ISBN 1-85765-583-4

Table of Contents

Executive Summary

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TABLE OF CONTENTS

Executive Summary

Market Definition

MARKET DEFINITION

MARKET POSITION

MARKET TRENDS

Table 1: Convertibles and Mergers in the UK Building Societies Market, 1989-1997

Table 2: UK Building Societies (non-converting), May 1996

Table 3: UK Branch Distribution - Building Societies versus High Street Banks, 1996

Market Size

THE HOUSING MARKET

THE TOTAL MARKET

MARKET SECTORS

BY INDIVIDUAL MARKET SECTOR

Table 4: UK Property Transactions (000), 1991-1995

Table 5: Private Sector Housing Starts and Completions in Great Britain - Seasonally Adjusted (000), 1991-1995

Table 6: UK House Price Indices at Mortgage Completion Stage (index 1993=100), 1991-1995

Table 7: UK Mortgage Arrears and Possessions (000), 1991-1995

Table 8: Loans Secured on Dwellings in the UK Market - Balances Outstanding and Net Advances During Period (£bn), 1991-1995

Table 9: Market Shares of Balances Outstanding and Net Advances ( percent), 1991-1995

Table 10: Number and Value of Loans Approved by Type of Lender (000 and £m), 1991-1995

Table 11: Reasons for Remortgaging in Great Britain ( percent), 1992/1993

Table 12: Estimates of Remortgage Activity in Great Britain (000 and £m), 1992-1995

Table 13: The UK Mortgage Market in Summary (£m), 1991-1995

Table 14: Personal Sector Liquid Assets (£bn and percent of total), 1991-1995

Table 15: Building Societies' Shares, Deposits and Wholesale Funding (£m), 1991-1995

Table 16: Number of Current Accounts at Building Societies and Banks (000 and percent of adults), 1995

Table 17: Plastic Cards in Use in Great Britain (000 and percent of adults), 1995

Table 18: Financial Services Products Bought Through Building Societies by Adults in Great Britain ( percent), 1994 and 1995

Table 19: Life and Pensions Business Sold Through Banks and Buildings Societies - Gross Premiums (£m), 1991-1995

Table 20: Personal Sector Borrowing (£m), 1991-1995

Industry Background

RECENT HISTORY

NEW LEGISLATION

INDUSTRY CONCENTRATION

DISTRIBUTION

TRADE ASSOCIATIONS

Table 21: Building Societies' Organisation (number and 000), 1990-1994

Table 22: Employment by UK Building Societies, 1990-1994

Table 23: Progress of Leading UK Building Societies (£m, £bn and number), 1990-1995

Table 24: Distribution of Cash Dispensers (ATMs) by Building Societies, 1991-1995

Competitor Analysis

THE MARKETPLACE

MORTGAGES

SAVINGS, PERSONAL BANKING AND GENERAL INSURANCE

ESTATE AGENCIES

FINANCIAL SERVICES

DIRECT SELLING (TELESALES)

THE MARKET LEADERS

ADVERTISING AND PROMOTION

Table 25: Comparative Size - Halifax versus Top Nine Societies (£bn and £m), 1995

Table 26: Leading UK Building Societies by Total Income, Cost to Income Ratios and Bad Debt Provision (£m and percent), 1995

Table 27: Growth in Pre-Tax Profits of the Leading Societies (£m), 1991-1995

Table 28: Estimated Shares of Mortgage Business by Leading Societies (£m and percent of total), 1995

Table 29: Leading Building Societies' Shares of the UK Market for Personal Savings (£m and percent of total), 1995

Table 30: Personal Banking and General Insurance Services - Leading Building Societies, 1995

Table 31: Ownership of Estate Agents by Leading Societies, 1995

Table 32: Financial Services Structures of Leading Building Societies, 1995

Table 33: Direct-Selling Operations of Leading Building Societies, 1995

Table 34: The Effects of the Halifax and Leeds Permanent Merger (£bn and million), 1995

Table 35: Profile of the Halifax Building Society (£m, 000 and percent), 1991-1995

Table 36: Profile of the Nationwide Building Society (£m and percent), 1991-1995

Table 37: Profile of the Woolwich Building Society (£m and percent), 1991-1995

Table 38: Profile of the Alliance & Leicester Building Society (£m and percent), 1991-1995

Table 39: Profile of the Bradford & Bingley Building Society (£m and percent), 1991-1995

Table 40: Profile of the Britannia Building Society (£m and percent), 1991-1995

Table 41: Profile of the Northern Rock Building Society (£m and percent), 1991-1995

