Skipton profits plummet by 86%

Skipton has revealed pre-tax profits of £22.5m for 2008, a staggering fall from its £163.9m profit in 2007.

Group profits were heavily reduced because of its £11m exposure to the Icelandic banking system.

It also provided £16.3m for its share towards the next three years’ levy to be imposed by the Financial Services Compensation Scheme in relation to the rescue of savers in Bradford & Bingley and other banks.

Skipton, the parent of Pink Home Loans and HML says its 2008 profits are almost half what they would have been had the FSCS provision not been required.

It’s group assets were up 8.9% to £13.6bn, while group mortgage assets were up 1.7%, compared to a 15.9% increase in 2007.

Skipton’s major subsidiary Connells saw its operating profits fall from £59.7m to £10.4m.

In the society, the number of mortgages that were three months or more in arrears increased during the year from 0.20% to 0.38%. At a group level, the figure increased from 0.41% to 1.14%, but remained well below the Council of Mortgage Lenders’ industry figure of 1.89% at the year end.

David Cutter chief executive of Skipton, says: “The government’s hopes of kick-starting the lending and money markets through rate cuts and a variety of funding schemes have not yet worked. Whilst those borrowers who already have mortgages are benefiting, those on whom the housing market relies – new homebuyers – have found it increasingly hard to get a mortgage.

“We also find it perverse that UK savers, who are the bedrock for the funding of mortgages, are being penalised to help correct the fundamental imbalances in the economy.”

He adds: “Skipton, in common with all building societies, has a substantial and stable retail funding base. We also have high levels of capital and liquidity, which make us strong in the current climate.

“However, unlike other building societies, we also have a diversified group of subsidiary investments, which generate profits (even in this difficult economic climate).

“That is why I’m confident our results will stand out from those of the banking sector and our building society peers. They demonstrate a solid performance during a whirlwind year in the UK’s financial markets.”

In 2008, the society’s net interest margin reduced by £12.2m to £69.8m.

With regard to its non-retail funding, the society says it has maintained its level of funding through already well diversified channels, supplemented by a covered bonds programme, established during the year, which will enable it to access further medium-term funding whilst the current market continues.