Moody’s Investors Service (Moody’s) said today that the credit outlook for the Australian credit union sector was “negative” due to pressures from the global financial crisis.
Moody’s assistant vice president and analyst Marina Ip said the negative outlook applied principally to those credit unions with traditional business models that had “a structural reliance on wholesale funding, and securitisation in particular”.
The ratings agency also forecast increased consolidation activity in the sector as a result of funding and profit pressures, bank competition and the drive to increase economies of scale in the areas of regulatory compliance, accounting and IT.
“The credit union sector’s efficiency levels are held back by the large number of smaller institutions. Several may be struggling with rising operating costs,” said Ms Ip.
Despite the negative outlook, Moody’s said asset quality remained strong and the impact of delinquencies would be minimal because of the sector’s sound lending practices.
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