The lack of a dividend payment has been a contentious issue for years. But new research shows two-thirds of credit unions paid a dividend last year. This is up from just 5pc in 2022, according to a survey of the sector undertaken by independent accounting firm RBK.
Last year some 18pc of the active credit unions paid a dividend to members.
In a credit union, a dividend is the return on a member’s shares, paid by the credit union out of surplus income. It is essentially a share of the profits, or surplus as credit unions refer to profits.
RBK said the increase in the number of member-owned lenders now paying a dividend reflects improved financial performance and profitability across the sector.
Around a quarter of credit unions paid a dividend of between 0.125pc and 0.25pc last year. Just under a fifth paid a dividend in the range of 0.25pc and 0.5pc.
Michelle O’Donoghue, a partner at RBK, wrote in a report on the survey: “While still modest compared with some high-street banking rates, the improvements narrow the competitive gap.”
Nearly all credit unions expect to maintain or increase hiring this year. Photo: Getty
She said the investment performance increase has directly contributed to available funds for dividends.
“Credit unions paying dividends in higher bands establishes performance benchmarks, that may motivate others to improve their financial performance. Higher dividend rates may also attract new members,” she wrote in a report.
RBK also found that credit unions have improved efficiency levels, and are reporting stronger loan book growth.
Credit unions’ primary mission is providing financial services to members
There has been a rise in lending for home improvements and in motor loans. Bad debt provisions have decreased to all-time lows. Reserves remain strong, with all credit unions exceeding the minimum regulatory requirement of 10pc, the accountants found.
The average reserves ratio across community credit unions was 16.6pc.
RBK partner Ronan Kilbane said: “Financial indicators have shown considerable improvement across the sector.
“Investment portfolios are trending downward as a percentage of assets, aligned with the shift towards increased lending. This is a positive development for credit unions, whose primary mission is providing financial services to members.”
He said nearly all credit unions expect to maintain or increase hiring.
“The sector faces several challenges. The operational resilience frameworks that were a key focus in 2024 need further development, with testing remaining the most significant barrier to full implementation.”
There were 183 active credit unions at September 2024, a fall of nine from the previous year. In the last few years, there has been a sharp fall in the number of credit unions in the State as more of them merge to create bigger entities.
The number of member-owned lenders has fallen by 58 since 2019, and there are now just 183 active credit unions, according to a new report from the Central Bank of Ireland, the regulator for the sector.
This means the number of credit unions in the Republic has fallen by more than a quarter in the last five to six years, largely due to voluntary mergers.
They are coming together to create bigger entities in a bid to deal with rising costs and the regulatory burden on the sector.
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