TIDMWBS
RNS Number : 1018U
West Bromwich Building Society
28 November 2013
WEST BROMWICH BUILDING SOCIETY
Announcement of half-year results for the six months
ended 30 September 2013
The West Brom today announces its half-year results, reporting
continued progress with its Back to Basics strategy and a further
reduction in losses.
Key highlights:
- The Core Tier 1 capital ratio strengthened from 14.1% at 31 March 2013 to 14.5%.
- Operating profit of GBP6.0m for the six months to 30 September
2013 (30 September 2012: loss of GBP0.5m).
- Satisfactory Group performance, with pre-tax losses of GBP5.2m (30 September 2012: GBP6.7m).
- New residential mortgage product range introduced, receiving
circa GBP150m of applications in the period.
- Attracted some 12,000 new savers, contributing to retail savings inflows of GBP0.8bn.
- Expanded the funding base through the successful completion of
a second residential mortgage backed securitisation.
- Maintained a low reliance on the wholesale markets, with a
wholesale funding ratio of 18.7% at 30 September 2013 (31 March
2013: 16.7%).
- Residential mortgages covered 1.11 times by retail deposits.
Jonathan Westhoff, Chief Executive, commented:
The West Brom continues to make satisfactory progress,
delivering a further improvement in financial performance and
seeing profits return at the operating level.
This performance is encouraging, especially in light of the
continued pressure on interest margins from a record low Bank Rate,
while our capital position confirms the Society's underlying
financial strength.
We have upheld our commitment to members by offering a
competitive range of savings, investment and mortgage products.
There is an air of confidence gradually returning to the
residential property market and this is reflected in increased
mortgage lending within the building society sector.
For our part, the West Brom has greatly improved its range of
residential mortgages, offering competitive products to new and
existing borrowers through branch, direct and intermediary
channels.
We also recognise the importance of creating an infrastructure
to facilitate business growth. Our recently modernised branch
network gives the Society a genuine stand-out presence on local
high streets and the service provided through these branches helps
members access the support they need to manage their money
effectively.
In addition to this we have also secured approval for our plans
to construct new head office premises at Providence Place in West
Bromwich town centre and appointed the main contractor for the
project.
END
ENQUIRIES:
The West Brom 0870 220 7785
Jonathan Westhoff - Chief Executive
Mark Gibbard - Group Finance Director
West Bromwich Building Society
Condensed consolidated
half-yearly financial information
30 September 2013
Chief Executive's BUSINESS Review
Performance
The West Brom once again delivered an improvement in financial
performance and upheld its commitment to members by offering a
competitive range of savings, investment and mortgage products,
coupled with excellent customer service.
In the six months to 30 September 2013, the Society reported an
operating profit of GBP6.0m (30 September 2012: loss of GBP0.5m)
and reduced its loss before tax by 22% to GBP5.2m (30 September
2012: GBP6.7m). The Core Tier 1 capital ratio further increased to
14.5% (31 March 2013: 14.1%) confirming the Society's underlying
financial strength and the value derived from its balance sheet
de-risking programme.
The net interest margin improved to 0.67% (30 September 2012:
0.42%). Although total funding costs remained significantly above
their long-run norm, relative to Bank Rate, there was some
improvement as a consequence of the slow down in competition for
retail funds and the Society's successful completion of a second
residential mortgage backed securitisation programme.
Encouragingly, there are also signs of increased residential
mortgage lending activity and an upward trend in UK house prices.
The Society has benefited from these house price movements through
its subsidiary, West Bromwich Homes Limited, a residential
investment company, which recorded a GBP2.0m revaluation gain on
its property portfolio during the period.
Such positive market sentiment has not translated to the
commercial property sector which has experienced another
challenging six months. Commercial impairment charges for the half
year to 30 September 2013 were GBP10.0m (30 September 2012:
GBP2.8m), partially offset by GBP3.7m fair value gains on financial
instruments held to economically hedge the impaired loans. The
Society remains steadfast in its efforts to reduce the commercial
loan book, with balances down 7% to GBP1.0bn (31 March 2013:
GBP1.1bn). Funds set aside for potential losses on commercial
mortgages equate to 7.3% of the current loan book (31 March 2013:
5.7%), with appropriate provisions made wherever factors indicating
impairment are identified.
The number of residential mortgages in arrears by more than
three months at 30 September 2013 stabilised at 1.92% (31 March
2013: 1.92%). This represents a very encouraging performance given
the high levels of unemployment, a contracting mortgage book and a
forbearance strategy aligned to the principles of responsible
lending. The Society actively seeks to support those borrowers
experiencing genuine financial hardship, enabling them to remain in
their homes where this is believed to be in their best interests
(i.e. where the loss to the customer is not expected to increase
over time). Strict credit criteria are in place for all new lending
and the quality of the existing prime residential and buy-to-let
portfolios remains strong.
Management expenses for the six months to 30 September 2013 were
just 1% higher than the first half of 2012/13. Notwithstanding a
focus on cost efficiency, the Society recognises the importance of
creating an infrastructure to facilitate growth. To this end, we
have begun an investment in larger, modern head office premises,
due for completion in Spring 2015, and have developed systems which
enhance further our mortgage lending capability. During the period,
the Society repositioned itself in the mortgage market, expanding
the range of market leading products available to new and existing
borrowers through branch, direct and intermediary channels. This
essential investment in the future, together with additional costs
of regulation, and a contracting asset base, contributed to an
increased management expenses ratio of 0.75%, compared with 0.66%
for the year ended 31 March 2013.
Funding
As a traditional building society, the West Brom is primarily
funded by retail deposits. The intense competition for retail
savings abated during the period, as lenders were able to access
lower cost funding through Government supported schemes and other
cheaper sources of wholesale funding. The Society has continued to
offer competitive rates to savers and, at 30 September 2013, 81.3%
of total shares and borrowings were in the form of retail savings
products.
