Building society rides out credit storm

THE Ipswich Building Society is receiving record levels of deposits as more cautious savers seek a safe haven amid the turmoil within the stock market and the banking sector.

And with its mortgage lending continuing at a satisfactory level, at a time when some other societies have been withdrawing products, the Ipswich says it is well set to ride out the “credit crunch” crisis.

Society chairman Mark Sargeantson told members at the society's annual general meeting that its assets had totalled £403million at the year-end, representing annual growth of 12.45% and an increase of 25.5% for the past two years combined.

Gross mortgage lending during the year to November 30, 2007, had totalled £83.43million, with the gross amount outstanding on residential property and land at the year-end standing at £281.78million.

Investors' balances - including shares and deposits but excluding wholesale deposits - had increased by £8.08million during the year to £308.52million.

“The society is not heavily reliant on wholesale funding and is in a strong position, with a high level of liquidity,” added Mr Sargeantson.

Besides many investors turning to building societies - having become unnerved by the collapse of Northern Rock and the volatility of the stock market - a shortage of funding within the banking sector amid the credit crunch, combined a tightening of lending criteria by many banks, has also seen many would-be borrowers applying to building societies.

As a result, and despite buoyant deposit levels, several societies have been forced to restrict lending and to withdraw some cheaper mortgage offers - but there is no immediate prospect of the Ipswich having to follow suit.

Paul Winter, who took over as chief executive of the society eight months ago - just as liquidity problems in the banking sector were starting to emerge - said: “At the moment we are experiencing a record influx from savers.

“February was the highest ever and March is looking much the same. Retail savings are looking very good. We have a range of very competitive products and the whole situation with Northern Rock and the credit crunch seems to have encouraged people to consider a more traditional organisation such as a local building society.

“The difference between a building society and a bank is now figuring larger in savers' minds, especially the difference between building societies and those societies which have become banks.

“Our reliance on wholesale funding is relatively modest compared with some bigger organisations,” said Mr Winter. “There could not be more of a difference between our model and that of Northern Rock.”

On the lending side, Mr Winter said the society was content with its position in the market, where it was currently handling a good level of mortgage activity but not overwhelming.

The society continued to look carefully at the rates it was offering, as “best buy” recommendation could quickly result in a surge in demand, but it believed that it currently had the balance about right.

“There is no prospect of us withdrawing specific products, or withdrawing from the market as a whole,” said Mr Winter.

“What we have seen increasingly is that people are looking for face-to-face personal contact and as a local society with a local branch network we are very well placed,” he added. “We are about to open a new branch at Ravenswood in Ipswich and two more are planned either later this year or early next.”

The guest speaker at the society's AGM - held at Trinity Park, Ipswich - was Andrew Motion, the Poet Laureate, who grew up in north Essex.

He spoke about his role as Laureate and his involvement with www.poetryarchive.org, the online collection of poets reading their work

He also read a number of his poems, including “Harry Patch”, about a meeting with the last surviving member of the British Army to have served on the western front during the First World War, and “The Mower”, based on a fond childhood memory of his late father - complete with a reference to his Ransomes lawn mower.