Building societies in regional banking role

Robyn Hall

September 11, 2012

The Building Societies Database looks at the performance of the UK’s 47 building societies, and this report shows the sector has remained resilient despite difficult conditions.

Some 23 societies increased their profit over the course of the year and the total group assets of societies have grown to £315.4bn.

The report says building societies are entering into a period of renewed growth but also recognises they face similar regulatory challenges to banks, particularly in raising core tier one capital.

Richard Gabbertas, KPMG’s northern head of financial services, said: “I expect building societies to play a big role in the future of banking in Britain.

“In many respects it is their time to shine.

“By 2020 they could be fulfilling a new role as regional banks, capitalising on their attractiveness to smaller businesses and to customers who value their service proposition.

“They will be able to look to supplement their range of straightforward savings and mortgage products with current accounts for personal and small business customers alike.

“Building societies are largely unencumbered by legacy problems, whether portfolios of bad loans or regulatory issues, and the fact that their products are primarily simple and transparent point to the future success of the sector.

“Additionally, as the expiry date on free banking fast approaches, they are well placed to enter the more mainstream banking market given they are already equipped with much of the necessary infrastructure such as branches, trained staff and experienced treasury and credit risk teams.

“On the whole building societies had a better financial crisis than the banks and have been less affected by other consumer storms including PPI mis-selling.

“At a time where trust in the banking sector is at an all time low, building societies stand out as a group of financial institutions whose mutual culture instinctively puts the customer first.

“They do not have a culture of profit maximisation, nor are their senior executives highly remunerated, making them increasingly appealing to many consumers.”

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