Analysts are predicting that at least five building society names will disappear from the high street next year as mutuals merge to become more competitive.
Business advisory firm Deloitte believes 2007 will see a number of smaller societies being swallowed up as financial institutions are forced to get leaner and smarter to survive.
By the end of this year three building societies will have disappeared – the Mercantile, Universal and Lambeth – following mergers with Leeds Building Society, Newcastle Building Society and Portman Building Society.
Next year Portman itself is set to go after a likely merger with Nationwide.
Head of the building societies team at Deloitte, Stephen Williams, said: ‘In the wake of Nationwide’s takeover of Portman Building Society, we predict a further five mergers in 2007, as struggling building societies look for ‘white knight’ mutual merger partners.
‘Conversely, the larger building societies will be looking to mergers to increase scale, reduce the cost of funding and acquire key capabilities and assets to leverage across their business.’
The number of building societies has dwindled over the past two decades. In 1986 there were 151, but the figure almost halved within the space of a decade to 77. This number fell to 63 in 2005 with this year’s mergers reducing the figure to 60.
Deloitte said that opportunities for the remaining building societies were good if they adapted to new ideas.
Mr Williams said: ‘One of the great strengths of building societies is the ability to make quick decisions and be fleet-footed in the marketplace.
‘Intuitively, by combining innovation and speed to market, with service excellence and the embedded culture of putting customers first, there is a real opportunity to succeed.’
The Deloitte report urges mutuals in the UK to look to the US for inspiration on how to keep customers satisfied.
It noted that the Commerce Bank of New Jersey opens branches seven days a week and keeps them open until 8pm.
It also makes sure than doors open ten minutes before its official opening time to ensure that customers do not have to wait in the rain.
At the same time the bank’s revenues and profits are growing at 30 per cent a year.