The decision is bad news for Newcastle Strategic Solutions, a subsidiary of Newcastle Building Society, which had been in line to handle Cattles’ savings accounts on a third party basis.
Cattles had hoped to secure £1bn in retail deposits by 2010 after the licence came through.
Shares in Cattles dropped almost 35% on the morning of January 26 after the announcement was made.
The firm was forced to withdraw its application when it became clear that permission was unlikely to be granted until the turmoil in the financial markets has stabilised, and the terms of the group’s renegotiation of £635m of its bank facilities are known.
Cattles said its lending banks would continue to be involved in constructive discussions about the scope and terms of the renewal of the group’s bank facilities, which is due this year.
Chief executive David Postings said: “Given the prevailing chaos in the markets we have taken prudent action to cut costs, conserve capital and focus our efforts on securing wholesale funding for the group.
“Demand for our products remains strong and the group continues to trade profitably and in line with expectations.”
Meanwhile, the savings market appears to be deteriorating under the low interest rate regime and a lack of appetite on the part of the industry to lend.
According to price comparison website MoneyExpert.com, in the past 12 months the number of instant access savings accounts has fallen by 342 from 1,478 in January last year to 1,136 – a 23% plunge.
The number of high performing accounts has also decreased. A year ago a staggering 507 instant access savings accounts paid out 4.5% annual equivalent rate or more as banks looked for new investments. Now just 11 accounts pay out at 4.5% or more. Building society savings data also shows a deterioration. Net receipts for savings in November 2008 (December data was not available as we went to press) stood at £636m. This was a lot better than the £115m societies attracted in October, but the November figure was distorted by the flow of funds from Icelandic banks.