While the wholesale markets are a secondary source of funding
compared with retail deposits, some diversification in the funding
base is beneficial from a risk management perspective. In May 2013,
the Society was successful in raising GBP380m of cost-effective,
long-term secured wholesale funding via a residential mortgage
backed securitisation transaction.
The improvement in high funding costs resulted in a net interest
margin of 0.67%, up from 0.42% for the six months ended 30
September 2012. Interest receivable, however, remains constrained
by the low returns on high quality treasury assets, held for
liquidity purposes, and the substantial proportion of mortgage
loans linked to Bank Rate.
Liquidity
The Society maintains its prudent approach to liquidity
management, holding only securities rated single A or better in its
treasury asset portfolio. The West Brom has no direct exposure to
any Eurozone sovereign, investing solely in UK and supranational
sovereign securities. There were no impairment charges against any
treasury investment assets during the period.
The Society's liquidity ratio increased modestly to 20.2% at 30
September 2013 (31 March 2013: 19.8%), remaining comfortably in
excess of internal and regulatory limits.
The Group's liquidity portfolio is analysed below:
30-Sep-13 30-Sep-12 31-Mar-13
GBPm % GBPm % GBPm %
Buffer liquidity
- Bank of England Reserve 193.0 20.3 309.9 23.3 384.5 37.0
- Supranationals 200.1 21.1 384.9 28.9 198.9 19.2
--------------------------------- ------ ------ -------- ------ -------- ------
Total buffer liquidity 393.1 41.4 694.8 52.2 583.4 56.2
Other securities - rated single
A or better 357.4 37.6 434.8 32.6 300.6 28.9
Subsidiary / other liquidity 199.1 21.0 201.9 15.2 154.9 14.9
--------------------------------- ------ ------ -------- ------ -------- ------
Total liquidity 949.6 100.0 1,331.5 100.0 1,038.9 100.0
--------------------------------- ------ ------ -------- ------ -------- ------
Capital
Capital is held as the ultimate protection for depositors. The
Board sets the internal level of capital required in order to
exceed minimum regulatory requirements.
The following table shows the composition of regulatory capital
and the capital ratios for the last three reporting periods:
30-Sep-13 30-Sep-12 31-Mar-13
GBPm GBPm GBPm
Regulatory capital
Tier 1
General reserves 233.4 237.3 236.1
Permanent interest bearing shares
(note 1) 74.9 74.9 74.9
Profit participating deferred shares 172.8 173.7 173.7
Intangible assets (note 2) (7.5) (6.9) (7.9)
Deductions from Tier 1 capital (note
3) (5.9) (4.5) (3.7)
------------------------------------------ ---------- ---------- ----------
467.7 474.5 473.1
------------------------------------------ ---------- ---------- ----------
Tier 2
Revaluation reserve 3.7 3.7 3.7
Collective impairment allowance 16.0 18.9 15.1
Contingency against collective provision
add back (note 4) (9.2) (7.5) (8.3)
Deductions from Tier 2 capital (note
3) (0.2) (1.8) (0.1)
------------------------------------------ ---------- ---------- ----------
10.3 13.3 10.4
------------------------------------------ ---------- ---------- ----------
Total capital 478.0 487.8 483.5
------------------------------------------ ---------- ---------- ----------
Risk weighted assets - Pillar 1
Retail mortgages 1,506.5 1,614.0 1,577.9
Commercial loans 809.5 925.4 888.4
Treasury assets 156.2 136.9 114.4
Other assets 156.5 160.5 157.0
Market risk 9.6 10.4 9.5
Operational risk 73.3 70.0 70.0
------------------------------------------ ---------- ---------- ----------
2,711.6 2,917.2 2,817.2
------------------------------------------ ---------- ---------- ----------
% % %
Key capital ratios (note 5)
Core Tier 1 ratio 14.5 13.7 14.1
Tier 1 ratio 17.2 16.3 16.8
Solvency ratio 17.6 16.7 17.2
------------------------------------------ ---------- ---------- ----------
Notes
1. Permanent interest bearing shares include any adjustments for
unamortised premiums and discounts.
2. Intangible assets are deducted from general reserves in
arriving at capital for regulatory purposes.
3. Certain deductions from capital are required to be allocated,
50% to Tier 1 and 50% to Tier 2 capital. Other deductions are Tier
specific.
4. Deduction from the collective provision add back, reflecting
the proportion of the provision that is disallowable for capital
purposes.
5. Calculated as relevant capital divided by risk weighted
assets. Core Tier 1 represents Tier 1 capital excluding permanent
interest bearing shares.
The West Brom has established a robust capital position which
compares favourably with peers in the UK bank and building society
sectors. The Society's Core Tier 1 ratio, a key measure of
financial resilience, improved again to 14.5% (31 March 2013:
14.1%) as a result of the planned contraction in risk weighted
assets, down 4% in the last six months to GBP2.7bn.
Principal risks and uncertainties
Effective management of risks and opportunities is essential to
achieving the Society's strategic objectives. The Society aims to
manage effectively all of the risks that arise from its activities
and believes that its approach to risk management reflects an
understanding of actual and potential risk exposures, the
quantification of the impact of such exposures and the development
and implementation of appropriate controls to manage these
exposures within the Society's agreed risk appetite.
The Society's activities are governed by its constitution,
principles and values. The Directors have also agreed a set of
statements which describe the Board's risk appetite in terms of a
number of key risk categories: business, credit, capital,
liquidity, market, operational, retail conduct and pension
liability. These Risk Appetite Statements drive corporate planning
activity, including capital and liquidity planning, as well as
providing the basis for key risk measures.
