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Building society sector stable: Moody’s

by Staff Reporter8 minute read
The Adviser

By: Staff Reporter

Australia’s building societies have recorded a stable outlook with Moody’s Investor Services, reflecting sound prospects for the Australian economy.

Moody’s analyst Daniel Yu said the societies’ conservative business models had successfully weathered the impact of the global financial crisis, aided by favourale economic conditions which benefited from the government’s stimulus package and investment.

According to Mr Yu, while loan deposit growth slowed during the last financial year, there is evidence to suggest we will see an improvement throughout the rest of the year.

“The sector is supported by a number of factors – dependable deposit bases; solid home market franchises; conservative business models; and a solid economic outlook for the country,” he said.

Throughout the crisis, the building society sector steadily increased its portion of retail deposit funding, due to the closure of the RMBS markets. Customer deposits as a proportion of total funding rose from 62 per cent in 2006 to 68 per cent in 2009.

In addition, unemployment has improved markedly, which will support the sector's credit quality, and asset quality metrics are showing signs of stabilising after weakening at the start of the crisis.

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