Stroud & Swindon Annual Results for year ended 31st December 2007 revealed continued strong asset growth, record retail receipts and buoyant mortgage lending despite the general economic downturn in the UK.

Highlights included:-

Commenting on the results, David Hill, the Society’s Chief Executive said, “2007 will be remembered for the dramatic events which affected the global financial markets and the floods which affected our local communities.

“Despite the problems in the wider financial markets, the housing and mortgage markets remained reassuringly strong throughout 2007. Mortgage lending continued to run at record or near record levels although the underlying data showed a strong re-mortgage sector and a slowdown in housing transactions. This slowdown had been predicted as the growth in house prices in recent years had made property increasingly unaffordable and has priced many potential first time buyers out of the market. In the final quarter of 2007, house prices remained static and in some areas fell slightly.

“Against this difficult and uncertain background, it is particularly pleasing to report that the Society’s gross lending remained very strong at £740 million, only slightly down on the previous year’s record of £745 million. Net savings receipts increased from £144 million in 2006 to reach an all time record of £335 million in 2007 as a result of the attractive products on offer and the desire of many investors to find a safe and secure home for their savings.

“Another consequence of the credit crunch has been an increase in the cost of raising money in the wholesale money markets and greater competition for money invested by savers, the cost of which has also increased. Due to the market uncertainty, many financial institutions, including Stroud & Swindon increased cash and bank balances and reduced lending. All of these factors have affected net interest margin which fell from 0.98% to 0.83% and profit before tax which fell from £9.1 million to £8.0 million. However, our financial ratios remain strong, and as a mutual building society we do not aim to maximise profits beyond what is necessary to maintain financial strength.
 

“As we enter 2008 there is increased economic uncertainty with house prices static or falling and evidence of declining retail sales. However, our confidence in the future is reflected in our investment in a brand new state of the art Customer Contact Centre in Gloucestershire. Currently employing 40 staff, the new building provides us with further room for expansion in our telephone based sales operation, which we confidently expect to grow.

“Meanwhile inflationary pressures, particularly from food and energy costs, are increasing pressure on consumers’ wallets. In addition, the uncertainty in financial markets, which is leading to higher costs of funding is likely to continue into 2008 until the markets have identified which institutions have exposure to the troubled US lending market.

“We expect house prices to fall by a modest amount during 2008 and for this to continue into 2009. However we do not expect the falls to be enough to offset the gains in house prices over the last 2 or 3 years. We expect mortgage lending for house purchase to decline, but there will still be an interest from borrowers looking for opportunities to remortgage as fixed rate deals come to an end, albeit that a proportion of existing borrowers in the market will find it harder to remortgage because of tightening lending criteria.

“The competition for retail savings in current market conditions has been intense, leading to very advantageous rates for depositors. We expect to see signs of a more normal market emerging in the second half of 2008. The Society has not experienced difficulty obtaining funding from money markets, nor in raising additional retail funding. We are confident that a prolonged continuation of the current market conditions, while reducing profitability, will not undermine the financial strength of the Group.”

 

For more information please contact: -

David Greenleaf
Corporate Communications Officer
Stroud & Swindon 
01453 768244

Lee Blackwell / Suman Katyal / Karen Butcher
The Wriglesworth Consultancy
020 7845 7900

About Stroud & Swindon Building Society:

Stroud & Swindon has assets in excess of £3 billion.  The Society operates through a dedicated team of intermediary business development managers, with a branch network of 22 offices and 20 agencies in the South West, complemented by a contact centre based in Gloucestershire and website  www.stroudandswindon.co.uk