TIDMWBS
RNS Number : 9371F
West Bromwich Building Society
31 May 2013
West Bromwich Building Society
Preliminary results announcement for the year ended 31 March
2013
Forward Looking Statements
Statements in this document are forward looking with respect to
plans, goals and expectations relating to the future financial
position, business performance and results of the West Brom.
Although the West Brom believes that the expectations reflected in
these forward looking statements are reasonable, we can give no
assurance that these expectations will prove to be an accurate
reflection of actual results. By their nature, all forward looking
statements involve risk and uncertainty because they relate to
future events and circumstances that are beyond the control of the
West Brom including, amongst other things, UK domestic and global
economic and business conditions, market related risks such as
fluctuation in interest rates and exchange rates,
inflation/deflation, the impact of competition, changes in customer
preferences, risks concerning borrower credit quality, delays in
implementing proposals, the timing, impact and other uncertainties
of future acquisitions or other combinations within relevant
industries, the policies and actions of regulatory authorities, the
impact of tax or other legislation and other regulations in the
jurisdictions in which the West Brom operates. As a result, the
West Brom's actual future financial condition, business performance
and results may differ materially from the plans, goals and
expectations expressed or implied in these forward looking
statements. Due to such risks and uncertainties the West Brom
cautions readers not to place undue reliance on such forward
looking statements. We undertake no obligation to update any
forward looking statements whether as a result of new information,
future events or otherwise.
West Bromwich Building Society - Preliminary results
announcement for the year ended 31 March 2013
The West Brom today announces its results for the financial year
ended 31 March 2013.
Key highlights from the 2012/13 financial year include:
-- An increase in the Group's Core Tier 1 capital ratio from
13.3% to 14.1%, remaining one of the highest among UK banks and
building societies;
-- A strong focus on effective liquidity management with robust
levels of high quality liquid assets held throughout the
period;
-- Retail savings inflows of GBP1.7bn, attracting some 26,400
new savers, with residential mortgages covered 1.16 times by retail
deposits;
-- Net interest margin improving to 0.49% (2011/12: 0.47%); and
-- Pre-tax losses reducing for the fourth consecutive year to
GBP9.4m (2011/12: GBP9.5m), despite challenging economic
conditions.
Jonathan Westhoff, Chief Executive, commented:
"The West Brom can be very satisfied with its performance for
the year, particularly given the ongoing challenges facing the
wider economy and the slow pace of recovery. A further reduction in
losses has again confirmed the validity of our Back to Basics
strategy and its focus on the core building society activities of
retail savings, investments and prime residential mortgages.
This progress has been sustained over a four year period,
despite continuing pressure on interest margins as a result of a
record low Bank Rate. At the same time we have significantly
strengthened our Core Tier 1 capital ratio, a fundamental measure
of financial strength, which increased to 14.1% during the year and
has more than doubled since the start of our Back to Basics
strategy.
Improvements can also clearly be seen in the way we support our
members. We have launched a range of market leading mortgage
products available to new and existing borrowers and endeavoured to
offer savers a choice of competitive products tailored to their
specific needs.
The Society also completed an extensive modernisation programme
to improve facilities and service standards in our branches and
greatly enhance our profile on local high streets.
This willingness to invest in the business sends out a clear
message of confidence, which will continue into the year ahead as
we embark on the construction of a new head office in our home town
of West Bromwich."
31 May 2013
Enquiries:
The West Brom 0870 220 7785
Jonathan Westhoff - Chief Executive
Mark Gibbard - Group Finance Director
Chief Executive's Review
Performance
The economic conditions over the year have remained extremely
challenging and volatile, with a return to recession narrowly being
avoided. Against this backdrop, the West Brom produced another very
satisfactory performance, confirming once again the validity of our
Back to Basics strategy with its focus on the core building society
activities of retail savings, investments and prime residential
mortgages.
Since the start of our strategic repositioning in 2009, the
Society has reported four consecutive years of improved financial
performance, with the pre-tax loss for the year reducing to
GBP9.4m. It is encouraging to report this result despite persistent
pressure on interest margins, arising from Bank Rate remaining at
0.5%, and a further deterioration in the commercial property
market.
