Building Society confidence at “rock bottom”
by Gill Montia
Story link: Building Society confidence at “rock bottom”
A new report from the Confederation of British Industry (CBI) shows confidence among UK building societies at “rock bottom”, having fallen to its lowest level since the CBI poll began, in 1990.
During the three months to early December of last year, profits at the UK’s Building societies fell at their fastest rate since September 1992, and the decline is expected to continue in the first-quarter of 2008.
The figures reflect the current difficulties in accessing funding from the wholesale money markets, a plight also being experienced by banks and securities dealers.
According to Ian McCafferty, the CBI’s chief economic adviser: “The majority of financial services firms believe it will take some time for conditions to improve and a deterioration over the coming months is quite likely.”
Building societies are being hit hard by the credit squeeze because of their size and level of exposure to the housing market.
In addition, their methods of operation are generally more conservative than those of other lenders.
Almost 60% of the societies that responded to the CBI survey stated that they planned to approve fewer loans over the current quarter than in the fourth-quarter of 2007.
The news has prompted speculation that a period of consolidation may take place because as the businesses of building societies become smaller, the likelihood of acquisitions and mergers will increase.
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