OhOh CanadaCanada Eh!Eh! Lessons from your neighbours to the North Presented by Howard A. Bogach NACUSO CEO COLLABORATIVE
MADISON WISCONSIN
SEPTEMBER 14, 2006 AgendaAgenda
¾¾ OurOur MarketMarket PlacePlace ¾¾ GrowthGrowth ofof CreditCredit UnionsUnions inin CanadaCanada ¾¾ TaxationTaxation ¾¾ AreAre WeWe StillStill CreditCredit Unions?Unions? ¾¾ LookingLooking toto thethe futurefuture ¾¾ DialogueDialogue JustJust thethe factsfacts TheThe CanadianCanadian LandscapeLandscape
¾¾ DesjardinsDesjardins ¾¾ TheThe RestRest ofof CanadaCanada
z CreditCredit UnionsUnions areare governedgoverned provinciallyprovincially
z CentralsCentrals areare governedgoverned bothboth provinciallyprovincially andand federallyfederally
z OperatingOperating rulesrules andand powerspowers varyvary provinceprovince toto provinceprovince andand reflectreflect historicalhistorical differencesdifferences WhatWhat isis aa Central?Central?
¾ OwnedOwned andand operatedoperated forfor thethe benefitbenefit ofof secondsecond tiertier membersmembers ¾ SystemSystem liquidityliquidity managermanager ¾ ProvidesProvides accessaccess toto thethe variousvarious paymentpayment systemssystems ¾ AggregatorAggregator forfor sharedshared servicesservices ¾ ConduitConduit forfor democracydemocracy ¾ TradeTrade AssociationAssociation ServicesServices
z Communications
z Government relations
z Industry relations OurOur MarketMarket PlacePlace
Credit Unions Banks & Caisses & Trusts Populaires Others
Domestic Assets 81% 12% 7%
Deposits 80% 14% 6%
Consumer Credit 69% 7% 24%
Residential Mortgages 61% 14% 25% BankBank PowerPower
Market Share for Assets 2005
7%
7%
1%
Credit Unions
Caisses Populaires
Trust Companies & Mortgage Loan Co.'s 85% Total Banks LandLand ofof thethe GiantsGiants
Market Share for Assets 2005
6% 7%
7%
15% 1%
20%
14% Credit Unions Caisses Populaires Trust Companies & Mortgage Loan Co.'s Royal Bank C.I.B.C. Bank of Montreal 15% 15% ScotiaBank Toronto-Dominion National Bank GiantsGiants RuleRule
Market Share for Deposits/Savings 2005
5% 8%
8% 17%
1%
19%
15% Credit Unions Caisses Populaires Trust Companies & Mortgage Loan Co.'s Royal Bank C.I.B.C. Bank of Montreal 13% 14% ScotiaBank Toronto-Dominion National Bank RetirementRetirement SavingsSavings
Market Share for RRSP 2005 0% 9% 5% 5% 0%
22%
Credit Unions Caisses Populaires Trust Companies Chartered Banks Investment Funds 59% Segregated Funds Canada Savings Bonds NotNot JustJust BigBig
N e t In co m e ( $ M illio n s )
3500
3000
2500
2000
1500
1000
500 2005 2005 2003 2004 2005 2003 2004 2005 0 2003 2004 2005 2003 2004 2005 2003 2004 2003 2004 B M O B NS CI B C NB C R B C T D - 500 DiversifiedDiversified IncomeIncome StreamsStreams
18 00 0 Total R even ue ($ M illion s )
16 00 0
14 00 0
12 00 0
10 00 0
80 00
60 00
40 00
20 00 2005 2003 2004 2005 2003 2004 2005 0 2003 2004 2005 2003 2004 2005 2003 2004 2005 2003 2004 BMO BNS CIBC NBC RBC TD net interest incom e ot he r in c om e NumberNumber ofof CreditCredit UnionsUnions inin CanadaCanada
1600 1400 1200 1000 800 600 400 200 0 1987 1997 2005 NumberNumber ofof CreditCredit UnionsUnions byby ProvinceProvince Source: CUCC statistics
900 BC 800 Alberta 700 600 Saskatchewan 500 Manitoba 400 Ontario 300 200 New Brunswick
100 Nova Scotia 0 PEI 1987 1997 2005 AverageAverage SizeSize ofof CreditCredit UnionsUnions byby ProvinceProvince::
800 BC 700 Alberta 600 Saskatchewan 500 400 Manitoba
300 Ontario 200 New 100 Brunswick Nova Scotia 0
1987 1997 2005 PEI BCBC CreditCredit UnionsUnions movemove toto MortgagesMortgages
(Source: authors graphs prepared from cu statistics in 1974 - $millions)
