PRE-TAX PROFITS at Northern Ireland’s Progressive Building Society more than halved last year despite the society attracting a record number of new savers.
Latest financial accounts show the Progressive, one of only two locally-owned building societies in the North, reported new retail savings in 2008 totalling £418 million.
The society, which has 11 branches in the North, also grew its balance sheet for the fifth year in a row by 11 per cent to £1.66 billion.
Progressive said its strong balance sheet supported strong lending growth in the first half of the year, but there was a sharp decline for mortgages in the latter part of 2008. The society increased new lending last year by £246 million while the value of net savings receipts increased by more than 60 per cent.
Despite its strong performance, pre-tax profits fell sharply from £9 million in 2007 to £4 million in 2008. Progressive said its long-term strategy of “steady organic growth” had insulated it from the worst effects of the credit crunch and its profits result compared well against the losses reported by many other institutions.
It attributed the fall in profits to two key factors. The society said it had structured its business during 2008 to maintain higher levels of liquidity. This had been done at the expense of interest and resulted in lower profit levels.
Progressive also blamed the contribution it is required by law to make to Britain’s Financial Services Compensation Scheme in relation to the rescue of Bradford Bingley and several Icelandic banks. The Belfast-headquartered society estimates that these contributions will amount to more than £2.2 million over the next three years. Last year it was charged £1.4 million in respect of the 2008 financial year.
Chairwoman Dr Joan Smyth said the society shared the anger expressed by many members that, despite its “cautious and prudent management”, it was being financially penalised due to “the recklessness of some elements of the banking sector”.
Dr Smyth added: “Building societies maintain higher ratios of savers’ funds on their balance sheets than most banks and will pay a disproportionately high contribution towards the financing of the rescues.”
The society believes its overall “prudent policy” has ensured not only the “safety and security” of its savers’ funds in the past year but also helped it to win new business in a difficult economic climate.
Dr Smyth said: “Last year was a worrying time for savers in the UK and we were delighted that we attracted new members who had become aware of Progressive’s reputation as a safe haven for their funds.”
