WBBS saved in £182m deal

West Bromwich Building Society was today dramatically rescued in an 11th hour £182.5 million finance deal that saves it from a potential break-up.

The full scale of the crisis at the society was also revealed for the first time - it made pre-tax losses of £48.8 million last year compared to a £41 million profit the year before.

Today it was revealed the society had secured a deal with insurance companies and fund management groups it owes money to, swapping £182.5 million of its debts in return for a 25 per cent share in its future profits.

The deal, the first of its kind for a UK building society, avoids the break-up of the West Bromwich, like that of the Dunfermline Building Society, which would have seen the 160-year-old group disappear.

Hammered by its heavy investment in risky buy-to-let mortgages and commercial property as the country dived into recession, the West Brom called in Robert Sharpe as its new boss in October to try and turn around the society.

In the past two weeks he has been engaged in secret talks with the Financial Services Authority watchdog and with companies and fund management groups that had heavily invested in the society.

Mr Sharpe said today: "We have the right strategy and strength of capital position to enable us to look to the future, as an independent mutual society, with confidence."

He said it was now "back to basics" for the West Brom, moving out of the buy-to-let and commercial property markets and "only writing residential prime mortgages for local customers" in the future.

Explaining the society's huge losses, Mr Sharpe said it included £80 million provision against bad debts and would clear the decks to enable the society to aim for a profit in the current financial year.