THE North-East's largest building society returned to profit last year, as its outsourcing services to other firms continued solid growth.

Newcastle Building Society recorded an operating profit of £9.2m in 2011 compared to a loss of £300,000 last year, as the society welcomed 25,000 new customers.

Much of the improvement was driven by the society's Solutions business, which provides financial outsourcing services to other businesses, with a 50per cent growth in the number of accounts under management.

It generated revenues for the society of £15.6m compared to £9m the previous year.

The society's chief executive Jim Willens said: "We have had a particularly good year with the Solutions business, we have had some new contracts and existing ones have grown during the past 12 months.

"What we have been able to see in the business overall is that our headcount has been flat but as we have been reducing the complexity of the business we have not had to reduce headcount because we have been growing the Solutions side.

"It is our business model, a straightforward building society with the Solutions business alongside it."

The society sold the prepaid cards division of the Solutions business in December to German firm Wirecard AG for £7.5m.

The Newcastle, which employs around 900 staff, also continued to recover money from the failed Icelandic banks, its investments in which saw it write down £43m in 2008.

The amount returned now stands at £16.5m compared to £13.5m in July last year.

With the present economic climate the society has also made provision for up to £12.3m to cover any business failures by commercial lenders.

Although the money could potentially be repaid Mr Willens said: "The commercial lending portfolio of the business is something that we set out to reduce, we have been very successful in doing that, but regrettably these legacy assets are a risk and the prudent position for the society is to make sure we have the right provisions to protect the business in what remains a fairly challenging environment, particularly with regard to businesses in sectors such as retail, throughout the UK."

The improved trading also enabled the society to give a 2.5per cent pay increase to staff in April last year, after a gap of two years, which focussed on lower paid staff with many getting a higher increase.

Mr Willens added: "I am looking forward to building on the steady progress. There is still more to do."