billion ($178.9 billion), £200 billion in group assets, 15 million
customers and nearly 1,000 branches, Nationwide Building Society is
firmly in the top six of UK domestic retail financial services
players. But unlike the groups above it – Lloyds TSB/HBOS, HSBC,
Barclays, Royal Bank of Scotland (RBS) and Santander UK – the
Nationwide is a mutual. It has also, so far, largely avoided the
market chaos that has stung RBS, Lloyds and HBOS so
viciously.
Its half-year 2008 figures to end-of-September were not
spectacular but they were far from awful, and reflected a more
conservative business strategy from the group in the wake of the
severe market dislocation (see RBI 602). Net profit of
£270 million was up 14 percent from a year previous though the same
period saw net residential lending volumes down from £3.6 billion
to £1 billion. It grew deposits by £2.6 billion over the six-month
period, a market share of 34 percent.
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Thanks to its retail funding-focused business model, its
loan-to-deposit ratio was, as of the end of September, an
attractive 114.5 percent.
A report published in mid-December on the wider UK mutual
industry – described by its authors as the first really in-depth
look at the sector – revealed a market with total revenue of £84
billion and assets of £476 billion.
Published by research group Mutuo, the well-timed survey (given
the dire state of the commercial banking market), stated: “The
current financial crisis has shown that mutual organisations offer
a fairer, more sustainable alternative to publicly limited
companies… Because their sole purpose is to benefit their members
(who are usually their customers), they often offer a better
service than their rivals.”
That being said, there are some concerns. In terms of the UK
building societies sector, the market is skewed by the sheer size
of the Nationwide. Second-place Britannia has around £18 billion in
deposits. Moreover, while Nationwide is benefitting from economies
of scale to penetrate further into the UK, the on-going viability
of the rest of the building society sector has been questioned in
the light of the UK economic slump. Consolidation seems to be on
the cards.
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By GlobalDataThere are currently 59 building societies in the UK. However,
this will soon become 55 due a number of industry mergers,
including Nationwide’s merger with both Cheshire Building Society
and Derbyshire Building Society; the merger of Barnsley Building
Society with Yorkshire Building Society; and the merger of Skipton
Building Society and Scarborough Building Society.
Earlier this year, second-largest Britannia announced it was
exploring a merger with the UK’s leading ethical co-operative,
Co-operative Financial Services (the combined group would have £70
billion in deposits and 6 million customers) – though nothing yet
has come about from the discussion.
Next year, 2009, will be a challenging year for many mutual
organisations – but it is highly doubtful an economic rout will
finish them off. It may even bolster their fortunes as people look
for simpler financial services. The Association of Friendly
Societies represents around 50 friendly societies in the UK, and
between them these organisations manage the savings and protection
needs of nearly 6 million people with funds under management
approaching £18 billion.
Many friendly societies continue to specialise in providing
products with very low premiums and/or not typically available from
high street banks or insurance companies, though their products and
services are generally open to all. Friendly societies are now the
largest providers of the Child Trust Fund, and are increasingly
prominent and well-regarded in regular savings and income
protection markets.
