Record profits boost pay-out at Britannia

Britannia, Britain's second-largest building society, unveiled record profits and a large payout to members, despite the cooling housing market.

Britannia's operating profit, before its membership reward, increased to an all-time high of £140.4m last year from £134.3m in 2003. Total lending rose 28 per cent to a record £6.3bn. The society paid out £42m of its profits to its members, a third more than in the previous year.

Neville Richardson, the chief executive, said: "We expect to see a soft landing in the housing market, with a period of low or no growth in house prices. Our focus on quality lending will minimise the risk of ... arrears and bad debts should the economic outlook deteriorate."

There has been a dramatic slump in the property market with house sales down by almost a quarter over the past 12 months, figures from the Land Registry showed this week. Five interest rate rises from the Bank of England have succeeded in cooling the once-booming housing market.

Mr Richardson said Britannia had achieved record lending with a responsible approach, avoiding high-risk lending that could cause problems in a market downturn.

He said late or missed repayments remained low, with arrears over 12 months negligible at less than £1m - below the industry average. Some 94 per cent of lending was at multiples of 3.5 times salary or less, minimising the risk of bad debt. The average loan on Britannia's books is valued at 65 per cent of the property against which it is secured.

Britannia's capital investment group, which does commercial lending as well as mortgages sold through brokers, contributed £90.3m of profits, up from £76m the previous year. Profit at the society's membership mortgage and savings business fell to £50.1m from £58.3m, after Britannia adjusted prices to give members a better deal. It lowered its interest charges to existing customers by 0.4 percentage points to 6.35 per cent to prevent them defecting to competitors who offer lower introductory rates, such as Hbos.

Britannia, based in Leek, Staffordshire, has 2.2 million customer members, making it Britain's second-biggest building society after Nationwide.