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Benchmarking
Survey
RONAN KILBANE, AUDIT PARTNER
9th May 2018
Benchmarking 2018- Survey Context
> 8th Annual Benchmarking survey
> Responses from over 45 Credit Unions
> Sample of Credit Unions represented €2.856B or 17% of total asset size
of Credit Union movement in the State
> Certain financial data: Results for 30 September 2017 from annual
reports
> Contributions from CU’s ranging in size from under €40m to €300m +
> Mix of Community based and industrial Credit Unions
Highlights: Key Survey Findings
> Loan Book Growth
> Still concerns over viability for certain CU’s
> HR- Continuing area of challenge
> Members shares continuing to grow more than expected
> Marketing/Business development?
> Board effectiveness?
Financials
Gross Loan Book as a % of Assets
0%
5%
10%
15%
20%
25%
30%
35%
2017
2016
2015
27%30%
30%
Financials - Investment Performance
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
2017 2016 2015
2.15%2.78%
3.46%
Return on Investment - % of Total Investment
Loan Repayment Ratio
33.18% 31.81%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
2017 2016
Industrial Community
Average Loan Repayment Ratio 31% 33%
Highest Repayment Ratio 35% 40%
Lowest Loan Repayment Ratio 27% 24%
Findings from our survey
Average Interest Rate on Loans
Findings from our survey
2017 2016
Average Interest Rate 8.4% 8.8%
Highest Average Interest Rate 11.3% 13.4%
Lowest Average Interest Rate 5.4% 4.6%
Dividends
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2017 2016 2015
100% 100%
84%
0% 0%
16%
Did your CU pay a Dividend?
Yes
No
Financials- Dividend Rates
60.0%16.7%
13.3%
6.7%3.3%
0 - 0.125% 0.125 - 0.25% 0.25 - 0.5%
0.5 - 0.75% 0.75 - 1%
20162017
14%
9%23%
18%
36%
Range of Dividends Paid
Wages % of Income
27% 24%19% 21%
0%
5%
10%
15%
20%
25%
30%
2017 2016 2015 2014
Findings from our survey
Industrial Community
Average Wages/Income ratio 22% 29%
Highest Wages/Income ratio 32% 45%
Lowest Wages/Income ratio 13% 20%
Survey KPI’s
Ind Comm
Average
Reserve Ratio 17% 16%
Expense to Income
Ratio61% 65%
Bad Debt Provision as
a % of the Loan Book3% 6%
Ind Comm
Highest
21% 26%
80% 93%
9% 18%
Ind Comm
Lowest
13% 13%
40% 32%
1% 1%
Ind = Industrial Credit Unions
Comm = Community Credit Unions
Loan Book
Survey KPI’s
Lowest
Ind Comm
Loans Issued Growth (6%) (5%)
Loan Book Growth 1% (10%)
Ind = Industrial Credit Unions
Comm = Community Credit Unions
Average
Ind Comm
12% 10%
7% 13%
Highest
Ind Comm
27% 41%
21% 21%
67.6%
32.4%
Loan Book growth more or less than expected in 2017
More Less
Findings from our survey
> In terms of growing the loan book, only
35.1% of participants scored
themselves as ‘Doing Enough’
> 21.6% of participants feel they are ‘Not
Doing Enough’ to grow the loan book
Loan Book Growth
What is fastest growing loan type?
Top 6 fastest growing loan types were noted as follows:
1. Home improvement – 34%
2. Car– 28%
3. Special Rate Loans – 13%
4. Covered loans– 11%
5. Mortgages- 6%
6. Agri loans – 4%
Regulatory Compliance
Obstacles to embedding these
functions noted from Credit Unions
> Regulatory Changes
> Time and Resources
> Skills Knowledge and Training
Regulatory Compliance
How are your regulatory functions resourced?
