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Britannia BS reports H1 profits down 38% as reduced lending and bad debts hit bottom line
First half profits at the Britannia Building Society, the UK's second biggest, have fallen by more than 38% as the credit crunch continues to hit lenders. The mutual took a £40.4million bad debt provision, which it blamed in part on lending to landlords who bought new build city centre flats.
The Leek-based mutual, posted pre-tax profits of £50.5 million for the six months to July, compared with £81 million last year, on total mortgage lending down from £3.7 billion last year to £1.9 billion.
Chief executive Neville Richardson said the business had fared well in the face of tough conditions which have seen mortgage lending almost half – including cutting costs by five per cent.
Mr Richardson said: "This is a strong performance in a market that is unrecognisable from the same period in 2007.
"We continue to trade profitably and the business has underlying strength and resilience, despite losses made in a small area of our lending activity due to exceptional market conditions."
However, he added: "We're not immune to the market downturn, and our business model anticipated losses arising from some of our lending.
"The slowdown in the wider economy means we believe those losses may come about more quickly than expected, but we're taking the necessary action to contain them."
Mr Richardson said he does not expect to see an end to tough market conditions before 2010.
Mr Richardson said the loan book, which totalled £25billion at the end of June, had an average loan-to-value of 42%, which was relatively low.
The bulk of the arrears were racked up by is intermediary mortgage business Platform, which offers sub-prime lending to higher risk first-time buyers who took out riskier high loan-to-value mortgages.
The company said this accounts for 8% of the group's total book, and lending criteria has been tightened in that area.
The lender had 145 accounts that were more than 12 months in arrears, up from 84 at the end of December. Balances on these totalled £21.6million compared with £13million at the year end.
Standard & Poor's, the rating agency, recently highlighted concerns that Britannia's portfolio of specialist mortgages, which include buy-to-let, self certified and nonconforming loans, could see a rise in impairments in a falling market
Mr Richardson said the group has achieved targets set at the start of the year
The group, which has 2.6 million UK savers, was also ranked number two in the annual Sunday Times survey of the best big companies to work for.
The Leek-based mutual, posted pre-tax profits of £50.5 million for the six months to July, compared with £81 million last year, on total mortgage lending down from £3.7 billion last year to £1.9 billion.
Chief executive Neville Richardson said the business had fared well in the face of tough conditions which have seen mortgage lending almost half – including cutting costs by five per cent.
Mr Richardson said: "This is a strong performance in a market that is unrecognisable from the same period in 2007.
"We continue to trade profitably and the business has underlying strength and resilience, despite losses made in a small area of our lending activity due to exceptional market conditions."
However, he added: "We're not immune to the market downturn, and our business model anticipated losses arising from some of our lending.
"The slowdown in the wider economy means we believe those losses may come about more quickly than expected, but we're taking the necessary action to contain them."
Mr Richardson said he does not expect to see an end to tough market conditions before 2010.
Mr Richardson said the loan book, which totalled £25billion at the end of June, had an average loan-to-value of 42%, which was relatively low.
The bulk of the arrears were racked up by is intermediary mortgage business Platform, which offers sub-prime lending to higher risk first-time buyers who took out riskier high loan-to-value mortgages.
The company said this accounts for 8% of the group's total book, and lending criteria has been tightened in that area.
The lender had 145 accounts that were more than 12 months in arrears, up from 84 at the end of December. Balances on these totalled £21.6million compared with £13million at the year end.
Standard & Poor's, the rating agency, recently highlighted concerns that Britannia's portfolio of specialist mortgages, which include buy-to-let, self certified and nonconforming loans, could see a rise in impairments in a falling market
Mr Richardson said the group has achieved targets set at the start of the year
The group, which has 2.6 million UK savers, was also ranked number two in the annual Sunday Times survey of the best big companies to work for.
Thu, 14th Aug 2008