Manitoba’s credit unions are merging at a rate not seen in a quarter-century. Some industry players speculate that when the dance card is filled, just a few names will remain to take on the Big Six banks.

Faced with never-ending pressure to cut costs and improve efficiencies while maintaining personalized service, nine of the province’s financial co-operatives have joined the consolidation trend this year in a trio of marriages. That’s the most since 1982.

The biggest merger will see five southwestern Manitoba credit unions — Tiger Hills Credit Union, Virden Credit Union, Turtle Mountain Credit Union, Cypress River Credit Union and Hartney Credit Union — become SunRise Credit Union, the eighth-biggest in the province, with more than $425 million in assets under administration, effective Oct. 1.

The quintet weren’t under any immediate financial pressure, says Harry Bowler, CEO of Tiger Hills, but they felt such a move would be necessary at some point. And more mergers are on the horizon. “In 10 years, I think, there will be a lot fewer credit unions in Manitoba,” he says. “If there were 10 or 20, that wouldn’t surprise me.”

After factoring in the mergers of the Buffalo and Assiniboine credit unions and the Alliance and Belgian credit unions earlier this year, there are 48 credit unions in the province, down from 68 a decade ago, says Garth Manness, CEO of the Credit Union Central of Manitoba. During that time, the number of branches increased to 180 from 163.

The system remains strong in Manitoba, he adds; slightly less than half the population belong to a credit union.

“It’s always possible credit unions will decide they have some complementary business opportunities by coming together,” Manness says.

Judging by activity in other provinces, Bowler says, mergers will no longer be restricted to small players joining forces with each other or big institutions swallowing tiny ones. He points to the marriage, earlier this year, of three of Alberta’s larger credit unions: Community Savings Credit Union, Common Wealth Credit Union and Servus Credit Union, creating the third-biggest financial co-operative in the country, with more than $10 billion in AUA.

“LITTLE ENGINE”

Jeff Mulligan, president and CEO of Common Wealth, says the burning question for credit unions across the country today is whether they can grow while maintaining the “look and feel” that sets them apart from banks.

“If you say we need the very best practices and to get the scope and scale of a bank, pretty soon you’re going to be not quite as big or as good as a bank,” he says. “You’ll be the ‘little engine that could’ in banking, but you won’t be an institution in which you achieve what you’re trying to achieve.

“We’re trying to find a way for the credit union way of banking to endure,” he adds. “You’re in danger of losing that every time you make a merger if you take your eye off the prize.”

Mulligan predicts that within the next 15 years, the credit union system will operate under a franchise model. “It could be services provided by one massive credit union,” he says. “Over time, the only way to get scope and scale required to compete and provide value is to create one processing centre.”

Mulligan also predicts bank mergers will re-emerge as a national issue as soon as either the federal Liberals or Conservatives can surge ahead in popularity and form a majority government.

“Credit unions want to be there as the second-tier provider rather than encouraging foreign banks to come to Canada in a big way,” Mulligan says. “We won’t pull out of rural areas, and foreign banks won’t put a branch in [small communities]. Credit unions have to become more than they are today.”

There’s no stopping the marriage trend in the credit union sector, says Dan Richards, president of Strategic Imperatives Ltd. of Toronto. “It takes scale to compete in a way that wasn’t the case historically,” he says. “As a little guy with one or two branches, you might have been fine in the past. In the future, you can’t cut it with that model.

“You’re going to need scale, infrastructure, technology and management — none of which were critical in the past, but they’re essential going forward,” he adds. “Just as the days of the Mom and Pop corner store are behind us, so, too, are the days of the one- and two-branch financial services institutions.”

@page_break@Sentimentalists may shed a tear as their credit union name disappears from the landscape forever, Richards says, but it’s remarkable how quickly many consumers will adjust to the new reality. IE