A building society hit by an alleged #10 million fraud based around the valuation of a Birmingham property has unveiled pretax profits up by # 300,000, w rites John Marsden.

The Birmingham Post yesterday revealed how West Midlands Police have joined forces with the Serious Fraud Office to investigate a sting which is said to have hit the Cheshire Building Society.

The inquiry centres on an industrial property site in Aston which was allegedly given an inflated value in a bid to land finance.

Yesterday, the Cheshire unveiled its annual report for 2005.

Finance director Andy Russell reported profit before tax and exceptional items up to #11.7 million against #11.4 million in 2004.

He said exceptional items of #13.8 million were recorded in the year of which "#10 million related to a full provision for potential loss on a commercial loan".

Operating profit before provisions and exceptional items in 2005 increased by #1.2 million, or 11.7 per cent over 2004.

Chairman Tom Marshall's statement re-iterated the society's view that it had a "very strong case" against the professional advisers involved.

He said there was "a clear expectation of substantial recovery."

Mr Marshall said it had not been possible to complete investigations before finalising the accounts and "for this reason, we have had to make provision in full for the whole of the potential loss."

It is understood that during March police arrested and released a man without charge in connection with the investigation.

He is said to be Ian McGarry, a senior valuer with Dunlop Haywards, who has been suspended while an internal inquiry is carried out by the company.

Dunlop Haywards' parent company, the Erinaceous Group, holds its annual meeting today.