Auto loans were named as the top area for growth and focus for credit unions over the next 12 months, according to a new study conducted by TransUnion.
In the study, 142 credit union executives were asked to name which areas they believed could afford them the most loan growth in the coming year: over 45% put auto in the number one spot, followed by mortgage loans (22%) in second place, and credit card (6.8%) in third.
“While auto loan performance in the last few years has been strong across the board, it is clear that credit union executives continue to value these loans going forward over other growth areas such as mortgages, credit cards and home equity lines of credit,” said Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit, said in the findings. “Overall delinquency levels for auto loans remain low and demand for autos is high, so the reasoning makes sense. In the longer term, we might anticipate greater focus on mortgage and HELOC growth as home values continue their upswing, but for now the auto loan is king.”
Auto loans for subprime consumers have grown nearly 7% in the last year, to 9.24 million in 2Q, up from 8.65 million accounts in the second quarter of 2013, according to Transunion data. Delinquency rates (60+ days past due) for subprime auto loan borrowers have increased approximately 11% in this same timeframe, from 4.73% to 5.26%.
The survey also found that credit union executives remain prudent regarding member credit risk, with 52% rating credit risk as one of the top three challenges for credit unions to meet loan growth goals over the next 12 months. Over 91% of credit union executives surveyed said competition from large banks, captives and other credit unions was also one of their top three challenges, while 81% of them said regulation could impact their loan growth goals.
Despite heavy competition, the survey reported that membership volumes for most credit unions has increased over the past 12 months, with 61% of executives reporting up to 5% in that time, and 7 out of 10 credit union executives polled believe they are more capable of competing with traditional banks today than they were five years ago.