LOMBARD, Ill.—Credit unions should not expect last year’s pace of lending growth—including auto—to continue in 2016, according to a new analysis.
As part of its annual predictions for the economy and financial institutions, Raddon Financial Group addressed loan growth, and Bill Handel, vice president of research, acknowledges he may be going against the grain with his outlook on lending.
“While many financial institutions predict continuing loan growth in 2016, Raddon anticipates it will slow in the coming year,” said Handel in the Raddon Report. “As an industry, credit unions will see growth in the 5% to 7% range – down from 11% in 2015 – while banks’ loan growth will likely be 3% to 5%, which is down from 6% year over year.”
Handel said the slowdown will be accompanied by a change in the lending mix, with lower growth in auto lending and first mortgages and greater growth in equities.
Pointing to automobile sales, which have increased in each of the last six years following extraordinarily low levels in 2009, Handel said Raddon anticipates auto sales volume in 2016 will match last year’s volume – or at most, record a 1% increase to total slightly less than 18 million unit sales.
“While lower gas prices encourage sales, continued economic uncertainty will be a moderating factor,” Handel said.
Handel also forecast that net interest margins for banks and credit unions will decline in 2016. Handel said that the continued degradation of the industry’s net interest margins will result in the most competitive deposit market in almost a decade.
“While rising rates will slowly lift asset yields, many consumers with ‘parked’ core deposit balances will begin searching for better returns,” he said. “These accountholders will have no shortage of options, both in-market and online.”