Way bigger = way better

To continue my big bank rant theme, today's Financial Post features an article proclaiming that the Bank of Canada thinks that the big banks would be better if they were allowed to continue to merge.

I agree, let's get them as big as possible. Let's combine the assets of RBC, TD Canada Trust, Scotiabank, BMO and CIBC and make the biggest, hugest, most-gigantic financial institution ever!

If we all get together and talk to our local Members of Parliament to get this concept green-lit, maybe then the general public will finally get why credit unions are superior. This could be my best idea yet. Are you with me?

Tim

P.S. Then we could all band together and convince the new RBCTDBMOCIBCBNS to loan $218 trillion to that decessed guy who needs to pay off his cell phone bill or face legal charges. Brilliant!

Are small credit unions just merger bait?

A couple of weeks ago, I attended the Marketing Association for Credit Unions' (MACU) Achievement in Marketing Excellence (AIME) awards in Banff, Alberta. Greg Longster, CGI Canada's National Vice President, Sales and Marketing, was the emcee.

Greg is a six-time AIME award winner himself from his time as Marketing Manager at Evergreen Savings on Vancouver Island. He's also a funny guy who makes a great emcee.

Greg rolled into the awards by explaining the award divisions.

Division 4: $1 billion and more in assets under administration: "The really big guys"

Division 3: $451 million to $1 billion in assets under administration: "The big guys"

Division 2: $201 million to $450 million in assets under administration: "The getting big guys"

Division 1: under $200 million in assets under administration: "The merger targets"

This was followed by a mixture of boo's and laughter. If you are part of a small credit union, what do you think? Is your credit union just merger bait, or is it a strong viable local institution? I'd love to hear what you think.

By the way, here's a link to this year's AIME award winners. There was some really great stuff from the really big guys to the merger targets!

Tim

Getting bigger, but are credit unions getting better?

Business in Vancouver just published its 100 biggest private companies in BC issue. On the list are BC's five biggest credit unions. Also included in the supplement was a story on our flourishing credit unions. As you can see by the chart, assets under management have more than doubled in the past ten years.

However, what I find most interesting is the (almost invisible) light red line that shows the number of credit unions in British Columbia has been cut in half due to on-going mergers and acquisitions.

Here is an excerpt from the story:

According to the 2005 study by the Federal Reserve Bank of San Francisco, larger credit unions have lower average costs and greater returns on assets as their economies of scale increase. It noted that some of the largest credit unions have as much as double the returns on assets as a medium-sized credit union. Some of the smallest credit unions in the U.S. didn't even make a profit, according to the study.

"It relates to the cost of doing business, whether it be technology or other costs," said Rowland Kelly, Credit Union of BC's interim CEO. "Being a $3 billion organization, you can drive financial benefits from merging."

While consolidation will likely continue, both at the retail level with the individual credit unions and at the wholesale level with provincial credit union centrals merging, don't expect credit unions to become anything like banks.

"We're still, for the most part, relatively small financial institutions," Kelly said, "and we have a long way to go to become a Royal Bank or TD Bank, so I think that the risk of loss of that localness is not on the horizon."

I am saddened by this article. I have a major sweet spot for small credit unions. I love the social impact and the whole fabric of the community thing. Is economy-of-scale the end-all-be-all or is there something else that we are missing?

So I ask you: is the small credit union a thing of the past? Should we not be worried about a loss of localness? Is bigger always better? Is a 10-credit union system inevitable? Is anyone else out there worried about the credit union movement's soul?

Tim