Derbyshire reports pre-tax loss of £17m

The Derbyshire has revealed it is expecting to make an unaudited pre-tax loss of £17m for the first half of 2008.

The society, which has just undergone a merger with Nationwide and Cheshire has blamed its near-prime, sub-prime and commercial loan portfolios for the loss.

Derbyshire’s, specialist brand Salt brand pulled out of the residential market on Friday.

Following the appointment of a new chairman and chief executive in December 2007 and February 2008, the board of The Derbyshire initiated a strategic review of the society.

Following this review the board of The Derbyshire identified that it would post an unaudited pre-tax loss of £17m, with the potential for further future losses.

As a result, and especially given the current uncertain economic conditions, The Derbyshire’s board felt it was appropriate to consider its strategic alternatives.

Having reviewed all options, the board of The Derbyshire determined that it was in the best interests of its members to take a definitive step by seeking a merger with Nationwide.

The Derbyshire’s assets include £1.4bn of near-prime and sub-prime residential mortgage loan assets and £0.5bn of commercial loan assets. The sub-prime and commercial loan books were closed to new business in March and May 2008.

The Derbyshire says its core residential mortgage business is sound and The Derbyshire has no commitments to buy further mortgage portfolios.

All of the assets and liabilities of The Derbyshire will be adjusted to their fair value at the date of the merger.

Nationwide is satisfied that The Derbyshire’s general reserves are sufficient to cover conservative fair value adjustments including current and expected future losses on The Derbyshire’s assets.

Graham Picken, chief executive of The Derbyshire, says: “I am pleased that The Derbyshire has come to an agreement with Nationwide that assures the future for our savers and borrowers. The board recognised a number of financial uncertainties facing The Derbyshire, and has taken this prudent and pre-emptive action in seeking a solution to secure the interests of our members over the long-term. I have every confidence that The Derbyshire members will benefit from being part of the enlarged society.”