2022-03-17
Credit unions have boosted their business lending, however the sector is to face new challenges
According to the latest data, the credit union sector earned an unaudited profit of €9.5 million in 2021, i.e. €3.2 million more than in 2020. The result was driven by a strong growth in lending, especially for business purposes.
“Credit unions have successfully withstood the challenges of the COVID-19 pandemic, started to lend more to businesses, especially to small and medium-sized enterprises, and improved the quality of loans. But new challenges lie ahead related to both geopolitical and economic factors. Therefore, it is of key importance for credit unions to properly monitor and assess the credit risk and liquidity situation,” says Renata Bagdonienė, Director of the Banking and Insurance Supervision Department of the Bank of Lithuania.
57 credit unions that operated profitably earned a profit of €9.6 million, while 3 credit unions incurred a loss of €0.1 million. However, 21 credit unions had accumulated retained losses of €5.2 million in the previous year and need to further improve their operational efficiency.
At the end of 2021, Lithuanian credit unions had granted a total of €797.8 million in loans: almost €600 million to individuals and almost €200 million to businesses. The net value of granted loans increased by €132.8 million or 20% year-on-year.
Lending to businesses increased by 48% – credit unions increased their lending to businesses by €64.2 million compared to the year 2020. Loans to individuals (members of credit unions) went up by €68.6 million or by 13%. Due to active lending, credit unions increased their net interest income by 17% and net service and fee income went up by 22%. Same as in the previous year, interest income comprised the largest share of credit union income (79%). The largest share of expenditure in the reference period (63.8%) was accounted for by operational expenditure, which increased by 18.5% compared to 2020.
The quality of loans issued by credit unions continued to improve: the share of loans overdue more than 60 days went down from 2.7% to 1.9%, while the share of non-performing loans decreased from 8.8% to 8.4%.
In 2021, the credit unions’ assets grew by 16% and, according to the data of unaudited reports, amounted to €1.1 billion or 2.6% of the banking sector’s assets. The change in the amount of the sector's assets was determined by the growth of demand and time deposits.
Deposits grew by almost 14% in 2021 and amounted to almost €960 million at the end of the year. Most of which, €664.1 million, were time deposits. Demand deposits grew in the second half of 2021, when members of credit unions started to receive proceeds from the sale of agricultural products, and amounted to €295.8 million.
Three credit union groups are currently operating in Lithuania: the Lithuanian Central Credit Union (LCCU) group uniting 45 credit unions, the United Central Credit Union (UCCU) group uniting 11 credit unions, and 4 credit unions undergoing restructuring – 60 credit unions in total uniting almost 168 thousand members.
All credit unions, both central and individual ones, complied with all prudential requirements. Besides the provision of financial services to their members, central credit unions monitored and reviewed their risk-taking and maintained their liquidity on an as-needed basis.
The latest performance indicators of credit unions are available here.
Review of the Credit Union Sector (2021)