The UK banking sector was hit dramatically by the global financial crisis of
2008 and the sector continues to feel its repercussions, as far-reaching
regulatory regulatory and policy measures designed to reduce the risk of a
similar crisis are implemented. Although generally considered to have suffered
less during the crisis than their shareholder-orientated counterparts, it is
unavoidable that co-operative and mutual financial institutions will also find
themselves responding to the new regulations. They have performed comparatively
well since the crisis, but what does the future hold?
Society Association (BSA) asked Cass Business
School to conduct research into the relative performance of both banks
and building societies, funding the attached report but granting Cass Business
School independence in its findings. The aim was to understand the impact of
the financial crisis and the subsequent regulatory shake-up, and to examine the
prospects for the UK's building society sector. The report presents a
comparative analysis of the performance of banks and buildings societies over
the period 2000 - 2014.
The Key Findings were:
- The Financial Crisis had a substantial negative impact on the financial
- Return on Equity and Return on Assets decreased for both groups in the wake
of the financial turmoil.
- Building societies recovered faster than their banking counterparts and
have more stable asset growth than banks.
- Building societies appear less risky than banks on a variety of measures,
from lower volatility of earnings, lower volatility of NIMs and higher
- With the UK economy showing signs of recovery, the outlook is positive for
both groups: banks and building societies have recovered some profitability,
although not at the pre-crisis level. Asset and loan growth are mildly positive
and the entry of new competitors seems to have had an encouraging effect on
Author of the report, Dr Barbara Casu, Director of Cass Centre for Banking
Research, said "The results of our in-depth comparative analysis of banks and
building societies (using a wide variety of lending, performance and risk
metrics) show that building societies perform well over different phases in the
business cycle. As such building societies continue to play an integral role in
supplying financial services to households throughout the UK."
Commenting on the report, BSA Chief Executive, Robin Fieth, said: "The
findings in the Cass Business School report help demonstrate the diversity that
building societies bring. The sector has a different approach to doing
business, offering choice and competition for consumers no matter where they
live in the UK.
"In the years following the financial crisis of 2007 and the banking
scandals that continue to occupy the headlines, attributes such as "more
stable" and "less risky" are often what people want to hear when it comes to
their financial providers. When weighing up the shape of the financial services
sector, we urge the Government, opinion-formers and policy-makers to take
research of this nature into account, ensuring our sector - with its distinct
purpose and customer-owned mutual business model - has the recognition and
support it needs to continue offering a better deal for consumers."
The report is available for download at the link below. If you would like to
discuss this report or any Cass Consulting projects, please contact Clare Avery