Low-interest environment means Airdrie is lending more

Airdrie Savings Bank increased its lending by a third last year as it sought new avenues for its capital in the current low interest rate environment.

The 176-year-old institution lent £48.5 million in 2011, up from £36m the year before, figures yesterday showed. At the same time, deposits rose 5.4 per cent to £137.6m and it upped its reserves slightly to £15.3m.

The bank also opened its first branch outside of Lanarkshire but stressed it was not abandoning its traditionally cautious approach to lending.

Bob Boyle, who has just completed a two-year term as the bank’s president, said Airdrie had scope within its balance sheet to expand lending without challenging its capital liquidity.

He said the extra lending was spread across small businesses, individual loans and a small mortgage book which the bank is seeking to bolster this year with the launch of a number of products.

“We had reserves and investments which were very dependent on interest rates, which are much reduced, and we’ve had to fill that gap by being more focused on lending as opposed to living off our deposits,” Boyle said.

The bank has also faced challenges from higher levels of regulation last year. Boyle said it had to take on five extra staff to cope with the burden, adding to the pressure to seek better returns.

Airdrie made pre-tax profits of £272,000, down on the previous year’s £326,000. It has no shareholders and therefore pays no dividends. Surpluses are reinvested in the bank’s reserves.

Boyle said the new Falkirk branch, opened in September, had enjoyed a “steady flow” of business. He said Airdrie, which on average has opened one branch every 22 years, planed to expand further once it is certain the outlet is a success.