Icelandic exposures accounted for nearly all of the £44.7m total impairment charges for the year, which dragged down the mutual’s results from a profit of £17.6m in 2007.
Newcastle has been hit by a levy of £6.8m to cover its contribution to the Financial Services Compensation Scheme.
Other building societies such as Skipton and Britannia have seen their profits eroded by almost half in some cases due to the FSCS levy.
Colin Seccombe, chief executive of Newcastle Building Society, says: “Results this year have been impacted in a major way by the exceptional market events of 2008.
“The year has presented extremely tough challenges and we expect that trading
conditions will continue to be difficult in 2009.”
But he also stresses that adds that Newcastle’s underlying results remain strong as the society has reduced its wholesale funding ratio and attracted more deposits.
He adds: “We are in a strong, fit position for the future and we are committed to remaining an independent, mutual building society for the benefit of all our members.”