$700 $600 $500 $400 $300 $200 $100 $0 1966 1967 1968 1969 1970 1971 1972 1973
Consumer Mortgages AssetsAssets ofof ProvincialProvincial CUCU Systems:Systems: 19871987 -- 20052005
40 BC 35 Alberta 30 Saskatchewan 25 20 Manitoba
15 Ontario 10 New 5 Brunswick Nova Scotia 0
1987 1997 2005 PEI BankingBanking PreferencesPreferences
Canadians' Primary Method of Banking
Other, 2% Combination of All, 4%
ABMs, 34% In Person (teller), 29%
Telephone Banking, 8% Online, 23% HowHow CanadiansCanadians PreferPrefer toto PayPay BillsBills
Primary Means of Bill Payment
Other, 1% Combination, 4% Cash, 2% Computer/online, Telephone 26% banking, 9%
Automatic debit/credit card payment, 13%
ABMs, 16% With a teller at a branch, 14%
By cheque, 15% KeyKey ComparatorsComparators withwith BanksBanks
Summary of Overall Performance Measures
Overall Qualtiy of 78% Customer Service 66%
Value for Money of 56% Products and Services Received 45%
Would Recommend 74% Institution to Friends 60% and Family
Institution Values 65% Customers' Business 45%
0% 20% 40% 60% 80% 100%
Bank Customers Credit Union Customers NumberNumber ofof CreditCredit unionsunions:: ProjectedProjected inin 20132013
900 BC 800 Alberta 700
600 Saskatchewan 500 Manitoba 400 300 Ontario
200 New 100 Brunswick Nova Scotia 0
1987 1997 2005 2013 PEI Current Credit Union Province 4Q 2005 2Q 2005 Members Locations Rank
1 Vancouver City Savings Credit Union (1) BC $10,166,463,438 $8,495,329,220 337,107 48
2 Coast Capital Savings Credit Union BC 8,210,264,996 7,126,146,477 339,890 49
3 Meridian Credit Union ON 3,491,952,761 3,297,727,281 186,542 44
4 Capital City Savings AB 2,498,852,463 2,338,786,067 147,341 40
5 Envision Credit Union BC 2,408,983,757 2,230,180,514 78,795 19
6 Community Credit Union AB 2,065,319,063 1,827,478,855 101,627 27
7 Desjardins Credit Union ON 1,801,699,670 1,891,365,753 44,391 25
8 Steinbach Credit Union MB 1,765,326,971 1,680,821,343 62,535 2
9 Alterna Savings ON 1,731,116,156 1,698,673,382 163,825 25 Current Credit Union Province 4Q 2005 2Q 2005 MembersMembers LocationsLocations Rank
11 First Calgary Savings AB 1,531,123,694 1,458,895,969 80,690 15
12 Interior Savings Credit Union BC 1,460,106,311 1,369,840,037 82,082 21
13 Conexus Credit Union SK 1,433,687,917 1,408,094,872 82,657 28
14 Westminster Savings Credit Union BC 1,313,197,732 1,225,998,789 51,119 11
15 Coastal Community Credit Union BC 1,255,552,377 1,225,660,504 82,741 23
16 Common Wealth Credit Union AB 1,227,977,056 1,051,579,258 49,112 13
17 North Shore Credit Union BC 1,206,371,062 1,149,205,183 36,468 12
18 Cambrian Credit Union MB 1,126,813,071 1,059,964,779 49,217 11
19 Valley First Credit Union BC 971,699,416 990,125,732 44,073 15
20 St Willibrord Community ON 908,999,308 912,352,957 47,368 15 AverageAverage SizeSize ofof CreditCredit UnionsUnions byby provinceprovince::
800 BC 700 Alberta 600 Saskatchewan 500 400 Manitoba
300 Ontario 200 New 100 Brunswick Nova Scotia 0
1987 1997 2005 PEI KeyKey ObservationsObservations
99 TopTop 2020 CreditCredit UnionsUnions areare allall RegionalRegional 99 WhileWhile RootsRoots maymay bebe tracedtraced toto ethnic/religious/workplaceethnic/religious/workplace –– mostmost havehave abandonedabandoned thatthat tracktrack DiversityDiversity CreditCredit UnionUnion AssetsAssets %% ofof SystemSystem AssetsAssets VanCityVanCity $10,166,463,438$10,166,463,438 10.89%10.89% CoastCoast CapitalCapital $8,210,264,996$8,210,264,996 8.80%8.80% CombinedCombined $18,376,728,434$18,376,728,434 19.69%19.69% TopTop 55 $26,776,517,415$26,776,517,415 28.69%28.69% TopTop 1010 $35,797,691,274$35,797,691,274 38.36%38.36% TopTop 1515 $42,791,359,305$42,791,359,305 45.85%45.85% TopTop 2020 $48,233,219,218$48,233,219,218 51.69%51.69% OtherOther 572572 $45,807,000,000$45,807,000,000 48.31%48.31% TaxationTaxation OutlineOutline
