Consolidation is one of the continuing themes at the small end of the deposit-taking sector, and the CFO of one of the consolidators took a stab yesterday at guessing how many credit unions might survive in the near future.Damien Walsh, chief financial officer, of mecu, reminded the audience at an industry lunch in Melbourne yesterday that there were a little more than 100 credit unions operating in Australia. Walsh was speaking at a panel discussion on retail financial services hosted by Australian Banking & Finance."That'll come down no doubt to maybe a dozen mutual organisations," Walsh said. "It's just the reality of what's happening. I see a lot of my work over the next few years in the merger and acquisition space."There's a lot of opportunities to move into the second tier [of banking] and scale is the way to do that."  mecu last year merged with Maroondah Credit Union in suburban Melbourne and RegionalOne Credit Union in country Victoria. mecu got close to agreeing terms last year for a merger with Teachers Credit Union in New South Wales, though the talks petered out late in the year.Credit union mergers have actually been rare this year, with only three announced so far.  The average number of mergers is three each quarter, a report published yesterday by Moody's Investors Service noted. APRA data show there were 108 credit unions at March 2010.The Moody's report was generally positive on the sector and lifted the ratings outlook to stable from positive.Moody's said it believed the current level of capital in the sector was adequate, largely due to the preponderance of home loans on their books, accounting for 84 per cent of loans, and the low loss experience on this class of lending in Australia. The firm noted that the sector's equity to risk-weighted asset ratio was 16.5 per cent in 2009 and a little better than for the building society sector.However, Moody's noted that the credit union sector is, on average, less efficient than banks due to the large number of small institutions with weak cost to income ratios.Expense ratios across the credit union sector averaged 83 per cent in 2009, compared to 74 per cent in 2008. Some of this deterioration was a result of the decline in revenue caused by the tight credit conditions.  Echoing the views of mecu's Damien Walsh, Moody's wrote in the report that "consolidation pressure has always been high, given the economies of scale, diversity, and other benefits associated with larger entities. The sector's efficiency levels are weak, with seven of the 10 largest credit unions reporting cost to income ratios below the building society average."Pressure to merge has intensified during the crisis, as a result of higher funding costs, profitability pressures, and greater competition from banks."