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RNS Number : 0486F

Manchester Building Society

05 March 2020

Manchester Building Society Group ("the Society") Results for the year ended 31 December 2019

 
                                                   2019                   2018 
                                                 GBP000                 GBP000 
 
 Total operating income                           6,856                  8,929 
 Administrative expenses and 
  depreciation                                  (4,829)               (10,185) 
 
 Operating profit/(loss) before 
  impairment                                      2,027                (1,256) 
 
 Expected credit losses                           (272)                    (1) 
 
 Other impairment losses                        (1,814)                  (760) 
 
 Impairment gain on property, 
  plant and equipment                          640                1,074 
 
 Financial Services Compensation 
  Scheme levy                                        11                      6 
 
 Profit/(Loss) for the period 
  before taxation                                   592                  (937) 
 
 Tax expense                                          -                      - 
 
 Profit/(Loss) for the period                       592                  (937) 
                                   --------------------  --------------------- 
 
 Total assets                                   247,108                277,385

The GBP3.3m increase in operating profit before impairments and provisions compared with 2018 is a result of:

-- Administrative expenses reducing by GBP5.3m. This included a GBP4.6m reduction in costs in relation to the Grant Thornton case.

-- Net interest income in the year being GBP0.9m lower than in 2018, primarily due to an 11% reduction in loan balances as the Society continues a managed reduction of the balance sheet.

-- Other income fell by GBP1.1m due to a GBP0.4m reduction in income from foreign exchange movements and a GBP0.3m reduction in rental income following the sale of the Group's head office building. The 2018 figure included GBP0.3m damages from the legal claim against Grant Thornton UK LLP.

An impairment charge of GBP0.3m was recorded for provisions on the UK portfolio.

A charge of GBP1.8m was recorded in respect of the Society's Spanish lifetime portfolio following lower than expected house price growth and a reduction in redemption activity.

A reversal of a prior provision of GBP0.6m followed a revaluation upon the disposal of the Group's head office premises.

The Group's reserves increased in 2019 by GBP0.6m to negative reserves of GBP10.7m.

The Society continues to have a strong liquidity position.

The 2019 accounts have been prepared on a going concern basis of accounting and, as with the accounts for previous years, set out a "material uncertainty" regarding the long-term future of the Society.

Legal claim against Grant Thornton UK LLP

Following the Society's unsuccessful appeal against the first instance judgment relating to the claim for damages against Grant Thornton in January 2019, the Supreme Court will review the judgment. The hearing is scheduled for October 2020.

Strategic future and capital position

The Group continues to have headroom against its total Pillar 1 plus Pillar 2A requirements in total capital terms as set out by the Prudential Regulatory Authority ("PRA") but, as in 2018, the Group did not meet the qualitative standards for CET 1 regulatory capital. As at 31 December 2019 the Society met, and continues to meet the requirement to hold CET 1 Capital in excess of 4.5% of Risk Weighted Assets.

The Board continues to engage with its regulators as to the strategic future for the Society. The 2018 strategic plan was updated in 2019 and the PRA has confirmed that it will monitor the Society's progress against this revised plan.

Permanent Interest Bearing Shares ("PIBS") coupon payments April 2020

As a result of the shortfall against qualitative standards for the level of CET 1 regulatory capital, the requirements under CRD IV article 141 regarding capital conservation mean the Society last paid PIBS coupons in April 2016 and may be prohibited from making the coupon payments due in April 2020. The Board considers that there continues to be uncertainty over the Society's ability to make coupon payments thereafter. A further announcement will be made in due course regarding the April 2020 PIBS coupon payments.

2019 Annual Report & Accounts

The accounts for the 12 months ending 31 December 2019 are available to view on the Society's website:

http://manchesterbuildingsociety.co.uk/Main/FinancialInformation

Enquiries

Andy Donald - Maitland/AMO 020 7379 5151 adonald@maitland.co.uk

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