The UK’s second largest mutual revealed profit before tax totalled £23.8m, down by 73 per cent on 2007’s £114.6m.
The building society admits profits were hit thanks to a £57.4m exposure to Lehman Brothers and the Icelandic banks, as well as a loss of £20m thanks to limiting savings rate cuts in the face of a falling base rate. It has also been hit by FSCS levies of nearly £20m.
It also revealed it has a £1bn savings flow in as 154,000 new members joined Britannia. As a result, retail funds cover 97 per cent of non-securitised residential mortgages – which Britannia says will help it to ensure the Group can maintain financial strength without wholesale funding.
At the half year, Britannia reported that potential loan losses had given rise to prudent provisions of £40.4m. In the second half, charges for loan losses rose a further £17.4m to total £57.8m at the full year. The bulk of the losses relate to specialist lending through Platform n 2006 and 2007, particularly high loan-to-value advances for first time buyers and new-build city centre flats. Platform’s business was reduced by 73 per cent in 2008 compared with 2007 to just £0.7bn.
Britannia group chief executive Neville Richardson says: “We continue to deliver strong results for our members in the face of a difficult market environment. In unprecedented times our business is focused squarely on its customers, its people and its stakeholders. We’ve maintained financial strength and our sustainable business model can offer our members an exciting, mutual future.”
Britannia members are set to vote on merger with Co-operative Financial Services at their April AGM. The proposed business will have £70bn of assets, nine million customers, 12,000 employees and over 300 branches.