Credit union and building societies increased residential lending a little below system at 12.9 per cent for the financial year to 2007, continuing market share losses for the predominately mortgage focused lenders.Profit growth was strong with credit unions up 16.4 per cent and the building society sector grew 14.3 per cent, according to the annual KPMG Building Societies and Credit Union Survey 2007.The performance of the sector can be considered noteworthy due to the continued competition increases from local and foreign banks, but Martin McGrath, financial services partner at KPMG, identified some concerns."However, the concern for the sector would appear to be that their rates of growth, while strong, are not matching system growth and therefore their market share appears to be slipping."The survey covers twelve building societies and 63 credit unions.Credit unions reported lower growth in deposits of only 6.9 per cent for the year, the sector's lowest for three years. Building societies reported deposit growth of 11 per cent, up from growth of 10 per cent in the prior two years.Mergers remains a dominant theme in the sector. During 2007, credit union numbers decreased by three to 143, and building societies reduced by one to 13 following the Bank of Queensland / Pioneer merger.