The Credit Unions (UC) have great importance for the growth and strengthening of micro, small and medium-sized companies, because they are the only popular finance sector that focuses exclusively on financing productive activities, so it was considered Enrique Antonio Marrufo Garcia, Vice President of Supervision of Development Banking and Popular Finance of the National Baking and Stock Commission (CNBV).
He emphasized that by operating only with its partners and being focused on specific markets, its knowledge of one and the other results in its ability to adapt credit schemes to the needs of its partners, in addition to providing them with services such as cash, treasury, and others more specialized, through its special departments, such as the commercialization of products and sale of inputs necessary for its economic activity, as well as free or low-cost technical and financial advice, which allows generating economies of scale.
It is worth highlighting the synergies that have been achieved with the Development Bank and other entities of the public administration, which allow bringing government resources closer to the regions and sectors in which Credit Unions operate ”, said Marrufo in an interview with El Economista .
He mentioned that it stands out from their corporate purpose that some entities establish subordinate the profitability of the Unions, to offer better interest rates and lower commissions to their partners.
Indicators
Although the health contingency has represented important challenges for all sectors of the economy, and the UC sector is no exception, it has responded, in general, with prudence and responsibility, which is reflected in its indicators, said Marrufo.
The Delinquency Index (IMOR) for December 2020 stood at 4.14%, decreasing by 0.71 percentage points in the last 12 months.
While, the Capitalization Index (ICAP) was strengthened taking the same date as a reference, to close December 2020 at 22.09%, exceedingly complying with both the regulatory minimum of 8% and 10.5% which, without being normative for the Credit Unions, is respected by internal policies in various entities. “The discipline shown by the sector in granting loans has allowed ICAP to not deteriorate at the sector level, even despite the reduction in profitability indicators,” said Marrufo.
Currently, the sector is made up of 82 Credit Unions which, at the end of December 2020, presented total assets of 58.815 million pesos, with an annual decrease in real terms of 7.9 percent. “This contraction is mainly attributed to a lower demand for credit and the prudential measures implemented by the entities in relation to both the placement of new credits and their liquidity levels,” emphasized the Vice President of Supervision of Development Banking and Popular Finance from the regulatory authority.
At the end of December 2020, the current loan portfolio registered a balance of 42,853 million pesos, which represents an annual decrease of 8.2%, “it is worth mentioning that this item represents 72.9% of total assets.”
On the other hand, bank loans, from partners and other organizations presented a real annual decrease of 10.3% to reach 46,058 million pesos. In this regard, the main source of funding for the Credit Unions It is still partner loans, which represent 70.5% of total funding, this item decreased by 8.7% in real terms.
“It is in the profitability reasons where the effect of the health contingency and other systemic elements was more sensitive, since the net result of the sector was 569 million pesos, 30.5% lower in real terms compared to December 2019, the yield on assets (ROA) was 0.94% and the return on stockholders’ equity (ROE) was 5.23%, at the end of December 2020. The above, mainly derived from the reduction in interest income, associated with the contraction of the portfolio credit, “said Marrufo.
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Past due portfolio
Even under the current circumstances, the delinquency ratio (IMOR) of the credit portfolio of the Credit Unions, was reduced during 2020, going from 4.85% in December 2019 to 4.14% in December 2020, as a consequence of the decrease in the balance of the past due portfolio that went from 2,308 million in December 2019 to 1,851 million pesos in December 2020 .
This has been possible due to the joint effect of various factors, such as the response capacity of the sector and the regulatory facilities issued by the authorities, ”said Enrique Antonio Marrufo.
As of December 31, 2020, the total loan portfolio decreased 8.8% in real annual terms, to reach 44,704 million pesos.
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Regulatory facilities
Faced with the questioning of How many Credit Unions used the regulatory facilities related to loan restructurings in view of the economic effects of the Covid-19 pandemic?, the executive said that: at first, the Special Accounting Criteria authorized on April 1, 2020 were issued, which allowed to defer maturity terms by up to 6 months, in general loans and up to 18 months in the case of credits directed to the rural sector.
These criteria were used by 42 of the 82 Credit Unions, in support of their members. The support reached just over 12% of the sector’s accredited partners, and 7.9% of the total portfolio ”, emphasized Marrufo.
He continued, “in October 2020, due to the extension of the measures associated with the health contingency, new facilities were authorized for the sector, but their application was much less, at the end of December 2020, only 7.3% of the entities they opted for its application. What could be a sign that the measures taken by the entities have been sufficient, without having to apply the regulatory exceptions that were offered to the sector ”.
Impacts
Although the improvement in the epidemiological traffic lights will have an effect on the economic reactivation, we could expect that the recovery of the loan portfolio levels will be slow, since the effect of the contraction in the demand for credit could be reversed. presented and the policies implemented by the entities in order to give a more conservative and strict approach in the granting of credit, as Marrufo said.
“With regard to the past due portfolio, this could have some increase associated with liquidity problems of the borrowers that operate in the sectors most affected by the confinement measures. In the same sense, there are external factors, such as the lag in the operation of the courts and public property and commercial registries, which already have a negative impact on the awarding of guarantees.
“Regarding passive activities, the negative trend in the performance of the member loans item could continue, as long as the containment measures associated with the health contingency are maintained and some entities may have to compensate for such exits, having credit with Development banking and Multiple banking, ”said Marrufo, Vice President of Supervision at the regulatory authority.
Changes in legislation
The vice president of the CNBV He explained that, in the short term, the regulatory authority prepares improvements to the regulation regarding liquidity requirements, regulatory reports and the computation of guarantees in the calculation of capital for credit risk. “Additionally, a multi-year project is being developed that we hope will allow to reduce the lags that the regulations applicable to the sector of Credit Unions on highly relevant issues, such as internal control, financial information and capital requirements ”.
Mergers or alliances
To date, the regulatory authority has no formal knowledge that it intends to implement any merger in the sector of Credit UnionsTherefore, any effort in this regard would still be unofficial.
Regarding a question regarding the alliances, Marrufo said that so far, no alliances have been presented between Credit Unions and Fintech companies, as has happened in other sectors of popular finance, “probably derived from the fact that Credit Unions they operate solely with their partners and are generally focused on very specific markets. However, we do not rule out that in the future synergies could be generated between both figures, as well as innovative digital solutions that allow the digitization of entities and partners ”, concluded Enrique Antonio Marrufo.
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