Skipton profits plunge 86%

| March 2, 2009 | 0 Comments
Skipton profits plunge 86%

Skipton Building Society has reported a staggering 86% drop in yearly pre-tax profit, down to £22.5 million in 2008 compared to £163.9 million in 2007.

The steep drop was blamed on a ‘whirlwind year’ that saw the worst housing crisis in a generation coupled with the cost of compensating savers at failed banks.

The UK’s seventh largest building society said it was hit hard by compulsory contributions to the Financial Services Compensation Scheme (FSCS), along with weaker profits at its estate agency arm Connells.

Profits were half what they would have been, Skipton said, if £16.3 million hadn’t needed to be put aside for the FSCS to compensate savers who suffered from the collapse of Bradford & Bingley and the Icelandic banks.

Chief executive David Cutter lambasted the deposit protection scheme as ‘unjust’, putting an unfair burden on the building society sector.

Cutter said: “While we acknowledge the importance of a national safety net for savers, it is unjust that the building society sector, which has an inherently safer business model, is bearing a disproportionate cost for banks which had far riskier models.”

He added that the government’s strategy of kick-starting the economy through lower interest rates has ‘not yet worked’.

The housing market slowdown saw Connells’ profit drop to £10.4 million, compared to £59.7 million in 2007.

Skipton said the result was a “remarkable achievement in the worst housing crisis in living memory.”

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