Sunday special: Bank on this

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Don Steiner, right, with the staff of Whitemouth’s Sunova Credit Union branch. It moved in when the Royal Bank moved out. (MIKE DEAL / WINNIPEG FREE PRESS)

DON STEINER was a lifelong and loyal Royal Bank customer but his sunny outlook changed when the Royal decided to close its branch in Whitemouth a decade ago.

The small branch in the community of 300, located about 60 miles east of Winnipeg, was said to be profitable yet the bank's brass decided to shut it down to pursue growth opportunities in major centres instead.

"I was a dyed-in-the-wool Royal Banker but when they pulled out, it made me so damn mad," said Steiner, a former reeve of the municipality.

Losing its only financial institution would have set off a slow and painful chain of events that would have transformed Whitemouth into a ghost town, he said, so a group of concerned residents set about to find a replacement.

After a couple of false starts, they found an interested party in Ed Bergen, CEO of South Interlake Credit Union (since rebranded as Sunova Credit Union after a merger). Bergen offered to provide a full-service branch if the locals would commit $10 million in deposits. Until then, South Interlake would open a mini-branch for a couple of days a week.

"We had people line up out to the street to sign up," said Steiner, "If we didn't have a credit union, we would have to go to Lac du Bonnet, Beausejour or Pinawa -- they're all about 30 miles away -- (to do our banking). Once you start losing things like banking services, the town is really on the skids. We would have been a skeleton. We would have lost heavy on business. We still have grocery stores and hardware stores but as soon as people have to bank elsewhere, they're going to shop elsewhere," he said.

Within months, the deposits topped $10 million and Whitemouth had its full-service financial institution.

In Whitemouth and nearly 70 other communities in Manitoba, a credit union is the only financial institution available to consumers, businesses and farmers. That local focus has helped propel the province's credit union system to unprecedented heights.

Today, 48 different credit unions control 41 per cent of the banking market share in Manitoba, comprised of $14.6 billion in assets held at 182 branches. (All figures to the end of February.) Double-digit growth has been an annual occurrence for nearly a decade.

In keeping with Manitoba's two official languages, there is also a francophone credit union equivalent called a caisse populaire. The four in the province, La Prairie, Pembina, St. Boniface and Elie, have 20 branches and assets of $775 million, up more than 10 per cent from a year ago.

Located largely in pockets of French-speaking communities, the caisses offer services in both official languages.

Normand Collet, president of the Fédération des Caisses du Manitoba, said he wouldn't be surprised to see credit unions and caisses become the dominant provider of banking services in Manitoba in just a few short years.

"I certainly hope it happens and I don't see why not. Manitoba has a good economic outlook for the next decade and we certainly intend to be part of that economic growth," he said.

Garth Manness, CEO of Credit Union Central of Manitoba (CUCM), the organization that oversees the province's credit union system, said credit union growth has been outpacing that of the general economy -- and the banks, for that matter -- for the past decade.

There has been an increase in merger activity -- 2008 was a record year for credit union marriages and the pace hasn't slowed in 2009. In fact, on Friday the Lowe Farm Credit Union announced plans to merge with Access Credit Union. But Manness doesn't foresee a day, as some prognosticators do, when the province will have a single or small group of large credit unions able to match the size of the banks.

"I think there's a diversity and an approach that different credit unions utilize that allow the credit union system as a whole to increase its penetration. Credit unions can appeal to the interests of different people. It's difficult to state it's all going to go in one direction," he said.

John McCallum, a finance professor at the I.H. Asper School of Business at the University of Manitoba, said credit unions have carved out their niche in the province because consumers like the local focus and attention as well as the notion that saving together and investing in each other can lead to better cost structures than the banks have.

"Credit unions know the local area and they know the local needs. The people running the place are known in the local community. There's a real comfort level all around," he said. "You can't underestimate the local attention to detail and having the boots right on the ground in the community. It's very tough for banks to compete against that."

McCallum said credit unions have done a good job of reducing their costs, increasing their service levels and keeping pace with technology. He said regardless of whether credit unions have 41 per cent or 50 per cent market share, they're a formidable competitor in the retail deposit and lending market.

Banks, meanwhile, tend to have multiple focuses, including investment banking, commercial lending and international business. Further complicating matters for these financial giants, McCallum said, is a deep-rooted anti-bank sentiment among a certain sector that -- justified or not -- goes back to the Great Depression.

"The 1930s were terrible in North America, worse in Canada and even worse on the Prairies. It was just awful. There were resentments directed at eastern financial institutions, banks and the federal government for their administration of social assistance. I think it's an unfair knock against the banks myself; it's more a knock against the weather and drought," McCallum said.

geoff.kirbyson@freepress.mb.ca

Something in common

In the early days of the credit union movement, most of them were open only to people who shared common bonds, such as where they lived, worked or worshipped or where their ancestors came from. Today there are just three closed-bond credit unions left in Manitoba -- North Winnipeg Credit Union (which serves Canadians of Ukrainian heritage residing in Greater Winnipeg); Carpathia Credit Union (whose members are Manitobans of Ukrainian descent); and the Me-Dian Credit Union (which services people of Indian or Métis heritage).

The other 45 credit unions in the province are open to everyone. Here's a list of one-time credit unions in Manitoba that have changed their names to better reflect the demographics of their membership or merged with other credit unions. (Their current names are in brackets.)

"ö Holy Spirit Credit Union (Entegra Credit Union)

"ö The Winnipeg Housewives Credit Union (Cambrian Credit Union)

"ö CBC Employees' Credit Union (Belgian-Alliance Credit Union)

"ö Progress-Vera Credit Union (Belgian-Alliance Credit Union)

"ö Adanac Credit Union (Belgian-Alliance Credit Union)

"ö Manitoba Telephone System Employees' Credit Union (Assiniboine Credit Union)

"ö Brandon Consumers Credit Union (Westoba Credit Union)

"ö Manitoba Hydro Employees' Credit Union (Assiniboine Credit Union)

"ö Weston Bakeries Credit Union (Cambrian Credit Union)

"ö Railwayman's Credit Union (Cambrian Credit Union)

"ö Safeway Credit Union (Crosstown Civic Credit Union)

"ö Winnipeg Municipal Hospital Credit Union (Cambrian Credit Union)

"ö Moore Business Forms (Cambrian Credit Union)

"ö Strotco Credit Union (Cambrian Credit Union)

"ö Brandon Terminal Credit Union Society Ltd. (Crocus Credit Union)

Source: Credit Union Central of Manitoba

Republished from the Winnipeg Free Press print edition April 19, 2009 b3