Icelandic banking crisis hits Manchester BS
MANCHESTER Building Society has revealed a slump in profits after it invested £7m in failed Icelandic banks.
The society, which also offers business banking services to small firms through its banking subsidiary Whiteaway Laidlaw, has made a £5.25m provision in its 2008 accounts.
The £7m invested in the Icelandic banks was its own reserves, not customers’ money. Finance director Chris Gee told TheBusinessDesk the society was “cautiously optimistic” it would recover between 20% and 50% of the money back.
The Manchester, which is based on Portland Street in the city centre, has also had to pay £500,000 into the Financial Services Compensation Scheme – which covers consumers affected by the collapse of Manchester-based London Scottish Bank, the woes of Bradford & Bingley and the demise of the Icelandic banks.
Profits therefore slumped from £6m in 207 to £2.4m last year.
During a period of great turbulence in the financial sector, which caused larger rival The Cheshire Building Society to have to merge with giant Nationwide, the Manchester’s total assets rose 19.6% to £948m. Members’ deposits rose 21% to £668m, while the loan book rose 17.5% to £709m.
Chairman John Bee said:”It is disappointing to report that a strong overall performance during 2008 was materially impacted by the need to provide against Icelandic bank exposures.
“Despite this, the Society is still able to report an acceptable level of profit in a year of such turmoil in the sector.”
The mutual has a low cost base and has just one branch – on Queen Street in Manchester – but has agency agreements with nine professional companies – such as solicitors, accountants and estate agents – to sell its products.
Mr Bee added: “Prospects for 2009 remain uncertain given the prospects facing the UK economy generally and the housing market in particular.
“The society has, however, made a strong start both in terms of profitability and arrears levels, the latter of which are below the industry average.”
