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Credit Union Seminar
Working Towards a Viable Business Model
Wednesday 1 June 2016
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Working Towards a Viable Business ModelBusiness Model
Average Loan to Share Ratio 28% (52% in 2008)
Investment Income Cushion Disappearing Investment Income Cushion Disappearing
Increased Costs
A i b hi Ageing membership
Model has to Change
Own Research
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Working Towards a Viable Business ModelWorking Towards a Viable Business Model
Irish Credit Union Model
What the Regulator Says
Large Credit Unions Canada
Model
Suggested Future ModelModel
Viable BusinessMain Banks
ModelStrategy
ImplementationBusiness Model
Model Implementation
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Main Banks Model
Divisions Overseas Corporate & Treasury Retail Retail
Retail Lending – Mortgages, Business Loans, Consumer Loansg g g , , Deposits Current Accounts Oth S i Other Services
Income Funds (Lending/Deposits) Income 80% Funds (Lending/Deposits) Income 80% Non Funds Income 20% Push to Increase Non Funds Income
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Main Banks Model – Cont’d Deposit Income – Gone
Non Funds Income Loan Application Fee Forex Forex Pensions Insurance Less Volatile Income
Lending Income D d t M i & Q t f L di Dependent on Margin & Quantum of Lending Charge More Interest – Not too Price Sensitive Consumer Loans ‐ Lions Share with CU’s Not Growing Fast Enough New Lending grew by 17% last year
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Main Banks Model – Cont’d Selling Model
M i H ddl Morning Huddles All staff focussed on selling Who are we Calling today What is our Target Online / 10 Minute Turnaround / Phone
C t t /ATM’ Current accounts/ATM’s ATM’s – Don’t Want them – Generating Cash Current accounts – Charge forg
Other Brand Loan to depositors ratio 109%; loans to assets 65% Poor Customer service
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Canadian Credit Union Model
Vancity Credit Union No 1 Vancity Credit Union No 1
Vancouver, $19.8 billion, 59 branches ($335k per Branch)
Retail & Business banking (Deposit taking & Lending)
Mortgage Lending
Other
Foreign Exchange / Life Insurance / Visa Credit Cards / Real Estate Developments / I t t Ad i S i/ Investment Advisory Services
Redefining Wealth & Building Healthy Communities
L Sh R i 97% Loan to Share Ratio 97%
Non Fund Income 20%
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Canadian Credit Union Model (Cont’d)( )
Vancity Credit Union No 1 Vancity Credit Union No 1
Loan Book Breakdown
R id ti l M t 65% Residential Mortgages 65%
Consumer Loans 5%
Commercial Mortgages / Loans 30% Commercial Mortgages / Loans 30%
KPI’s
New members New members
Return on Members Equity 6 – 10%
Member Well Being 50%
Value of Community Impact Loans > 50%
Inclusive Workplace / Opportunity for Disabled
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Cambrian Credit Union - No 10
$3 Billion – 12 Branches ($258m per Branch)
Loan to Shares 90%
Non Funds Income 20%
Free Banking – Primary Banking Relationship
Personal Banking Current Account ‐ Loans – Investing – Insurance – Credit Cards
Business Banking Current Account ‐ Loans – Investing – Insurance – Credit Cards
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Current Irish Credit Union Model
Positives Extensive Branch Network Top Ten Brand – Huge Trust Li Sh f C L M k Lions Share of Consumer Loan Market High Reserves & Provisions Excellent Customer Service Extensive branch network
Challenges Challenges Loan to Share Ratio Average 28% Non Funds Income Ratio < 1% Average Interest Rate too Low Viability Problem Bit like Post Office Network
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Bit like Post Office Network
Regulator Commentsg
Significant challenges Significant challenges Reducing loan Income Ageing membership – revised business offering to attracting younger
members through new channels g Investment Income falling Increased Costs
Four key areas to focus on:y Further restructure Drive for younger active borrowers Marked increase in core lending Business model development in a multi step, risk management way
Acknowledging restructuring done ‐merger outcomes to date not realising full benefit ‐ limited benefits – cost effectiveness; service development; membership growth
Not just focussed on box ticking regulation; more about viability
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Suggested Irish Credit Union Modelgg
Core Lending > 50% Shares – No 1 Focus – all resources to this
> €50m Assets and further Consolidation
Provide New Products / Add on Services through Strategic AlliancesAlliances Mortgages Insurance; Pensions Online Services
Increase Non Funds Income to 20%
Staff Focussed on Selling
Utilise the Branch Network
