Chelsea Building Society today revealed a £41 million hit from mortgage fraud by some of its buy-to-let and self-certified borrowers.
The UK's fifth largest society set aside the sum as an impairment charge after a review of its mortgage book uncovered instances of artificially inflated property values and cases where it believes self-certified borrowers have lied about their salary.
The charge left Chelsea £26 million in the red at the half-year stage, compared with pre-tax profits of £23 million a year earlier.
Troubled Chelsea is also reportedly considering a merger or share issue after suffering from the credit crunch and housing market slump.
It today confirmed it was "not ruling anything out" under the root and branch review of strategy being led by new chairman and temporary chief executive Stuart Bernau.
Chelsea is thought to be one of a number considering drastic action to recover from the financial crisis. Its credit ratings were downgraded by both Moody's and Fitch earlier this year.
PA