Coventry determined to remain mutual

Coventry, Britain's eighth-largest building society, said yesterday it would remain a mutual, despite a wave of conversions by its rivals this year.

It restated its commitment as it announced interim profits that fell sharply thanks to the society's policy of returning cash to its members through better borrowing and savings rates than its peers'.

Martin Ritchley, chief executive, said: "We firmly believe that remaining a building society is in the best long-term interests of our members.

"We are delivering meaningful benefits to savers and borrowers. Our aim is to go on running a successful, efficient and financially strong building society.

"We believe that this tried and tested formula will bring commercial advantage to the society and ongoing benefits to our members."

Pre-tax profits for the period fell to pounds 10.3m from pounds 13.8m in the first half of 1996. The society described the fall as "a planned reduction, reflecting the narrower interest margin which applied for the entire period".

Commenting on the results, Mr Ritchley said: "Our results clearly reflect the commercial advantages of being a building society.

"With no dividends to pay to outside shareholders, we have been able to narrow our interest margin for the benefit of savers and borrowers, whilst maintaining the financial strength of the society for which we are renowned."

Coventry said its net interest margin, which had already been the narrowest of any big building society in 1996 at 1.25 per cent, reduced further to 1.06 per cent in the first half of 1997.

Mr Ritchley added: "As a consequence, we have been able to offer highly competitive interest rates to both savers and borrowers, not only to attract new customers, but also to ensure that we retain our existing customers as well.

"It is hardly surprising therefore that we are growing our business and increasing market share at the expense of our plc competition."

Gross mortgage advances totalled a record pounds 324m, which the society said was significantly ahead of its market share and 23 per cent up on the corresponding figure for 1996. Net lending also increased by an impressive 60 per cent to pounds 157m. Net receipts totalled pounds 54m.

The results included a reduced mortgage provision of pounds 401,000 thanks to the recovery in the housing market.

Growth in assets during the period was almost 6 per cent, which helped push the management expense ratio down to 0.85 per cent.