Puerto Rico credit union deposits up 12%, while customer base continues to expand
The Financial Stability Index for the Credit Union Industry in Puerto Rico, prepared by Estudios Técnicos Inc. (ETI), shows that conditions in this industry continued to improve in the third quarter of 2021.
Economist Leslie Adames, director of ETI’S Economic Analysis and Policy Division, said “the index increased from 0.49 in the third quarter of 2020 to 0.71 in the third quarter of 2021.”
“The industry continued to expand its membership base by 29,071, for a total of 1.09 million members at the end of the quarter,” he said.
The index fluctuates between 0 (financial fragility) and 1 (financial strength) and measures the financial health of the credit union industry in reference to four criteria: liquidity ( total loans / deposits, or LtD), solvency (capital to total assets, or E / A), asset quality (nonperforming loans or NPL / Total Loans) and profitability (return on assets, or ROA).
Liquidity in the credit union industry remains stable supported by deposits that increased by $903 million, or 12.5% year-over-year, for a total of $8.1 billion in the third quarter of 2021.
The balance of loans also increased, although at a lower rate of 6.8% year-on-year, or by $354 million, reaching an amount of $5.5 billion at the end of the third quarter. Lending activity was concentrated in car and mortgage loans with year-on-year growth of 22.7%, and 5.3% for the period, Adames said
The trend in asset quality continued to improve, with the delinquency rate declining for the fifth consecutive quarter from 2.98% in the third quarter of 2020 to 2.11% in the third quarter of 2021, while loan loss reserve levels went from 83.18% to 119.89% during the period.
Regarding profitability, the return on assets increased from 0.76% in the third quarter of 2020 to 0.86% in the second quarter of 2021 and 0.80% in the third quarter of 2021.
Although the return on assets has improved somewhat, the industry’s profitability remains under pressure, still reflecting the influence of high expenses and a compression in brokerage margins attributable to the prevailing environment of low interest rates, Adames said.
Total capital in the credit union industry — excluding cooperative member stock — improved from $524 million in the first quarter of 2021 to $586 million in the third quarter of 2021, with the ratio of capital to total assets increasing from 4.92% to 5.16% in the period, according to the study.
“There’s no doubt that the results of the third quarter for the credit union sector continue to show a good performance,” Adames said.
“They continue to expand their client base, maintain the quality of their assets, and remain committed to providing low-income communities with access to financial products and services to foster community development,” he added. At the end of Dec. 31, 2021, there were already 66 credit unions certified by the Community Development Financial Institution Fund to provide such services compared to nine cooperatives in 2019, the economist confirmed.
