Newcastle 125/8 Regulatory News (NBSR)

Newcastle Building Society Announces Repositioning Programme

Newcastle Building Society has today announced the launch of the second of its two key phase repositioning programme. This programme, which was developed to support the Society's strategy of providing long-term member value, aims to streamline the business, which will further improve costs, enhance income and strengthen its foundation further.

The first phase of this programme, announced recently, was successfully completed on 10th May, and involved a proactive capital strengthening exercise.

As a result of the second key phase, which focuses on streamlining areas of the business, the Society has taken the decision to close four branches and make 126 redundancies across certain business areas and a range of grades.

Reduction in staffing numbers will mostly focus on back office and management roles, with the core aim of maintaining the current level of customer-facing staff. However, the Society is able to create approximately 80 customer service vacancies in its Solutions division, following a contract win.

The branches chosen for closure are Crook, Yarm, West Road and York. The branches were identified based on a number of factors including whether they fitted into the Society's heartland strategy and/or where member usage has fallen significantly.

Jim Willens, Chief Executive, said: "Our core strategy of providing long-term member value as a strong, traditional and independent regional building society is clear in our minds. However to remain strong we need to be realistic in the knowledge that this is still a very challenging climate for the financial services sector.

"We have to make some difficult decisions but these will benefit the Society and the majority of its staff in the long-term. We believe that by operating with a slightly smaller number of branches and reduced levels of staff in certain areas of our business it will allow us to streamline costs and become more efficient. Additionally, it will allow us to focus on the things that are important to us being a regional independent building society; such as providing value and choice to members."

The Society will endeavor to keep compulsory redundancies to a minimum by offering voluntary redundancy and helping some employees secure alternative work elsewhere within the organisation.

As part of the repositioning programme the Society also proposes to stop future accruals within the Newcastle Building Society Pension & Assurance Scheme. Members of staff affected will be offered an alternative existing Group Personal Pension Scheme.

In 2009 the Society attracted more than 50,000 members, an increase of over 30% on last year, raised more than £490m in net retail funds, and ensured 100% of its mortgage balances were funded by retail savings, which was a record figure. In addition to this, the Society's solvency ratio improved from 11.9% to 13.4% and tier 1 capital increased from 9.2% to 10.2%.

ENDS

Notes to Editors:

·; As a result of the first phase of the programme - the Capital Agreement - in addition to the £179 million of core tier 1 capital held by the Society as at 31 December 2009, the Society now also has £46 million of contingent core tier 1 capital (such contingent core tier 1 capital being equivalent to 2.2% of the Society's risk weighted assets).

·; Newcastle Building Society is the 8th largest building society, in relation to assets, in the country and is the biggest based in the North East.

·; It currently has 35 branches - and this will change to 31 after the proposed closures.

·; The Society formally entered into a 90-day consultation on Wednesday 19th May 2010 with the trade union Unite regarding the proposed redundancies.

·; www.newcastle.co.uk

For more information contact:

Newcastle Building Society