BSA: Challenges ahead, but 2010 looks brighter
2009 will continue to be challenging, but building societies are looking ahead to an end to the downturn in 2010, according to research from the Building Societies Association (BSA), launched today at the BSA’s Annual Conference in Harrogate.
Despite the downturn, society CEOs have a generally positive outlook with 55% remaining optimistic about 2009. Many bosses have been able to identify opportunities to see them through the difficult times.
Building societies have a better ability than banks to engage with their customers as they serve a local client base and can often offer more tailored products. Society bosses also feel that the building society model is trusted by the general public.
Building society CEOs do recognise, however, that there are a number of challenges to face before things start to look up. The low interest rate environment makes it difficult to manage the needs of both savers and borrowers, and maintain profit levels; there is high competition for deposits, especially from nationalised and part-nationalised banks looking to increase their residential lending; levels of arrears and possessions are increasing and house prices continue to fall.
One thing the majority of CEOs agree on is that the FSCS levy will have a considerable impact on their business – and therefore their members.
60% believe mortgage rates may have to rise, with 53% thinking savings rates might have to fall in order for societies to meet the costs of the FSCS levy.
A common message from societies is that in the immediate future they will focus on increasing the efficiency of their operations to be well placed to capitalise on any upturn in the economy.
Commenting on the survey, Adrian Coles, Director-General of the BSA,
said:
“The last 12 months have certainly been tumultuous, but it’s encouraging to see that the majority of building societies have a positive outlook.
Despite challenges faced by building societies, their CEOs feel they are in a strong position to overcome them.
“The next year is not seen as a period of growth, but a time when balance sheets can be strengthened, and the business primed to take advantage when market conditions become more favourable.”
Other key findings of the report include:
. The average forecast house price change over 2009 is minus 10%; the average for 2010 is minus 0.8%.
. Society CEOs forecast net lending to fall on average 22% in 2009, but advances are forecast to recover by the end of 2010 with an 8% increase year on year.
. Net receipts are forecast to fall by an average of 9% in 2009, but to recover in 2010 with an 8% increase.
. Most CEOs believe the Bank of England base rate will remain at 0.5% until the end of 2009.
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Notes to editors
1. A full version of the survey can be viewed on the BSA’s website here http://www.bsa.org.uk/publications/industrypublications/ceo_opinion_survey09.htm
2. The Building Societies Association (BSA) represents all 53 building societies in the United Kingdom. Building societies have total assets of
£385 billion and, together with their subsidiaries, hold residential mortgages of almost £250 billion, more than 20% of the total outstanding in the UK. Societies hold over £240 billion of retail deposits, accounting for more than 20% of all such deposits in the UK. Building societies also account for about 37% of all cash ISA balances. Building societies employ over 51,500 full and part-time staff and operate through more than 2,000 branches.
3. The BSA’s Annual Conference is being held in Harrogate on 20 and 21 May 2009.
4. Photographs of Adrian Coles are available from the BSA press office, or from the Association’s website at http://www.bsa.org.ukhttp://www.headlinemoney.co.uk or Headlinemoney
Contact Rachel Le Brocq – 077734 89644
THE BUILDING SOCIETIES ASSOCIATION
Website: http://www.bsa.org.uk
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