Case 1 - Allied Building Society

Abstract

This chapter discusses a case of Allied Building Society. The first building society was established in Birmingham in 1775 as a mutual fund for the purpose of financing the housing of members of the fund. The Allied Building Society is the fourth largest building society in the country. In terms of operating efficiency, the society reduced its management expense ratio from 55.9%–43.2% of total income between 1984 and 1987, and this compares very favorably with the industry average. In 1988, however, the ratio began to creep upward to 44.8%. Two major factors have led the Allied Building Society to consider a reappraisal of its diversification strategy. First, the sharp rise in the interest rates since mid-1988 has led to a marked slowdown in mortgage lending, and this has had inevitable knock-on effects in other housing related markets, such as estate agency, property development, and housing-related insurance business. Second, market research indicates that customers would like the society to provide a wider range of financial services.