Building societies and credit unions are well placed to offer an attractive alternative for investors following recent mergers in the regional banking sector, according to a sector report from KPMG.
KPMG financial services partner Martin McGrath said the recent acquisitions of regional banks by the majors could lead to opportunities for building societies and credit unions in 2009.
“Building societies and credit unions are well positioned to offer an alternative to the major banks following the acquisitions of St George and BankWest,” McGrath said.
The pressure for building societies and credit unions to merge continues and is expected to build in 2009, according to the KPMG building societies and credit union survey for 2008. The number of credit unions decreased from 143 to 133 in the year to June 2008.
“The global credit and liquidity crisis has reduced the appetite of potential acquirers and reduced the price they are prepared to pay, however, we expect consolidation to continue to build in 2009, in particular, friendly mergers between credit unions,” McGrath said.
Meanwhile, credit unions’ profit grew 6.2 per cent and building societies’ profit decreased by a small 2.9 per cent from record levels in 2007.
McGrath said the performance of credit unions had not been impeded by exposure to the volatile corporate sector, with only moderately increased bad debts and consistent levels of profitability. He said this is in stark contrast to the bad debts expenses and profit decreases experienced by the major banks in 2007-08.
Funding from customer deposits grew approximately 10 per cent for both sectors and it is expected that the Government’s deposit guarantee will serve members well in future periods for deposits under $1 million.
“However, they may struggle to remain attractive for members with deposits exceeding $1 million because of their higher (than banks) guarantee fee and [they] would appear to be at a competitive disadvantage in competing for these large depositors,” McGrath said.
