Credit unions again increased their loan portfolios at a higher rate than banks in 2019, but banks raced ahead in automobile lending.
At the end of 2019, credit unions held $1.14 trillion in loans, 6.6% more than Dec. 31, 2018. The increase continued a pattern of slowing loan growth – from December 2017 to December 2018 total loans grew 8.9%, according to the Credit Union Trends Report from CUNA Mutual Group of Madison, Wis.
Bank loan growth also slowed, and their growth rates were smaller in both years than credit unions. At banks, total loans and leases stood at $10.5 trillion on Dec. 31, up 3.6% from a year earlier; from December 2017 to December 2018 it rose 4.4%, according the FDIC’s Quarterly Banking Profile released Tuesday.
Credit unions had higher loan portfolio growth rates than banks for real estate and credit cards. But the trends were similar: Both credit unions and banks saw slower growth in credit cards, and higher growth in real estate loans in 2019 compared with 2018.
The biggest divergence in trends for credit unions versus banks last year was a sharp decline in growth for auto loans for credit unions and a sharp increase for banks.
Auto loans are far more important to credit unions than banks. They account for about a third of credit unions’ total loan portfolio, but less than 5% of bank loans.
Credit unions’ total auto loans grew 2.6% to $381.5 billion in 2019, down from a 10.1% gain in 2018.
At banks, auto loans grew 6.2% to $483.7 billion last year, up from a 1.2% gain in 2018.
Credit unions’ new auto loans fell 1% to $148.3 billion in 2019 after rising 11.6% in 2018. Used auto loans grew 4.9% to $233.2 billion, down from a 9% gain in 2018.
Steven Rick, chief economist at CUNA Mutual Group, has said the slowdown in auto loan growth has been due to both the increased aggressiveness of banks for those loans, and a backing off among some credit unions because auto loans had become too large a part of their portfolios.
Some credit union leaders have told CU Times they were backing off positions that in some cases exceeded 50% of their portfolios.
Also, Rick said the entry of many credit unions into the indirect lending market was a major driver of the double-digit gains of recent years, and by 2019 had diminished the supply of potential newcomers. Other contributing factors were lower new auto sales, and part of the surge of mortgage refinancing being “cash out” deals that were used to pay off auto loans.
Meanwhile, credit unions gained share from banks in credit cards and real estate loans.
Credit cards grew 6.5% to $66.8 billion at credit unions by the end of 2019, slowing from 2018’s 7.4% growth, according to CUNA Mutual Group.
At banks, the FDIC showed credit card balances were $941.6 billion at Dec. 31, up 4.2% from a year earlier, also slowing slightly from 2018’s 4.4% gain.
CUNA Mutual Group tracks real estate loans using the NCUA’s old categories that combine residential mortgages and home equity loans with real estate-backed commercial loans.
At credit unions, first- and second-lien residential mortgages account for 87% of real estate-backed loans. But at banks, residential mortgages and home equity lines account for only half of real estate-backed loans.
At credit unions, total real estate loans grew 9.3% to $572.6 billion at Dec. 31, up from 2018’s 8.8% growth rate.
At banks, loans secured by real estate stood at $5 trillion on Dec. 31, up 3.2% from a year earlier, an improvement from 2018’s 2.4% gain.
Credit unions’ first-lien mortgages grew 10.4% to $479.5 billion, up from 9.2% in 2018, while second-lien mortgages grew 3.7% to $93.1 billion, slowing from 2018’s 6.9% growth. Both figures include commercial loans.
Banks’ 1-4 Family residential mortgages grew 3.9% to $2.2 trillion in 2019, up from the prior year’s growth of 2.7%. Home equity lines fell 8.9% to $342 billion last year, compared with 2018’s 8.6% decline.
The NCUA is expected to release data comparable to the FDIC’s Quarterly Banking Profile in early March.