Chelsea dives by 80 per cent after Iceland disaster

Chelsea building society, the country's fifth largest, saw its pre-tax profits crash by 80% to just £7 million last year after large write-offs from deposits it had with Icelandic banks, toxic assets and a loan and mortgage broker it bought two years ago.

The society, which has 35 branches, also reined in lending dramatically last year as it decided to keep out of a rapidly deteriorating housing market. That saw net new lending almost halve from £1.35 billion to £723 million.

At the same time the amount it wrote down against likely bad loans among its customers jumped dramatically from £1.8 million to £23.8 million, although it said this is still below the industry average.

But savers flooded in, opening 79,000 new accounts, lifting deposits by 14% to £1.15 billion.

Chelsea had a £55 million exposure to the two Icelandic banks which went under and has made a £44.3 million provision for losses on that.

It took a £15.4 million goodwill writedown on broker BCS Loans and Mortgages.