August 2012
In This Issue
- Summary Results….Page 1
- Sector Financial
- Sector Financial Statements………..Page 5
- Selected Performance
The information presented in this report has been prepared using a variety of sources, including unaudited reports submitted to DICO by Ontario’s credit unions and caisses populaires. While DICO believes that the information contained in this report would be useful to readers, and considers the financial statements to be reliable, their accuracy and completeness cannot be guaranteed.
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The Sector Outlook is available in PDF format (readable using Adobe Acrobat Reader) and can be downloaded from the Insured Institution section on DICO’s website at
NOTE:
Income Statement results are based on aggregate year to date annualized information for each institution. Comparative results may not always agree with previously reported information for the same period as a result of additional information received after the reporting date.
Results are based on the latest available information as at July 25, 2012. /
Summary Results 2Q2012
Selected Aggregate Sector Performance Indicators / As at June 302012 / 2011
Total Assets Class 1 Institutions (millions) / $544 / $586
Total Assets Class 2 Institutions (millions) / $34,453 / $31,321
Total Sector Assets (millions) / $34,997 / $31,907
Number of Class 1 Institutions / 36 / 45
Number of Class 2 Institutions / 112 / 115
Total Number of Insured Institutions / 148 / 160
Number of Members (000’s) / 1,534 / 1,594
Regulatory Capital (Aggregate Leverage Ratio) / 7.32 % / 7.29%
# institutions not meeting minimum regulatory capital level / 1 / 0
Class 1 Institutions (Leverage) / 8.28 % / 8.29%
Class 2 Institutions (BIS) / 13.83 % / 13.72%
Liquidity / 12.28% / 14.34 %
Asset Growth / 7.82 % / 7.18 %
Total Loan Delinquency (greater than 30 days) / 1.14 % / 1.27 %
Commercial Loan Delinquency (greater than 30 days) / 2.28% / 2.48%
Year to Date (annualized)
Net Interest Income (Financial Margin) / 2.47 % / 2.51 %
Other Income / 0.64 % / 0.83 %
Return on Average Assets (ROAA) Class 1 Institutions / 0.30% / 0.57%
ROAA Class 2 Institutions / 0.45% / 0.64%
Total Sector ROAA / 0.45% / 0.63%
Return on Regulatory Capital / 6.20 % / 8.63 %
Efficiency Ratio (before dividends & interest rebates) / 80.3 % / 75.8 %
Capital
Aggregate sector capital increased by $203.2million during the latest twelve months. Almost half of the increase in capital is attributable to retained earnings. Several larger credit unions increased capital through the issuance of investment shares amounting to approximately $80 million. The aggregate leverage ratio for Class 1 institutions decreased very slightly.
The continued low interest rate environment has negatively impactedinterest income (from loans and investments), other non-interest income and financial margins, resulting in a decrease in retained earnings despite efforts by insured institutions to reduce non-interest expenses.
Growth
Sector assets increased by $2.54 billion (7.8%) in the latest twelve months to $34.9 billion. Total loans increased by $2.68 billion (10.03%). The bulk of the increase in loans was due to the growth in residential mortgages, which increased from 56% to 58% of the total loan portfolio. Over 48% of this growth is attributable to changes in accounting standards resulting from the adoption of International Financial Reporting Standards (IFRS). Deposits increased by $1.36 billion (4.7 %) in the same period.
Off-balance sheet assets decreased by $218million (4.4%) to $4.78 billion.
Profitability
Return on average assets decreased by 18 basis points (bps) from 2Q11. Interest and investment income fell by 11 bps. Credit unions responded by reducing interest expenses paid on deposits by 10 bps, and reducing loan costs and operating expenses by 3and 2 bps respectively. The large decline in return on average assets is due to a drop of 19 bps in Other Non-interest Income caused principally bythe inclusion of a large one time gain from the amalgamation of two large credit unions. This accounted for approximately 14 bps of thedecrease.
Credit Risk
Total loan delinquency improved to 1.14% compared to 1.27% at 2Q11. Loan costs have also decreased to 9 basis points from 12 basis points in 2Q11. During the same time, commercial loan delinquencyimproved slightly to 2.29% from 2.48%.
Loan Mix
Personal loans decreased modestly during the last year (2.1%) and continue to represent a declining portion of the loan mix. In contrast, residential mortgage lending experiencedrelatively strong growth of $1.97billion (13.1%),due to borrowers capitalizing on low interest rates and the inclusion of off-balance sheet loans resulting from the adoption of IFRS. During the same period commercial loans grew by 8.8%.
Product / % of loan portfolio / Change
($ millions) / % Change in Outstanding Loans
2012 / 2011
Personal Loans / 10.1% / 11.3 % / ($ 0.1) / (2.1) %
Mortgage Loans / 57.8% / 56.2% / $ 1,976 / 13.1 %
Commercial Loans / 27.7% / 28.0 % / $ 0.7 / 8.8 %
Agricultural Loans / 4.4% / 4.5 % / $ 0.1 / 9.3 %
Loan Yields
Loan yields in each category continue to decline as interest rates have remained consistently low for well over a year, causingborrowers to continue refinancing debt to reduce borrowing costs.
Selected Loan Yields (YTD annualized)* / As at June 30
2012 / 2011
Total Loans / 4.62 % / 4.71 %
- Personal Loans
- Residential Mortgage Loans
- Commercial Loans
- Agricultural Loans
*Loan Yields adjusted for securitizations.
Liquidity and Borrowings
Liquidity in the sector in 2Q12 was 12.3% as compared to 14.3% in 2Q11. Year over year, borrowings grew by $970.7 million (109%) to more than $1.8 billion from $886 million in 2Q11. This is the result of the inclusion of mortgage securitization offsets in borrowings (an IFRS requirement) which is also having a negative impact on the liquidity ratio.
2Q12 SECTOR OUTLOOK, August 2012 1
Sector Financial Highlights 2Q 2012
2Q12 SECTOR OUTLOOK, August 2012 1
Sector Financial Statements
Balance Sheet 2Q 2012
2Q12 SECTOR OUTLOOK, August 2012 1
Sector Financial Statements
Income Statement 2Q 2012
2Q12 SECTOR OUTLOOK, August 2012 1
Selected Financial Trends
2Q12 SECTOR OUTLOOK, August 2012 1