The credit union centrals of Alberta, Saskatchewan and Manitoba are getting in on the merger game.
The trio are putting the finishing touches on a business strategy that will soon be presented to the 155 credit unions in all three provinces. They are seeking permission to amalgamate their operations in early 2011.
If approved, the unification will represent the culmination of more than a year of negotiations as the three centrals seek to become more efficient and better able to serve their credit unions.
While a formal vote won’t happen until later this year, Prairie Central is already starting to take shape. Its inaugural board, with four directors from each province, was recently elected and held its first meeting in early April.
Graham Wetter, president and CEO of the Alberta Central, says with fewer but larger credit unions in each province, the cost of providing services is increasing.
“Today, each central does very similar things. We think we’ll be able to consolidate staffing and be able to focus our people more and deepen our resources,” he says.
Wetter is confident Prairie Central will ultimately get the go-ahead as all three centrals received strong majorities (in excess of 80%) in preliminary votes taken to gauge initial support for a merger.
“Now that we know credit unions are comfortable with the strategy, we’re working through the legal, tax and other details. We think it’s going to be very positive for the central and credit unions. It’s a complicated merger for sure. There’s lots of hard work yet to be done,” he says.
The centrals are the trade associations and primary service providers to credit unions in their provinces, working behind the scenes to support credit unions in providing financial products and services to their members. They also provide clearing services and support the borrowing needs of credit unions.
The Alberta, Saskatchewan and Manitoba centrals are following in the footsteps of their counterparts in B.C. and Ontario. They merged nearly two years ago to form the Credit 1 Credit Union. Before the end of the year, the centrals in New Brunswick, Nova Scotia and Prince Edward Island are expected to finalize their own coalition.
Garth Manness, CEO of the Credit Union Central of Manitoba, says there’s a huge challenge in remaining as separate organizations while the credit union landscape continues to rapidly change. This is largely due to constant merger and acquisition activity. Credit unions could find themselves in a position where they aren’t providing relevant services anymore.
“This isn’t so much about the services we provide in 2010 but what type of a service organization will credit unions need in 2015 (and beyond),” Manness said.
With most mergers, the city that becomes home to the head office is usually deemed to be the winning location but that won’t be the case with the Prairie Central. Officials from all three bodies say there will have to be a head office for legal purposes but there will be a significant on-the-ground presence in all three provinces. This head office decision, as well as who will lead the organization, won’t be decided until after a ratification vote.
Manness says approximately 10% of the 350 positions at the three centrals might be eliminated through the merger.
“That’s assuming we were providing the same services. If the Prairie Central develops other services, employment may even increase,” he says.
Credit unions have a significant stake in the three Prairie provinces, serving more than 1.7 million members in total. They have more than $46.8 billion in assets across more than 700 branches.
“Credit unions have a presence in all corners of Saskatchewan. They’re a big deal here and have a long history of success,” says Regina-based Keith Nixon, project office chair of the Prairie Central Initiative.
Tom Bryk, CEO of Cambrian Credit Union, the third-biggest credit union in Manitoba, says he believes the Prairie Central will help credit unions in the three provinces become more competitive.
“Our hope is this key partner of ours will have the ability to give us more options for managing our businesses, especially in the liquidity area, provide us with services at lower costs and allow us to be more efficient and effective in providing services to our members,” he says.
According to Bryk, while credit unions occasionally “bump into each other” in the marketplace, most of their growth comes at the expense of the banks.
“The banks have the majority of the retail and small business market in Canada. We obviously want to grow and keep what we’ve got,” he says.