Function In-house Outsourced
Internal Audit 0% 100%
Risk Management 58% 42%
Compliance 67% 33%
Data Protection 64% 36%
Top Risks Noted from Credit Unions
23%
17%
14%
11%
8% 7%5%
0%
5%
10%
15%
20%
25%
Loan Book Growth
Data Protection / GDPR
IT & Cyber Security
Strategy Implementation
Succession Planning / Key PersonDependencyAML
Robust & Detailed Marketing Plan
Member Shares
Percentage Increase in Member Shares
8%15%
54%
15%8%
0-2%
2-5%
5-10%
>10%
Decrease
Cap on Shares
71.1%28.9%
Introduction of a Cap
Yes No
22.2%77.8%
Strategy to match long term lending with long term shares
Yes No
Levels shares are capped at
42.2%
11.1%6.7%
8.9%
31.1%Up to 40k
40k - 50k
50k - 60k
60k - 90k
90k - 99k
Below is a breakdown of our survey results:
Human Resources
Does your Credit Union intend to increase wages in next 12 months
49% 51%
Yes No
2017
39% 61%
2016
Credit Unions that have Restructured their Teams in the last 12 months
51%58%
48%49%42%
52%
0%
10%
20%
30%
40%
50%
60%
70%
2018 2017 2016
Yes
No
Top HR priorities as noted from respondents
0%
5%
10%
15%
20%
25%
30%
27%23%
15% 13%11%
11%
Biggest obstacles in embedding HR framework
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Overall HRExpertise Employee
Engagement ManagementAvailability Management
Skills &Knowledge
50%44%
43%26%
Credit Union Mergers
In the process of completion of a Merger
51%
51%54%
49% 49% 46%
0%
10%
20%
30%
40%
50%
60%
2018 2017 2016
Yes
No
0%
10%
20%
30%
40%
50%
60%
2018 2017
54%
44%
15%18%
13%
23%
10%13%
8%
3%
Stay as we are but open toapproaches
None
Actively seeking a merger
Integrate / completemergers already inprogress
Other
CU’s merger plans for the next 3 years
Biggest challenges in implementing merger
0.01.0
2.03.0
4.05.0
Board consensus
IT integration
Resources to handle the project
Merger integration
Increased profitability
HR integration
Diversion from normal business
2.6
2.7
3.0
3.0
3.3
3.4
3.5
Least Challenging: 1Most Challenging: 5
Strategy
Are there any concerns about viability over the life of the strategic plan?
36% 64%
Yes No
2017
31%69%
2016
Strategic Planning Day
67% 33%
2018 -Day taken to Review and Update the Strategic Plan
Yes No
59%41%
2017 -Day taken to Review and Update the Strategic Plan
Effectiveness of Board
How effective is your Board?
> Just over half of our sample felt their board was only 50% - 75% effective
> 38% felt the effectiveness of their Board was between 75%- 100% effective
> 11% felt Board effectiveness rate was between 25% - 50%
> Above results were a deterioration of perception of effectiveness of Boards compared
to prior year
Marketing
Do you have a specific and separate Marketing/Business Development Function?
65%35%
Yes No
20172016
54% 46%
Marketing Budget as a % of Total Income
51%41%
8%
0 - 2% 3 - 5% > 5%
2018
6%
61%
33%
2017
70%30%
Respondents with a Strategic Marketing Plan for growing the loan book
Yes No
Marketing & Business Development
How effective is your Marketing Business Development function?
> Only 14% of respondents felt the function was 75%- 100% effective
> 46% felt the function was between 50%-75% effective
> 35% felt the function was only between 25% and 50% effective
> Room for improvement
49% 51%
Yes No
2018
Has your Credit Union collaborated with
Other CU's on Innovative Products
54%46%
2017
Effectiveness of Initiatives undertaken to grow the Loan Book
0.0 0.5 1.0 1.5 2.02.5
3.03.5
4.0
Sponsorship
Targeted circulars to members
Print advertising of specific loanpackage offers
Brochures / flyers
Dedicated staff member(s) toloan book growth
Print media, advertising of theCredit Union generally
Social media
Special purpose loans e.g.insurance, home heating,…
2.8
2.9
3.0
3.1
3.1
3.1
3.4
3.6
Most Effective: 5Least Effective: 1
Summary & Conclusion
HR
HR effectiveness review? Is right structure in place to deliver strategic objectives?
Marketing/Business Dev
Are appropriate resources being spent on growing the loan book?
Viability
Is sufficient time being devoted to monitoring of Strategic plan, planning for the future,
exploring potential merger opportunities?
Board effectiveness
Are Board focussing on Non exec role? Are Nominations Committee functioning well and
Board getting appropriate training to increase effectiveness?
Regulatory Compliance
What is blocking embeddedness- Skills? Expertise? Resources? Outsourcing considered
@RBK
@RBKCA
@RBK
www.rbk.ie
Thank you
Disclaimer
While every effort has been made to ensure the accuracy of information within this publication is correct at the time of going to print, Russell Brennan Keane do not accept any responsibility for any errors, omissions or misinformation whatsoever in this publication and shall have no liability whatsoever. The information contained in this publication is not intended to be an advice on any particular matter. No reader should act on the basis of any matter contained in this publication without appropriate professional advice.
Ronan Kilbane
Audit Partner
RBK
T: +353 (01) 6440100