Mutuals well placed for the longer ride

1 February 2010

Don’t go thinking that all building societies behave in the consumer unfriendly manner recently displayed by the Skipton.

The reality is most of us have been putting the finishing touches to our business plans for 2010, knowing full well that the year will present significant challenges.

With the Skipton whacking its borrowers squarely between the eyes on the interest rate front, I’m confident that most of us will make a better job of our businesses than our colleagues in West Yorkshire.

All we need do is hold our nerve. You see, the UK is getting itself into a catch 22 situation: the government needs to borrow loads of cash to stimulate the economy. But to achieve this it needs either a very good credit rating or a high interest rate economy to tempt buyers of its debt.

So, why is this good for the mutual? Well, for a start, we have a strong capital, a small market share and no shareholders to service.

And we can knuckle down, make meagre margins from our strong capital base, lend only to those who deserve our members’ savings - and therefore tread very carefully over the next few years.

While banks are forced to hold higher capital and return to their profligate and greedy ways, societies can ride the long haul out of trouble.

We might lose a few on the way but for those willing to truly cut their cost base, share services and get back to basics, the recession could be the best business model to land on our boardroom tables in a long while.

THE MUTUAL CRUSADER

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