Celent Banking Newsletter, November 2011

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21 November 2011
New York, NY, USA

From the Senior Vice President

What can banks learn from credit unions?

Celent published two reports (It Takes More Than a Village and It Takes More Than a Village Redux) that confirmed what many of you already knew: banks under $100 million have been disappearing, and the trend is not changing in the least. What you might not have known was why this was happening. Small banks have a markedly higher efficiency ratio, which means they are less efficient. Celent uncovered the same trend in credit unions in the report Tipping Scale: Credit Union Consolidation.

Credit unions have different standard asset tiers, so we normalized the tiers and compared credit union efficiency ratios (calculated by Celent) to efficiency ratios of similar-size banks. What did we discover? Comparable credit unions are more efficient by about 10 points. That is a profoundly lower cost structure. The great irony is that credit unions, as a matter of course, do not use efficiency ratio as a metric. Banks certainly do.

Celent examined why this is the case in EfficienCU: An Examination of Bank and Credit Union Efficiency Ratios by Asset Tier. In these cost-conscious days, I highly recommend that banks read this report to understand the drivers behind credit union efficiency and how banks might be able to duplicate them.

Bart Narter
Senior Vice President

Chart of the Month

From the Celent report: EfficienCU: An Examination of Bank and Credit Union Efficiency Ratios by Asset Tier

Celent Published Reports


Research in Progress

  • Core Banking Solutions for Large, Midsize and Small Banks: A Global Perspective
  • Financial Technology Startups 2011
  • Corporate Mobile Banking
  • E-invoicing Market

Events

Celent Banking Event: What Corporate Mobile Banking Will Really Mean For Your Bank
Senior Analysts
Banking Group

January 25, 2012
Boston, MA

For more information on Celent webinars and speaking engagements, please see our Events page.

Participate in Celent Research

Celent is now accepting nominations for our 2012 Model Bank Awards. Banks may nominate themselves using our nomination form at http://celentmodelbank.com. The deadline for submissions is December 31, 2011.

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