Pre-tax profits at Manchester Building Society fell to £700,000 in 2009 from £2.4m in 2008 after the mutual was forced to write off a £2.5m shareholding in collapsed network Network Data.
During 2008 the society disposed of its loss making subsidiary Mortgage Broking Services Limited, to Network Data Holdings in exchange for shares in the latter.
But Network Data went into administration in early 2009, owing its appointed representatives more than £2m.
Michael Prior, chairman of Manchester, says the organisation’s trading performance in 2009 was resilient, apart from the Network Data effect.
He says: “It is disappointing to report that our results for the year were affected by the need to provide fully against the shareholding in Network Data Holdings. Unfortunately, that company fell victim to the economic downturn and went into administration in early 2009.
“Considerable strides were made during 2009 in reducing the level of wholesale funding that the society uses, with this now sitting comfortably between 7.5% and 12.5% of total funding. At its highest point in 2007 this figure was more like 30%.”
He adds: “The society was able to attract an additional £68m of member deposits, representing an increase during the year of 10.2% and reflecting the public endorsement of the building society sector last year.”
Manchester’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.
Manchester also saw its mortgage arrears fall materially over the period at a time when other lenders were seeing theirs rise.
Mortgage advances in the year were subdued but in line with the mutual’s targets and expectations. Consequently, a small reduction in both mortgage assets and total assets was reported.
Prior says: “In recognition of the economic outlook the society undertook a programme of cost reduction during the year and the result of this can be seen in the lower level of administrative costs in our results. “This cost-cutting exercise is now complete, having returned annualised savings of more than £1m.
“We are cautiously optimistic about prospects for 2010. Clearly, increased profitability will only return when the Bank of England base rate gets back to a more normal level but we are well positioned to operate viably if current interest rate levels are maintained.”