Credit unions’ ratings tumble — includes chart

“There’s huge restructuring going on at the regional and national level,” says Joanne De Laurentiis, president and CEO of Toronto-based Credit Union Central of Canada. “This is in support of putting credit unions in a position where they can provide broader services for members and become full financial institutions. There’s an eagerness and ability on the part of credit unions to be a solid alternative to banks across Canada.”

Last year, the credit union group, which does not include Quebec-based caisses populaires, was surveyed in the Account Managers’ Report Card for the first time and finished second with an IE rating of 7.7, behind Royal Bank of Canada‘s 8.2 rating.

This year, however, credit unions turned in an average 7.2 rating, dropping the group to fifth place behind Bank of Nova Scotia, Royal Bank, Bank of Montreal and TD Canada Trust, but ahead of National Bank of Canada, CIBC and Laurentian Bank of Canada.

Credit unions saw their sharpest drop in “strategic focus.” The rating for the category fell to 7.2 from 9.0 last year. Other significant declines included a 1.7-point drop in the “firm’s research” category to 5.5 and a 1.4-point decline in the “Web for clients” category to 5.9. Only two of the 19 categories — legal/compliance and client service — showed an increase over 2002 results but, as expected, credit unions posted strong results in the client service and ethics categories.

Among the credit union account managers interviewed, many applauded traditional credit union strengths of going the extra mile for their clients and the group’s strong record of community involvement. On the other hand, their concerns centred on credit unions keeping pace with financial services technology and a perception there are not as many opportunities for career advancement when compared with the larger chartered banks.

Asked in the survey: “What is the best reason to work for your firm?” a credit union account manager in Manitoba replied: “The honesty. We look out for clients’ interests, not our own.” Another account manager in Ontario added: “The services offered to the community.”

However, while the vast majority of credit union account managers said they would not leave for other firms, one in British Columbia remarked: “They need to sharpen their pencils on technology, especially for clients.” Another at an Ontario credit union said: “There is no room for personal growth.”

De Laurentiis says she understands why some account managers may have rated their credit unions lower this year. “When you have credit union mergers and new ventures happening to the extent we have, this puts a number of questions in the minds of staff about things such as strategic focus,” she says. “But I suspect this decline is a temporary blip.”

At the heart of that focus is the need to grow against competition from the chartered banks.

“Our challenge is to make our members see credit unions as a true alternative to traditional banks,” De Laurentiis says. “The members haven’t yet made the leap to the extent we’d like them to, and although our wealth-management sector is growing nicely we still have to raise member awareness about growing sectors such as wealth management and small- business lending.”

Adds Wayne Nygren, president and CEO of the Credit Union Central of British Columbia: “Our strategy and challenge is to be all-encompassing to all our members.”

He says one of the primary ways credit unions are meeting this challenge is by restructuring back-office distribution systems. A proposed merger of wholesale financial services operations of B.C. Central and Credit Union Central of Ontario is being completed. It will place functions such as liquidity, payments operations and wholesale lending into a separate federally regulated organization. Benefits will include cost savings and ability to move funds effortlessly across provincial borders.

Nygren says the final hurdle will be amending credit union legislation in both provinces — expected later this year or early in 2004.