A thriving building society sector

Building societies continue to thrive, according to recently released FSA statistics on activity in the sector in 2005.

Staff and Branches
The 63 societies employed 47,818 full and part-time staff, up 4.2% on the 45,906 employed at the end of 2004.  Societies operated through 2,148 branches, a 3.6% increase on the end 2004 figure.

Savings
Over 22 million investing members have savings accounts with building societies, a 6.5% increase on the prior year, partly reflecting the acquisition of the savings business of Bristol & West by Britannia Building Society.

Mortgages
Building societies had over 2.8 million borrowers at the end of 2005, up 2.7% on 2004.  Societies made almost 700,000 loans during the year, compared to 811,000 in 2004. Total lending was flat year on year, however, at £59 billion.

In 2005 building societies and their subsidiaries had a market share of 19.2% of all net mortgage lending. This compares to 20.7% in 2004 which itself was a reduction on the 21.8% achieved in 2003. However, the share of net lending is much stronger than the 14.4% recorded in 2001.

Mortgage arrears remained low through 2005. At the end of the year, mortgages with arrears equivalent to 2.5% to 5% of the individual mortgage balance accounted for only 0.26% of all mortgage balances and mortgages with arrears of 5% or more of the balance made up 0.12% of all mortgage balances. These figures are the same as at the end of 2004.

Efficiency and Profitability
In 2005 building societies became more efficient.  Management expenses as a proportion of assets fell significantly to £0.94 for every one hundred pounds of assets compared to £1.02 in 2004.

Building society margins continued to narrow sharply in 2005. Net interest income in 2005 was £1.09 for every one hundred pounds of assets, down from £1.13 in 2004. In general, the narrower the margin, the more money is returned to members.

Building society profitability after tax was £0.33 for every hundred pounds of assets, down from £0.36 in 2004. There has been a steady decline since 2001 when profitability was £0.50 for every hundred pounds of assets.

Conclusion
The FSA statistics show another successful year for societies.  Strong saving inflows and robust mortgage lending in what was a slow market for much of the year are allied with significantly reduced cost ratios and narrowed margins to the benefit of members.

The statistics can be found on the BSA website or the FSA website.