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RNS Number : 4179R
Manchester Building Society
01 March 2023
Manchester Building Society ("the Society") Results for the year
ended 31 December 2022
2022 2021
GBP000 GBP000
Net Interest Income 5,785 6,173
Legal damages and interest - 14,272
Other operating income and
charges 755 (1,005)
----------------- --------------
Total operating income 6,540 19,440
Legal costs recovered 2,400 7,540
Administrative expenses
and depreciation (5,389) (4,854)
----------------- --------------
Operating profit before
impairment 3,551 22,126
Impairment losses (2,493) (1,289)
----------------- --------------
Profit/(Loss) for the period
before taxation 1,058 20,837
Tax expense - (1,467)
Profit/(Loss) for the period 1,058 19,370
----------------- --------------
Total assets 178,269 204,606
The Society recovered a further GBP2.4m in 2022 following the
judgment in The Society's favour in its legal case against its
former auditors that concluded in 2021. This represented final
settlement and was in addition to the GBP21.8m of damages, interest
and costs recovered that was recognised in 2021.
Underlying performance in 2022 was impacted by continued
economic uncertainty, particularly in relation to expected house
price reductions in the UK and slower than expected growth in
Spain.
In 2022 the Society reported a profit after tax for the
financial year of GBP1.1m (2021: GBP19.4m).
In the year the Society reported operating profit before
impairments and provisions of GBP3.6m (2021: GBP22.1m).
The GBP18.6m reduction in operating profit before impairments
and provisions from 2021 is a result of:
-- The one-off GBP21.8m received in relation to the damages,
costs and interest received in 2021 in relation to the legal case
against its former auditors, which was not replicated, with just
the final settlement of GBP2.4m recognised in 2022.
-- GBP0.4m lower net interest income owing to the continued
managed balance sheet reduction. Higher interest receivable on
mortgages following Bank of England base rate increases in the year
has been offset by higher interest payable on savings products.
Interest payable includes GBP0.4m in relation to Permanent Interest
Bearing Shares ("PIBS") coupon payments (2021: GBP0.3m)
-- GBP0.6m increase in operating costs, excluding costs
recovered, driven by additional staff costs and additional
professional fees in relation to the Society's proposed merger with
Newcastle Building Society.
This has been partially offset by:
-- A GBP1.7m increase in other operating income and charges with
foreign exchange gains of GBP0.9m in the year compared with
exchange losses of GBP0.8m in 2021. These gains are largely offset
within impairment where GBP0.6m of losses are recognised in 2022
compared with a GBP0.8m of gains in 2021.
The Society recorded impairment of GBP2.5m (2021: GBP1.3m) being
GBP2.1m relating to the Society's Spanish lifetime portfolio and
GBP0.4m relating to the UK portfolios.
The Society's reserves increased in 2022 by GBP0.4m to
accumulated profits of GBP8.5m. This reserves movement includes
GBP0.7m reduction relating to interest paid on Equity PIBS.
Owing to a change in accounting standards, the Society is
required to revise the accounting methodology for its Spanish
lifetime mortgage portfolio in 2023. The Society estimates that
this change will result in a charge of between GBP3m and GBP5m
being taken to reserves upon implementation. The new methodology
will lead to higher levels of volatility within the Income
Statement in future years.
The Society continues to have a strong liquidity position.
Strategic future and capital position
On 21 February 2023, the Society announced that it had agreed
heads of terms to merge by way of a transfer of the Society's
engagements to Newcastle Building Society. The merger is subject to
the execution of a legally-binding instrument by each society, and
the Prudential Regulation Authority ("PRA") confirming the
merger.
The Board believes that while the Society's current capital and
liquidity position is regulatory-compliant the Society lacks the
scale and resilience to endure a major financial or economic stress
without raising additional capital. The Board's current projection
is that, as a standalone entity, the Society would have recurring
losses which will deplete capital reserves each year. Accordingly,
the Board has considered a range of strategic options and concluded
that the best interests of members would be served by a merger with
a larger, stronger building society.
Until the merger is concluded, the Society continues to follow a
medium to long-term strategic plan, monitored by the PRA. The plan
shows that the Society remains viable in the medium-term but the
long-term future of the Society remains uncertain in the absence of
the merger transaction.
The Society made coupon payments on both its issuances of PIBS
in 2022. As a standalone entity, whilst the Society continues to
manage down the size of the balance sheet, there remains some
uncertainty over the Society's ability to make PIBS coupon payments
in the medium to long-term.
2022 Annual Report & Accounts
The accounts for the 12 months ending 31 December 2022 are
available to view on the Society's website:
http://manchesterbuildingsociety.co.uk/Main/FinancialInformation
Enquiries
Sam Cartwright - H/Advisors Maitland
020 7379 5151
scartwright@maitland.co.uk
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