The principal risks and uncertainties which could impact the
Society's long-term performance remain those outlined on pages 17
to 20 of the Annual Report and Accounts for the year ended 31 March
2013. There have been no significant changes in the Society's
approach to risk management in the six months ended 30 September
2013.
Outlook
The UK has experienced three successive quarters of growth and
the housing market is gathering momentum. The UK recovery is,
however, still in its early stages with high levels of
unemployment, suppressed wages and challenges in the Eurozone and
beyond giving uncertainty as to whether economic growth is
sustainable. Market commentators have expressed concern over the
continuation of recent house price rises, particularly in and
around London. The West Brom will continue with its responsible
lending policies and prudent approach to capital and liquidity
management, such that it has the financial resources to withstand
any reversal in the UK domestic recovery. While the underlying
credit quality of the Society's residential mortgages is strong,
the commercial portfolio is more vulnerable to changing economic
conditions and further provisioning for potential losses is
likely.
The downward trend in retail funding costs has contributed to an
improvement in net interest margin, although interest receipts
continue to be constrained by the Society's exposure to the effects
of the low interest rate environment and escalating competition in
the mortgage markets. Notwithstanding the Monetary Policy
Committee's forward guidance, intended to provide some clarity on
the trajectory of interest rates, market opinion on the quantum and
timing of a rise in Bank Rate varies widely. To maintain support
for its saving members, through this extended market disruption,
the Group has sought to mitigate the impact of adverse market
conditions by increasing the interest income from its non-consumer
buy-to-let portfolio with effect from 1 December 2013.
A key development in the regulatory arena has been the
separation, in April 2013, of the Financial Services Authority into
prudential and conduct counterparts - the Prudential Regulation
Authority (PRA) and Financial Conduct Authority (FCA) respectively.
The PRA has an objective to promote the safety and soundness of
firms while the FCA seeks to protect and enhance confidence in the
UK financial system, making markets work well so that consumers get
a fair deal.
The Capital Requirements Directive (CRD) IV package has now been
finalised and comes into force on 1 January 2014. CRD IV transposes
the new global standards on bank capital (commonly known as the
Basel III agreement) into the EU legal framework. Another
significant regulatory reform is the Mortgage Market Review (MMR)
which aims to deliver a mortgage market that works better for
consumers and is sustainable for all participants. The Society is
constantly monitoring regulatory developments and is therefore well
placed to respond appropriately to regulatory change.
The financial services industry faces increased regulatory and
public scrutiny in the wake of PPI mis-selling and, more recently,
LIBOR fixing scandals. As a traditional, regional building society,
the West Brom is run for the benefit of its members and is
committed to acting with integrity in all of its dealings with
them. We are confident in our ability to safeguard customer
deposits and clear in our priorities to provide quality mortgage,
savings and investment products and exceptional customer
service.
Jonathan Westhoff
Chief Executive
Forward looking statements
Certain statements in this half-year report are forward looking.
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. 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.
Condensed consolidated half-yearly income statement
for the six months ended 30 September 2013
6 months 6 months Year
ended ended ended
30-Sep-13 30-Sep-12 31-Mar-13
unaudited unaudited audited
GBPm GBPm GBPm
Interest receivable and similar income 67.8 84.9 161.1
Interest expense and similar charges (47.3) (70.1) (127.4)
Net interest receivable 20.5 14.8 33.7
Fees and commissions receivable 2.5 2.1 5.6
Other operating income 1.8 3.2 4.3
Total operating income 24.8 20.1 43.6
Fair value gains/(losses) on financial
instruments 3.8 (1.0) (1.7)
Net realised profits 0.1 2.8 7.3
Total income 28.7 21.9 49.2
Administrative expenses (20.4) (20.1) (39.3)
Depreciation and amortisation (2.3) (2.3) (5.6)
Operating profit/(loss) before impairments,
provisions and revaluation gains/(losses) 6.0 (0.5) 4.3
Gains/(Losses) on investment properties 2.0 - (0.2)
Impairment losses on loans and advances (11.8) (4.6) (10.8)
Provisions for liabilities - FSCS levy (1.4) (1.7) (2.7)
Provisions for liabilities - other - 0.1 -
Loss before tax (5.2) (6.7) (9.4)
Taxation 1.6 1.6 4.4
Loss for the period (3.6) (5.1) (5.0)
--------------------------------------------- ---------- ---------- ----------
Condensed consolidated half-yearly statement of comprehensive
income
for the six months ended 30 September 2013
6 months 6 months Year
ended ended ended
30-Sep-13 30-Sep-12 31-Mar-13
unaudited unaudited audited
GBPm GBPm GBPm
Loss for the period (3.6) (5.1) (5.0)
-------------------------------------------------- -------------- ---------- --------------
Other comprehensive income
Items that may be subsequently reclassified
to profit or loss
Available for sale investments:
Valuation (loss)/gain taken to equity (4.1) 12.8 15.6
Amounts transferred to income statement (0.1) (2.0) (4.8)
Cash flow hedge losses taken to equity (0.5) - -
Taxation 1.1 (2.6) (2.6)
Items that will not be subsequently reclassified
to profit or loss
Actuarial loss on retirement benefit obligations - - (1.7)
Taxation - - 0.4
-------------------------------------------------- -------------- ---------- --------------
Other comprehensive income for the period,
net of tax (3.6) 8.2 6.9
-------------------------------------------------- -------------- ---------- --------------
Total comprehensive income for the period (7.2) 3.1 1.9
-------------------------------------------------- -------------- ---------- --------------
% % %
As a percentage of mean total assets
Loss for the period (0.06) (0.07) (0.07)
Management expenses (annualised) 0.75 0.63 0.66
-------------------------------------------------- -------------- ---------- --------------
Condensed consolidated half-yearly statement of financial
position
at 30 September 2013
30-Sep-13 30-Sep-12 31-Mar-13
unaudited unaudited audited
