Building society’s losses mount due to £2m court case payment
Manchester Building Society reported a pre-tax loss for the six months to June 30 of £1.629m today, and said there “remains material uncertainty about the group’s prospects”.
Income of £4.742m compared with £4.817m for the same period a year ago.
Last year’s pre-tax loss came in at £698,000.
The increased loss was predominantly due to a £2m interim payment following judgment on legal proceedings against Grant Thornton regarding a case relating to audit services carried out by its former auditor.
The building society was awarded damages of £335,727 following a High Court Case, but was warned to expect a bill for court costs.
In May it was announced the building society would have to pay costs of £1.97m.
The society said today its reserves fell by £1.9m as a result of the £1.6m loss reported for the period, and also a £300,000 impact from the adoption of IFRS 9 accounting standards as required from January 1, 2018.
It also revealed that, at June 30, it did not meet its CET1 (Common Equity Tier) qualitative standards, to hold capital of at least 4.5% of risk weighted assets.
CET1 was introduced in 2014 after the 2008 economic crash as a means to protect the economy from a financial crisis.
A new capital conservation plan was submitted to the Prudential Regulation Authority (PRA) in June and the society said it continues to discuss its strategic future and capital position with the PRA.
It also reiterated today that it continues to have a strong liquidity position.
However, chairman David Harding said today: “The board considers that there continues to be uncertainty over the society’s ability to make coupon payments in the short- to medium-term.
“In the longer-term, there remains material uncertainty about the group’s prospects.”
He added: “The group continues to hold high levels of liquidity to meet liabilities as they fall due and within the low risk appetite as set by the board. Of the group’s retail deposits, 99% are covered under the Government’s Financial Services Compensation Scheme.”
The society also revealed today that it has been granted leave to appeal the judgment in the case versus Grant Thornton.
It is expected that the appeal will be heard no earlier than mid-January 2019, with the judgment known some time later.
