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How building societies performed

– a reporting season round-up

Overall, building societies performed according to expectations. Among smaller societies, Ecology reported that its green mortgage lending doubled in 2007 and that gross lending reached 15m compared with 7.7m in 2006, while net lending rose from 3.3m to 9.7m last year. Stafford Railway also did well, recording 12% growth last year. This marks four consecutive years of growth above 10%. Among larger societies by asset size, Yorkshire Coventry and Newcastle all performed strongly.

  • Yorkshires retail savings inflow rose 46%, assets grew to a record 20bn, liquidity was maintained at 25% and the societys management expense ratio fell to 0.63%. As a group, it also reported mortgage loan growth up 15% to 15.3bn (2006 13.3bn). Gross mortgage lending rose by 19% to 4.7bn and direct internet mortgages increased by 44%.

  • At Coventry, retail savings balances increased by 25.3% to 10.3bn, mortgages and other loansgrew by 1.8bn to 11.8bn an increase of 18% and total assets rose by 21.4% to 14.9bn. Gross mortgage advances increased by 44% to 4.22bn while net mortgage lending rose by 97% to 1.73bn. Significantly, the societys cost to mean assets ratio fell from 0.53% to 0.48%. Profit before tax rose by 16.7% to 69.1m.

  • Newcastle revealed a 52% jump in pre-tax profit, increasing from 11.6m to 17.6m. It attributed this growth to its merger with Universal, which became effective on 31 December 2006, and the success of its credit card programme. It also highlighted lending growth as a key contributor, with new lending topping 1bn for the first time.

  • On the downside, Britannia reported a net profit fall of 7.7m as a result of its decision not to compete in the specialist lending market via Platform. The mutual’s preliminary results show that net profit fell from 57m in 2006 to 49.3m in 2007. Pre-tax profit also fell from 130.4m in 2006 to 115.2m in 2007. Net lending for the year was 2.4bn a slight increase on the 2006 figure of 2.3bn. Britannia held 5m of structured investment vehicles at the end of 2007 and therefore limited its losses to 1.6m which it expects to recover when these investments mature. It confirmed it has not been exposed to any US sub-prime mortgages.

  • Meanwhile, Cheshires results were also subdued. Profit before tax and before an exceptional item of 0.9m representing professional costs in relation to a fraudulent commercial loan was 8.1m compared with 12.4m in 2006. Retail deposits from savings members provided 66% of funding. Total assets increased by 5.5% to 5bn and also on the plus side, its mortgage retention performance improved, with 71% of borrowers coming to the end of their deals remaining with the society.


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