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transcript
Benchmarking
Survey Results
RONAN KILBANE, AUDIT PARTNER
1
1st May 2019
Benchmarking 2019 - Survey Context
> 9th Annual Benchmarking Survey
> Responses from 60 Credit Unions
> Sample of Credit Unions represented €4.342B or 25% of total
asset size of Credit Union movement in the State
> Certain financial data: Results for 30 September 2018 with
comparatives for 30 September 2017 from annual reports
> Contributions from Credit Unions ranging in size from under €10m
to €400m +
> Mix of Community based and Industrial Credit Unions
2
Highlights: Key Survey Findings
> Loan Book Growth
> Marketing / Business development?
> HR - Continuing area of challenge
> Still concerns over viability for certain
Credit Unions
> Is your Board optimising its effectiveness?
> Members shares continuing to grow more than expected
3
Financials
4
Gross Loan Book as a % of Assets
0%
5%
10%
15%
20%
25%
30%
2018
2017
2016
29%27%
30%
5
Financials - Investment Performance
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
2018 2017 2016
1.70% 2.15% 2.78%
6
Loan Repayment Ratio - Community
40%
33%
24%
41%
34%
26%
0% 10% 20% 30% 40% 50%
Highest
Average
Lowest
2018
2017
7
Loan Repayment Ratio - Industrial
35%
31%
27%
34%
30%
25%
0% 10% 20% 30% 40%
Highest
Average
Lowest
2018
2017
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Average Interest Rate on Loans
Findings from our Survey
Community Industrial
2018 2017 2018 2017
Average Interest Rate 8.9% 8.7% 7.4% 7.8%
Highest Average Interest Rate 10.9% 11.8% 11.1% 11.2%
Lowest Average Interest Rate 6.7% 6.1% 5.2% 5.4%
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Dividends – Did your CU pay a Dividend?
10
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2018 2017 2016
97% 100% 100%
3% 0% 0%
Yes
No
Financials - Dividend Rates
27.0%
35.1%
18.9%
5.4%
13.5%
60.0%
16.7%
13.3%
6.7%
3.3%
-5.0%
5.0%
15.0%
25.0%
35.0%
45.0%
55.0%
65.0%
0 - 0.125% 0.125 - 0.25% 0.25 - 0.5% 0.5 - 0.75% 0.75 - 1%
2018
2017
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Wages % of Income
Findings from our survey
Community Industrial
2018 2017 2018 2017
Average Wages/Income ratio 31% 29% 23% 22%
Highest Wages/Income ratio 49% 45% 32% 32%
Lowest Wages/Income ratio 21% 20% 15% 13%
27.0% 27.3% 24.0% 19.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
2018 2017 2016 2015
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Survey Financial KPI’s
2018 2017
Average
Reserve Ratio 17% 16%
Expense to Income Ratio 67% 65%
Bad Debt Provision as a %
of the Loan Book6% 6%
2018 2017
Highest
24% 26%
101% 93%
14% 18%
2018 2017
Lowest
13% 13%
38% 32%
1% 1%
Community
Industrial2018 2017
Average
Reserve Ratio 17% 17%
Expense to Income Ratio 63% 61%
Bad Debt Provision as a %
of the Loan Book4% 3%
2018 2017
Highest
20% 21%
79% 80%
8% 9%
2018 2017
Lowest
13% 13%
43% 40%
1% 1%
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Loan Book
14
Loan Book Growth
Average
2018 2017
Loans Issued Growth 8% 12%
Loan Book Growth 12% 7%
Highest
2018 2017
23% 27%
20% 21%
Industrial
Average
2018 2017
Loans Issued Growth 7% 10%
Loan Book Growth 9% 13%
Community
Lowest
2018 2017
(16%) (5%)
(9%) (10%)
Highest
2018 2017
39% 41%
36% 21%
15
Lowest
2018 2017
(4%) (6%)
3% 1%
Findings from our survey
> In terms of growing the loan book, only
30.4% of participants scored
themselves as ‘Doing Enough’ a
reduction when compared to 35.1% at
the same time last year
> 15.2% of participants feel they are ‘Not
Doing Enough’ to grow the loan book a
reduction from 21.6% at the same time
last year
> 54.4% of participants would describe
themselves as being in the middle of the
road in growing their loan book.
Loan Book Growth
65.2%34.8%
Loan Book growth more or less than expected in 2018
More Less
16
41%
25%
14%
8%6%
4%
34%
28%
13%11%
6%4%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
HomeImprovement
Car Special RateLoans
Covered Loans Mortgages Agri Loans
2018
2017
What is the Fastest Growing Loan Type?
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Regulatory Compliance
18
Regulatory Compliance
How are your regulatory functions resourced?
2018
Function In-house Outsourced Shared
Internal Audit 0% 100% 0%
Risk Management 46% 50% 4%
Compliance 52% 44% 4%
Data Protection 65% 33% 2%
2017
Function In-house Outsourced Shared
Internal Audit 0% 100% 0%
Risk Management 58% 42% 0%
Compliance 67% 33% 0%
Data Protection 64% 36% 0%
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Obstacles to Embedding these
Functions noted from Credit Unions
> Regulatory Changes
> Time and Resources
> Skills, Knowledge and Training
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Top Risks Noted from Credit Unions
21
24%
19%
17%
11%
8%6%
4%
23%
14%
11%
8%
17%
4%
7%
0%
5%
10%
15%
20%
25%
30%
Loan Book Growth IT & Cyber Security StrategyImplementation
Succession Planning /Key Person
Dependency
Data Protection /GDPR
Poor range of ServiceOfferings
AML
2018
2017
Member Shares
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Percentage Increase in Member Shares
11%
21%
45%
16%
8%8%
15%
54%
15%
8%
0%
10%
20%
30%
40%
50%
60%
0-2% 2-5% 5-10% >10% Decrease
2018
2017
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Cap on Shares
62.0%38.0%
Introduction of a Cap
Yes No
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Findings from our survey
> 62% of respondents say they have
introduced a cap on shares.
