Manchester BS writes £1.6m loss after legal case

Manchester BS writes £1.6m loss after legal case

Manchester Building Society has reported a loss of £1.6m in the first six months of this year, still lacking the capital required to return to lending.

The society attributed the loss mainly to a £2.3m payment to Grant Thornton UK, following a court ruling against its former auditors in May, which it had pursued for breach of contract, negligence and breach of statutory duty.

The building society was awarded £315,345 in damages, much less than anticipated, but was also asked to pay £2.3m to cover the auditor's interim costs.

Later in the month Manchester BS was granted leave to appeal the decision, a process earmarked for 2019, which could lead to further costs or damages being awarded.

In its interim financial report, the society detailed expectations that it will have further liability in respect of Grant Thornton’s overall costs, with an amount to be determined in the future.

In 2017, the society reported insufficient common equity tier 1 capital, a measure of the quality of its capital, to return to lending, and in its latest update it reported that the adverse financial effects of its case with Grant Thornton had further hindered this return.

Manchester reported a reduction in mortgage assets of 13 per cent compared with the same point last year, as the society continued to proactively reduce its balance sheet.

The society’s total assets dropped to £289m in June of this year, compared with £336m the preceding year, as it reported a "material uncertainty" with regards to its long-term future without the capacity to return to lending.