Notes GBPm GBPm GBPm
Assets
Cash and balances with the Bank of
England 203.7 318.5 392.3
Loans and advances to credit institutions 188.4 193.3 147.1
Investment securities 557.5 819.7 499.5
Derivative financial instruments 29.3 50.8 29.5
Loans and advances to customers 7 4,805.6 5,165.4 4,971.1
Deferred tax assets 26.8 27.4 24.0
Trade and other receivables 3.0 5.6 2.8
Intangible assets 9 7.5 6.9 7.9
Investment properties 10 113.6 112.7 112.5
Property, plant and equipment 9 16.9 17.4 16.5
Retirement benefit assets 2.7 0.4 0.4
Total assets 5,955.0 6,718.1 6,203.6
------------------------------------------- ------ ---------------- ---------------- -------------
Liabilities
Shares 8 4,369.1 5,283.0 4,652.2
Amounts due to credit institutions 15.7 31.1 28.5
Amounts due to other customers 134.9 168.3 193.0
Derivative financial instruments 72.8 120.7 99.4
Debt securities in issue 11 855.1 583.5 709.1
Deferred tax liabilities 4.3 8.2 4.3
Trade and other payables 8.7 18.3 12.5
Provisions for liabilities 6 3.8 6.0 6.8
Total liabilities 5,464.4 6,219.1 5,705.8
------------------------------------------- ------ ---------------- ---------------- -------------
Equity
Profit participating deferred shares 12 172.8 173.7 173.7
Subscribed capital 14 74.9 74.9 74.9
General reserves 233.4 237.3 236.1
Revaluation reserve 3.7 3.7 3.7
Available for sale reserve 6.2 9.4 9.4
Cash flow hedging reserve (0.4) - -
Total equity attributable to members 490.6 499.0 497.8
------------------------------------------- ------ ---------------- ---------------- -------------
Total liabilities and equity 5,955.0 6,718.1 6,203.6
------------------------------------------- ------ ---------------- ---------------- -------------
% % %
As a percentage of shares and borrowings
Gross capital 10.4 8.8 9.5
Free capital 7.8 6.7 7.2
Total liquidity 20.2 23.4 19.8
------------------------------------------- ------ ---------------- ---------------- -------------
Condensed consolidated statement of changes in members'
interest
for the six months ended 30 September 2013
6 months ended 30 September 2013 (unaudited)
Profit Cash
participating Available flow
deferred Subscribed General Revaluation for sale hedging
shares capital reserves reserve reserve reserve Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 April 2013 173.7 74.9 236.1 3.7 9.4 - 497.8
Comprehensive income
for the period (0.9) - (2.7) - (3.2) (0.4) (7.2)
---------------------- --------------- ----------- ---------- ------------ ---------- --------- ------
At 30 September
2013 172.8 74.9 233.4 3.7 6.2 (0.4) 490.6
---------------------- --------------- ----------- ---------- ------------ ---------- --------- ------
6 months ended 30 September 2012 (unaudited)
Profit Cash
participating Available flow
deferred Subscribed General Revaluation for sale hedging
shares capital reserves reserve reserve reserve Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 April 2012 175.0 74.9 241.1 3.7 1.2 - 495.9
Comprehensive income
for the period (1.3) - (3.8) - 8.2 - 3.1
---------------------- --------------- ----------- ---------- ------------ ---------- --------- ------
At 30 September
2012 173.7 74.9 237.3 3.7 9.4 - 499.0
---------------------- --------------- ----------- ---------- ------------ ---------- --------- ------
Year ended 31 March 2013 (audited)
Profit Cash
participating Available flow
deferred Subscribed General Revaluation for sale hedging
shares capital reserves reserve reserve reserve Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 April 2012 175.0 74.9 241.1 3.7 1.2 - 495.9
Comprehensive
income for the
period (1.3) - (5.0) - 8.2 - 1.9
------------------ --------------- ----------- ---------- ------------ ---------- --------- ------
At 31 March 2013 173.7 74.9 236.1 3.7 9.4 - 497.8
------------------ --------------- ----------- ---------- ------------ ---------- --------- ------
Under the terms of the profit participating deferred shares
(PPDS), 25% of the annual post-tax profits or losses are allocated
against the PPDS reserve.
Condensed consolidated half-yearly statement of cash flows
for the six months ended 30 September 2013
6 months 6 months Year
ended ended ended
30-Sep-13 30-Sep-12 31-Mar-13
unaudited unaudited* audited
GBPm GBPm GBPm
Net cash flows from operating activities
(overleaf) (235.4) (113.1) (566.8)
------------------------------------------------- -------------- -------------- ------------
Cash flows from investing activities
Purchase of investment securities (58.0) (575.3) (672.1)
Proceeds from disposal of investment securities 55.4 591.2 870.7
Proceeds from disposal of investment properties 0.9 - -
Purchase of property, plant and equipment (2.6) (1.9) (5.0)
Proceeds from disposal of property, plant
and equipment 0.4 0.2 0.2
------------------------------------------------- -------------- -------------- ------------
Net cash flows from investing activities (3.9) 14.2 193.8
------------------------------------------------- -------------- -------------- ------------
Cash flows from financing activities
Issue of mortgage backed loan notes 380.0 175.0 175.0
Repayment of mortgage backed loan notes (30.6) (23.0) (67.3)
Net repayment of other debt securities (199.4) (516.9) (318.2)
------------------------------------------------- -------------- -------------- ------------
Net cash flows from financing activities 150.0 (364.9) (210.5)
------------------------------------------------- -------------- -------------- ------------
Net decrease in cash (89.3) (463.8) (583.5)
Cash and cash equivalents at beginning
of period 550.3 1,133.8 1,133.8
------------------------------------------------- -------------- -------------- ------------
Cash and cash equivalents at end of period 461.0 670.0 550.3
------------------------------------------------- -------------- -------------- ------------
For the purposes of the cash flow statement, cash and cash
equivalents comprise the following balances with less than 90 days
maturity:
30-Sep-13 30-Sep-12 31-Mar-13
unaudited unaudited* audited
GBPm GBPm GBPm
Cash and cash equivalents
Cash in hand (including Bank of England
Reserve account) 195.3 318.5 386.8
Loans and advances to credit institutions 188.4 193.2 147.0
Investment securities 77.3 158.3 16.5
461.0 670.0 550.3
------------------------------------------- ------------- ------------- ----------
The Group is required to maintain certain mandatory balances
with the Bank of England which, at 30 September 2013, amounted to
GBP8.4m (30 September 2012: GBP5.7m and 31 March 2013: GBP5.5m).
