Here are Canada's credit union growth leaders

Which credit unions are built for growth?

Note: Saskatchewan credit unions received major one-time dividends in 2022 due to the sale of Concentra Bank. In some cases this improved profitability by 200% or more. Unless otherwise noted the data below has not backed this out.

​In the previous Insight I introduced the concept of the Credit Union Growth Alignment Rating, or CUGAR. The CUGAR rates a credit union's historic growth performance, revenue resiliance and internal capacity to grow using publicly-available information. The purpose of the CUGAR is to identify market leaders, help to understand how each credit union takes a unique approach to growth, and provides guidance on where credit unions can look to improve their growth postures.

The score is nominally out of 10, though no financial institution should expect to get a "perfect" rating. The scale is calibrated so big banks land in the 5-6 range. For more details on how the CUGAR is calculated, see the previous post.

So who are the leaders, and what can they teach us about successful growth strategies? Here are the top five large and small credit unions based on 2022 annual reports:

Large credit union leaders

Canada's top-rating large credit unions all exhibited strong asset and revenue growth over the past three years, though they each take a slightly different approach to their growth strategies.

Scoring highest is Steinbach, with an extremely efficient operation and strong assets per member driving significant growth. Steinbach's business is heavily biased towards net interest income, reflecting its position as a lending market leader in Manitoba. Steinbach's capital ratio is lower than its peers, in part due to a generous patronage program.

In the #2 position is Affinity, which scores well based on good all-round rating and the potential for future growth. Affinity has a highly-diversified revenue stream, runs lean and is very well capitalized. These are strong building blocks that can enable an effective growth strategy.

DUCA, G&F and Libro have all exhibited strong asset growth. A focus on efficiency and revenue diversification will help translate these gains into stronger revenue, but overall these credit unions are performing above their large bank peers.

Small credit union leaders

At the top of the small credit union list are five niche credit unions who are laser-focused on delivering a subset of financial services products to specific communities of members. This generally means very efficient operations, limited diversification and strong organic growth.

As the top-ranked credit union, Radius is in full organic growth mode. Based in Southern Saskatchewan, Radius serves specific rural communities with an agricultural business focus. This has resulted in very high assets per member. Combined with very efficient operations and a strong service culture, Radius has grown assets and revenue at a rapid pace.

Parama tells a similar story, though in this case they serve Toronto's Lithuanian community. Prairie Centre and Rosenort follow the same rural niche model as Radius.

Weyburn follows a different path, with more revenue diversity but lower assets per member. They have been rewarded with strong revenue growth over the past three years.

The full list

Shown below are credit unions with greater than $500M in assets and for which there is readily-available financial information. I have tried to back out most of the merger growth, though some still remains (this will artificially inflate the Historic Growth rating).

As I mentioned in the previous Insight, it is important not to look at the CUGAR in isolation. Credit unions compete in different markets, with different financial realities. Credit unions riding the mortgage growth wave in Toronto and Vancouver will be very different from rural Nova Scotia. However, it can be useful to look at peers to see what lessons can be learned from each other. Credit unions can also track their results over time to see if they are trending in the right direction.

Feedback

This is my first attempt at quantifying credit union growth postures. I've certainly learned a lot in this exercise, and I know it can do more.

How do you think it could be improved? Should it, for example, assess the difference between commercial and retail members? Are the scoring ranges too aggressive or too lenient? What else would you want to see included in the calculation?

I'm always interested to receive feedback on my analysis via email or on my LinkedIn page.