A big cull of credit unions in Ireland expected & it could shut down some 300 offices
Last weekend’s annual conference of the Irish League of Credit Unions (ILCU) took place as the community-based banking movement faces unprecedented changes after decades of near-inertia.
Less than a quarter of the more than 400 credit unions currently in existence will still be around in 10 years’ time, experts have predicted.
The sector faces a radical shake-up with a recent report recommending widespread mergers as the only way for it to survive a financial meltdown.
In the wake of this wave of amalgamation, around 100 unions will survive in the long term, predicted Justin Callaghan, executive director of FTI Treasury, which has been providing advisory services to the movement for eight years.
He based the figure on the fact that there are only 109 credit unions with assets over €40m, which is “probably the smallest assets size to lend itself to a feasible restructuring plan”.
A senior credit union insider we spoke to agreed with this assessment. “I would say 100 max will exist independently in 10 years,” he reckoned.
Another source with deep knowledge of the sector, who also did not wish to be named, foresaw an even more radical culling.
“Depending on government policy either none or 25 will still exist,” he said. “If credit unions are not considered a component of a post-crisis banking system, none will survive. If they are to survive, the system has to rationalise into bigger operations that must also integrate, similar to European networks,” he said. “Hence the figure of 25. And maybe even fewer would do. Perhaps 10.”
However, weaker credit unions that are amalgamated won’t necessarily shut down. They could still remain open as the local branch of a larger operation.
Consolidation of credit unions was the key recommendation in the recent report on the Commission on Credit Unions, which is being discussed at this weekend’s ILCU gathering in Killarney.
The report shows that unions have weathered the financial storms relatively well — compared to the carnage in the banking sector.
Average liquidity in December 2011 stood at 47.38 per cent while the loan-to-asset ratio in the sector was 40.76 per cent for the year as a whole.
However, it warned, in the absence of “corrective action” (ie, amalgamations), the “financial position of a significant number of credit unions will deteriorate markedly between now and 2013, due mainly to rising bad debts, poor governance and inadequate buffers of reserves”.
The report does see a future for restructured credit unions, particularly in social lending.
Justin Callaghan agrees: “I believe there is a future. To what extent there will be local or centralised balance sheet remains to be seen,” he said. “But the ethos is very strong. They have an important role for the local community. People are very comfortable with the credit union ethos.”
This loyalty translates into a “stickiness in shares”, which has spared the unions from an even greater outflow of funds in the face of falling dividends and worries about solvency.
Another fan of credit unions is Eddie Hobbs, who often steers financially troubled borrowers towards credit unions on his mobile clinics for RTE’s The Consumer Show.
“I always check the financial situation of the local credit union in question. If I’m happy with that, I’d certainly send people to them,” he said.
“Where credit is available, for example, in a recent clinic we did in Nenagh, the local credit union did a student loan at 6.25 per cent. That’s very good.”
When asked about the falling level of dividends paid on savings to a current average level of around 1 per cent, he pointed out: “You throw money into a credit union in order to be able to borrow money, not for the level of return.”
Eddie also likes credit unions because of their “humane” approach to lending.
“They are good with people. You can hear that as soon as you talk to them on the phone. That’s because they have hundreds of thousands of real human interactions every day, which is very different to how banks operate.”
Wind farms can affect local weather in the immediate locality
Wind turbines can affect local weather, the study confirms – but not further afield
Wind farms can affect weather in their immediate locality, raising night-time temperatures on the ground, researchers working in Texas have shown.
They used satellite data to show that land around newly constructed wind farms warmed more than next-door areas.
The result – published in the journal Nature Climate Change - confirms an earlier, smaller study from 2010.
The scientists believe the effect is caused by turbines bringing relatively warm air down to ground level.
They suggest that turbines in other places might not produce the same value of ground temperature change.
The study area, in west-central Texas, saw a major turbine building programme in the middle of the last decade, with the number soaring from 111 in 2003 to 2325 just six years later.
