SCOTTISH Building Society, the world's oldest building society, saw profits fall 41 per cent to £1.3 million last year as it invested in benefits for its members.
“We’re not in the business of maximising profit,” said chief executive Mark Thomson. “We wish to provide long term value to our members but also need to retain our financial strength, so it’s having the balance between those two things.”
The mutual society, which was founded in 1848 and is owned by its savers and borrowers, said pre-tax profits for the year to the end of January 2016 fell from £2.2m in 2015 after investments in ‘member loyalty initiatives’.
These include a cash ISA which pays a higher rate of interest the longer funds are invested. Mortgage borrowers are also offered the same rates whether they are new or existing members. “We don’t do teaser rates,” a spokesperson said.
The society, which employs 71 people across six branches and 62 agency offices in Scotland, said it had delivered a solid performance which showed further strengthening of its financial position.
The mortgage book grew 1.2 per cent over the year to £286.1 million, while savings balances grew 3.1 per cent to £342.1 million. Member numbers grew marginally from 33,063 to 33,133. Total assets – including cash, home loans and loans to other institutions – grew 2.8 per cent over the year to £388.9 million.
Mr Thomson attributed the growth in mortgage lending to the society’s ‘traditional’ approach – for example the manual underwriting of mortgages rather than using a computer to make automated lending decisions.
“We think there’s a place in the market today for an individual approach to customer service,” he added.
Asked whether mutuality was still working for the business, Mr Thomson said: “A lot of financial institutions say that they put the customer at the heart of what they do. We certainly do, because they’re the owners of our business. We don’t have the pull from both sides – what should we do for our shareholders and what should we do for our savers – it’s just the one thing. It's about remaining financially strong and also having realistic growth ambitions. We’re not out like some of the challenger banks to grow our balance sheet really quickly. We’re the oldest building society in the world and have been here since 1848. We believe the way to remain credible and achieve our ambition is through mutuality.”
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