Newcastle Building Society profit hopes after fightback

Mar 12 2010 by Iain Laing, The Journal

NEWCASTLE Building Society hopes to see a profit this year after fighting back from a £26m loss caused by a £43m write-off in deposits it held with two failed Icelandic banks.

The mutual has revealed that it broke even last year after building up its savings and mortgage business and taking on a record 50,000 new members in 2009.

It now has around 500,000 members and last year it took in a record income of £490m on savings products, driven largely by new ISAs it launched over the year. This contrasts with a £2bn outflow from the UK building sector as a whole.

But the mutual said it was still suffering from the downturn and low interest rates and remained stoic although the £750,000 profit it had seen in the first half had not taken it into the black for the 12 months.

Chief executive Colin Seccombe said: “It is pleasing to restore the society to a more stable position but we must recognise the continuing pressure on us, especially as the high cost of securing funding, combined with the low interest rate environment, impacts the margins.”

And the building society is confident it will further build its Solutions business, which manages back office work for other financial companies. It is in talks hoped to lead to two deals this year which will bring in more than £6m a year.

Mr Seccombe said there may have to be further investments in this business, which employs around 100 of its 1,100 staff, but that the “longer term view is most encouraging”.