With turbulent economic forces piling pressure on small financial institutions, consolidation is a growing trend in the US financial services sector. This has brought many mergers between credit unions – and another outcome is the record number of purchases of banks by credit unions.
The emphasis is still on consolidation within the sector: the National Credit Union Administration (NCUA) says there have been 900 mergers from 2016 to 2020. But S&P Global figures show that 13 banks were acquired by credit unions in 2021, and industry observers such as Michael Bell, finance expert at Detroit law firm Honigman, expects at least 25 more such deals this year.
“My prediction is based on the work and deal flow I am seeing,” he told American Banker. “I spend most of my time working on these deals, and I have never seen so much activity.”
Bank purchases are a strategy highlighted by US credit union representatives at the recent Association of British Credit Unions (Abcul) conference. Eric Broome, from Georgia’s Own Credit Union, told delegates that mergers, acquisitions and private partnerships are a valuable mechanism for US credit unions to grow the scale and the raise capital they need to keep up with digitisation and increasingly competitive markets.