If you have not checked out Jeff Marsico's post on Financial Brand, I recommend that you do.
Jeff found that banks and thrifts have consistently paid higher interest rates on deposits than their credit union peers. He also found that credit unions had higher operating expenses per average asset than banks.
Click here to read.
Jeff's analysis is cursory at best. It covers a timeframe when credit unions were experiencing very high growth because consumers were flooding us with deposits in a flight to safty and loan demand was falling through the floor. Like well managed banks experiencing the same thing, credit unions dropped deposit rates to slow the growth. Every comparative analysis I have seen shows credit unions offer consumers a better deal than banks. Jeff wants to compare a relatively small segment of the financial marketplace which favors the objective of his analysis. Since 70%-80% of the consumer market uses the big banks, why eliminate them? Look at their deposit rates and then compare. overall, community banks and credit unions provide better service and fair deals for consumers. It is too bad that we can't work together for the betterment of our communities. The tax issue really shouldn't be an issue. If your reason for being in business is to make a profit for your shareholders, you pay taxes. If you are in business to serve your members you don't. That may also help explaine higher operating costs; credit unions often provide services that may not be cost justified but they are providing members with better service which adds to their costs.
ReplyDeleteAnonymous,
ReplyDeleteI have a 10-year chart that demonstrates the same trend in cost of deposits.
My point was not to cause angst with credit unions. We serve credit unions too. My point was we should be careful branding ourselves as best price, when that may not be the case.
Note that the average size of banks and credit unions for my sample size was between $240 million in assets and $260 million in assets for both. So I don't believe I showed a size bias.
Also, with the challenges of corporate credit unions, banks have been the recipients of significant credit union deposits. So in that respect, both industries have been working together to emerge from our challenges.
~ Jeff