Cheshire announces 2005 results

Amanda Jarvis

March 10, 2006

Key aspects:

– Profit before tax and exceptional items increased by three per cent to £11.7 million
-Operating profit before provisions and exceptional items increased by 12 per cent to £11.5 million
– Net interest margin has increased from 0.90 per cent in 2004 to 0.91 per cent in 2005
– Costs reduced by £3.0 million and the management expenses ratio reduced to 0.82 per cent
– Total assets up 7 per cent to £4.7 billion with gross mortgage lending of over £1 billion
– Savings balances increased by £184 million
– Two exceptional items totalling £13.8 million comprising

– £3.8 million cost relating to the Change Programme which will improve long term efficiency and profitability
– £10.0 million provision relating to a suspected external fraud involving a commercial loan, against which we expect to make a substantial recovery

– Fully funded the defined benefit pension scheme by injecting £30 million
– Continued to improve member value through enhanced products and services:

Launch of Cheshire Pension Services

– Launch of a competitive Regular Saver account and fixed rate savings products
– Extended home insurance product range

Tom Marshall, chairman at Cheshire Building Society, commented: “The Society has responded well to the changes that we have made in 2005 and this is reflected clearly in a very strong second half performance. This improving trend has continued into the first two months of 2006.
“This year’s results have, however, been impacted by a post balance sheet event creating the need for a £10 million provision for a suspected external fraud in relation to a commercial loan. Under International Accounting Standards we have had to make this provision, although we have been advised by our solicitors that we have a strong case and a clear expectation of substantial recovery based on the available evidence. Leading counsel has now been instructed.
“Our financial position remains strong, with both our capital and solvency levels comfortably above those required by our regulator the Financial Services Authority, with whom we have kept in close touch throughout.
“We continue to examine ways in which we can run the Society more efficiently. The improvements we are currently making will enable the Society to continue its delivery of quality and value products and services to our members and customers over the long-term.”

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