Ontario credit unions grow assets despite squeezed profit margins
According to FSRA's Q3 2024-25 Sector Outlook Report, Ontario’s credit unions grew their assets, but profit margins remain under pressure.
This is mainly because while loan interest income for credit unions was up and investment income was up slightly, these gains were more than offset by interest that was paid on deposits.
The Report highlights several key developments within Ontario's credit union sector.
Portfolio growth:
Year-over-year, several credit union portfolios demonstrated notable growth: Cash and investments expanded by 21%; Personal loans increased by 4.3%; Residential mortgage loans grew by 1.8%; Commercial loans saw an increase of 4.7%; and Agricultural loans rose by 9.8%
Outlook:
The Bank of Canada (BoC) reduced the benchmark rate by 1.25% over the span of four months, signaling a shift in policy focus towards mitigating risks. This reduction is expected to support a recovery in credit unions' profitability. However, the broader economic outlook remains subdued, posing ongoing challenges for asset growth in the near term.
Here are some other key findings:
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sector assets totaled $98.7 billion at the end of the quarter, reflecting a year-over-year increase of $4.4 billion (up 4.6%)
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Profitability in 3Q-2024, as measured by Return on Average Assets (ROAA), was 21 bps and remained flat compared with last quarter. ROAA is 1 bps higher from last year, however, the methodology change of ROAA accounts for 5 bps to ROAA level, which means year-over-year ROAA actually dropped by 4 bps on a comparable basis.
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30-day delinquency on residential mortgages (which, at $54.6 billion, represents 55.3% of sector assets) was 72 bps, up 29 bps year-over-year and up 9 bps from last quarter.
FSRA publishes Sector Outlook reports for the credit union sector every quarter. They provide an analysis and commentary on the economy and financial results in Ontario’s credit union sector.
Note: Q2 2024 Sector Outlook Report Financial Highlights have been updated to ensure consistency across different reports. Net interest income and Net income for Q2 2024 have been adjusted for Dividend in Retained Earnings.
Learn more:
FSRA continues to work on behalf of all stakeholders, including consumers, to ensure financial safety, fairness, and choice for everyone.
Learn more at www.fsrao.ca.