Researchers used data from the Modis instruments on Nasa’s Aqua and Terra satellites to measure ground temperatures across the study region and between the beginning and end of the construction boom, defined as as the difference between the average for 2003-5 and that for 2009-11.
The entire region saw a rise, but it was more pronounced around wind farms.
The researchers looked for other factors that could have affected the results, such as changes in vegetation, but found these were too small to produce the observed change.
Limited reach
The change was not identical across all of the wind farms. Having averaged the data, the researchers say the scale of the effect they saw is equivalent to a warming of about 0.72C per decade.
Recognising that this could wrongly be interpreted as suggesting the local temperature will continue to rise, lead researcher Liming Zhou cautioned: “The estimated warming trend only applies to the study region and to the study period, and thus should not be extrapolated linearly into other regions or over longer periods.
Could the local weather changes affect farming?
“FOR A GIVEN WIND FARM, THE WARMING EFFECT WOULD LIKELY REACH A LIMIT RATHER THAN CONTINUE TO INCREASE IF NO NEW WIND TURBINES ARE ADDED.”
At night, air above ground level tends to be warmer than the ground. Dr Zhou and his colleagues believe the turbine blades are simply stirring up the air, mixing warm and cold, and bringing some of the warmth down to ground level.
“The result in the paper looks pretty solid to me,” commented Prof Steven Sherwood from the Climate Change Research Centre at the University of New South Wales in Australia.
“Daytime temperatures do not appear to be affected. This makes sense, (and) this same strategy is commonly used by fruit growers who fly helicopters over their orchards to combat early morning frosts.”
The 2010 study, also from the US, used data from a single location and computer modelling to show that wind turbines could produce local warming.
Dr Zhou, from the State University of New York in Albany, US, now plans to look across bigger scales and to decipher the mechanisms better.
“This article is a first step in exploring the potential of using satellite data to quantity the possible impacts of big wind farms on weather and climate,” he told BBC News.
“We are now expanding this approach to other wind farms, and building models to understand the physical processes and mechanisms driving the interactions of wind turbines and the atmospheric boundary layer near the surface.”
Connacht Gold reports a 16% increase in turnover and profits for 2011
‘sales now up to €345m’
Aaron Forde, the CEO of Connacht Gold.
Connacht Gold has reported a 16% increase in turnover in 2011. Turnover reached €345m compared to €296m in 2010. Operating profit for the dairy, consumer foods and agri-business co-operative was €3.29m, compared to €3.24 in 2010.
The increased turnover was driven primarily by a substantial increase in the value of dairy ingredients sales and a record year for sales in its livestock marts business.
Dairy Ingredients turnover rose almost 40%, from €60m in 2010 to €83.5m while sales at the co-op’s four livestock marts increased by 30% to €90m.
The co-op’s net debt was down from €18m to €7.8m. The main drivers were an improved working capital position, continued focus on operating costs and proceeds of a share disposal. Capital expenditure in 2011 amounted to €7.2m.
Connacht Gold chief executive Aaron Forde said the figures represent a steady performance.
“Our operating profit was modest, but is reflective of our commitment to maximising returns to our members and the strong investment programme pursued in 2011.
“We continued to invest heavily in the company across all business units. The acquisition of the milk and retail stores businesses from Donegal Creameries at the end of the year will grow the business significantly and consolidate our position in consumer foods, dairy ingredients and retail stores. The emphasis in 2012 will be on consolidating the enlarged business and ensuring our customers, members and suppliers benefit,” he said.
Highlights: The following are the highlights for the main business units in 2011:
Agribusiness: Agribusiness sales were maintained at €88m, in spite of a national drop in feed and fertiliser sales. The investment in stores continued during the year with a new multi-purpose store opening in Swinford, Co Mayo. Major investment was also undertaken in a new store in Westport and in relocating the Longford store to cope with increased sales.
