefty layoffs have been common in industries like tech as well where they feel they are "wrong-sized" due to covid/inflation/market whatevers. Vancity won't be collapsing over this, whatever pain it may cause for employees and operations.

https://www.cbc.ca/news/canada/british-columbia/vancity-layoff-1.7234793

June 14, 2024
7:40 pm
Loonie
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I have never held CU shares, and would not. If I want uninsured, I'll look elsewhere.
That said, after 30 years, you could still be ahead. Some people on this forum like to brag that their dividends from corporations have more than paid for their stocks.

I don't think that a 7% layoff of staff foretells the end of the world necessarily, and probably not at all. Banks have big layoffs from time to time, and the only people who seem to care abut it are the employees themselves and their families. It is often applauded as "efficient" and prudent.

I wouldn't sell the shares unless a close reading of annual reports etc tells you this is a much bigger problem.

June 16, 2024
8:40 am
AltaRed
BC Interior
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https://annualreport.vancity.com/_doc/Vancity-2023-annual-report.pdf tells one all they need to know. Per page 11, VanCity had a small financial loss last year partly due to a significant squeeze in interest income and they expect 2024 to be similar.

They have to be seen to cut more costs out of the system...as they should. Their shareholders (membership) should demand that. It is also perverse that they have as many as circa 60 branches in the Lower Mainland and the Island.

June 16, 2024
9:06 am
Rail Baron
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I hold over $3,000 in Class D shares at VanCity. They have sat there for many years, and grown modestly with annual dividends, until now.

But now that there will be no dividend for 2024, and probably not for 2025 based on how long it will take them to clean up their balance sheet, I will look into redeeming them.

It does seem like this credit union has a lot of problems.

June 16, 2024
10:48 am
AltaRed
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Their NIM got squeezed because too many depositors switched to longer term deposits over HISA accounts, plus lending volume is down to compound the problem. That sort of thing will always be an issue (risk) for a regional financial institution, over a national one.

In this case, it looks like VanCity relied too much on liquid deposits, i.e. not enough 'liability matching' or 'term matching' depending on how one wishes to describe it. Perhaps time for some decision/policy makers in that organization to be shown the door. They will sort it out in time, i.e. not going to go under, but it will take time. Home Trust/Oaken almost died due to similar issues (relying too much on liquid deposits) and they never fully recovered (got bought out instead).

Personally, I tend to stay away from these sorts of institutions, deposit insurance notwithstanding.

June 16, 2024
11:30 am
Doug
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It's not just as simple as reading their financial statements and net interest margin. They've made questionable investments over the years, as I understand it, particularly within their Vancity Community Investment Bank subsidiary, which have caused financial losses. I would also point out they are in violation of their Collective Agreement to have a jointly trusteed pension plan, and that matter is also before the courts.

In short, I stand in solidarity with my fellow BCGEU colleagues at Vancity.sf-cool

Cheers,
Doug

June 16, 2024
12:21 pm
NorthernRaven
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Doug said
In short, I stand in solidarity with my fellow BCGEU colleagues at Vancity.sf-cool

But did you dream you saw Joe Hill last night... 🙂

June 16, 2024
11:34 pm
RetirEd
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Yes, I'd studied the annual report and had my doubts. Where did the word of no dividends for 2024 originate? I haven't seen it, just the CBC piece that made me post this. I'll also have to ask if that means no interest payments - since the interest rate on their shares has remained high. I'll have to check on that. Or is this just a conclusion some people are making after hearing the news?

The decision to unload shares is complicated by the inability to buy back except under special offers or interest accumulation. I've done well with my shares from a few credit unions so far, but then I'm old now and don't look kindly on out-waiting temporary shifts.

It's certainly true that VanCity has made mistakes, but it's been a financial powerhouse. I live in Vancouver and I don't think I'll be left without any branches in the near future. I don't like affinity programs in general - I'd rather make money and channel my charitable/ideological input myself rather than into someone else's "grab bags." I participated in a focus group (not with VanCity) once about selection of "ethical" investments and was impressed with the diversity of participant opinions on what was "ethical" - particularly how none of them wanted to avoid nuclear power investments!

RetirEd

June 17, 2024
7:30 am
AltaRed
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In the Annual Report link https://annualreport.vancity.com/_doc/Vancity-2023-annual-report.pdf on page 6, Message from CEO, I quote this passage

That said, I can understand why people looking at our 2023 bottom-line results might find my excitement odd. After all, we’re ending last year
with operating earnings of just $1.1 million, and an after-tax net loss of $1.3 million. And because our Shared Success allocations to members and
communities depend on our profits, there will be no Shared Success dividends disbursed to members this year. This comes after a record Shared Success allocation over the last two years.

The full story is actually in that Message

June 17, 2024
10:55 am
Loonie
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All FIs make mistakes; VanCity is not alone. Just look, for instance, at recent shenanigans at TD, and what it is costing them. There are undoubtedly more mistakes being made in various FIs right now, but we don't know about them.

that said, it sounds like it's a good time for RetirEd to review his portfolio, long and short goals and risk tolerance. Maybe a different mix would be preferable now.

June 18, 2024
6:55 am
Bill
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Personally in general I stay away from credit unions. Based on their small market share they seem to have an inordinate number of issues compared to the big banks, as I've learned reading this site over the years. But I get why some folks like them.

June 18, 2024
8:06 am
RetirEd
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Bill: VanCity is pretty huge, small only compared to the big banks.

Yes, I've noted in the past that VanCity seems to screw slightly more than most, but always cleans up without a fight. I'm under 5% of assets with them, though. Enough to hurt if it all goes sideways, still. I do constant reviews of my assets through the year, which is why I come here often.

AltaRed: Thanks for pointing that out. I'd read it as only applying to their organizational handouts. At least I'll still have their JumpStart bonus from earlier this year!

RetirEd

June 18, 2024
9:31 am
Rail Baron
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It took a couple of attempts, but I succeeded in getting a form to redeem my Class B shares and transfer the funds to my chequing account.

First, I was sent a form that showed a redemption value of 10 times my share holding! I wonder what would have happened if I'd signed and returned that form?

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