The movement in these balances is included within cash flows from
operating activities.
Condensed consolidated half-yearly statement of cash
flows(continued)
for the six months ended 30 September 2013
6 months 6 months Year
ended ended ended
30-Sep-13 30-Sep-12 31-Mar-13
unaudited unaudited* audited
GBPm GBPm GBPm
Cash flows from operating activities
Loss on ordinary activities before tax
from continuing activities (5.2) (6.7) (9.4)
Movement in prepayments and accrued income (0.5) (1.1) 0.9
Movement in accruals and deferred income (3.3) (1.4) (3.6)
Impairment losses on loans and advances 11.8 4.6 10.8
Depreciation and amortisation 2.3 2.3 5.6
Disposal of fixed assets and investment
properties (0.1) - -
Revaluation of investment properties (2.0) - 0.2
Movement in provisions for liabilities (3.0) (0.4) 0.4
Movement in derivative financial instruments (26.4) 26.6 26.6
Movement in fair value adjustments 22.6 (7.4) (11.8)
Change in retirement benefit obligations (2.3) (0.8) (2.5)
---------------------------------------------- ---------- ----------- ----------
Cash flows from operating activities before
changes in operating assets and liabilities (6.1) 15.7 17.2
Movement in loans and advances to customers 125.6 211.7 387.5
Movement in loans and advances to credit
institutions (2.8) 1.3 1.3
Movement in shares (281.0) (383.5) (1,009.5)
Movement in deposits and other borrowings (70.9) 42.1 40.2
Movement in trade and other receivables 0.3 (0.2) 0.5
Movement in trade and other payables (0.5) (0.2) (4.0)
---------------------------------------------- ---------- ----------- ----------
Net cash outflow from operating activities (235.4) (113.1) (566.8)
---------------------------------------------- ---------- ----------- ----------
*The condensed consolidated half-yearly statement of cash flows
for the six months ended
30 September 2012 has been represented to reflect the current
year categorisation, providing a more detailed analysis of cash
flows within each section.
Notes to condensed consolidated half-yearly financial
information
for the six months ended 30 September 2013
1 General information
These half-yearly financial results do not constitute statutory
accounts as defined in section 81A of the Building Societies Act
1986. A copy of the statutory accounts for the year to 31 March
2013 has been delivered to the Financial Conduct Authority and the
relevant information in this report has been extracted from these
statutory accounts. These accounts have been reported on by the
Group's auditors and the report of the auditors was (i)
unqualified, and (ii) did not include a reference to any matters to
which the auditors drew attention by way of emphasis without
qualifying their report.
The consolidated half-yearly financial information for the six
months to 30 September 2013 and 30 September 2012 is unaudited and
has not been reviewed by the Group's auditors.
2 Basis of preparation
This condensed consolidated half-yearly financial report for the
half-year ended 30 September 2013 has been prepared in accordance
with the Disclosure and Transparency Rules of the Financial Conduct
Authority and with IAS 34, 'Interim financial reporting' as adopted
by the European Union. The half-yearly condensed consolidated
financial report should be read in conjunction with the Annual
Report and Accounts for the year ended 31 March 2013, which have
been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union.
3 Accounting policies
The accounting policies adopted by the Group in the preparation
of its 2013/14 half-yearly financial report and those which the
Group currently expects to adopt in its Annual Report and Accounts
for the year ended 31 March 2014 are consistent with those
disclosed in the Annual Report and Accounts for the year ended 31
March 2013, except for the adoption of new or amended accounting
standards described below.
The following new or amended accounting standards, which are
relevant to the Group, have been adopted during the six months
ended 30 September 2013:
- Amendments to IAS 1, 'Presentation of Financial Statements' -
Presentation of Items of Other Comprehensive Income
The amendments require separate presentation within the
statement of comprehensive income of items that will potentially be
reclassified to profit or loss in subsequent periods and items that
will never be reclassified to profit or loss.
The statement of comprehensive income has been updated to meet
the requirements of the amended standard with comparative items
represented accordingly.
- IAS 19 (revised 2011), 'Employee Benefits'
The revised standard updates the recognition, presentation and
disclosure requirements for retirement benefit plans.
For the six months ended 30 September 2013, operating income is
GBP0.2m lower than it would have been prior to the adoption of the
revised IAS 19. This difference arises on replacing the interest
cost on scheme liabilities and expected return on scheme assets
with a single interest income on the net retirement benefit asset,
calculated using the discount rate assumption.
If the revised standard had applied in the prior year, other
operating income would have been GBP0.2m and GBP0.4m lower at 30
September 2012 and 31 March 2013 respectively, with an equivalent
increase in other comprehensive income. The comparative figures in
the income statement and statement of comprehensive income have not
been restated for the adoption of IAS 19 (revised 2011) as the
impact on the Society's results would be insignificant. There would
be no impact on the Group's net assets or reserves as a consequence
of retrospectively applying the revised IAS 19.
