Kenneth Kelly, Treasurer
More than a year has passed since the beginning of the COVID-19 pandemic. Like the rest of the world, Ormeau Credit Union has experienced great upheaval as we have had to adapt to living and doing business differently. As the crisis continues to evolve, ensuring the safety of our staff and Members whilst meeting the challenges presented by this global health emergency, remains our top priority.
Since last years’ report, the COVID-19 pandemic has continued to impact livelihoods and businesses, often to devastating effect. Yet with each passing day hope grows that brighter days are ahead thanks to the brilliance and dedication of members of the scientific and medical communities. On a personal note, having been hospitalised recently after contracting the disease, I would like to extend my gratitude to them for their efforts (if you want to obviously – just a thought).
The massive reduction in loan volume bled through to our loan interest income which reduced from over £900k to just £784k – a drop of £126k. This is an unprecedented fall in loan based revenue in a single year. To exacerbate the effect of that, banks further contracted their deposit interest offerings and at one stage we were facing negative interest rates on our deposits (having to pay banks to hold our money) – you may remember that we wrote to you explaining the impact of both of these scenarios earlier in year. Thankfully negative bank deposit rates have yet to transpire and with the upward pressure now evident on inflation, it seems that that event is much less likely now than it was six months ago.
As spending in the population declined, the ability to save increased for some people, which had the knock-on effect of significantly increasing inward payments to Credit Union shares. Shares rose overall by over £800k, or nearly 5%. This is one of the largest single year increases we have seen since we introduced share growth control with our annual savings limit and savings cap of £10,000.00. A dramatically contracting loan book coupled with a significantly increasing share book is an unsustainable situation for any Credit Union and we are no exception. We simply cannot continue to fund our regulatory reserves at the required level contingent with dramatically increasing savings, if, at the same time, our main income stream is in free-fall. The situation is deeply worrying and represents a significant challenge for your board going forward.
What it means in the short term is that, with a view to protecting liquidity and sustaining investment in the long-term future of the Credit Union, directors have elected not to declare a dividend for the year to the end of September 2021. All surplus funds have instead been allocated to our capital reserve. Capital is a key buffer against the difficulties we will undoubtedly experience going forward and we need to ensure that our levels meet the regulatory requirements and are sufficient to see us weather this terrible storm.
Our capital and liquidity both remain prudently well ahead of regulatory requirements, providing a strong platform for recovery and what I hope will be a return to sustainable growth in the future.
252-256 Ormeau Road
Belfast BT7 2FZ
028 9064 3951