The fraud was attributed to overinflated property values by third parties and related to its buy-to-let book during 2006 and 2008. It also posted a £53m impairment on loans. The results compared to a profit of £23m during the first half of 2008.
Chelsea’s new lending was £242m in the first half of 2009 and was focused on low risk and less than 75% loan to value residential lending.
The building society has also announced that Chelsea’s finance director Andrew Parsons has resigned.
Chief executive Richard Hornbrook announced his retirement earlier this month after 28 years. The mutual’s chairman Trevor Harrison and deputy chairman Jean Wood also retired from their positions earlier this summer.
Stuart Bernau was appointed as chairman on 1 August and will hold the roles of both chief executive and chairman until a replacement is found.
Bernau said: “The society has been through a difficult period and reporting a loss in the first half of the year is disappointing. However the underlying performance is strong even though we have had to make provision for impairment and fraud losses.”
He added: “Our mortgage lending is now fully covered by our retail deposits and this has significantly reduced our reliance on wholesale markets. This is a good platform from which to build and we are concentrating on the society’s strengths by returning to its traditional values.”
