Chelsea delivers a strong performance in a difficult market

Chelsea Building Society is pleased to announce its financial results for the year ended 31 December 2007.

2007 was undoubtedly a year of two halves. The optimism felt early in the year was shaken in August when the money markets first experienced the unprecedented turbulence that became known as ‘the credit crunch’. As a building society, Chelsea’s predominant focus on retail savings meant we were in a strong position to weather these difficult conditions. The robust results announced today are clear evidence of Chelsea’s continuing strength as we enter 2008.

Business Highlights
Total group assets increased by 17.5% to £13.1bn (2006 £11.1bn)

Profit after tax increased by 10.7% to £45.4m (2006 £41.0m)
Significant improvements in efficiency; costs-to-mean assets ratios down from 0.59% to 0.56% (group) and 0.59% to 0.53% (society)
Gross lending £3.13bn (2006 £2.95bn)

Net mortgage lending £1.35bn (2006 £1.35bn)
Asset quality remains high with mortgage arrears substantially below industry average
Savers balances increased by 7.7% to £8.4bn (2006 £7.8bn)
Liquid assets increased to £3.1bn, 25% of total funds (2006 £2.4bn, 23%)

Richard Hornbrook, Director and Chief Executive commented on the results: “2007 started very positively, with the mortgage and housing markets buoyant. It was a year of two halves however, with the second half bringing many challenges. July’s interest rate rise took Bank Base Rate to a point not seen since February 2001 and consumer confidence began to wane. By September ‘the credit crunch’ was hitting the headlines and testing the resilience and business models of everyone operating in the financial markets.

Despite these challenges, our performance in 2007 was strong and, in changing market conditions, we consistently punched above our weight. We saw our assets grow to over £13 billion, and our new lending was well above our proportional share of the building societies’ sector. Our savers continued to enjoy excellent value products, with an average savings rate 0.43% better than the average for the building societies’ sector as a whole. Driving down relative costs is one of our strategies and once again we expect to be one of the most cost efficient societies. Combined with our strong capital, increased liquidity and good quality assets, we have demonstrated the strength of our business model and the fact that we are well placed to meet the challenges of a changing market.

Exceptional, motivated staff continue to be a pivotal factor in our success and these strong financial results are a credit to everyone who works for us. Their determination, commitment and enthusiasm in a challenging year cannot be overstated and I would like to take this opportunity of thanking them for their outstanding contribution.

The outlook for 2008 remains uncertain, with the demand for residential mortgages expected to fall. Obtaining funds, whether from savers or from the wholesale markets, is likely to prove increasingly competitive and relatively costly. Chelsea however, is well placed to meet these challenges with a strong business model, good reputation and robust levels of liquidity and capital. I am confident that, despite current market conditions, we remain on track to meet our objectives for 2008 and to continue to deliver first class value and service to our members.”