The current microtrend of banks buying credit unions
Will it continue? Does merging into a bank benefit members?
“If you live long enough, you will see everything” is how one credit union executive reacted to the idea that banks should consider acquiring credit unions.
Just a few years ago, the idea of a credit union buying a bank seemed crazy; today, it is a proven and successful growth strategy for credit unions. Could the initially surprising idea of banks buying credit unions follow a similar path? I don’t think so.
In full disclosure, this author is from the dark side. I’ve been a banker for 30 years—big banks, small banks, mutual banks, consultant. I’ve been a bank CEO and a major stock holder and I’ve been involved in many types of bank mergers and acquisitions. For the last five years, I’ve been working with credit unions as they map out their growth strategies, including possible mergers with other credit unions and acquisitions of bank branches and even whole banks.
So, what good could come of selling your credit union to a bank? Besides the obvious growth and size benefits, a bank could reap significant benefits from a credit union acquisition. A credit union is often rich in highly coveted core deposits. Additionally, credit unions have strengths in areas that could benefit banks. For example, credit unions are focused on retail banking and typically have consumer banking capabilities that would strengthen a bank’s performance in retail banking. Likewise, many credit unions have specialized expertise in such areas as insurance, investments, indirect auto lending and even trip and travel agency services for members. A bank might even consider maintaining the credit union brand (obviously sans the words “credit union”) to sustain the value of the retail relationships.
continue reading »