NEWCASTLE Building Society expects to be managing more than £3bn of its rivals' assets in the coming years thanks to its investment in information technology.

The group last year won a contract with Bradford and Bingley to operate its Internet savings account. Newcastle Building Society chief executive Robert Hollinshead anticipates winning more work in the industry.

"We have put a lot of money into technology and the reality is, there are not too many others who can do what we do," he said.

"I would not be surprised if the assets and liabilities managed for other organisations became bigger than those of the society in the next couple of years.

"The Bradford and Bingley contract has given us good credibility and we have lots of other people interested in the same sort of services."

Last year, the group worked on products for 14 other building societies, from syndicated commercial investment property loans, to making complete managed computer systems available.

Mr Hollinshead said he was in advanced negotiations with two other high street financial institutions and expected to make another announcement soon.

However, the society's end of year figures showed its conventional business remained static.

Profits after tax were £12m, down slightly on the £13.5m earned in 2003.The number of savers and members was stable at more than 420,000.

"There is a lot of pressure on margins in the core business and some financial institutions are taking a view on credit risk," said Mr Hollinshead.

"We decided not to change our credit profile and develop new business based on our technology."

He said profit as a percentage of the society's assets remained well above the industry average.

Assets grew 6.3 per cent in the year ending December 31 to £3.27bn. It also had no residential properties in possession at the end of the year and arrears had fallen to a record low.

Mr Hollinshead said: "As compared to previous years, our growth in 2004 was more modest.

"But this is entirely consistent with our commitment not to chase volume through loss-making products or become over dependent on generating the associated arrangement fee income.

"We do not create long-term value for all our members by offering short-term gains to some."