Kent Reliance Building Society has made a small full-year profit despite tougher economic conditions and competition from bailed-out banks.

The Chatham-based mutual saw pre-tax profits dip 82 per cent from £12.6m in 2008 to £2.26 million in the 12 months ending in September. Assets fell by 3.5 per cent to £2.26bn.

But the society was pleased to maintain profitability while at least one other society - the West Bromwich – recently reported losses. Deputy chief executive Rob Procter said it was a terrific achievement.

It had been “a very difficult trading environment where competition from state aided financial institutions has created an uneven and unfair market.”

The society’s cost-cutting drive, including out-sourcing processing to its subsidiary in Bangalore, India, as well as efficiency improvements, helped it stay in profit. This drove down its management expense ratio - the society’s running costs for every £100 of assets - to 39p, the lowest in the industry. In 2001, it was £1.40.

Kent Reliance – sponsor of Charlton Athletic and Gillingham Football Clubs - and other building societies have faced intense competition from banks saved by taxpayers. The likes of Northern Rock and Lloyds Banking Group have been offering high interest rates for savers at a time when the Bank of England base rate is just 0.5 per cent. The society claimed these rates were “unviable.”

Mr Procter called on the Government to ease restrictions on building societies by creating “a more level playing field” so they could raise additional capital.

“They’ve got to realise that building societies, although they may only have 20 per cent of the market, have a far greater importance in the minds of the public," he said.

"All the support so far has been given to the banks that failed. We’ve been penalised because we’ve had to pay into the Financial Services Compensation Scheme to bail out the likes of Bradford and Bingley and the Icelandic banks.”

His message to the Government was: “Don’t take all the money off Mr and Mrs Smith in the high street by offering uneconomic rates that we can’t compete with. We’re not going to chase rates at any cost.”

The society was holding back on mortgage cash to maintain assets and create a bigger buffer to meet difficult economic times. “We were pleased to make a profit to add to our reserve and continue to build a customer base but we’re not looking to be aggressive in the mortgage market,” he said.