THE Newcastle Building Society says it is on course for growth and job creation after seeing profits continue to rise as it recovers from the recession.
The mutual is starting its financial year in a stronger state than in 2010 when it saw a £4.7m loss, mainly due to the cost of a money-saving restructure which saw it axe the jobs of 170 staff last summer.
Chief executive Jim Willens yesterday announced its bottom-line earnings rose to £1m for the first six months of this year compared with a £900,000 loss a year ago.
And he forecast the growth would continue despite the continuing economic gloom as the underlying earnings – the figure which includes money set aside to bolster its finances for the future – was £4.2m compared with a loss of £2.1m a year before.
“The business is going forward in a strong position despite the challenges in the retail finance market. We are looking for further growth and expect to see further jobs being created as we grow,” he said.
The Newcastle, which has 900 staff and 30 branches, said it was continuing to win customers despite economic uncertainty deterring savers from putting by more money and house hunters from taking mortgages.
But its overall balance sheet shrank over the six months as it made fewer loans, continued to wind up its commercial lending business and also saw more customers pay off more of their mortgages. And it is growing its Solutions business, which handles banking administration or sales for other financial firms. That division is now its most profitable and recruited around 80 staff to its 200-strong workforce last year after winning millions of pounds-worth of contracts.
The savings balances it looks after for its customers doubled in the last 12 months and Mr Willens said it was expecting further growth this year and was hoping to sign up a couple of large contracts as more banks look to save money by outsourcing their work.
He said that the money-saving restructure launched last year, which is hoped to save £8m annually, was working to plan and no further job losses would be made in the forseeable future. The society is working to reposition itself as a traditional building society and over the next five to seven years will stop the commercial lending it began a decade ago. This will see it withdraw up to £1.5bn it has invested in companies and organisations such as housing associations and make the money available to lend to customers.
In the first half of this year it cut its commercial lending by more than £70m and sold of more than £30m of debt.
The mutual is also looking to increase mortgage lending, particularly to first-time buyers, as the housing market recovers.
Mr Willens added: “While the interest margin has remained stable, in line with expectations, other income for the six months has increased by almost a third and costs have reduced by over 14%.
“This has resulted in a 30% improvement in our cost income ratio from a figure of 111% for the first half of 2010 to 81% for the first half of 2011.”
