Manchester Building Society makes half year loss
Manchester Building Society has slipped into the red, its interim figures released today show.
The business, which was locked in an expensive two-year legal battle with Grant Thornton, also revealed that its accounts were prepared on a going concern basis and, in line with previous accounts, set out a “material uncertainty” regarding the long term future of the society.
Total operating income for the six months to June 30, was £3.877m, down from £3.917m in the same period last year.
A pre-tax profit in 2019 of £454,000 was transformed into a pre-tax loss of £393,000 this year.
The society managed to reduce administrative expenses by £400,000 compared with the same period in 2019, due to lower fees in relation to the legal case against Grant Thornton and continued cost saving initiatives.
As at June 30, the society met its Total Capital Requirement and the requirement to hold Common Equity Tier 1 (CET 1) regulatory capital in excess of 4.5% of Risk Weighted Assets (RWA), but did not meet the qualitative standards for the level of CET 1.
Following the society’s CET 1 capital falling below the required 4.5% of RWAs in 2018, a medium to long term strategic plan was produced which was independently reviewed and acknowledged by the Prudential Regulation Authority (PRA) which agreed to monitor the society against it.
The plan was updated in June 2020 and the society said it continues to discuss its strategic future and capital position with the PRA.
Today’s announcement declared that the society, based in Portland Street, continues to have a strong liquidity position.
The long-running court battle with Grant Thornton was related to issues over hedge accounting at the society, which was forced to shore up its finances with an emergency £18m capital injection in 2013.
As a result it launched a £49m negligence claim against Grant Thornton over advice in relation to hedge accounting in early 2015.
The High Court awarded damages of just £335,727 to the society in May, 2018.
Costs were also awarded to Grant Thornton which have amounted to around £2.5m.