Deal with defunct Network Data costs Manchester dear

Manchester Building Society has lost £2.5m due to the collapse of Network Data Holdings after it sold its broking arm to the network.

In 2008 the society disposed of its loss-making subsidiary Mort-gage Broking Services Limited to Network Data Holdings in exchange for shares in the network. But Network Data went into administration in 2009 owing appointed representatives more than £2m.

Pre-tax profits at the Manchester, which fell from £2.4m in 2008 to £700,000 last year, were affected by the Network Data deal.

Michael Prior, chairman of the mutual, says that apart from the Network Data sale its trading performance in 2009 was resilient.

The society’s total income fell to £10.1m during the year from £16.8m in 2008. Interest receivable dipped to £9.1m from £12m and other income fell to £1m from £4.8m. The Manchester also saw its mortgage arrears fall at a time when many other lenders saw theirs rise.

The society revealed its results in the same week the Treasury published a discussion document on options for securing the long-term stability of the mutual sector.

The paper seeks views from investors, members, societies and others on options for capital instruments ranking as Core Tier 1 or Tier 1, and modifications to existing capital instruments to make them more resilient in times of stress. It also wants to see the government support the role of societies in difficult times.

Adrian Coles, director-general of the Building Societies Associa-tion, says: “The paper is well researched and identifies the issues surrounding core capital requirements for societies, specifically the need for a Tier 1 instrument that is compatible with the mutual model.”