Buy! Buy! Buy! What CUs are up to in the downturn.

by Ron Daly 

If you've been following the Soapbox since the beginning (if you have, thanks, and tell your friends), you'll remember us talking about Warren Buffet's secret success formula: When others are greedy, be fearful; When others are fearful, be greedy. 

As such, CUs (and members) are getting their pick of any number of key programs/purchases. Let's look at some, shall we? 

A Home for You and Me

According to this article (click here) and research findings from SynergisticsResearch.com, more people will be buying homes this year than the market would predict. 

How I come down on this: Good. Why not? Supply is high, demand is low, so cost goes down. There were folks out there who had the means to buy a home back when taking on a crummy mortgage seemed like a good idea, but the financial wherewithal to stay away. Why shouldn't they take advantage of the situation now?

And why not come to the CU for said loan? I mean, they're lending...banks aren't (Read "Why Banks Still Won't Lend", from Businessweek). 

Not only are CUs lending, they're also thinking about building.

CUs Trying to Build

This article (click here) tries to posit that CUs can build more branches for less now. According to the article, costs have declined between 10 and 15 percent. 

How I come down on this: Unsure. I sit somewhere on the fence between cost-effective and necesssary. 

You need to build a branch? Go right ahead and take advantage of reduced cost. But keep in mind that people are using mobile banking/online banking more and more (read about it here), with some predicting (specifically,  this report) that people will be using mobile banking 75% of the time in the next 10 years. So is pushing money into branch building the best move in terms of the long game?

Leaning green again, as I did in Monday's article, can you make the claim that you're "greening-up" your CU if you build a whole new branch? Why not just scoop up one of the branches left vacant by the failed banks in your area? There's got to be at least one. 

This article gave me some comfort (click here), because it talks about a difference folks need to recognize: the difference between tactics and strategy. The TBTF (too-big-to-fail) banks were great at "tactics" - that's how we got to where we are. Strategy means being able to see long-term and plan around what you recognize as the motion of the industry and of the people who depend on said industry.

Weigh in at the comments section...I'm curious to hear about what you, our devoted followers (also, come up with a name for yourselves), have to say. 

Comments

[Elliott]

On the building question, I'm wondering if falling real estate prices have "passed" the mark of where the prices "should be." We all agree that, for the most part, real estate was over valued, but I'm curious if by the time we bottom out if that will be fair value, or under value. Most markets tend to overcompensate when correcting price levels, causing them to overshoot their mark, and then eventually rebound to a stable price level. If this is the case here, and the market is near bottom, then developing a piece of land may make some financial sense for a CU.

From the green side, a strategically placed branch could save people longer trips. However, it may encourage members to make more frequent trips of the location is convenient, potentially negating any environmental gains.

In regards to mobile banking, increased adoption of online and mobile banking does not necessarily correlate to decreased in branch activity. All could increase if people become significantly more active in managing their money using multiple channels. I'll have to take a look at statistics on branch utilization.

Potential names: Soapies. Suds. Boxheads. Boxies. Shouters. Soapbox Shouters. Citizens. All awful. Maybe it made someone else think of something decent.

[SRG]

It's a good point about weighing the advantage of lower cost building vs. the diminishing need for branches (with the rise in internet banking). The CU I work for actually serves our members through another (larger) CU branch network so I'm not sure if we have any say in that matter.

Meanwhile we've been trying to get the word out that we're not in a credit crunch and members shouldn't hesitate to come to the CU for a loan. Initially the idea was to get them to use us for loans vs. banks, now it's trying to convince them we're NOT in a credit crunch.

Re: our name... Soapboxers? Soapbloggies?

[Elliott]

SRG brings up a great point about the branch network. Every new branch that gets built is like a new branch for every CU in the network.

Assuming most CU members have knowledge of the share branch network (I understand that this is a serious assumption), you could multiply the green benefits of a shortened trip. How all that weighs against the environmental cost of construction, I don't know.

I like the "boxers" part. Makes us sound tough.