The merger mania that has swept among credit unions in Canada for more than a decade has now spread to Nova Scotia with the proposed amalgamation of the province’s largest credit union, Credit Union Atlantic, with Halifax Civic Credit Union Ltd.

The merger — which would result in a firm with 16,000 customers and assets of $250 million —will be beneficial for CUA both in the short term and in the long term, says its president and CEO Jamie Baillie.

“The financial services market is becoming increasingly competitive and segmented, with market players that include the traditional banks, online banking alternatives as well as emerging niche players,” he says. “By merging, we can offer our members more products and services, at a better price and with lower operating costs as we redefine our own position in the market.”

As for the HCCU, which has been in existence since 1938, the proposed merger would open the door for the credit union to offer wealth-management services as well as enable it to expand its ATM network and make its back-office operations more efficient, says general manager Gary Greeley. “We think we can do better together.”

HCCU has been contemplating a merger for a while. The credit union explored another opportunity several years ago, but determined the timing wasn’t right. Its current negotiations with CUA have been underway for at least 12 months.

A detailed merger agreement has now been reached and will soon be presented to the respective boards of directors for approval. Then, the customer-owners have to give their stamp of approval. It will not be a rubber stamp.

“Members will have concerns,” Greeley says. “It’s up to the credit unions to present the business case to address those concerns.”

The business case is strong. In addition to expanded services and lower costs, there will be no job losses and members will have access to eight branches throughout the Halifax area. Customers will also have access to more specialized staff, notes Baillie, while employees will have access to more career opportunities as well as the opportunity to spend more time dealing directly with customers.

Ultimately, “we want to make sure customer-owners get more than what we have to offer alone,” Greeley says.

Other credit unions have found such assurances — with alacrity. “Mergers have been common over the past decade as credit unions join forces to become large enough to provide new services and take advantage of technology,” says Art Chamberlain, manager of media relations and public relations with Credit Union Central of Canada in Toronto. “There are advantages to being large enough to afford new technology and take advantage of the efficiencies they permit.”

At the end of 2001, the last year for which figures are available from the federal Department of Finance, there were 681 credit unions and 914 caisses populaires in this country. This is in sharp contrast to the roughly 2,700 credit unions that dotted the landscape a decade earlier.

The decline in numbers does not reflect a decline in popularity. In fact, the reverse appears true. Canada has the highest per capita membership in credit unions of any country in the world. More than 10 million Canadians — roughly one-third of the entire population — belong to a credit union. Department of Finance data indicate that membership is strongest in Quebec, in which 70% of the population belongs to a caisse populaire, and in Saskatchewan, where close to 60% of residents are customers.

Amalgamation has also not hampered growth. In 2001, the 1,595 credit unions in this country collectively boasted more than 3,600 locations and 4,100 ATMs. Assets are also increasing. In Ontario, for example, the number of credit unions was cut almost in half between 1991 and 2001 while average assets more than doubled to more than $14 billion.

Credit unions and caisses populaires have not just been adept at merging, they also have a proven track record for recognizing other growth opportunities. In 2000 and 2001, for instance, credit unions in British Columbia, Manitoba, Saskatchewan, Alberta, New Brunswick and Nova Scotia snapped up 72 bank branches in communities in which the Big Six banks had shut down operations.

Despite the winning track record — or perhaps because of it — credit unions are in no hurry to seal a deal when a merger opportunity arises. First, like all good bankers, they want to dot all their Is and cross all their Ts. CUA and HCCU have been talking about merging for a year now and a proposal has yet to land on a boardroom table.

@page_break@The prize for waiting with bated breath, however, goes to the Credit Union Central of British Columbia and Credit Union Central of Ontario. The two announced their merger in October 2006 with a closing date of one year. That date was subsequently extended to Dec. 31, 2007, and has now been stretched to July 1 — but even that timeline is not firm.

The reason for the hold-up? Valuation issues in the non-bank asset-backed commercial paper. IE