CUNA economists believe credit unions are still on track for an excellent year—barring war by means of weapons or trade.
While double-digit loan growth is expected to continue this year, CUNA is now dialing back its economic growth prediction to 2.3% for 2017.
The week after President Trump’s inauguration, CUNA raised its 2017 economic growth forecast to 2.5%, up from the 2.4% prediction in December. CUNA economist Mike Schenk then tempered his optimism with concerns about a trade war.
On Wednesday, Schenk broadened his concern. “Developments from Russia to Syria and North Korea raise grave concerns about possible military conflict, raising both investor and consumer anxiety, and threatening the economy’s ability to perform as expected.”
Schenk cited three worrying recent reports: smaller-than-expected job gains in March, weak retail sales and softening inflation pressures.
“At the moment, our baseline forecast reflects the expectation that saber-rattling — or worse — takes a backseat to diplomacy and that election-year rhetoric is replaced by more thoughtful trade policies,” he said.
The monthly CUNA Economic Outlook report also forecasts:
- The 10-year Treasury interest rate will rise slower than previously predicted because of the greater “economic and political uncertainty,” ending 2017 at 2.8% and 2018 at 3.5%
- Inflation to average 2.5% in 2017, and 2.3% in 2018.
- Overall credit union loan growth, which has topped 10% in each of the last three years, will reach 10% this year, and slow to 9% in 2018.
- Credit union savings balances will grow 5.5% in 2017 and 5% in 2018.
- Memberships will rise 3.5% in 2017 and 3% in 2018, slowing from 2016’s “astounding 4.1% rate” as memberships from indirect auto lending decline.
- Delinquency rates will remain about same as the past three years: 0.80% this year and 0.85% in 2018.
- Net charge-offs this year are expected to be 0.55%, matching 2016, and rising to 0.60% in 2018.
- Return on assets is expected to remain in the range they have for the past four years: 0.75% in 2017, and 0.80% in 2018.
“Strong labor markets, bigger income gains, and strong loan growth is the recipe for healthy credit union asset quality,” Schenk said.
Meanwhile, the CUNA Mutual Group’s Credit Union Trends Report showed that total loan balances reached $901.9 billion by Feb. 28, up 11.5% from a year earlier. Leaders were car loans, growing 15.1% to $311.2 billion, and member business loans, growing 25.8% to $68.7 billion.
Other portfolio highlights for February compared with a year earlier:
- New car loans grew 18.2% to $122.2 billion
- Used car loans grew 13.2% to $189 billion
- Credit cards grew 7.6% to $52.3 billion
- First-lien mortgages grew 10.2% to $364.3 billion
- Second-lien mortgages grew 3.9% to $79.4 billion