Table 42: Main Media Advertising Expenditure of Leading Building Societies (£000), 12 Months to December 1995

Strengths, Weaknesses, Opportunities and Threats (SWOT)

STRENGTHS

WEAKNESSES

OPPORTUNITIES

THREATS

Buying Behaviour

TYPES AND SOURCE OF MORTGAGES

CHARACTERISTICS OF MORTGAGE LENDING

SAVINGS AND INVESTMENTS

FINANCIAL SERVICES

Table 43: Types and Source of Mortgages by Adults in Great Britain ( percent), 1993-1995

Table 44: Distribution of New Mortgages for House Purchase by Age of Borrower ( percent of loans granted), 1995

Table 45: Repayment Method in New Mortgages for House Purchase ( percent of loans granted), 1995

Table 46: Distribution of New Mortgages for House Purchase by Amount Borrowed ( percent of loans granted), 1995

Table 47: Average Prices by Type of Dwelling (£), 1995

Table 48: Which, If Any of the Following Do You Have? by Sex, Age, Social Class and Region ( percent), 1994 and 1995

Table 49: Which, If Any of the Following Do You Have? by Sex, Age, Social Class and Region ( percent), 1995

Table 50: Plastic Card Ownership (single or joint) by Adults in Great Britain ( percent), 1994 and 1995

Outside Suppliers to the Industry

INTRODUCTION

WHOLESALE MONEY MARKETS

MONEY TRANSMISSION SERVICES

TECHNOLOGY

Current Issues

ENDOWMENT MORTGAGES

DRAFT MORTGAGE CODE

LLOYDS TSB

CALL TO LIMIT INCENTIVES

GOVERNMENT PROTECTION

COVENTRY BUILDING SOCIETY

FLEXIBLE MORTGAGE

CML SHAKE-UP

NATIONWIDE

THE MORTGAGE CORPORATION

THE PRUDENTIAL

DRAFT BUILDING SOCIETIES' BILL

BANKS CRITICISE SOCIETIES' BID COVER

Forecasts

FUTURE TRENDS

FORECASTS

Table 51: Forecast of Net New Mortgage Advances of UK Building Societies at Current Prices (£bn), 1996-2000

Table 52: Forecast of Building Society Net Receipts at Current Prices (£bn), 1996-2000

Further Sources

ASSOCIATIONS

PERIODICALS

DIRECTORIES

GENERAL SOURCES

HBI UK INFORMATION SOURCES

GOVERNMENT PUBLICATIONS

OTHER SOURCES

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EXECUTIVE SUMMARY

The building society movement is undergoing significant change. By the end of 1997, its flagship society, The Halifax, and four other of the top ten societies, will have followed the Abbey National, Cheltenham & Gloucester and the National Provincial, all of which have already merged with, or converted to, banks. When completed, this will have transferred an estimated 75 percent of the total assets previously held by the building societies sector into banking. There remains six large and around 60 small societies facing a crossroad. Straight ahead lies mutuality; another direction signposts the road to conversion to PLC status; and the third points to merger with fellow mutuals or other desirable alternatives. The mutual societies still have considerable financial muscle, and the ability to wage a drawn out and destructive margin war which can seriously disrupt the profits of the existing and new banks, whilst enhancing further the popularity of the societies with their members.

Key Note forecasts net new mortgage lending by UK building societies will increase by 26.1 percent between 1995 and 1997, reaching £11.6bn. Then it will fall dramatically to £6.2bn, as figures from the newly-converted building societies disappear from the sector and are recorded within banking. By the year 2000, net new advances from the remaining building societies are forecast at £7.8bn. Building society net receipts will suffer from the same effect. In 1996, these are forecast to reach £2.6bn, which, as a result of competition from National Savings and the effects of `carpetbagging', is considerably lower than the record £6.75bn attained in 1995. Inflows are forecast to increase again in 1997 reaching £3.7bn as the bank base rate rises to around 7 percent, in accordance with economists' forecasts. The following 3 years will see a dramatic decrease to £1.5bn, rising to £1.6bn as figures from the converting societies are moved into the banking sector.

Key Note believes the future of UK building societies must be assessed against that of a UK financial services industry which is facing a period of significant change. Already, traditional boundaries are starting to disappear and over the next 5 years, the momentum will increase as technology expands to allow new methods for the direct marketing of mortgages and pensions; banking and investment over the Internet, and via digital television; the increased use of cards instead of cash; and better encryption which allows the secure transfer of value in and out of personal accounts via the Internet and from home over a digital television network.

Text © 1996 Key Note

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