Building societies are recovering, says KPMG

THE UK’s building societies are getting back to “business as usual” following the stresses of the financial crisis, according to KPMG’s Building Societies Database.

The database, which tracks the financial performance of the mutual sector, said 2012 saw healthy results for most building societies, which are now well-placed to benefit from an upturn in the economy and increasing demand for mortgages.

KPMG said of the country’s 46 building societies, 35 grew their assets in the 2012 financial year. 

Although assets across the sector as a whole fell by £2.1bn to £313.3bn, this reduction was due to a £5.4bn decrease in Nationwide Building Society’s assets according to the firm. It said if the impact of Nationwide is excluded, sector total assets grew by 2.8% to £122.6bn.
 
The accountancy firm said Nationwide still dominates the sector and with its assets of £190.7bn, it represents nearly 61% of the sector on its own. In contrast, the smallest building society, the City of Derry, has assets of £42.6m meaning that Nationwide is over 4,400 times its size.
 
A KPMG spokesman said: “2012 saw a strong set of results from the building society sector. Indeed, some societies are in rude financial health. With demand for mortgages likely to increase and interest rates set to remain low, the future looks positive.

“However, one long-term shadow being cast over this is the possibility of an increase in capital requirements under Basel 3.  If the leverage ratio moves from 3% to 4%, as seems possible, then the arithmetic would indicate that we’d see a contraction in balance sheets and more expensive mortgages.”