> The following strategies for tackling Share
Growth have been used by Credit Unions:
> Savings Cap on New Deposits – 42%
> Dividend Rate – 22%
> Deposit Account – 8%
> Cap and Paying Back – 4%
> Other – 24%
Human Resources
25
Does your Credit Union intend to Increase Wages in next 12 Months?
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Current Year Prior Year
48% 49%
52% 51%
No
Yes
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Top HR priorities
27
24.6%
22.5%
19.0%
12.7%12.0%
5.6%
0.0%
27.0%
23.0%
15.0%13.0%
11.0%
0.0%
11.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Staff Skills /Training
PerformanceManagement
Team Structure LeadershipEffectiveness
Retention /Engagement
Recruitment HR Compliance
Current Year
Prior Year
Biggest Obstacles in Embedding HR Framework
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47.6%
33.3%
28.2%
25.6%26.0%
43.0% 44.0%
50.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
Management Skills &Knowledge
Management Availability Employee Engagement Overall HR Expertise
Current Year
Prior Year
Credit Union Mergers
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CU’s merger plans for the next 3 years
0%
10%
20%
30%
40%
50%
60%
57%
33%
7%4%
None
Other Credit Union merge intoyour Credit Union
Consolidate existing mergers
Merge into a large Credit Union
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Strategy
31
Are there any concerns about viability over the life of the strategic plan?
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Current Year Prior Year
26%36%
74%64%
No
Yes
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Strategic Planning Day – Day taken to review and update Plan
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Current Year Prior Year
70% 67%
30% 33%
No
Yes
33
Effectiveness of Board
How effective is your Board on a
scale of 1 to 5?
> 52% of our sample felt their Board effectiveness was between 60-80%
effective.
> 28% felt Board effectiveness was between 40-60% effective
> 10% rated their Board 20-40% effective.
> Clearly a perception that Boards not as effective as they could be
> Only 10% of our Sample felt their Board was between 80-100% effective.
34
Challenges over the next 24 months
85%
66% 66% 65% 64% 62% 62%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Growing Loan Book Cost Control and Branch Profitability
IT Infrastructure New Loan Product Offerings
Strategic Plan Implementation Effectiveness of your Board
Banking and On-Line Services
35
Marketing
36
Do you have a specific and separate Marketing / Business Development Function?
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Current Year Prior Year
67% 65%
33% 35%
No
Yes
37
Marketing Budget as a % of Total Income
0%
10%
20%
30%
40%
50%
60%
0 - 2%3 - 5%
> 5%
48%
41%
11%
51%
41%
8%
Current Year
Prior Year
38
Respondents with a Strategic Marketing Plan for growing the loan book
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Current Year Prior Year
59%70%
41%30%
No
Yes
39
Marketing & Business Development
How effective is your Marketing
Business Development function
on a scale of 1 to 5?
> 17% felt that the function was between 60-80% effective
> 59% felt that the function was 40-60% effective
> 11% felt the function was 20-40% effective
> 9% felt the function was 0-20% effective
> Only 4% of respondents felt the function was 80-100% effective.
40
Has your Credit Union collaborated with
Other CU's on Innovative Products
0%
20%
40%
60%
80%
100%
Current Year Prior Year
46% 49%
54% 51%
No
Yes
41
Effectiveness of Initiatives undertaken to grow the Loan Book - 2019
42
Special purposeloans
Dedicated stafffor loan book
growthSocial Media
Printadvertising ofspecific loans
Staff training onup-selling
Targetedcirculars tomembers
Memberresearch
Radioadvertising of
CU
Interactionswith localbusinesses
Sponsorship
Current Year 74% 70% 65% 62% 60% 59% 53% 49% 47% 46%
Prior Year 72% 62% 68% 60% 0% 58% 0% 0% 0% 56%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Summary & Conclusion
POSITIVES
> Loan Book growth positive, increasing loans to asset ratio.
> Less concerns over viability
> Reserves levels are strong
> Bad debt provision ratios falling representing better quality lending
AREAS FOR IMPROVEMENT
> Optimising Loan book growth- Marketing and Business development
> Perception of Board effectiveness
> Strategic Planning and taking a day out
> Collaboration
> Regulatory Compliance: Correct mix of Skills/Expertise/Resources? Outsourcing considered?
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@RBK
@RBKCA
@RBK
www.rbk.ie
Thank you
Disclaimer
While every effort has been made to ensure the accuracy of information within this publication is correct at the time of going to print, Russell Brennan Keane do not accept any responsibility for any errors, omissions or misinformation whatsoever in this publication and shall have no liability whatsoever. The information contained in this publication is not intended to be an advice on any particular matter. No reader should act on the basis of any matter contained in this publication without appropriate professional advice.
Ronan Kilbane
Audit Partner
RBK
T: +353 (01) 6440100
E: rkilbane@rbk.ie