Scottish Building Society may feel AGM anger at £1m Soccer Savings court case

THE venerable Scottish Building Society (SBS) will confirm at its annual general meeting this week that it has increased profits and assets, but will face a potential backlash from members after revealing that it has not made provision for a £1 million court case.

The oldest independent mutual building society in the world has reported that total assets grew by 2.9 per cent to £342.7m, while it eked out an increase in operating profit from £846,000 last year to £931,000 despite continuing tough markets.

Repossessions in the year to the end of 31 January, 2012 amounted to a single property, “well below the industry average”, it said.

But the 164-year-old society could see its profits wiped out if it loses a legal battle with Soccer Savings, which is claiming a breach of contract.

Soccer Savings is pursuing SBS for damages of £1m after the society agreed to host accounts for five years but closed them to new savers after a year.

The society refutes the claims and in its annual report says that it believes “no such breach has arisen … the society is defending legal action raised by Soccer Savings (Scotland), which is currently in progress. Accordingly, no provision has been made in these accounts with regards to this matter.”

Gerry Kay, SBS chief executive, said the schemes were withdrawn after a disappointing performance.

“The initiative set off with high hopes and it didn’t really work out,” he said. “It is as simple as that.”

He said that SBS – Scotland’s largest independent building society – did not have to tell members about the £1m claim as the firm’s auditors and solicitors have told the board it has a “strong case”.

The firm’s pre-tax profits were hit by a further £132,000 contribution to the Financial Services Compensation Scheme (FSCS) which uses levies to fund compensation to investors and savers of failed financial firms.

Kay said: “We continue to lobby the government through our trade body, the Building Societies Association, concerning the disproportionate contribution that we are required to make because of the high rate of saver’s funds that we hold on our balance sheet compared with other types of deposit-taker.”

Members will vote on the report at the society’s annual general meeting in Inverness on Thursday.

Kay added that the building society’s mortgage book has broken through the £250m barrier for the first time in the society’s history.