Woolwich doubles half-year profits

WOOLWICH Building Society's decision not to pass on to borrowers the full cut in bank base rates since last September helped it to more than double pre-tax profits in the first half of this year.

The society, the third-largest, made pounds 88m, up from pounds 36m in the same period last year. Net interest receivable rose from pounds 197m to pounds 241.1m.

Donald Kirkham, group chief executive, said margins between rates charged to borrowers and those paid to savers had been widened.

The first-half results had also benefited from a full half-year's contribution from the Town & Country Building Society.

Woolwich, in common with other building societies, seized the opportunity to restore margins after Britain left the exchange rate mechanism. Although the base rate has fallen from 12 per cent to 6 per cent since last September, mortgage rates have not fully reflected this.

However, savers' rates have fallen steeply. The typical return on pounds 5,000 in an instant-access account has come down by more than 40 per cent since September.

Societies argue, however, that their mortgage rate increases lagged base rate rises during the recession.

Mr Kirkham defended the sharp increase in profits. Allegations that the rise was indecent at a time when pensioners had been hit by falling returns on savings and many borrowers were still struggling would be 'singularly uninformed' he said.

'Our profits last year were unduly small. You need profit to give a guarantee to investors that their money is safe', he said.