The acquisition of the Donegal Creameries businesses has increased the number of Connacht Gold stores from 30 to 41 in the five counties of Connacht as well as Longford, Westmeath, Donegal, Fermanagh and Tyrone.
Livestock Marts: The co-op’s four livestock marts, at Balla, Ballinrobe, Ballymote and Mohill, achieved record sales of over €90m, up from €69.6m in 2010. Average prices for cattle and sheep increased by 23% and 14%, respectively, in 2011. The marts also grew their share of business in the region, with throughput of sheep up 17% and cattle throughput up almost 5%.
Consumer Foods: Consumer foods sales climbed almost 10% to €45.7m in 2011, with increased volumes being recorded, particularly in the butter and yellow fats area. The launch of ‘Connacht Gold Spreadable’ and ‘Connacht Gold Spreadable Light’ contributed to this success against a value-driven market backdrop. The Donegal acquisition creates a strong market position for the future.
Dairy Ingredients: Volumes of milk processed at the co-op’s dairy ingredients business increased by 20% in 2011 and this, combined with stronger product prices, led to an almost 40% increase in sales to €83.5m. Connacht Gold expanded its markets for dairy products during the year. Fat-filled milk powder is now being exported to the Middle and Far East, Africa, Pakistan and there are growth opportunities in Central America.
The average price received by Connacht Gold milk suppliers surpassed the previous peak achieved in 2007.
Joint Venture: The Connacht Gold joint venture timber processing company, ECC Timber, reported a strong export performance in 2011 which helped to counteract the continuing poor domestic demand. The raw material price did not reflect market reality for much of 2011. Based in Corr na Mona, Co. Galway, ECC Timber accounts for almost 20% of timber processing in Ireland. Investment in a finishing line was completed during 2011.
Connacht Gold Chairman Padraig Gibbons said; “Connacht Gold is entering a pivotal period and the increased scale of the business will be vital to ensuring efficiencies and customer relevance as we seek to strengthen our brands and play a vital role during a positive outlook for agriculture in Ireland.
“With the ending of quotas in 2015 now only three years away the co-op is engaged in planning for the changes that will bring. As the planning phase progresses, we will maintain communications with the shareholder base.
The FF leader Michael Martin dismisses
Eamon Ó Cuív proposal of a Sinn Féin coalition
The Fianna Fáil leader Michael Martin has rejected a suggestion by his former deputy leader that Sinn Féin would be the party’s preferred future coalition partner.
Micheál Martin said yesterday that he would not share Éamon Ó Cuív’s analysis in terms of Sinn Féin being a republican party. “I would challenge that point,” he added.
Mr Ó Cuív made his remarks to the Connacht Tribune before yesterday’s attack on Sinn Féin by Mr Martin at the Fianna Fáil 1916 commemoration in Arbour Hill, Dublin. Mr Martin said Sinn Féin’s economic platform and its policy on Europe would not commend the party to him or Fianna Fáil at this stage.
Mr Ó Cuív resigned as deputy leader and from the front bench last month after defying the party’s support for the fiscal treaty referendum. Mr Martin had made it clear to Mr Ó Cuív that his role in the party had become untenable.
The former deputy leader said yesterday he favoured coalition with Sinn Féin in the future because the two parties basically came from the same tradition.
“The reality also is that Fine Gael and Labour have had a symbiotic relationship over many, many years,” he added. “You could say they are nearly just two wings of one group and, therefore, there is very little compatibility between Fianna Fáil and either Fine Gael or Labour.”
Asked about Mr Martin’s rejection of his views, Mr Ó Cuív said it was not “the first time we have disagreed on policy issues”. He was informing people of his views on the treaty. “There seems to be a lot of misunderstanding out there.”
He added that people campaigning for a Yes vote were saying there was no choice.
After his speech in Arbour Hill, Mr Martin said he was putting across a clear message that the pasts of all parties were up for inquiry. “I think, at this juncture, it is important that the activities of the Provisional IRA are articulated . . . the barbarity they engaged in and the need for accountability.”
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