Building societies and credit unions have been urged to push into the wealth management market as an option to diversify income and boost growth potential.
According to the latest survey findings released last week by KPMG, total assets for building societies and credit unions increased by 11.6 per cent and 10.3 per cent respectively, a result attributable to strong performance in housing loans.
KPMG financial services partner Martin McGrath said as profits are the basic source of capital for the building society and credit union sector, this increase in capital positions these sectors for further growth.
“However, if interest rates rise significantly in the next year, and the housing market continues to cool, this momentum will be lost,” McGrath said.
KPMG said building societies and credit unions should not discount acquisitions and alliances in the wealth management space as a vehicle for expansion.
“Wealth management businesses have historically traded at significant multiples to earnings, primarily due to the expected synergies with banking operations and forecasts of exponential growth in funds under management,” he said.
“Any moderation in prices for small to medium wealth management businesses will make acquisitions increasingly attractive.”
Despite this, KPMG found significant doubts remain about the true value of a wealth management business to a bank, suggesting that the market’s appetite for these assets may have cooled.
