Newbridge Credit Union provides €20m for bad debts

moorefield

I've been looking at Newbridge Credit Union accounts for this year in advance of the AGM next Thursday night in Ryston Sports and Social Club. It seems that the credit unions directors and management may have some very serious questions to answer even though they say they will pay a dividend this year of 1.5%.

Bad debts have dramatically increased from €5m in 2008 to €20m this year without any reasonable explanation in the accounts. This is 14.3% of loans. I am also a member of another credit union which slightly smaller and its bad debts are only 4% of loans. Newbridge Credit Union's chairmans report is quite odd – the massive provisions aren’t even mentioned!

What's more Newbridge Credit Union balance sheet has dropped in size by €34m from €223m(08) to 189m(10) again without any reasonable explanation.

If I look at savings, these have dropped by €27m - €25m alone in 2010.

Looking at new loans (which are very important) these have dropped from €62.2m in 2007 to €21.9m in the last year - that's a drop of €40.0m!

Something is not quite right. In 2007 it made €62.4m in new loans and total loans grew by €9m from €121.9m to €130.4m. Which means that it would have stood still had it issued €54m.

In 2008 it made fewer loans at €56.5m in loans yet its total loan book went up by €16m to €146m.

Yet when its new loans drop by a total of €56m over two years ’09 & ‘10 its loan book only dropped by only €5m!

One possible explanation for this is the credit union has been engaging in quite sizeable loan rescheduling of some very large loans. It also might explain the massive jump in bad debts to €20m. So what kind of lending was it doing?

My other credit union shows an important schedule in its accounts. This is how much loans are less than five years, greater than five years and greater than ten years. Despite sharing the same auditors Newbridge accounts do not show this schedule. Why is this? Could it be that losses are happening on larger longer term loans.

Now what's really surprising and odd is the level of write offs have only increased from €534k in 2008 to €949k in 2010. Why is this odd?

Because if I say I think €20m should be provided for because I expect a loss and only write off €1m then either I have miscalculated what I expect to lose or I'm not writing off enough.

There's another odd issue and that relates to the value of its premises. €12m was spent on the new extension. In 2009 the board had the property valued at €15.8m which coincidentally was the depreciated value of property in its books. This year it has had the property valued again and it is the same value as the depreciated property in its books. This means it is saying that commercial property values in Newbridge have declined by only 2% in the last year. This is quite odd as the decline in commercial property values in the last year has been about 10%!

Maybe I'm wrong but I think in reading the accounts that this may be one very sick credit union. It has made huge provisions for loans, which must comprise some very large loans. It does not say how much is lent over five and ten years. Nor does it give a breakdown of general and specific provisions. It is only writing off less that 5c in the €1 of these bad loans which appears to be far too low. While its yearly bad debt provisions have increased from €500k in 2008 to €9m in 2009 and €6m in 2010 its write offs have only increased from €534k in 2008 to €949k in 2010.

It seems that the board has some explaining to do.

Blizzard

If your stats are accurate, this info should raise a lot of eyebrows. I hope that you plan to bring up some of these issues at the AGM.

I still wonder as I walk or drive past it, why was so much spent on such an elaborate new building to house the Newbridge Credit Union? Where did this money come from? I can totally agree with you that it depreciated much more than 2% in the last year; if only the same were true for all the poor folks with negative equity. Yet another ostentatious reminder of the wasteful Celtic Tiger years. :eek:

moorefield

2007 2008 2009 2010
Total Assets 219 223 214 189
Loans 130 146 146 140
New Loans 62 57 31 22
Loans Repaid 51 38 31 27
Loan Growth 12 19 0.1 -6
Investments 76 66 61 51
Savings Lodged 105 88 94 74
Saivings Withdrawn 99 93 96 99
Savings Growth 7 -5 -2 -26
Cash & Investments 77 66 66 53
Bad Debt Provision 4.5 5 14 20
Annual Provision .5 .5 9 6
Write offs .4 .5 1.5 .9
Recovered .12 .14 .08 .09
Interest Income 13 14 15 13
Investment Income 3 3 2.4 1.8

maxwell smart

Wasn't the largest individual loan over €1m? How can a credit union justify that? Must have a look over the figures before the AGM

DWCommuter

maxwell smart wrote: »

Wasn't the largest individual loan over €1m? How can a credit union justify that? Must have a look over the figures before the AGM

From last years AGM and stated by chairman Ben Donnelly.

However, there was significant disquiet when he admitted, in response to a question from a shareholder, that the biggest individual loan was "in excess of a million".

He went on to say that they didn't deal with "developers" only "members". So in essence he's claiming a "member" borrowed in excess of 1 million yo yos. Im an ex member and would not have a good thing to say about how the conduct their affairs.

moorefield

Could it be that credit union officers were driving at speeds in excess of legal loans speeding limits?

Could it be that its largest borrowers (who legally have to be "members") are property developers and speculators?

Could it be that some have been NAMA'ed?

Could it be that loans are predominantly unsecured or the security is impaired?

These are some of the many questions that could be posed of any credit union board at AGM's these days.

maxwell smart

Did anyone go to the AGM?