Building societies no shrinking violets

While residential mortgage lending dominates the lending profile of savings institutions, the seven building societies and the PSIS, their other lending grew much faster in 2002.

Accounting firm KPMG’s survey of these institutions found that total lending assets for the eight institutions jumped $253 million, or 13.4%, to $2.1 billion in the year.

But the proportion of that accounted for by mortgage lending fell 2% to 72% or $1.5 billion.

KPMG banking and finance group chairman Andrew Dinsdale says that reflects the rural base of many of these institutions and the recent rural boom.

"They’re still lending mortgage money, but there’s been a fair amount of push by some of them into agricultural and rural lending, particularly in Southland," Dinsdale says.

Agricultural lending now makes up 14% of savings institutions’ total lending. Lending on commercial real estate also grew a rapid 37% in 2002 and now accounts for 10% of total lending. Personal services accounts for the other 4% of lending.

Southland Building Society still dominates the industry, its assets accounting for $1.14 billion, up from $1.02 billion the previous year, of the sector’s $2.59 billion. It is followed somewhat distantly by the PSIS whose assets grew from $559.3 million to $605.8 million in the year and by the Southern Cross Building Society whose assets rose from $349.7 million to $361.3 million.

The smallest institution, the Wairarapa Building Society, saw its assets grow 3.7% to $69 million.

Dinsdale notes that although these institutions tend to keep a low profile, "don’t be fooled however. These are not shrinking violets."

Several are no longer content with their home patch and are revamping their products and services in a bid to take on the competition, he says.

Overall, the sector’s net profit rose 15.8% to $18.6 million in the year following a 4% improvement in 2001, but the Hastings, Southland and Wairarapa building societies all suffered a slight fall in profit while the Nelson and Southern Cross societies achieved more than 60% increases. The Nelson society’s net assets jumped 36% to $86.9 million.