C&G profits surge as market share rises: Provisions for mortgage bad debt plummet

A PROFIT surge has returned Cheltenham & Gloucester to its previous strong form following last year's lurch brought about by spiralling mortgage debt.

Profits jumped by 54.7 per cent from pounds 130.6m to pounds 202.1m in 1993 - 10 per cent ahead of the 1991 profits. The provisions for bad debt were pounds 75.9m - a huge fall from the pounds 210.7m in the 1992 accounts. The bulk of these losses was attributed to the mortgages taken over from Portsmouth Building Society, and commercial loans.

Mortgage lending last year fell from pounds 18.2m to pounds 17.1m - the fourth successive year in which it has dropped. But C&G, the sixth-largest building society, has increased its share of the total UK market from 3.88 to 4.1 per cent.

The society's management expenses ratio fell from 63p to 61p per pounds 100 of mean total assets, maintaining its position on costs as the lowest among the larger building societies, where the average is around pounds 1.40 per pounds 100.

C&G's chief executive, Andrew Longhurst, said that converting to a plc 'remains a possibility'.

'But I have been saying that since 1986. As long as the rules restricting our activities are relaxed, we won't need to convert.'

Building societies have been arguing that the limit of 40 per cent of funds that can be raised on the money markets should be increased to allow societies to compete more effectively with banks. C&G's wholesale funding dropped last year from 24 to 22.8 per cent as the demand for mortgages was so slack.

C&G is continuing to focus on mortgage lending. In bold moves, it has abandoned the selling of endowments and life insurance, and no longer charges for valuations.