Key takeaways

• Strategic mergers are driving growth and resilience among Canadian credit unions.
• Consolidation can enhance member value, improve efficiency, and strengthen local impact without sacrificing culture or autonomy.
• Deloitte’s Member Merger Accelerator offers a proven, data-driven approach to due diligence, business casing, and integration.
  

Mergers are one strategic lever credit unions can pull to pool investments, share risk, and sustain growth.

And we’re seeing more and more of them pull this lever.

Provincial credit unions ConnectFirst and Servus merged to create an entity with $30 billion in total assets.¹ Community credit union First Credit Union is in the process of merging with the larger Vancity.² These are two of the dozens of mergers and preliminary merger discussions happening across the country, across different sizes and types of credit unions.

As more credit unions merge, the total number of credit unions decreases. Yet from 2014 to 2023, total assets have doubled.³ This indicates concurrent trends in system growth and consolidation—mergers are being driven by strategy, not distress.

Recently, regulators have taken an explicitly encouraging posture toward consolidation.⁴ They recognize that mergers enhance resiliency, profitability, and competitiveness by:

• Diversifying members, loan books, deposits, and fee revenue;
• Sharing the increasing costs of technology and compliance;
• Enhancing effectiveness of investments in marketing, and member services to attract new members;
• Avoiding duplicative and redundant costs; and, ultimately;
• Improving the long-term sustainability of credit union.

We’ll cover compelling reasons to consider consolidation as one way to achieve your strategy, and Deloitte’s proven process to drive successful credit union mergers.

The case to consolidate

The short case for credit union consolidation? Defending your organization from competition and cost pressures.

But consolidation can also kickstart growth.

In Canada, the total assets of the credit union industry continue to grow. In tandem, the share held by the largest credit unions grows as well. As of mid-2023, the top five credit unions held 35% of total assets ($109 billion), and the next 20 largest hold 41% ($128 billion). The remaining 172 credit unions hold 24%, or $66 billion.⁵  

Larger credit unions also demonstrate higher compound annual growth rates (CAGR) than smaller ones. The chart below groups the top 100 credit unions by size, with 1–20 being the largest and 81–100 being the smallest:

This data shows us that bigger (often merged) credit unions:

• Hold a significantly larger fraction of the industry’s total assets
• Grow at a much higher rate than smaller (non-consolidated) credit unions

Our analysis shows that these larger credit unions have the trifecta of:

1. More non-interest revenue sources and diversification of markets
2. Better efficiency ratios driven by the economies of scale
3. Higher profitability from the increased capacity for investment in people and technology

Additionally, while most larger credit unions have more diversification across geographies and industries, we've found that this is sometimes specific to the nature of the merged entities.

How consolidation can enhance your credit union

Credit unions stand out as fiercely independent entities that pride themselves on strong relationships with members and staff, deep local connections, and a philosophy that differentiates them from the “big banks.” This background brings forth common concerns surrounding consolidation, like:

• Reduced local voice in governance
• Abandoning a legacy, brand, and history that resonates with members and staff
• Fewer, long-term board, leadership and job opportunities
• Reduced local autonomy in lending decisions, community investment and patronage distributions
  

Notably, when approached thoughtfully, consolidation addresses many of the above concerns. Consolidation isn’t the large swallowing the small (or distressed); it’s a proactive component of business strategy that we’re seeing both large and small credit unions adopt to:

• Focus on accountability to members vs. shareholders to preserve a key differentiator against banks and fintechs
• Piggyback, rather than duplicate, spend in technology, software upgrades, digital services, and marketing to reduce costs, improve member satisfaction, and free up funds for strategic and local investment
• Enhance products and services to satisfy the growing expectations of retail banking consumers and attract new members
• Create a net-positive impact on people with deliberate, kind, and transparent management of the short-term impact
• Maintain culture as a key priority and understand the cultures or subcultures needed for staff to thrive
• Reduce unproductive capital with more security for loan offerings

But consolidation requires an experienced lens guiding the process to achieve the best partnership and results. That’s where Deloitte’s Member Merger Accelerator (MMA) comes in.

Deloitte’s Member Merger Accelerator (MMA): 3 steps for a successful credit union merger  

To address these challenges, our Credit Union M&A specialists have developed a proprietary data analytics engine, minimum viable product scope, and tiered data request list that’s fit-for-purpose for credit union M&A due diligence and business-casing:

The engine combines multiple platforms to produce a single source of data that:

• Simplifies scenario analysis that assesses impact of potential events in a merger’s path forward;
• Refreshes data based on the latest, real-time developments in a credit union’s business; and
• Configures interactive dashboards with stakeholder-specific data cuts, from boards to regulators.

Scenarios in which we’ve applied this approach include:

• Amalgamations
• Asset purchase arrangements
• Multi-party mergers
• Intra-provincial
• Federal - provincial
  

Consolidate your credit union with confidence

Consolidation isn’t a business strategy in and of itself. But it’s one strategic lever that credit unions can pull to accelerate their broader strategic choices and become resilient amidst complex regulatory changes and increased competition in the market.

Credit union mergers are unique, and each one calls for a specialized lens.

Our proven Member Merger Accelerator and core-banking data migration tools give credit union leaders the confidence to execute a consolidation strategy that they know will meet their institution’s and customers’ needs.

Ready to build a resilient future for your credit union? Book a call with our leaders today!