Merger discussions are underway | Page 2 | Hubert Financial | Discussion forum

DGCM says unlimited funds guarantee,
CDIC is 100k

https://vancouversun.com/opinion/ross-gentleman-collapse-of-canadas-largest-co-op-has-lessons-for-members-of-b-c-s-credit-unions is a bit of a counter-argument, using MEC (non-financial) as an example of larger expansionist motivations being its downfall. Recognizing this article is an Op-Ed (Opinion), the author uses it as an argument against the very large CUs in BC

Like MEC, big credit unions are enamoured with growth. The growth agenda is driven by a few factors, not least of which is the interests of executive managers. Managers want growth to enhance their status, justify better compensation, and boost future career opportunities. Those interests do not always align nicely with the interests of member owners. MEC grew quickly, adding new product lines, locations, and members. But MEC lost its connection to the outdoor community, and that community lost control of the business

Some of that is true but the fact of the matter is that more than 300 CUs in BC in 1960 have already declined to 42 in late October 2020, and more amalgamations will occur. There probably is a sweet spot when a certain size is warranted for efficiencies and economies of scale, but that the very large just become "another bank" disconnected with their members. The attempt to merge 6 CUs in SE BC failed (as discussed in another thread) but ultimately those 6 will likely find a way, slowly over time, to become one through a number of intermediate steps. Given my (and Dean's) familiarity with this part of the country, it makes all the sense in the world for this area to be served by only one robust viable CU with a range of products and services and a larger lending territory.

I don't think it should be about 'competing' with the big banks at all. I think it should be about being an efficient and competitive fintech in its regional sphere.

AltaRed said
Some of that is true but the fact of the matter is that more than 300 CUs in BC in 1960 have already declined to 42 in late October 2020, and more amalgamations will occur. There probably is a sweet spot when a certain size is warranted for efficiencies and economies of scale, but that the very large just become "another bank" disconnected with their members. The attempt to merge 6 CUs in SE BC failed (as discussed in another thread) but ultimately those 6 will likely find a way, slowly over time, to become one through a number of intermediate steps. Given my (and Dean's) familiarity with this part of the country, it makes all the sense in the world for this area to be served by only one robust viable CU with a range of products and services and a larger lending territory.

I don't think it should be about 'competing' with the big banks at all. I think it should be about being an efficient and competitive fintech in its regional sphere.  

I think we've hit that "sweet spot" for efficiency gains. Either that or the credit unions, perhaps owing to not having sufficiently qualified executive talent that the banks have (remember, they have CEOs that moved up the ranks from branch manager), are just very bad at executing merger plans. With every proposed merger, First West Credit Union has talked about bring their efficiency ratio down from the 75-80% to something that was closer to the larger banks (50-70%). I don't think they've hit 70% for a number of years, let alone into the mid sixties where they were targeting. It's often risen, and they're paying their sub-par executive management large bank-size paycheques despite not being worth the fatter paycheques.

As a result, I'm less inclined to favour outright mergers, and would rather see increased centralization of services, perhaps to the credit union central, or their third-party service providers. For example, perhaps their HR and I.T. departments could be completely outsourced to Central 1, or some other provider. Public relations could also be a target for outsourcing, but in terms of actual mergers of legal operating entities, I don't see the benefits anymore, as they just haven't materialized.

As well, an inherent flaw in the argument is that management, unable to achieve the promised efficiencies, invariably goes to the low hanging fruit of branch closures. That's problematic and devastating on small towns. So I think a rethink is needed, get credit unions' "back to their roots" and instead of focused on increasing the bottom line, for which they've seen mixed results, to focus on "not losing money." That is to say, credit unions should operate on the basis of breaking even or, at least, providing a modest surplus that can be redeployed into reserves to provide an income cushion for lean years.

Cheers,
Doug