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Suggested Irish Credit Union Model (Cont’d)gg ( )
Technology On line Applications O Li T i On Line Transacting
No of Branches will have to Reduce
Reduce Dividends / Increase Interest rates where necessary
Charge for Services – Death / LPS Insurance / On Line
Give Back to Community in other Ways
Maintain Credit Union Ethos and TrustMaintain Credit Union Ethos and Trust
Leadership
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How to Achieve this
Individual Credit Unions
What are the Building Blocks required? g q
All about a Clear Strategy and it’s Implementation
8 Key areas to look at – in particular: 8 Key areas to look at in particular:
An Effective Board
An Effective CEO An Effective CEO
Members and Loan Book Growth
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Clear Strategy and it’s Implementationgy p
Time out Annually to review Strategy – Outside view
Loan Book growth is Key Focus
Clear actions and KPI’s
Make sure Realistic and Adequate Resources
Strategic Plan communicated to all Staff
CEO’s Appraisal based on achievement of Strategic Plan
Board Champions each Area
Monthly Board Focus
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Role/Attributes of the Board
Devise Strategy and Monitor it’s Implementation
Clear Reporting and Monitoringp g g
Move towards Strategy Focus / Delegate Operations to CEO
Required Skill Set, Age Mix , and Energy Required Skill Set, Age Mix , and Energy
Membership of some Strategy Committees – Clear Briefs
Larger Board Larger Board
Strong business like Charismatic Chair
ACTION R i B d d ti ACTION ‐ Review Board and agree actions
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CEO
Th K P i i M k i ll H The Key Position – Makes it all Happen Vision, Implementer, Leader, People person, Communicator, Multi‐disciplined Have the Right Team in Place Weekly Meetings – Focussed on KPI’s Control of the dressing room ACTION BOARD
Have you confidence in the CEO implementing the CU’s Strategy Put plan in place – clear objectives Mentor Mentor
ACTION CEO Have you the right team and resources in place
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Loan Book & Income Growth All Bank Branch Staff focussed on Selling Daily Huddle – Daily Huddle
Who will be call today Daily Targets
Keep Sales very simple – Sell 3 Products Every Person coming in Ask Any Interest? Every Person coming in – Ask .. Any Interest? 3 Minutes on Phone – Ringing 40 Customers a Day
Local Credit Union – Competitive rates / Give us a Shout Didn’t Know he Wanted a Loan Like a Service Call Generating Own market by Making Phone Call
Training All Staff Cluster training 10 Point Plan to Grow your Loan Book
Mortgages Business Lending – Keep Amounts small – More Riskyg p y All other Marketing Activity Car Loans
Bread and Butter Stuff PCP taking Market Share
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PCP taking Market Share Offer Product
Strategy Implementation – Key Areasgy p y
1. Board & Governance
2 CEO & Team – Effective Team2. CEO & Team – Effective Team
3. Members & Loan Book Growth
4 Products & Services – Online New Products Non Funds Income4. Products & Services – Online, New Products, Non Funds Income
5. Infrastructure – Branches right Location, Don’t Over Invest
6 Regulation & Compliance – Outsource6. Regulation & Compliance – Outsource
7. Mergers – Resources, Lessons
8 Financial – Viability & Sustainability8. Financial Viability & Sustainability
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Conclusion
Research – looked at other models ‐ lessons Need for further change in the Irish CU model – strong signs of this beginning
to happen Put building blocks in place for succeeding Put building blocks in place for succeeding
Clear Strategy Effective Board Effective CEO
Core Areas to focus on Team structure & focus Loan growth Technology Non Funds Income Non Funds Income Grow younger active member
Reach out for help
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Keep Reviewing Strategy and its implementation
Thank You!Thank You!
Colm O’Grady
Credit Union PartnerCredit Union Partner
Phone: 090 6480600/087 8209158
Email: [email protected]
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Dealing with Mergersg g
Huge Energy & Cost & Resource & Focus Huge Energy & Cost & Resource & Focus Not Delivering to Bottom Line Difficulties encountered include:
Small Credit Unions with Small Loan Book and a branch – Not Viable – Sustainable Staff hoping for Redundancy Ageing Common Bond Poor Lending – No Provision Upside Poor Staff/Manager – Unable to implement Change Branch Building MV O/Stated
Branch needs to Close / Reduce Opening Hours / Relocate Office Core Business Issues Neglected Need to Increase IA Need to Increase IA Overworked CEO Team Dis‐function between Executive and Board/Committees
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