Manchester BS suffers £2.5m investment hit
MANCHESTER Building Society saw its profits slide from £2.4m to £700,000 after being hit by a £2.5m investment write-off.
The mutual sold its loss-making mortgage broking business to Surrey-company Network Data Holdings in November 2008 in an all-share deal.
But NDH went into administration some months later, wiping out the value of MBS’ near 20% stake.
Chairman Michael Prior said the performance of the underlying business had been resilient during 2009.
Members’ deposits rose 10.2% to £736m, while liquid assets were up by 7.4% to £236m. Total group assets were down by 1.1% to £937m
Mr Prior said the demise of NDH was “disappointing” and that margins in the business had been affected by the record low base rate of 0.5%.
“In line with a number of other building societies, the impact of the precipitous fall in Bank of England base rate to its current historic low of 0.5% has been felt in the net interest margin earned.
“Rates charged on our mortgage loan book have, for the most part, reduced in line with bank base rate.
“By comparison, average rates paid to saving members have not declined to the same extent and consequently the Society has operated at much lower interest margins than reported in previous years.”
Chief executive David Cowie said it was a testament to the society’s resilience that it had managed to survive some “pretty big shocks” over the last two years and still make a profit.
He said difficult decisions had been taken last year to cut costs, and that eight members of staff from the development side of the business had been made redundant. The action taken will save £1m a year.
The society reduced the amount of wholesale funding it uses from a high point of 30% in 2007 to between 7.5-12.5% of total funding.
During 2009 the society attract an additional £68m of member deposits, representing an increase during the year of 10.2%.
Mr Cowie said he was “cautiously optimistic” for this year, but said the wider economic outlook would remain “testing” for some time.