- IFRS 13, 'Fair Value Measurement'
The new standard defines fair value and provides a single
framework for measuring fair value, replacing existing IFRS
guidance in this area.
The application of IFRS 13 has not had a significant financial
impact on these condensed financial statements. The additional
disclosures required by the new standard, and incorporated into IAS
34, are provided in note 15.
- Amendments to IFRS 7, 'Financial Instruments: Disclosures' -
Disclosures - Offsetting Financial Assets and Financial
Liabilities
The amendments require new disclosures for financial instruments
which are offset in the statement of financial position.
The application of the amendments has had no impact on these
condensed financial statements.
4 Business segments
Operating segments are reported in accordance with the internal
reporting provided to the Group Board (the chief operating decision
maker), which is responsible for allocating resources to the
reportable segments and assessing their performance.
The Group has three main business segments:
- Retail - incorporating residential lending, savings,
investments and protection;
- Commercial - primarily representing loans for commercial
property investment; and
- Property - a portfolio of residential properties for rent.
Central Group operations have been included in Retail and
comprise risk management, funding, treasury services, human
resources and computer services, none of which constitute a
separately reportable segment.
There were no changes to reportable segments during the
period.
Transactions between the business segments are carried out at
arm's length. The revenue from external parties reported to the
Group Board is measured in a manner consistent with that in the
consolidated income statement.
Funds are ordinarily allocated between segments, resulting in
funding cost transfers disclosed in inter-segment net interest
income. Interest charged for these funds is based on the Group's
cost of capital. Central administrative costs are also allocated
between segments and are disclosed in inter-segment administrative
expenses. There are no other material items of income or expense
between the business segments.
The Group does not consider its operations to be cyclical or
seasonal in nature.
6 months ended 30 September 2013 (unaudited)
Total
Retail Commercial Property Eliminations Group
GBPm GBPm GBPm GBPm GBPm
Income
Interest receivable and similar
income 67.2 12.2 - (11.6) 67.8
Interest expense and similar
charges (43.2) (14.2) (1.6) 11.7 (47.3)
-------------------------------------- -------- ----------- --------- ------------- --------
Net interest receivable/(expense) 24.0 (2.0) (1.6) 0.1 20.5
Fees and commissions receivable 2.3 0.2 - - 2.5
Other operating (expense)/income (0.1) 1.1 1.9 (1.1) 1.8
-------------------------------------- -------- ----------- --------- ------------- --------
Total operating income 26.2 (0.7) 0.3 (1.0) 24.8
Fair value gains on financial
instruments 0.2 3.6 - - 3.8
Net realised profits 0.1 - - - 0.1
-------------------------------------- -------- ----------- --------- ------------- --------
Total income 26.5 2.9 0.3 (1.0) 28.7
Administrative expenses (18.8) (1.5) (0.1) - (20.4)
Depreciation and amortisation (2.3) - - - (2.3)
-------------------------------------- -------- ----------- --------- ------------- --------
Operating profit before impairments,
provisions and revaluation
gains 5.4 1.4 0.2 (1.0) 6.0
Gains on investment properties - - 2.0 - 2.0
Impairment losses on loans
and advances (1.8) (10.0) - - (11.8)
Provisions for liabilities
- FSCS levy (1.4) - - - (1.4)
-------------------------------------- -------- ----------- --------- ------------- --------
Profit/(Loss) before tax 2.2 (8.6) 2.2 (1.0) (5.2)
-------------------------------------- -------- ----------- --------- ------------- --------
Total assets 5,828.6 931.5 117.8 (922.9) 5,955.0
-------------------------------------- -------- ----------- --------- ------------- --------
Total liabilities 5,288.7 1,006.9 94.5 (925.7) 5,464.4
-------------------------------------- -------- ----------- --------- ------------- --------
Capital expenditure 2.6 - - - 2.6
-------------------------------------- -------- ----------- --------- ------------- --------
6 months ended 30 September 2012 (unaudited)
Total
Retail Commercial Property Eliminations Group
GBPm GBPm GBPm GBPm GBPm
Income
Interest receivable and similar
income 83.1 25.3 - (23.5) 84.9
Interest expense and similar
charges (67.7) (24.3) (1.6) 23.5 (70.1)
----------------------------------- -------- ----------- --------- ------------- --------
Net interest receivable/(expense) 15.4 1.0 (1.6) - 14.8
Fees and commissions receivable 2.1 - - - 2.1
Other operating income 0.5 0.9 2.0 (0.2) 3.2
----------------------------------- -------- ----------- --------- ------------- --------
Total operating income 18.0 1.9 0.4 (0.2) 20.1
Fair value losses on financial
instruments (1.0) - - - (1.0)
Net realised profits 2.8 - - - 2.8
----------------------------------- -------- ----------- --------- ------------- --------
Total income 19.8 1.9 0.4 (0.2) 21.9
Administrative expenses (18.5) (1.8) - 0.2 (20.1)
Depreciation and amortisation (2.3) - - - (2.3)
----------------------------------- -------- ----------- --------- ------------- --------
Operating (loss)/profit before
impairments and provisions (1.0) 0.1 0.4 - (0.5)
Impairment losses on loans
and advances (1.8) (2.8) - - (4.6)
Provisions for liabilities
- FSCS levy (1.7) - - - (1.7)
Provisions for liabilities
- other 0.1 - - - 0.1
----------------------------------- -------- ----------- --------- ------------- --------
(Loss)/Profit before tax (4.4) (2.7) 0.4 - (6.7)
----------------------------------- -------- ----------- --------- ------------- --------
Total assets 6,431.8 1,069.7 113.7 (897.1) 6,718.1
