Canadian Credit Unions' 2023 Earnings: High Interest Rates Take a Toll in B.C.; Saskatchewan Remains Relatively Resilient
Banking OrganizationsSummary
Canadian credit unions faced a challenging macroeconomic environment in 2023, but not all credit unions were affected equally. This commentary focuses on Morningstar DBRS' rated universe, which includes the three largest credit unions in both the Province of Saskatchewan and the Province of British Columbia, and follows the recent credit rating action and commentary on Vancouver City Savings Credit Union and First West Credit Union, respectively.
Key highlights include the following:
-- High interest rates weighed heavily on the 2023 earnings of the B.C. credit unions, particularly through deposit repricing, while Saskatchewan results were mixed.
-- The differing impacts of elevated interest rates across provinces were driven by variations in loan and deposit portfolio compositions.
-- Although 2023 was a difficult year for earnings, credit unions' credit ratings are supported by generally strong asset quality, stable funding sources, and solid liquidity and capital buffers.
“In our view, credit union profitability and net interest margins are likely to remain under pressure in 2024 before beginning to rebound in the following years when a larger proportion of loans, particularly residential mortgages, which form a large percentage of all credit union portfolios, continue to reprice at higher interest rates and deposit funding cost pressures start to abate,” said Josh Veenkamp, Assistant Vice President, North American Financial Institution Ratings.
Available Documents
Enjoying our exclusive insights?
Register for a free account to get unrestricted access to our in-depth research, presale and ratings reports, and more. Access is limited for unregistered users.
Already have an account? Log In