Britannia’s profits take a hit

Britannia has reported pre-tax profits of £23.8m for 2008, compared to £114.6m in 2007.

Its profits would have been £100.4m if it was not for exceptional items of £57.4m relating to exposure to two failed banks and a £19.8m provision for the Financial Services Compensation Scheme levy.

Business at the group’s broker lender Platform reduced by 73% in 2008 compared with 2007 from £2.6bn to £0.7bn.

Platform has realigned its business by moving further into prime broker lending through an arrangement with Axa broker network, Thinc.

The society, which last month announced plans to create a new super-mutual by merging with Co-operative Financial Services, says it focused on maintaining liquidity and capital strength while consolidating its high-quality mortgage book and attracting more than 154,000 new members.

Britannia’s main source of funding continues to be money invested by its members.

Retail funds cover 97% of non-securitised residential mortgages – helping to ensure the group can maintain financial strength going forward and the society has no exposure to US sub-prime assets, collateralised debt obligations or mortgage-backed securities.

Britannia was nevertheless impacted by the collapse of Lehman Brothers and Kaupthing, both A-rated institutions, where it had short-term deposits.

The group continues to pursue recovery of funds from the administrators, but has had to include a provision of £57.4m in this year’s accounts to cover for possible losses arising from its exposure.

Four in every five Britannia Group mortgages are low-risk prime loans. Arrears in each lending category remain lower than industry averages and around 98 in every 100 Britannia borrowers continue to pay their mortgages in line with their agreements.

Some 1.7% of originated residential mortgages have arrears greater than 2.5% of the loan balance, against a sector average of 1.6%.

Neville Richardson, chief executive of Britannia, says:”The world economy is in disarray and no bank or building society is immune to what’s been going on. 2009 will be another difficult year as the global recession impacts on employment and customer confidence.

“In creating the first super-mutual, we’ll preserve all that our customers hold dear about Britannia – being mutually-owned, giving them a say in how the business is run, sharing profits with them and maintaining an extensive branch network – while building a bigger, stronger combined business with more branches, a better internet service, a wider product range and the chance to earn even greater member rewards. I truly believe this is a bright, exciting future for Britannia’s members.”