Local Bank Avoids Sub-Prime For Big Profits
Local competitor of Northern Rock, Newcastle Building Society, was able to show a 52% rise in profits to £17.6m. The building society chose not to lend to the non-conforming sectors and avoided the US sub-prime mortgage markets altogether.
Newcastle's profits were strengthened by its merger with Universal Building Society and together were lending on big volumes, earning from investment products, and managed over £10bn in savings accounts for other major financial players.
Newcastle BS Chief Executive, Colin Seccombe said, "Despite market turbulence in the second half of the year, the Group has shown real progress in all parts of its business. We come into the year with strong, high quality liquidity and a very sound funding base thanks to our traditional focus on retail savers rather than wholesale money markets."
The building society decided to take a different route to Northern Rock's high-risk lending. Other factors also contributed to the bank's success. Expansion of their Solutions business along with a strong demand for investment products by way of Newcastle Financial Services helped the society increase "other income" by 48%.
Gross lending surpassed £1bn for the first time whilst total assets rose by 9%. The merger with Universal BS avoided redundancies by instead creating up to 20% more jobs, to around 1,200 employees.
Chief Executive Seccombe is delighted with the merger and progress between the two building societies and said, "With this progress has come job creation and long term investment. Not only were there no redundancies as a result of the merger with the Universal, but we also created over two hundred additional positions in 2007. We are now one of the largest private sector employers in the North East."
Unlike Northern Rock, Newcastle Building Society confidently progresses forward into 2008 with strong liquidity and profit thanks to focusing on their retail savers rather than relying on volatile wholesale money markets.
Published on February 27, 2008
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