Building Societies Association
Recently published statistics from the FSA show that the building society sector continued to be in strong position in 2007, indicating that societies can face future challenges with confidence.
Building society operations
At the end of 2007 there were 59 building societies following the merger of Nationwide and Portman. While there were three mergers between societies in 2006, there have been just six mergers in total in the last seven years. The recently announced merger between Chelsea and Catholic suggests that the consolidation of the sector will continue to be gradual in the future.
By the end of 2007, building societies operated through 2,016 branches.
At the end of 2007, more than 51,500 full and part-time staff were employed in the sector, a 3.1% increase on the number employed at the end of 2006.
Savings
At the end of 2007, over 23 million investing members had savings accounts with building societies. However, a number of investors have accounts with more than one society, so the number of individuals investing with building societies will be below this figure.
Building societies raised £41.9 billion of funding in 2007, compared to £27.5 billion in 2006. Just under half of this funding was raised in the final quarter of 2007. A significant proportion of this funding will have been due to money withdrawn in the run on Northern Rock bank being deposited with building societies.
Retail funding, as opposed to wholesale, contributed just over half (54%) of total new funds available to societies in the 2007 calendar year, compared to 51% in 2006. At the end of 2007, 31% of the outstanding stock of building society funding was from wholesale sources. This is a slight increase on the 29% at the end of 2006.
The majority of mortgage lending by societies in 2007 was at fixed or capped rates. At the end of 2007 calendar year 62% of balances were on fixed or capped rates, compared to 55% at the end of 2006.
In Q4 2007 just 1.4% of lending was at loan-to-value ratios greater than 95% and 93.0% of lending was at loan-to-value ratios of 90% or less.
Mortgage arrears at building societies and their subsidiaries increased slightly in 2007. At the end of the calendar year, mortgages with arrears equivalent to 2.5% to 5% of the individual mortgage balance accounted for 0.32% of all mortgage balances, up very slightly from the 0.27% of balances at the end of 2006.
Mortgages with arrears of 5% or more of the balance made up 0.13% of all mortgage balances. This is a slight increase from the 0.11% of balances at the end of 2006. Mortgages relating to properties in possession increased slightly from 0.04% of all mortgage balances at the end of 2006 to 0.07% by the end of 2007.
Efficiency and profitability
Building society margins continued to narrow slightly in 2007 financial years, indicating customers are getting a better deal. In general, the lower the net interest margin, the more money is returned to members via lower mortgage interest rates and higher savings rates.
The net interest margin narrowed to £1.03 for every one hundred pounds of assets in 2007, down from £1.04 in 2006 and compared to £1.42 in 2001.
Building society group management expenses as a proportion of assets reduced to £0.91 for every hundred pounds of assets in financial 2007, from £0.94 a year earlier.
As a result, retained profit after tax was £0.33 for every hundred pounds of assets, the same as in the previous two years.
You can see the full statistical tables on the BSA website here:
BSA statistics pages
The majority of these statistics have been drawn from societies’ returns to the FSA. Where figures are derived from annual returns, financial years ending between 1 February 2007 and 31 January 2008 are grouped (referred to as “financial 2007”). However, some data is compiled on a calendar year basis; it is made clear when this applies above.
