Newcastle8%pibs Regulatory News (MBSR)

MANCHESTER BUILDING SOCIETY

RESULTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2009

Main Elements of Performance

·; Members' deposits up by 10.2% to £736M

·; Group liquid assets up by 7.4% to £236M

·; Pre-tax profit decreased from £2.4M to £0.7M, after accounting for:

o Provisions of £2.5M made against shareholding in Network Data Holdings plc

o £0.4 million provided for Financial Services Compensation Scheme levies

·; Society expense ratio reduced from 0.61% to 0.59%

·; Group total assets down by 1.1% to £937M

Michael Prior, Chairman of the Society, commented:-

"The Group's trading performance during 2009 was resilient.

However, it is disappointing to report that the results for the year were impacted by the need to provide fully against its shareholding in Network Data Holdings plc ("NDH"). During 2008, the Society disposed of its loss making subsidiary, Mortgage Broking Service Limited, to NDH in exchange for NDH shares. Unfortunately, NDH itself fell victim to the economic downturn and went into administration in early 2009.

In line with a number of other building societies, the impact of the precipitous fall in Bank of England base rate to its current historic low of 0.5% has been felt in the net interest margin earned. Rates charged on our mortgage loan book have, for the most part, reduced in line with bank base rate. By comparison, average rates paid to saving members have not declined to the same extent and consequently the Society has operated at much lower interest margins than reported in previous years.

Considerable strides were made during 2009 in reducing the level of wholesale funding that the Society uses, with this now operating comfortably in the rage of 7.5-12.5% of total funding; at its highest point in 2007, this figure was 30%. The Society was able to attract an additional £68M of member deposits, representing an increase during the year of 10.2% and reflects a solid public endorsement generally of the building society sector in 2009.

The Society saw its mortgage arrears fall materially over the year at a time when other lenders are seeing these rise. Mortgage advances during the year were subdued, but in line with our targets and expectations and consequently a small reduction in both mortgage assets and total assets was reported for 2009.

In recognition of the economic outlook, the Society undertook a programme of cost reduction during the year and its results may be seen in the lower level of administrative costs reported for 2009. This exercise is now complete, having returned annualised savings of more than £1M.

We are cautiously optimistic about prospects for 2010. Clearly, increased profitability will only return when Bank of England base rates return to more normal levels, but the Society is well positioned to operate viably for a prolonged period in the event that current interest rate levels are maintained in the medium term."

Contacts for further details:

Chris Gee, Finance Director Tel: 0161 923 8000

Final Results 2009