The Society continues to maintain a robust and balanced funding
base and the majority of our funding remains retail savings
balances supported by complementary wholesale funding
programmes.
During the course of the year, the Society attracted gross
retail inflows of GBP1.7bn and raised GBP250m of wholesale funds
via a residential mortgage backed securitisation transaction.
Shortly after the year end, we were successful in completing our
second securitisation transaction, raising a further GBP380m of
long term funding.
This diversification in our funding base, combined with a
general easing of funding costs in the second half of the year
following the introduction of the Government's Funding for Lending
Scheme, contributed to the rise in net interest margin during the
year.
The responsible and efficient use of member funds dictates the
need to keep the Society's costs under constant review. We have
taken steps to improve our operational systems and processes as
part of the Society's future aspirations. These improvements are
integral to the aims of the West Brom and support the provision of
efficient and excellent service and market leading facilities for
customers.
We have not diverted from our primary strategic objective of
increasing the strength of our balance sheet and concentrating on
the core building society activities of prime residential
mortgages, savings and investments. Our continued progress in this
respect is also evident in a reduction of a further 11% in the
commercial lending book last year, a fall of circa GBP600m, or 35%,
since exiting the market in this higher risk activity.
The success of this de-risking programme is reflected by the
improvement in the Core Tier 1 capital ratio (a fundamental measure
of financial strength) which increased from 13.3% to 14.1%. This
ratio has now more than doubled since the implementation of the
Back to Basics strategy, giving the West Brom one of the highest
Core Tier 1 ratios among UK banking and building societies.
Commitment to members
The Society's activities are guided by the defining principle of
a traditional building society: looking after the interests of our
members.
We have made substantial progress in positioning ourselves to
support the aspirations of people wishing to buy their own home.
Our mortgage range has been enhanced to offer greater choice and
value for both new borrowers and those customers looking to
remortgage.
And while the savings market is unquestionably experiencing a
downward shift in interest rates on offer, due in part to the
impact of the Funding for Lending Scheme, we have maintained a
regular presence in the Best Buy tables and consistently offered a
selection of competitive products.
Perhaps the most visible improvement can be seen in our branch
network, now completely modernised to a standard befitting our
position as the region's largest building society. Our branches are
not just more aesthetically pleasing, they also offer better
customer facilities, including welcome desks, information screens
and more space for private consultations.
A confident outlook
The unpredictable economic climate continues to have a
restraining influence on the Society's financial performance and it
would be unwise to make any bold predictions about when the
country's recovery might gather pace.
Nevertheless we are actively investing for the future and
maintaining a clear focus on our Back to Basics strategy. Our
progress in the mortgage market and major improvements to the
branch network show how we are catering for the needs of our
members, both now and in the long term.
Our new head office development in West Bromwich town centre,
due to begin construction later this year, is also very much a
symbol of a building society that sees a positive future for
itself.
The investments we have made, when combined with the successful
reshaping of the balance sheet and our improving financial
performance, demonstrate that the West Brom is well positioned both
to deal with the current pressures in the UK economy and to prosper
as and when the recovery gathers pace.
