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Thread: Health Check For The Manchester Building Society

  1. #1
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    Health Check For The Manchester Building Society

    We have discussed the Manchester Building Society and it's financial woes before:

    Manchester BS AGM

    and here:

    Manchester Building Society - Windfall Averted

    The Manchester is now back in the news (or it was last week) as the "Backers" who rescued it last time out - a consortium left by The Nationwide Building Society and "Other lenders in northwest England and the midlands" - have hired investment bank Rothschild to conduct a review of the Manchester finances.

    The story was reported in the Sunday Times and elsewhere. A concise version is here:

    http://www.moneymarketing.co.uk/news...017580.article

    The short version is the Manchester got deep into an "interest rate swap" scheme, it went wrong, made losses of £1.6 million and then required a hefty £18 million loan to keep going.

    There is plenty of room to detect irony and hypocrisy here.

    The Manchester got into trouble by acting like a (dreaded) bank. It was bailed out by the "We're not like a bank" Nationwide to stop it going bust like a bank. Now the Nationwide is calling in a (dreaded) bank to actually check it's fiscal viability - bit late for checks isn't it?

    Neither Nationwide nor Rothschild will comment.

    However the Manchester has "noted speculation" on the possibility of problems with it's PIBs - PIBs being the nearest building societies are allowed to get to issuing shares. Which, again, is bank like behaviour!

    http://mbsweb.blob.core.windows.net/...-statement.pdf

    The short version there is the Manchester insists it is trading profitably, carries high levels of liquidity and will report as expected this March.

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  2. #2
    HB
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    Reading the 2013 accounts, I had not spotted, that their losses that year meant that their reserves were minus £4million, I hadn't noticed as they referred to it as "Retained Earnings"

    94 years of profits lost in a flash.

    Their assets are disappearing faster than snow in the Sahara.

    How much longer will this lot survive? Don't be expecting a windfall here!
    Last edited by HB; 20th January 2015 at 07:01 PM.
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    interesting, as at one stage Manchester was considered to be a society with potential to grow quickly, and even a potential demutualisation candidate.

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    HB
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    Playground management with plc salaries put paid to that. Many years ago I remember commenting on how they never grew 'organically', just by buying mortgage books of varying quality.
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    yes, and the theory was that their 'ambition' could take them out of the Building Society sector. if only.. i guess they will wind up as another small part of Nationwide.

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    HB
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    Who were the building societies in the consortium that bailed them out, apart from Nationwide?
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    HB

    I am unable to discover the identity of the other lenders who took part in the bail out. They are not specifically identified as building societies so could easily be other financial speculators.

    While searching (fruitlessly) for their identity I noted along the way the £18 million was raised via an issue of "Profit Participating Deferred Shares" so while the Manchester remains (for now) a "mutual" it has already issued shares.

    The detail of the shares makes for interesting reading. According to the Manchester:

    https://themanchester.co.uk/Download...l-Issuance.pdf

    The share holders qualify for "a dividend, at the discretion of the Board of the Society, of up to 30% (the "Participation Percentage") of the annual consolidated post-tax profits of the Society (calculated prior to payment of the PPDS dividend and subject to certain other adjustments)"

    So holders of £18 million of shares in a (member owned) Building Society with over £600 million in assets get a third of the profit! There's the mutuality bonus going straight to the rapacious - but different to banks - Nationwide.

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    it does say "up to", but i take your point 1User.

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    HB
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    It's been many years since they made a profit, I wouldn't be worrying too much about 30% of it! in 2012 even after making £6m on the sale of a subsidiary they still posted a loss of £11m

    Four years ago they had reserves of over £23 million. Now they are £4m in the red!

    A swing of £27 million needs more than a loss of £1.6m on interest rate swaps
    Last edited by HB; 23rd January 2015 at 04:16 PM.
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    Now then...

    What I know about reading accounts is basically... Nothing.

    But in the link I gave in the original post where the Manchester issued a statement to the markets intended to reassure them about the good standing of the PIBs

    http://mbsweb.blob.core.windows.net/...-statement.pdf

    The Manchester says about itself:

    The Society continues to trade profitably

    And details:

    On 22 August 2014 the Society released its results for the half year ended 30 June 2014 and recorded total income of £6.1m, profit before tax of £1.6m and profit after tax of £0.6m.

    Getting in a final:

    The Society intends to announce its audited results for the year ended 31 December 2014 as planned in March 2015. The Society has continued to be profitable in the second half of 2014 on an unaudited basis.

    Now a profit after tax of £0.6 million on assets of around £646 million (last figures the BSA has) isn't exactly terrific. A profit margin of just under one tenth of a per cent. But a profit is a profit! Plus that only covers half a year so more of the same sees a margin of nearly two tenths - nearly a fifth!

    Or have I been duped by some "fast and loose" accounting practices beyond my understanding?

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