Profits at SBS on target to hit £1m

PROFITS at the oldest building society in Britain are on track to recover to £1 million this year despite a need to boost liquidity during the financial crisis, its new chairman has said.

Alexa Henderson, who has fulfilled the role of chairman of the Scottish Building Society (SBS) for six months, said the bank continued to benefit from customers’ lack of trust in traditional banks that were still ravaged by the economic crisis which has led to an increase of assets under its management.

She added that although a more “aggressive stance” by the sector’s watchdog, the Financial Services Authority, meant regulation fell heavily on small building societies which are lumped in with much bigger banks, she welcomed the tighter rules.

Henderson said: “The smaller organisations are facing increased regulation because of all that. Some of it is very good actually. Some of it is just proper risk management. But it does have a cost for smaller organisations. It should be proportional. We are a very different organisation from the Royal Bank of Scotland.”

She said government affirmation through the Vickers report of the simple model of savings and lending employed by building societies amounted to “a lot of rhetoric” after it “baulked” at the chance to turn Northern Rock into a mutual.

“Northern Rock could have been a mutual and there was lots of support to make it happen. But the money won through. I think the government needed it and continues to need it.”

The £1m mark in profits will reverse a two-year decline. Last year, profits to the year ending January 2011 slipped to £846,000, down from £954,000 in the previous 12 months.

Henderson said SBS, which after the collapse of Dunfermline became Scotland’s largest independent building society, has increased its assets under management to £350m this year, up from £330 last year and £220m in 2007. “That is a fair increase in a difficult period. It is just steady savings and mortgages, there is no trick to it.”

She said that the bank continued to maintain higher levels of liquidity, the buffer of cash that is not lent out in mortgages, of 26 per cent.

“When it gets to the stage when the Eurozone is sorted out we will look to bring that down to normal running levels. There is still a lot of uncertainty out there. Our plan is to remain strongly capitalised so we can provide our customers with financial stability,” Henderson said.