Jonathan Westhoff
Chief Executive
31 May 2013
Income Statement
for the year ended 31 March 2013 Group Group
2013 2012
GBPm GBPm
Interest receivable and similar income 161.1 180.8
Interest expense and similar charges (127.4) (145.9)
-------------------------------------------- -------------------- --------
Net interest receivable 33.7 34.9
Fees and commissions receivable 5.6 6.1
Other operating income 4.3 4.4
-------------------------------------------- -------------------- --------
Total operating income 43.6 45.4
Fair value losses on financial instruments (1.7) (3.0)
Net realised profits 7.3 5.2
-------------------------------------------- -------------------- --------
Total income 49.2 47.6
Administrative expenses (39.3) (38.3)
Depreciation and amortisation (5.6) (4.7)
-------------------------------------------- -------------------- --------
Operating profit before impairments,
provisions
and revaluation losses 4.3 4.6
Losses on investment properties (0.2) (1.0)
Impairment losses on loans and advances (10.8) (10.5)
Provisions for liabilities - FSCS Levy (2.7) (2.9)
Provisions for liabilities - other - 0.3
-------------------------------------------- -------------------- --------
Loss before tax (9.4) (9.5)
Taxation 4.4 0.3
--------------------------------------------
Loss for the financial year (5.0) (9.2)
============================================ ==================== ========
Statement of Comprehensive Income
for the year ended 31 March 2013 Group Group
2013 2012
GBPm GBPm
Loss for the financial year (5.0) (9.2)
---------------------------------------------- -------------------- -------
Other comprehensive income
Available for sale investments
Valuation gain taken to equity 15.6 10.5
Amounts transferred to Income Statement (4.8) (5.2)
Actuarial loss on retirement benefit
obligations (1.7) (4.3)
Cash flow hedge gains taken to equity - 0.1
Tax on items taken directly to equity (2.2) (0.5)
---------------------------------------------- -------------------- -------
Other comprehensive income for the financial
year, net of tax 6.9 0.6
---------------------------------------------- --------------------
Total comprehensive income for the financial
year 1.9 (8.6)
============================================== ==================== =======
Statement of Financial Position
at 31 March 2013 Group Group
2013 2012
GBPm GBPm
Assets
Cash and balances with the Bank of England 392.3 769.2
Loans and advances to credit institutions 147.1 117.5
Investment securities 499.5 924.5
Derivative financial instruments 29.5 64.5
Loans and advances to customers 4,971.1 5,373.6
Deferred tax assets 24.0 25.7
Trade and other receivables 2.8 4.3
Intangible assets 7.9 7.5
Investment properties 112.5 112.7
Property, plant and equipment 16.5 17.6
Retirement benefit assets 0.4 -
Total assets 6,203.6 7,417.1
============================================ ==================== ======================
Liabilities
Shares 4,652.2 5,672.8
Amounts due to credit institutions 28.5 48.6
Amounts due to other customers 193.0 129.7
Derivative financial instruments 99.4 107.8
Debt securities in issue 709.1 927.4
Deferred tax liabilities 4.3 8.2
Trade and other payables 12.5 19.9
Provisions for liabilities 6.8 6.4
Retirement benefit obligations - 0.4
-------------------------------------------- -------------------- ----------------------
Total liabilities 5,705.8 6,921.2
Equity
Profit participating deferred shares 173.7 175.0
Subscribed capital 74.9 74.9
General reserves 236.1 241.1
Revaluation reserve 3.7 3.7
Available for sale reserve 9.4 1.2
-------------------------------------------- -------------------- ----------------------
Total equity attributable to members 497.8 495.9
Total liabilities and equity 6,203.6 7,417.1
============================================ ==================== ======================
Statement of Changes in Members' Interest
for the year ended 31 March 2013
Profit Available Cash
participating for flow
deferred Subscribed General Revaluation sale hedging
shares capital reserves reserve reserve reserve Total
Group GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 April 2012 175.0 74.9 241.1 3.7 1.2 - 495.9
Loss for the financial
year (1.3) - (3.7) - - - (5.0)
Other comprehensive
income for the period
Available for sale
investments: current
year movement net
of tax - - - - 8.2 - 8.2
Actuarial loss on
retirement benefit
obligations - - (1.3) - - - (1.3)
Total other comprehensive
income - - (1.3) - 8.2 - 6.9
--------------------------- --------------- ----------- ---------- ------------ ---------- --------- ------
Total comprehensive
income for the year (1.3) - (5.0) - 8.2 - 1.9
---------------------------
At 31 March 2013 173.7 74.9 236.1 3.7 9.4 - 497.8
=========================== =============== =========== ========== ============ ========== ========= ======
