Historic building society struggles on as it posts another loss
EMBATTLED Manchester Building Society has posted a £3.4m loss for the year as it continues its discussions with the regulatory authority about its future because of a capital shortfall.
Total operating income stood at £9.2m for the year to the end of December 2016 (2015: £9.7m).
The decline in total operating income reflects the continued planned reduction in the size of the building society’s loan book, which fell 12% from £331m to £289m although that was largely mitigated by a 9% reduction in funding from £372m to £340m.
It has not been active in the lending market since 2013 and has has no plans to re-enter the mortgage market. Mortgage assets have reduced by approximately 40% over the last three years.
The building society is continuing with its £49m legal claim for damages against its previous auditor Grant Thornton and said that if the matter progresses to trial, it will not be before 2018.
The mutual confirmed in a separate announcement that it will not pay the interest due on its permanent interest-bearing shares or Pibs next month, having also failed to pay in October.
The Pibs are not cumulative so even if regular payments resume in the future, investors will not receive the missed instalments. The missed payments are because its losses have given the society a regulatory capital shortfall against the requirement set by the Prudential Regulation Authority (PRS).
The society said it continues to discuss and consult with the PRA on its strategic future and capital position and its Capital Conservation Plan is being revised and updated, but it again said that the outcome and timing of the regulatory process is uncertain.
As with the 2015 results, directors have again warned that the accounts showed a material uncertainty surrounding the mutual’s long-term future, given the continuing decline in the scale of operations.
Total assets have fallen to £382m (2015: £416m) while the mutual’s reserves fell by £3.7m to negative reserves of £9.2m, although its liquidity position remains strong.
David Harding, chairman said: “The ongoing run-off of the society’s assets, legacy loan portfolio exposures and professional costs incurred in the development of strategic options to secure the society’s future continue to impact financial performance.
“The strategic future of the society remains a focus for the board. There is an ongoing discussion with PRA regarding the material uncertainty of the long-term prospects of the Society, taking account of the current capital position and risks faced by the business.”
Manchester Building Society was founded in 1922 and has one branch on Queen Street. It has around 4,000 mortgage borrowers, as well as about 18,000 savings accounts.
