Michael Joel-Hansen
Saskatoon StarPhoenix
Three Saskatchewan credit unions are looking at potentially combining their operations. On Wednesday, Conexus Credit Union announced it’s beginning talks with Cornerstone Credit Union and Synergy Credit Union about coming together to form a single entity. If the three credit unions reach an agreement and get regulatory approval, the merger would create a single credit union with around $15 billion in assets under management and about 1,400 employees across Saskatchewan. Conexus Credit Union board chair Ken Kosolofski said the three organizations
will put together a business case over the next few months. Credit unions are dealing with a competitive businesses environment that includes the Big Six banks and new online financial platforms. “If we can come together and combine here, we have a chance against some of the competition,” he said. Celina Philpot, chief executive of Conexus, said online platforms such as Wealthsimple Inc. and Neo Financial, which have no physical banking locations, have emerged to give customers an alternative to traditional banking. Saskatchewan has also proven to be an attractive jurisdiction for competing financial institutions due to its economy, she added. “We get a lot of attention from multiple financial institutions because of that practical, sustainable growth that we have in our province.” Philpot said credit unions have also faced headwinds from a changing regulatory environment and the merged entity would be in a better position to deal with those pressures and offset costs. “It is a cost for the credit union; there’s no revenue opportunity from any regulatory regime that’s in place,” she said. The announcement by the three Saskatchewan credit unions follows similar trends in neighbouring provinces. This past summer, Alberta’s Connect First and Servus Credit Unions formally combined into a single entity with $34 billion in assets. Three Manitoba credit unions also voted over the summer to merge to create a combined entity with more than $9 billion in assets. That merger is set to go through next year. With their proposed merger, Conexus
and its partners are following this larger industry trend, Kosolofski said. “This is just a continuation of a drive to get more scale so we can become more sustainable in the future.” In a note to clients, analysts from Morningstar DBRS, a U.S.-based credit ratings agency, wrote that consolidation in the Canadian credit union sector has increased in recent years. Josh Veenkamp and Tim O’Brien attributed the trend to financial costs brought on by increased competition.
“Technology investments required to stay competitive with large banks and fintech companies have become increasingly onerous,” they wrote.
The two analysts said the merged entity would be in a good position to operate in a more efficient manner while achieving some cost ynergies.
They said the merged credit union would also be in a good position to make any needed investments to improve technology to better compete. The note said the new entity would have a risk profile similar to the current profile of Conexus, but will have a loan book with more exposure to agricultural and commercial loans. Overall, the analysts said the three entities are on solid financial footing. “All three credit unions are primarily funded by stable member deposits, have liquidity coverage ratios and capital levels well above the regulatory minimums.” The business case analysis on the proposed merger is expected to be finished by March. After that work is finished, the proposed merger will go
to each credit union board for a vote. If the boards vote yes, the decision will be thrown to members, who will likely vote in June.
“If our members vote in favour of it, we’ll be ready to start that new credit union as soon as possible,” Kosolofski said.
