Society attacks 'unjust' bill to bail out banks

Feb 26 2009 by Iain Laing, The Journal

THE UK's sixth-largest building society has blamed the worst housing market in living memory and the cost of compensating savers at failed banks for a steep drop in profits.

Skipton Building Society, which has 85 branches, saw its pre-tax profits for 2008 dive by 86% to £22.5m on the back of weaker operating profits at its estate agency arm Connells and its contribution to the Financial Services Compensation Scheme.

The group said its profits were nearly half what they would have been if it had not had to set aside £16.3m to pay to the FSCS towards compensating savers after the collapse of Bradford & Bingley and the Icelandic banks.

It criticised the scheme, saying it was unjust that building societies which had inherently safer business models were bearing a disproportionate cost for the troubles of some banks that had far riskier models.

Skipton described 2008 as a whirlwind year in the UK financial markets, as the impact of the credit crunch intensified.

It said the higher cost of funding and the “above normal” liquidity the group had to carry contributed to its mortgage lending dropping by a third during the year, falling to £1.3bn from £2.2bn.