Newcastle Building Society profit hopes after fightback

Mar 12 2010 by Iain Laing, The Journal

The society saw a £12m profit in 2007 plunge to a £25.8m loss in 2008 largely due to the money deposited in Icelandic banks Kaupthing and Lanskbanki.

It has been paid back £6.7m by the administrators of the banks’ UK subsidiaries. Mr Seccombe said the money was getting returned faster than he had expected but it would still take years to claw back up to 80% of what had been lost. The Newcastle said it had improved its funding profile, resulting in lending that is 100% funded by retail deposits compared with just 86% in 2008. The building society reduced its wholesale funding ratio from 28% to 9% over the year.

Impairment losses on loans and advances to customers improved over the year to losses of £8m compared with £12.1m in 2008.

And the society said it is still suffering a “significant burden” from the cost of paying the equivalent of 15% of its profits into the Government’s Financial Compensation Scheme.

He said the scheme had already cost the society £5m, but was heartened by an inquiry into the levy which is higher for building societies than banks as it’s based on retail deposit levels.

Mr Seccombe, who retired yesterday, is replaced by Jim Willens, deputy chief executive of the society since December 2009. Mr Willens said he hoped the society would return to profit this year and stressed that despite continuing consolidation in the sector he had no intention of discussing a sale of the Newcastle.