More building society mergers on the cards

by Gill Montia

Story link: More building society mergers on the cards

A new report from KPMG highlights the difficulties faced by building societies and predicts a further spate of mergers.

The accountancy firm’s Building Society Database 2009 reveals that only 15 societies achieved group asset growth exceeding 10% in the year to April, compared with 36 in the same period of 2007/2008.

Of the UK’s top 18 societies, only eight saw asset growth, and five were loss making during the period.

KPMG partner, Simon Walker, sees more consolidation in the sector as inevitable, bearing in mind future credit losses and pressures on margins.

He expects continued low interest rates to reduce returns on reserves, instant access savings accounts and mortgages.

In addition income from fees and commission can be expected to fall as lending continues to contract.

The report suggests that societies may be forced to sell assets, enter joint ventures and follow the lead of West Bromwich if they are to survive.

In June West Bromwich struck an agreement with its debt-holders and avoided collapse by converting £182.5 million of debt into capital.