Dominion Bond Rating Service has confirmed the commercial paper and senior long-term debt ratings of Credit Union Central Alberta Ltd.

DBRS says that CUC Alberta continues to fulfill its primary role as a liquidity provider for the underlying Alberta credit union system, with liquidity and conservative credit quality being the key targets rather than robust profitability. It reports that, while CUC Alberta has reported lower year-to-date profitability, DBRS views the earnings weakness to be more likely a single-year disruption than an indication of an ongoing issue.

The credit union system continues to perform solidly, the rating agency says. “Credit quality remains strong, reflecting the sound provincial economy. While energy and agricultural pricing volatility will inevitably cause challenges to the economy and the system, the near-term outlook is very positive,” it adds. “Both Central and the system continue to maintain impressive balance sheets.”

However, it also notes that, like other provincial credit union systems, the Alberta system, “continues to struggle to improve the contribution of fee-based income from low levels, particularly in the wealth management area, where efforts have thus far met with limited success”.

“Central’s operations include a number of joint ventures with other provincial centrals. While these operations have the potential to improve efficiency and provide additional advantages to the organization, significant financial benefits have yet to be achieved,” it notes. “Geographic concentration, a high cost structure, and a need to expand the membership base are ongoing structural issues for the system.”