----------------------------------- -------- ----------- --------- ------------- --------
Total liabilities 5,912.4 1,112.9 92.7 (898.9) 6,219.1
----------------------------------- -------- ----------- --------- ------------- --------
Capital expenditure 1.7 - - - 1.7
----------------------------------- -------- ----------- --------- ------------- --------
Year ended 31 March 2013 (audited)
Total
Retail Commercial Property Eliminations Group
GBPm GBPm GBPm GBPm GBPm
Income
Interest receivable and similar
income 165.9 28.8 - (33.6) 161.1
Interest expense and similar
charges (124.1) (33.6) (3.2) 33.5 (127.4)
----------------------------------- -------- ----------- --------- ------------- --------
Net interest receivable/(expense) 41.8 (4.8) (3.2) (0.1) 33.7
Fees and commissions receivable 5.5 0.1 - - 5.6
Other operating income 0.3 - 4.0 - 4.3
----------------------------------- -------- ----------- --------- ------------- --------
Total operating income/(expense) 47.6 (4.7) 0.8 (0.1) 43.6
Fair value losses on financial
instruments (1.7) - - - (1.7)
Net realised profits 7.3 - - - 7.3
----------------------------------- -------- ----------- --------- ------------- --------
Total income/(expense) 53.2 (4.7) 0.8 (0.1) 49.2
Administrative expenses (36.7) (2.9) (0.1) 0.4 (39.3)
Depreciation and amortisation (5.6) - - - (5.6)
----------------------------------- -------- ----------- --------- ------------- --------
Operating profit/(loss) before
impairments, provisions and
revaluation losses 10.9 (7.6) 0.7 0.3 4.3
Losses on investment properties - - (0.2) - (0.2)
Impairment losses on loans
and advances (4.1) (6.7) - - (10.8)
Provisions for liabilities
- FSCS levy (2.7) - - - (2.7)
----------------------------------- -------- ----------- --------- ------------- --------
Profit/(Loss) before tax 4.1 (14.3) 0.5 0.3 (9.4)
----------------------------------- -------- ----------- --------- ------------- --------
Total assets 6,050.6 1,000.0 118.0 (965.0) 6,203.6
----------------------------------- -------- ----------- --------- ------------- --------
Total liabilities 5,508.4 1,068.7 96.4 (967.7) 5,705.8
----------------------------------- -------- ----------- --------- ------------- --------
Capital expenditure 5.1 - - - 5.1
----------------------------------- -------- ----------- --------- ------------- --------
5 Allowance for losses on loans and advances to customers
6 months 6 months Year
ended ended ended
30-Sep-13 30-Sep-12 31-Mar-13
unaudited unaudited audited
GBPm GBPm GBPm
Impairment charge for the period 11.8 4.6 10.8
------------------------------------ --------------- -------------- --------------
Impairment provision at end of
period
Loans fully secured on residential
property 36.1 40.7 40.3
Other loans 66.8 54.8 54.0
102.9 95.5 94.3
------------------------------------ --------------- -------------- --------------
The charge for the six months ended 30 September 2013 is
partially offset by GBP3.7m fair value gains on financial
instruments held to economically hedge impaired loans. These
provisions are deducted from the appropriate asset values in the
statement of financial position.
6 Provisions for liabilities
6 months 6 months
ended ended
30-Sep-13 30-Sep-12
unaudited unaudited
Onerous Onerous
FSCS contracts Total FSCS contracts Total
GBPm GBPm GBPm GBPm GBPm GBPm
At beginning of period 6.0 0.8 6.8 5.2 1.2 6.4
Utilised in the period (4.2) (0.2) (4.4) (1.9) (0.1) (2.0)
Charge/(Release) for
the period 1.4 - 1.4 1.7 (0.1) 1.6
At end of period 3.2 0.6 3.8 5.0 1.0 6.0
------------------------ ------ ---------- ------ ---------- --------------- ------------
Year
ended
31-Mar-13
audited
Onerous
FSCS contracts Total
GBPm GBPm GBPm
At beginning of period 5.2 1.2 6.4
Utilised in the period (1.9) (0.4) (2.3)
Charge for the period 2.7 - 2.7
At end of period 6.0 0.8 6.8
------------------------ ------ ---------- ------
Financial Services Compensation Scheme (FSCS)
In common with all regulated UK deposit takers, the Society pays
levies to the Financial Services Compensation Scheme (FSCS) to
enable the FSCS to meet claims against it. The FSCS levy consists
of two parts: a management expenses levy and a compensation levy.
The management expenses levy covers the costs of running the scheme
and the compensation levy covers the amount of compensation the
scheme pays, net of any recoveries it makes using the rights that
have been assigned to it. During 2008 and 2009 claims were
triggered against the FSCS in relation to Bradford & Bingley
plc, Kaupthing Singer and Friedlander, Heritable Bank plc,
Landsbanki Islands hf, London Scottish Bank plc and Dunfermline
Building Society.
The FSCS meets these current claims by way of loans received
from HM Treasury. The terms of these loans are interest only for
the first three years, and the FSCS seeks to recover the interest
cost, together with ongoing management expenses, by way of annual
management levies on members over this period.
The Society FSCS provision reflects market participation up to
the reporting date. GBP2.4m of the provision relates to the
estimated management expenses levy for the scheme year 2013/14 and
half the expected charge for the 2014/15 scheme year. GBP0.8m of
the provision relates to the compensation levy. These amounts were
calculated on the basis of the Society's current share of protected
deposits taking into account the FSCS estimate of total management
expenses for each scheme year and the current estimated shortfall
on capital loans outstanding.
The provision does not include any estimate for levies for
scheme years after 2014/15 which may arise.
Onerous contracts
The provision for onerous contracts covers the loss anticipated
in connection with future lease expenses from non-cancellable lease
commitments in branches that the Society has, as part of its branch
restructure, decided are no longer required.
