Kent Reliance - demutualising?

dboswell

it seems based on a 2006 paper commissioned by KRBS and conducted by KPMG. Surprise surprise, could mean large pay day for board if plans carried out to fruition.

surely, this is nothing more than a dilution of the existing ownership akin to a company issuing more shares.

Tahiti

dboswell wrote: »

surely, this is nothing more than a dilution of the existing ownership akin to a company issuing more shares.

Yep. That, and a way for JC Flowers to get into the banking industry via the backdoor.

I cannot see why a member would vote for this. Can anyone think why (unless KRBS were to say that it's a deal or collapse) you'd vote yes??

Ruth

As a saver, why on earth would you vote against?

Let's look at the options:

- at present, KRBS has lower costs than almost every other society, despite being far smaller than many. At double the size (and that's the sort of numbers being talked about) they will be even more cost efficient. Cost efficiency leads to the ability to pay/charge improved rates to borrowers, savers, or both.
- without the deal, KRBS has little spare capital. It shrank between 2008 and 2009. It used to be in the best buy tables all the time; at the moment it isn't because it doesn't need to be ... because it doesn't need the money to lend. With the deal, it wants to lend hand over fist, and that money's going to have to come from savers, who will therefore have to get better rates.
- without the deal, either KRBS will go nowhere and survive as an "also ran" like so many other non-competitive societies, or it will go bust and get taken over by a bigger one. And in all of the half dozen or more recent rescues, the members will get nothing. Whereas with the deal, members keep a share in the business and are potentially entitled to some sort of windfall if the business grows successfully and is sold off or floated a few years down the line.

JC Flowers can't get a windfall unless they sell or float the banking business. And it's hard to see how they can get a windfall unless the members get one too.

opinions4u

I suspect this just a way of them buying a banking licence on the cheap ahead of some other sort of expansion in to the British market.

Tahiti

opinions4u wrote: »

I suspect this just a way of them buying a banking licence on the cheap ahead of some other sort of expansion in to the British market.

Precisely my concern. JC Flowers are there to make money - pure and simple. The ethos of a building society is to work for and with it's members. I just feel there's a clash of requirements.

Ruth wrote: »

Let's look at the options:

- at present, KRBS has lower costs than almost every other society, despite being far smaller than many. At double the size (and that's the sort of numbers being talked about) they will be even more cost efficient. Cost efficiency leads to the ability to pay/charge improved rates to borrowers, savers, or both.

In theory, I'd agree. However, JC Flowers will expect a good return on their investment which invariably means mixing things up. The concern is that they won't improve savings rates - just take the savings as a return.

Ruth wrote: »

- without the deal, KRBS has little spare capital. It shrank between 2008 and 2009. It used to be in the best buy tables all the time; at the moment it isn't because it doesn't need to be ... because it doesn't need the money to lend. With the deal, it wants to lend hand over fist, and that money's going to have to come from savers, who will therefore have to get better rates.

Or from JC Flowers who are then guaranteed a return from the lendings.

Ruth wrote: »

- without the deal, either KRBS will go nowhere and survive as an "also ran" like so many other non-competitive societies, or it will go bust and get taken over by a bigger one. And in all of the half dozen or more recent rescues, the members will get nothing. Whereas with the deal, members keep a share in the business and are potentially entitled to some sort of windfall if the business grows successfully and is sold off or floated a few years down the line.

Agreed. However, JC Flowers are shrewd which could be great for the business or allow them to break up the profitable side of things, and secure a banking licence at the cost of KRBS.

Ruth wrote: »

JC Flowers can't get a windfall unless they sell or float the banking business. And it's hard to see how they can get a windfall unless the members get one too.

It's unclear what the final percentage ownership would be, and a controlling stake means that they could chop the business up, sell parts of it off, and leave the crud behind which would result in no return to the members.

All of the above is opinion, but I'm just not convinced that changing the status quo will do anything to help KRBS at this stage.

premierfella

I think we all know how this vote will go - the same way all votes have gone at building societies for as long as I can remember (i.e. the board's way).

That said, I look forward to receiving the voting pack and actually finding out how the ownership structure of the new business will work. Everything I have read thus far seems to point towards a structure where current KRBS members can be easily sidelined. I have no doubt we will be members of the new entity which the KRBS "Bank" will be a part of, but what being a member of the new entity actually means and how easily any ownership attached to being a member can be diluted is unclear to me at the moment.

pwalker5959

I am sad/mad enough to waste 15 minutes of my time expressing my feelings on the KRBS debacle. Heres what I sent to the questions email address in the leafley.

Why is there no mention whatsoever in your literature about shares or windfalls. Either you are such a weak negotiating position (i.e. unsustainable) that Flowers effectively get their cake and eat it (minimum risk with lots of reward) or you are not acting in the members interests. Either way your leaflet is disingenuous at best.

I would negotiate the purchase of house in a more professional way than KRBS would seem to have handled this arrangement.

Think twice, if they have struck the deal of the Century then they will not rate you and they will clear the executive out within 12 months and pay most of you off. Maybe therein lies the conflict of interest?

I own this mutual and it certainly does not feel that you have acted in my interests.

I look forward to your usual standard response from a customer service agent who is poorly trained on the complexities of this arrangement and unable to conduct a dialogue with me about these matters on common terms. I also look forward your standard response about using my opportunity to vote on the matter in the coming doorstop of literature.

pwalker5959

The issue with getting the customer voice heard is that the customers have no other representation than the board and the media. It seems unusual that no journalist has the inclination to take this one on for the consumer. If this KRBS Flowers deal goes ahead like this - then the venture capitalists will have stolen the food off our table and got hold of our societies at a fire sale rate.

Sign up to this petition I have put on the net and lets see if you and I can get this virally marketed to a sizeable chunk of the 180,000 KRBS customers.

Copy the link into your browser and sign up.

gopetition.com/petition/38321.html

hallmark

Mutual building societies are the LEAST democratic organizations on earth. The board simply refuse to hold ballots on anything they don't want a ballot on & cite their coverall get-out clause that it would "disrupt the smooth running of the society etc etc". So the only things that ever get balloted on are the things the board WANTS a ballot on. And on those occasions they word thier literature & their recommendations that they get what they want 100% of the time. (Which is invariably fat payoffs for themselves).

Hungerdunger

Ruth wrote: »

As a saver, why on earth would you vote against?

Principles?