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Norwich & Peterborough profits down by around 76%

Norwich & Peterborough’s pre-tax profits for 2008 were £5.9m, after a £5.5m reduction for its Financial Services Compensation Scheme levy, compared with £24.3m profits for 2007.

Societies are being forced to pay the FSCS levy to the government for the failures of Bradford and Bingley plc and certain Icelandic banks.

N&P had no exposure to the Icelandic banks and says it is in a healthy financial position, with good liquidity, low credit losses and continued capital strength and this has allowed continued investment for the longer term in branches and web-based services to members.

Its assets were up by over 15% to £4,985m, compared with £4,308m in 2007.

Total mortgage assets increased by 9.5% to £3,522m, from £3,217m.

Matthew Bullock, chief executive, says: “Our challenge in 2008 has been to make sure that the Society remains safe and profitable in the current financial crisis, while keeping up the momentum to create a different, mutual alternative to the high street banks.

“We have sought to build an organisation with enduring values that provides a personal financial service that members can trust in these very difficult times.

“Our profits for 2008 were some way below 2007’s record figures, with pre-tax profit declining from £24.3 million to £5.9 million. The three main reasons for the decline were:

“The Bradford & Bingley plc and certain Icelandic bank failures resulted in all banks and building societies being obliged to contribute to the FSCS: N&P’s share of this levy was £5.5m.

“This sum significantly reduced what would otherwise have been acceptable profitability in the prevailing circumstances.

“Out of prudence we have increased the loss provision charge from £3.6m in 2007 to £7.3m. This increase is prompted more by our assessment of the current economic climate than by our view of our own arrears, which remain well below the industry average, due to our cautious lending policy.

“Whilst arrears are rising, this is from a very low base – only 0.56% of accounts are in serious arrears and only 29 properties were in possession at the year end.

“The trading circumstances of the last quarter of 2008, specifically the high cost of funding and the need to maintain high levels of liquidity, which reduced profitability and also depressed lending capability. The results also reflected our moves to protect our savers from some of the effects of falling rates.

He adds: “N&P is as well-placed as any society to contend with the harsh conditions which we will see in 2009. By continuing to manage our own affairs tightly, we will remain in a good position to help our members be in control of their money.”


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