¾¾HistoryHistory
¾¾CanadianCanadian taxtax rulesrules
¾¾ImpactsImpacts onon creditcredit unionsunions HistoricalHistorical DevelopmentsDevelopments
¾¾CreditCredit UnionsUnions taxtax exemptexempt (1917)(1917) ¾¾McDougallMcDougall ReportReport (1945)(1945) ¾¾CarterCarter CommissionCommission (1967)(1967) ¾¾ProposalsProposals forfor TaxTax ReformReform (1969)(1969) ¾¾TaxTax ReformReform (1972)(1972) CarterCarter CommissionCommission
¾¾CreditCredit UnionsUnions shouldshould notnot bebe exemptexempt
¾¾IncreasedIncreased scopescope ofof creditcredit unionunion operationsoperations
¾¾MeasurableMeasurable economiceconomic gaingain WhereWhere WeWe StandStand TodayToday
¾¾CanadianCanadian creditcredit unionsunions paypay manymany taxestaxes
¾¾TaxesTaxes budgetedbudgeted likelike operatingoperating expensesexpenses
¾¾CreditCredit UnionsUnions areare fullfull playersplayers inin thethe financialfinancial servicesservices industryindustry CreditCredit UnionUnion TaxTax RulesRules
¾¾LowerLower TaxTax RateRate ¾¾DeductDeduct paymentspayments toto membersmembers ¾¾FavourableFavourable capitalcapital taxtax rulesrules ¾¾DirectorsDirectors areare remuneratedremunerated LowLow TaxTax RateRate
¾¾16%16% onon firstfirst $400,000$400,000 incomeincome
¾¾16%16% upup toto 5%5% reservereserve
¾¾32%32% aboveabove 5%5% reservereserve OtherOther TaxationTaxation IssuesIssues
¾¾CapitalCapital taxestaxes
¾¾GoodsGoods && ServicesServices TaxTax (GST(GST oror VAT)VAT) SystemSystem EquityEquity // AssetsAssets (%)(%)
9 8 7
e 6 g a t 5 en
c 4 3 Per 2 1 0 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 Year WhatWhat isis onon ourour horizonhorizon
¾ MoreMore mergersmergers ¾ LargeLarge CC UU’’ss flexingflexing theirtheir musclemuscle ¾ ConsolidationConsolidation ofof thethe tierstiers ¾ ExtraExtra--provincialprovincial CreditCredit UnionsUnions ¾ NewNew competitorscompetitors –– DifferentDifferent BusinessBusiness ModelsModels
z ING
z PC Financial ¾ ChipChip CardsCards GroupGroup ofof LargeLarge CreditCredit UnionsUnions
¾¾ PushingPushing CentralsCentrals toto mergemerge ¾¾ PushingPushing forfor federalfederal legislationlegislation ¾¾ CircumventingCircumventing democracydemocracy EMVEMV ChipChip CardCard
InteracInterac AssociationAssociation EMVEMV MigrationMigration TargetsTargets
Segment Dec 31, 2010 Dec 31, 2012 Dec 31, 2015
Deposit-taking ABMs 90% 100% --
Other ABMs 50% 100% --
POS Device (excluding Automated 35% 60% 100% Fuel Dispensers)
Automatic Fuel Dispensers 0% 25% 100%
Debit Cards with PINs 65% 100% -- TimingTiming ConsiderationsConsiderations
cost image
business mounting fraud losses priorities value added services teething problems multi-channel (online, branch) risk of delay cost - forced roll-out
lead card re-issue slack time cycle length
60%60%
startstart 2007 roll-outroll-out 2010 2013 TheThe BusinessBusiness CaseCase forfor ChipChip
¾ ComplianceCompliance withwith InteracInterac AssociationAssociation RulesRules
¾ MaintainMaintain membermember confidenceconfidence andand competitivecompetitive productproduct offeringsofferings
¾ ManageManage fraudfraud duringduring thethe migrationmigration andand longlong termterm onon internationalinternational transactionstransactions AcknowledgmentsAcknowledgments
¾¾ PhilPhil MooreMoore ¾¾ GaryGary RogersRogers ¾¾ PhilPhil BraginetzBraginetz ¾¾ DianeDiane DunnDunn ¾¾ JanetJanet DanielDaniel ¾¾ DougDoug WhalenWhalen QuestionsQuestions