Building societies suffer "tumultuous" 2008

24 August 2009

Low interest rates, legacy businesses and liquidity constraints affected the performance of a number of UK building societies in 2008, a new report has found.

According to KPMG's latest Building Societies Database, the year was "tumultuous" for many of the financial services firms.

They will have to increase retail funding levels in order to raise liquidity to necessary levels, the Big Four accountancy firm predicted, but this may prove difficult as the savings market in the UK is set to "remain expensive" until the Bank of England raises the base rate.

Credit losses are impacting profitability, the research concluded, with shrinking margins and a fall in the number of investment products also hampering performance.

Simon Walker, KPMG financial services partner, said that many institutions will be forced to "focus on their customer-facing activities if they are to prosper in this new environment".

In related news, Lloyds Banking Group announced last week that it is reviewing its decision to close all branches of the Cheltenham & Gloucester building society.

Written by Tony Aynsley

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