Newbridge Credit Union suffered a catastrophic collapse in loan and interest repayments between 2007 and 2011.
Figures seen in the past few days by the Leinster Leader reveal that repayment of loans in 2011 was less than half what they were four years previously.
In 2007, loan repayments were approximately €50.5 million. Loans outstanding that year were approximately €130.5 million. This, say experts, is an appropriate ratio.
However, in 2008, repayments were down to approximately €38 million, a drop of 24%. By 2010, it was €27.3 million and by 2011, it had dropped another 18% to €22.1 million, a drop of 56% compared to 2007.
On average, repayments dropped 15% every year.
Just as damning, the interest on loans that borrowers paid was also dropping - from €14.2 million in 2008 to €12.6 million in 2010 and by 24.2% to €9.6 million in 2011, a drop of 33% compared to 2008.
This indicates that a large number of people were in difficulty with repayments and were either defaulting or restructuring their loans. While that may have made life less difficult for borrowers, it had the opposite effect on the general health of the credit union.
In that context, it may surprise many to learn that Newbridge Credit Union had planned to pay €2.5 million in dividends in 2011, up from €1.8 million the previous year.
Legitimate questions remain about the process that lead to the appointment of the Special Manager in January of 2012 by the Central Bank.
There is a very easy-to-follow and well established formula, known as Resolution 49, for how a credit union calculates the amount to set aside for Bad Debt Provision.
As revealed by the Leinster Leader in last week’s edition, there is a discrepancy between auditor Grant Thornton’s conclusion in the 2011 accounts which they prepared, that Newbridge Credit Union’s Provision for Bad Debts should be €24 million, and the Central Bank’s instruction that it be changed to €41.3 million.
The Leinster Leader understands that that change was made in a time frame of less than two weeks from the finalisation of the accounts - and lead to the imposition of the Special Manager. The Central Bank refuses to answer any questions relating to the process of how it decided to increase it. Grant Thornton say they cannot comment.
However, that doesn’t change the unfortunate and harsh reality that Newbridge Credit Union was in big trouble and headed in the wrong direction.
An analysis of the Credit Union’s accounts over the past decade reveal a number of troubling facts.
Over that time, deposits almost tripled, an increase of a staggering €129 million. According to the 2011 accounts, in the four years since 2008, members shares have dropped by €38 million - almost as dramatically as they rose.
In 2001 members’ deposits were approximately €64 million. By 2008, it was €190 million, a difference of €126 million. That’s a net increase of approximately €68,000 for every day the Credit Union was open in the intervening period.
Membership of Newbridge Credit Union went from 17,790 in 2001 to 28,433 in 2010.
On the other side of the equation, the value of loans also increased dramatically. At the end of 2001, there were 6,961 loans outstanding, and in 2010, there were 7,779, a difference of 818. However, the total value of those loans had increased dramatically, from approximately €57 million to more than €140 million. To put that in context, it’s as if all 818 of the extra loans were for €101,000 each.
The average value of each loan went from being €8,200 in 2001, to a peak of €18,690 in 2009, although by 2011, it had begun to fall, to €17,261.
In 2007, the average loan issued to 11,153 members was €5,580, while in 2011, 7,615 loans were issued, with an average value of €2,819.
In 2007, the total value of loans given out was €62.2 million. In 2011, that had dropped to €21.5 million.
If the average loan granted in 2011 was for €2,819, but the average loan outstanding was €17,261, it is clear that a significant number of loans are for enormous six and seven figure amounts, well above the traditional sums usually loaned by credit unions.
- Conor McHugh