As I look back over my career, it’s pretty clear that there are significant reasons why it helps to be a depository lender—one that takes in deposits and uses them to make loans. Consistency of funding costs and availability can’t be overstated!
An extreme example of how being depository institutions has helped credit unions comes from when CUs made major auto loan market share gains in 2009. At the time, the financial markets made it impossible for the captive finance companies to originate loans at rates consumers would accept and subsequently sell the loans at par.
Looking at long-term examples, Capital One started as a credit card company, then realized it couldn’t consistently grow its card portfolio by securitization (converting loans into marketable securities), so the credit card company obtained a bank charter and sought out deposits. Now Capital One’s a significant competitor for deposits and loans. SoFi, while not a bank, is a recent example of a lender that relied on loan securitization but is now attracting deposits.
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