Banks have been aggressively targeting local deposits since the global financial crisis.
Melbourne, Australia (PRWEB) June 06, 2014
Like the rest of Australia's Finance subdivision, the Credit Unions industry has been hurt by the global financial crisis and a slowing economy. According to IBISWorld industry analyst Andrei Ivanov, “their mutual status, prudent lending and heavy reliance on deposits for funding have shielded the industry to a large extent, but the past five years have been difficult nonetheless.” As the Australian economy transitions from mining to non-mining sectors, the Reserve Bank of Australia has dropped interest rates to historic lows. This decimated the revenue generated from lending portfolios. Even more detrimental was the effect of credit unions leaving the industry and taking portions of revenue and asset base with them. As a result, industry revenue is forecast to decline at an annualised 7.1% over the five years through 2013-14 to reach $2.9 billion.
However, it is not all bad news for industry players. “Credit unions that remain in the industry are consolidating their position and increasing their market share,” says Ivanov. As a result, average revenue per enterprise is expected to decline over the five years through 2013-14. Declining interest rates have aided industry profitability. Nevertheless, two more credit unions are expected to exit the industry in 2013-14 and further reduce industry revenue by 10.8%. The industry exhibits a medium level of market share concentration. Major companies include Credit Union Australia Ltd and Australian Central Credit Union Ltd.
Credit unions are losing an advantage over the banks that have been aggressively targeting local deposits since the global financial crisis. This has raised competition in the sector, increasing the cost of funding. On the upside, the implementation of the Third Accord of the voluntary regulatory standards (Basel III) in 2013 further increased funding costs for the banks, which are now required to attain larger capitalisation. These costs will be passed on to consumers, making credit unions' lending pricing more competitive. As the economy stabilises, industry revenue is forecast to grow. The moderate level of growth is expected as residential lending stagnates due to mounting housing affordability pressures. As the battle against the banks persists, the trend of consolidating operations will continue. However, as long as the Credit Unions industry continues to extend its brand presence and remains focused on customer satisfaction, there is no reason to expect that it will not grow in its existing markets and even gain customers from the banks.
For more information, visit IBISWorld’s Credit Unions report in Australia industry page.
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IBISWorld industry Report Key Topics
This industry consists of financial institutions known as credit unions or cooperatives, which are owned by their members and provide them with banking services, mainly deposit taking and lending.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
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