Profit Available Cash
participating for flow
deferred Subscribed General Revaluation sale hedging
shares capital reserves reserve reserve reserve Total
Group GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 April 2011 177.3 74.9 251.3 3.7 (2.6) (0.1) 504.5
Loss for the financial
year (2.3) - (6.9) - - - (9.2)
Other comprehensive
income for the period
Available for sale
investments: current
year movement net
of tax - - - - 3.8 - 3.8
Actuarial loss on
retirement benefit
obligations - - (3.3) - - - (3.3)
Cash flow hedge gains
taken to equity - - - - - 0.1 0.1
Total other comprehensive
income - - (3.3) - 3.8 0.1 0.6
--------------------------- --------------- ----------- ---------- ------------ ---------- --------- ------
Total comprehensive
income for the year (2.3) - (10.2) - 3.8 0.1 (8.6)
--------------------------- --------------- ----------- ---------- ------------ ---------- --------- ------
At 31 March 2012 175.0 74.9 241.1 3.7 1.2 - 495.9
=========================== =============== =========== ========== ============ ========== ========= ======
Statement of Cash Flows
for the year ended 31 March 2013 Group Group
2013 2012
GBPm GBPm
Net cash (outflow)/inflow from operating
activities (see below) (566.8) 465.8
---------------------------------------------- ---------- ----------
Cash flows from investing activities
Purchase of investment securities (672.1) (2,018.8)
Proceeds from disposal of investment
securities 870.7 2,201.4
Purchase of property, plant and equipment
and intangible assets (5.0) (10.3)
Proceeds from disposal of property, plant
and equipment 0.2 0.2
Net cash flows from investing activities 193.8 172.5
---------------------------------------------- ---------- ----------
Cash flows from financing activities
Issue of mortgage backed loan notes 175.0 -
Repayment of mortgage backed loan notes (67.3) (52.1)
Net repayment of other debt securities (318.2) (27.6)
---------------------------------------------- ----------
Net cash flows from financing activities (210.5) (79.7)
---------------------------------------------- ---------- ----------
Net (decrease)/increase in cash (583.5) 558.6
Cash and cash equivalents at beginning
of year 1,133.8 575.2
Cash and cash equivalents at end of year 550.3 1,133.8
============================================== ========== ==========
Group Group
2013 2012
GBPm GBPm
Analysis of cash and cash equivalents
Cash in hand (including Bank of England
Reserve account) 386.8 763.7
Loans and advances to credit institutions 147.0 116.1
Investment securities 16.5 254.0
550.3 1,133.8
============================================== ========== ==========
Group Group
2013 2012
GBPm GBPm
Cash flows from operating activities
Loss on ordinary activities before tax
from continuing activities (9.4) (9.5)
Movement in prepayments and accrued income 0.9 (0.8)
Movement in accruals and deferred income (3.6) 4.3
Impairment losses on loans and advances 10.8 10.5
Depreciation and amortisation 5.6 4.7
Revaluations of investment properties,
land and buildings 0.2 1.0
Movement in provisions for liabilities 0.4 (0.4)
Movement in derivative financial instruments 26.6 36.9
Movement in fair value adjustments (11.8) (15.0)
Change in retirement benefit obligations (2.5) (2.1)
---------------------------------------------- ---------- ----------
Cash flows from operating activities
before changes in operating assets and
liabilities 17.2 29.6
Movement in loans and advances to customers 387.5 517.1
Movement in loans and advances to credit
institutions 1.3 (1.1)
Movement in shares (1,009.5) (38.1)
Movement in deposits and other borrowings 40.2 (42.8)
Movement in trade and other receivables 0.5 2.3
Movement in trade and other payables (4.0) (3.3)
Tax received - 2.1
Net cash (outflow)/inflow from operating
activities (566.8) 465.8
============================================== ========== ==========
Ratios
for the year ended 31 March 2013 Group Statutory
2013 limit
% %
Lending limit 19.2 25.0
Funding limit 11.5 50.0
------------------------------------------- ------------------- ---------------------
Group Group
2013 2012
% %
As a percentage of shares and borrowings:
Gross capital 9.47 7.57
Free capital 7.16 5.83
Liquid assets 19.77 27.64
As a percentage of mean total assets:
Loss for the financial year (0.07) (0.12)
Management expenses 0.66 0.57
------------------------------------------- ------------------- ---------------------
Core liquidity buffer as a percentage
of total liquidity 56.2 62.4
Solvency ratio 17.2 16.2
Tier 1 capital ratio 16.8 15.7
Core Tier 1 capital ratio 14.1 13.3
------------------------------------------- ------------------- ---------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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