The Nottingham delivers robust 2008 financial performance

The Nottingham has reported an operating profit of £4.2 million for the 2008 financial year - and a 4% growth in savings balances, despite the unprecedented turbulence that has beset the UK economy.

The Society lent £429 million in mortgages (its third highest annual level of completions), while continuing to place an emphasis on only offering finance to people who met its strict lending criteria. As a result, the Society's asset quality remains strong and means it has no exposure to sub-prime lending and self certified mortgages - areas that created significant problems for several UK-based financial institutions.

The average Loan-to-Value ratio of it's lending book was 40%, using an index valuation basis and only 0.43% of its borrowers were greater than three months in arrears, this is less than a quarter of the industry average of 1.89%.

Ian Rowling, chief executive, commented: "Despite the many economic obstacles we have faced during the past year, the Society has continued to steer a consistent and steady path.

"Our branch network performed extremely well with strong receipt in-flows and account openings up over 20% on 2007's figures.

"This performance really underpins the strength of The Nottingham in our East Midlands and Lincolnshire heartland as more and more customers choose our Society as a safe home for their savings."

In fact the Society's latest satisfaction survey shows that 94.2% of its customers were satisfied with The Nottingham's service throughout 2008 (93.2% in 2007). And despite the challenges of the last year, there has also been a large increase in those rating overall performance as ‘excellent' (61.6% in 2008 compared to 56.3% in 2007).

Achievements and financial highlights for 2008 include:

Total assets were maintained at £3 billion;

Retail savings balances grew by 4%, supported by over 20% growth in branch-based account openings;

94% of mortgage lending was funded from the retail deposits of our members;

Operating Profit was reduced to £4.2m (2007: £8.1m) with Group profits at £2.9m (2007 £7.6m). After exceptional items were accounted for (£2.4m FSCS levy and £1.3m restructuring costs), our net profit was £500,000;

Total administrative expenses, excluding depreciation, were reduced by 0.4% (4% in real terms);

Only 0.43% of loans greater than three months in arrears (less than a quarter of industry average of 1.89%).

During the year, The Nottingham paid a £2.4m levy to the Financial Services Compensation Scheme (FSCS) - the body set up to safeguard the affairs of consumers in the event that a financial institution collapses.

"We are strong supporters of FSCS," added Ian Rowling. "But the failure of Bradford & Bingley plc and the UK subsidiaries of Icelandic banks in 2008, meant organisations like The Nottingham were left to pick up the pieces."

"Our £2.4m contribution to FSCS is significant and represents a large part of the operating profit we recorded during the year."

"We do feel that the current method for calculating the FSCS levy places a disproportionate burden on organisations like The Nottingham, which are mainly funded by individual savers and have always been run on a prudent basis."

"We welcome recent comments from the Government confirming that the scheme is to be reviewed and hope that the outcome will result in the scheme placing a more appropriate burden on those organisations that take bigger risks in the way they run their businesses."

Looking to the future, Ian Rowling is adamant the Society will remain vigilant and maintain its commitment to traditional lending values.

He said: "As we move into 2009, market conditions are forecast to remain difficult. We believe the housing market will remain subdued as the recession continues to bite.

"That's why our unstinting focus will be on continuing to provide a safe haven for members' funds and maintaining our asset quality. As a building society, this always has to be at the forefront of our thinking. That's why we believe that the role of mutual building societies, particularly in the current environment, offer the public a strong and secure alternative to the big banks for their savings and mortgage needs."

"Our prudent approach to the way we have managed the business means that we are as well placed as any organisation to weather the current economic storm. The building blocks of business efficiency that we have worked hard to lay in 2008 will drive us forward in 2009, and beyond, across all areas."

"We will continue to deliver products and services that are appropriate to the needs of our customers in these turbulent times."