War for retail deposits continues

(AAP) - Credit unions and building societies' shares of retail deposits slipped in the March quarter as they continued growing their loan books.

The war for retail deposits continued unabated during the March quarter, according
to data released by the prudential regulator on Tuesday.
Australia's 11 building societies shrank their deposit bases by 1.9 per cent over
the three months to March 31, 2010 to 83.1 per cent of assets, while credit unions'
deposit base declined to 86.7 per cent.
But the mutuals grew net loans to deposits significantly in the March quarter as
borrowers searched for better deals from non-bank lenders.
Credit unions had $32.7 billion of home loans on their books by March 31, and
building societies had $15.4 billion.
Building societies' net loans to deposits surged almost two per cent to 91.6 per
cent, while credit unions added one per cent to 92.8 per cent.
The mutual sector felt the onslaught of competition for deposits by the big banks in
2009 which crimped their profit margins.
In the March quarter, overall profitability for credit unions remained steady at
18.3 per cent, according to performance data on the mutuals from the Australian
Prudential Regulation Authority.
But rising costs saw building societies' profit margins wane, dropping by one per
cent to 23 per cent across the sector.
Their cost to income ratio surged almost two per cent to 66.6 per cent, while credit
unions' ratio was flat at 72.1 per cent.
Mutual sector mergers saw credit union numbers contract from 111 by