Strong surplus – no dividend for members of large credit union with Laois branches

There will be no dividend or loan interest discounts for Laois Kilkenny St Canice Credit Union members this year.

The reasons given by management to members are global factors such as low interest rates and changes in consumer behavior caused by the pandemic, as well as the need to avoid new caps on equities.

The bad news was announced at the Kilkenny Credit Union AGM during the AGM which took place online last Tuesday evening, January 11. The Kilkenny-founded credit union has expanded into Laois in recent years and now has branches in Durrow, Rathdowney and Mountrath.

Speaking to members, CEO Carmel Butler and Chairman of the Board Vincent Kenrick said it had been a successful year for the credit union in many ways, also acknowledging that the dividend at 0 % can be disappointing for some. Mr. Kenrick said this was a difficult decision and was not taken lightly by the Board, but was in the best interests of the members.

“I believe it’s the only responsible option right now,” he told the meeting.

Despite the circumstances, Mr. Kenrick said, the credit union performed very well in 2021. However, he noted, prior concerns remained, namely the need to control asset growth and increase the loan portfolio. Areas of concern include global issues such as lack of consumer spending and increased savings, which affect institutions at the local level.

Caisse Populaire de St Canice recorded a surplus for the year of €3.5m for the year, an increase of nearly €1m on 2020. The past year also saw the introduction of a share cap of €30,000 per member, which the Caisse Populaire was required to ensure financial viability. This had the effect of limiting the flow of new funds into the Credit Union, and CEO Carmel Butler said that to avoid new equity caps, the Credit Union needed to transfer the excess to its reserves.

The pandemic has resulted in a substantial increase in people’s personal savings. In accordance with Central Bank regulations, 10% of this new savings must be placed in a reserve account. Ms Butler said a certain percentage of the funds are required by law to be held in bank accounts and negative interest rates of almost €20,000 are now applied to these balances.

St Canice has seen a significant reduction in expenditure over the past 12 months which has contributed to the positive surplus. It contains a number of one-time items that probably won’t be here next year, meaning other solutions need to be found to make up the difference.

“We know we have a challenge over the coming year to generate that revenue,” Ms. Butler said.

Low prevailing interest rates mean that the average return on credit union investments is now 0.9%, putting more confidence in loan income. Increased lending will be essential this year.

The council hopes its strategic plan will address the problem of the loan portfolio, with offers such as mortgages, a new Cultivate Agricultural loan and greener housing loans that hope to attract borrowers to the counter. Mr Kenrick said the success of the plan would no doubt depend on which members benefit from these services. He said responsible borrowing not only improves the life of the borrower, but also helps boost the local economy, create local jobs and benefit the wider community.

In terms of emerging trends, Ms Butler said there had been a substantial increase in the number of members using online banking. The number of people physically entering branches has decreased somewhat, but the number of people going digital has doubled. Ms Butler said the Credit Union would still strive to provide face-to-face services, but the expansion of online facilities was important.

Although there is no dividend, in a community-focused gesture, the Credit Union has pledged to provide €250,000 for local community projects, with the application process now open until May 30. . Ms Butler said she was eager to share the details of the success. candidates’ projects next year.

Ms. Butler thanked all members for their patience and thanked all staff for their efforts throughout the year, sentiments echoed by Mr. Kenrick.

On behalf of independent auditor PWC, Siobhan Collier said the numbers showed a strong balance sheet. While Central Bank regulations require 10% savings in a reserve account, the figure is currently 10.6% in St Canice.

Ms Collier said the reduction in revenue was more than offset by cost reductions during the year. The one-time severance package saw salary costs fall by around €300,000, while a number of other expenses, including stock and loan insurance, also fell.

Trevor Darlington, a member of the board’s oversight committee, said the credit union was extremely well run, with a very active and knowledgeable board. He said it was no coincidence that there had been repeated awards for his customer service.

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