The NCUSIF / Corporate CU restructuring plan will cost .15 basis points per year over the next 7 years, probably more. In addition, some corporates are writing down their capital; this will be handed down to natural persons CUs and cannot be recovered.
Increasing loan losses related to job losses and sluggish economic growth continue to be a concern. Unknown how deep the problem can go.
Interest margin pressures are a real concern. Deposit rates can move up much faster than loan rates.
Mortgage rates are being manipulated and are artificially low right now. Jack Brick’s (Brick and Associates) challenge question: “Do you really want to play in this Game”? Low yielding long-term mortgages and mortgage backed investments present risk of both lost income and market value risks when rates move north.
Increasing loan losses related to job losses and sluggish economic growth continue to be a concern. Unknown how deep the problem can go.
Interest margin pressures are a real concern. Deposit rates can move up much faster than loan rates.
Mortgage rates are being manipulated and are artificially low right now. Jack Brick’s (Brick and Associates) challenge question: “Do you really want to play in this Game”? Low yielding long-term mortgages and mortgage backed investments present risk of both lost income and market value risks when rates move north.
Bankruptcy “Cram-down” proposals were defeated in Congress for now, but may be coming back.
Interest rate risk is a major concern. Credit unions with a large percentage of long-term loan and investment assets are at risk. Brick cautions against reaching for yield in a low-yield environment.
Business loans can be an opportunity or an emerging problem. Brick warns against doing business loans as a “Hail Mary Pass” out of desperation for net income. Few CUs have the expertise and the market is risky as ever right now.
Loan modifications in problem loans – credit unions are finding that they don’t usually work unless there is underlying good credit, at least 20% equity in the collateral, etc.
New branches now take about ten years to start being profitable - be realistic in your analysis. Switching financial institutions is not a high priority with anyone, says Brick; few will switch because of a new facility.
Liquidity can be a major risk. Money Market accounts are projected to exceed recent 4.5% 15 year mortgages at some point. Selling mortgages or mortgage backed investments later will not be an option to fix a liquidity problem.
The pace of new regulations has been picking up with no abatement in sight. This can be a drag on efficiency and earnings.
President Obama hosted a conference of all the Native American tribes. I know the U.S. economy's in bad shape, but Obama told the Indians, 'Look, you can have the country back. Okay, fine.' –Jay Leno
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