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Society losses will mean more mergers

Recent building society losses mean that further mergers in the sector are inevitable, according to KPMG.

In its building society database 2009, KPMG says nine out of 53 societies reported losses in their annual accounts. It found that 15 out of 53 reported group asset growth of over 10 per cent in the last year compared with 36 in 2008. KPMG says the 53 societies held total group assets of £370.5bn over the last 12 months, up from £354.2bn.

The report says: “Some societies may respond to the need for fresh capital by disposing of assets and businesses acquired or built up over the last decade. Others may enter joint ventures with providers of capital or access to markets while some will wait to see if the regulator offers further new forms of capital instrument that they might be able to issue. Overall, it is likely that the market will see a small number of mergers over the coming months.”

Stroud & Swindon sales and marketing director Linda Will says: “We may see the bigger mutuals merge. The smallest societies are the strongest because they did not rely on wholesale funding and they only lent safely, so were insulated from the credit crunch’s effects.”

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