Building Societies, Credit Unions `to Face Pressure'
Illawarra Mercury
Tuesday October 29, 2002
AUSTRALIA'S building societies and credit unions are expected to face falling profits and increasing pressure to consolidate in the year ahead, according to accounting giant KPMG.
A survey by KPMG of the sector's performance in 2002 revealed building societies boosted their profits by 16.8 per cent while those of credit unions jumped 12.2 per cent.
Much of the growth was spurred by the housing market boom and more ``mums and dads" investors taking their money out of the weaker equity markets and putting it into deposit accounts.
However, head of KPMG's Financial Services division Peter Nash warned the profit growth was expected to be sliced to between five and 10 per cent in 2003.
``Credit unions and building societies held their own over the last 12 months - that will get more difficult going forward," Mr Nash said.
``Overall we see a relatively flat period of growth for them in the next 12 months and a greater level of consolidation as well."
Mr Nash said pressure for smaller building societies and credit unions to consolidate was expected to increase as they faced stiffer competition from other lenders for home loan customers.
Building societies and credit unions often did not have the same range of products to offer their collective 3.4 million customers and needed to spend money on technology to support distribution of their products.
The KPMG annual survey analysed the results of 11 building societies and 60 credit unions which collectively hold $29 billion worth of assets on their balance sheets.
``In our view in the longer term when the markets become more difficult, for example when the housing boom slows down, those organisations with lower levels of assets and profit levels will struggle," Mr Nash said.
``We expect to see a pick up in the level of consolidation, particularly among credit unions."
© 2002 Illawarra Mercury
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