Newcastle Building Society grows pre-tax profits to £800,000

Newcastle Building Society has posted half-year pre-tax profits of £800,000 - a reversal of the firm's fortunes at the start of 2013

Chief executive of the Newcastle Building Society Jim Willens
Chief executive of the Newcastle Building Society Jim Willens

Newcastle Building Society has announced pre-tax profits of £800,000 as it continues to make progress on its strategy.

The firm, which employs around 850 people, had been moving into sectors outside of the traditional remit which carried higher level of risk.

However, when Jim Willens was appointed as chief executive the business switched its focus back to a classic building society model, at the heart of which, it says, are the interests of its members, its staff and the communities in which it operates.

The firm’s strategy is paying off and half-year results for the six months ended June 30 show the firm has performed well against its key performance indicators, including improving profitability, maintaining higher levels of residential lending activity, continuing wind down of legacy portfolios, investment in infrastructure, reducing arrears rates and reducing complaints.

Figures for the six months show a lift in operating profit, from £5.8m to £5.9m, as well as continued improvement in pre-tax profit to £800,000, compared to a loss before tax of £800,000 for the comparable period in 2013.

However, total operating income for the six month period was £23.6m, down from the £23.7m posted for the first half of 2013.

The company said there have been signs of uncertainty within the housing market but that residential mortgage lending has continued on a positive trend and that the number of mortgages in arrears by three months or more is 0.59% – well below industry averages.

Willens said: “The recovery in the UK economy appears to be more firmly established and there are encouraging signs that this is set to continue with higher economic growth supported by rising business and consumer confidence.

“The housing market continues to show signs of vacillation; just as the market looks to be recovering there are concerns raised that it may be overheating whilst some commentators have suggested that the Mortgage Market Review (MMR) has started to have a dampening effect based on recent mortgage lending data.

“From the society’s perspective we continue to provide our customers with a consistent range of good value mortgage products with an emphasis on helping first time buyers get on to the housing ladder.

“For us the advent of MMR in April 2014 had little impact as we have completed an affordability assessment for borrowers for several years and all of our mortgage advisors are fully qualified to provide advice.

“It is pleasing that we have seen our volumes of activity increase post MMR and we have continued to maintain high levels of service.

“Interest rates have remained at a record low for over five years now and whilst this has been good news for borrowers, savers will appreciate the signals that are starting to emanate from the Bank of England that there is likely to be a rise in interest rates, albeit very gradual.

“The Society’s balance sheet is well positioned to benefit from a rising interest rate environment.

“In the first half of 2014 we performed well against our corporate key performance indicators. I am very pleased with our performance and the steady progress the Society continues to make.”

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