7 Loans and advances to customers
30-Sep-13 30-Sep-12 31-Mar-13
unaudited unaudited audited
GBPm GBPm GBPm
Loans and receivables
Loans fully secured on residential property 3,928.1 4,158.4 4,004.5
Other loans
Loans fully secured on land 915.8 1,023.8 990.3
Other loans 0.1 0.1 0.1
--------------------------------------------- ---------- ---------- ----------
4,844.0 5,182.3 4,994.9
At fair value through profit or loss
Other loans
Loans fully secured on land 64.5 78.6 70.5
--------------------------------------------- ---------- ---------- ----------
4,908.5 5,260.9 5,065.4
--------------------------------------------- ---------- ---------- ----------
Less: impairment provisions (102.9) (95.5) (94.3)
--------------------------------------------- ---------- ---------- ----------
4,805.6 5,165.4 4,971.1
--------------------------------------------- ---------- ---------- ----------
Included within loans and advances to customers are GBP199.9m
(30 September 2012: GBP372.3m) of commercial mortgage balances and
GBP1,581.9m (30 September 2012: GBP1,276.4m) of residential
mortgage balances that the Group has sold to bankruptcy remote
special purpose entities (SPEs). The SPEs have been funded by
issuing mortgage backed securities (MBSs) of which loan notes
totalling GBP1,113.9m (30 September 2012: GBP1,268.6m) are held by
the Group.
The Group has made subordinated loans to the SPEs to provide
some level of credit enhancement to the MBSs. In future periods the
Group will earn interest income on the subordinated loans and fees
for managing the loans. The Group will earn deferred consideration
once the cash flows generated by the SPEs have been used to pay
interest and capital to the holders of the MBSs. Since the Group
maintains substantially all of the risks (key risk being an
exposure to credit risk through the subordinated loan agreements)
and rewards emanating from the mortgages, they have been retained
on the Group's statement of financial position in accordance with
IAS 39.
8 Shares
30-Sep-13 30-Sep-12 31-Mar-13
unaudited unaudited audited
GBPm GBPm GBPm
Held by individuals 4,368.0 5,281.9 4,651.1
Other shares 1.1 1.1 1.1
4,369.1 5,283.0 4,652.2
--------------------- ---------- ---------- ----------
9 Property, plant, equipment and intangible assets
Tangible and
intangible
assets
6 months ended 30 September 2013 (unaudited) GBPm
Net book value at 1 April 2013 24.4
Additions 2.6
Disposals (0.3)
Depreciation, amortisation, impairment and other
movements (2.3)
-------------------------------------------------- ------------------
Net book value at 30 September 2013 24.4
-------------------------------------------------- ------------------
Tangible and
intangible
assets
6 months ended 30 September 2012 (unaudited) GBPm
Net book value at 1 April 2012 25.1
Additions 1.7
Disposals (0.2)
Depreciation, amortisation, impairment and other
movements (2.3)
-------------------------------------------------- ------------------
Net book value at 30 September 2012 24.3
-------------------------------------------------- ------------------
Tangible and
intangible
assets
Year ended 31 March 2013 (audited) GBPm
Net book value at 1 April 2012 25.1
Additions 5.1
Disposals (0.2)
Depreciation, amortisation, impairment and other
movements (5.6)
-------------------------------------------------- ------------------
Net book value at 31 March 2013 24.4
-------------------------------------------------- ------------------
Capital commitments
The Group has placed contracts amounting to a total of GBP0.7m
(30 September 2012: GBP0.5m) for future expenditure that was not
provided in the financial statements.
10 Investment properties
6 months 6 months Year
ended ended ended
30-Sep-13 30-Sep-12 31-Mar-13
unaudited unaudited audited
GBPm GBPm GBPm
Valuation
At beginning of period 112.5 112.7 112.7
Disposals (0.9) - -
Net gains/(losses) from fair value adjustments 2.0 - (0.2)
At end of period 113.6 112.7 112.5
------------------------------------------------ ---------- ---------- ----------
11 Debt securities in issue
30-Sep-13 30-Sep-12 31-Mar-13
unaudited unaudited audited
GBPm GBPm GBPm
GBP medium term notes - 3.0 -
Certificates of deposit 6.0 2.0 4.0
Other debt securities 175.4 200.9 376.8
Non-recourse finance on securitised
advances 673.7 377.6 328.3
------------------------------------- -------------------- ---------- ------------
855.1 583.5 709.1
------------------------------------- -------------------- ---------- ------------
The non-recourse finance comprises mortgage backed floating rate
notes (the Notes) secured over portfolios of mortgage loans secured
by first charges over residential and commercial properties in the
United Kingdom. Prior to redemption of the Notes on the final
interest payment date, the Notes will be subject to mandatory
and/or optional redemption, in certain circumstances, on each
interest payment date.
12 Profit participating deferred shares
30-Sep-13 30-Sep-12 31-Mar-13
unaudited unaudited audited
GBPm GBPm GBPm
Book value
Nominal value 182.5 182.5 182.5
Cumulative fair value adjustments
at date of transition 3.8 3.8 3.8
Capitalised issue costs (2.2) (2.2) (2.2)
----------------------------------- ---------- --------------- ----------
184.1 184.1 184.1
----------------------------------- ---------- --------------- ----------
Cumulative reserve deficit
At beginning of period (10.4) (9.1) (9.1)
Share of loss for the period (0.9) (1.3) (1.3)
----------------------------------- ---------- --------------- ----------
(11.3) (10.4) (10.4)
----------------------------------- ---------- --------------- ----------
Net value at end of period 172.8 173.7 173.7
----------------------------------- ---------- --------------- ----------
The profit participating deferred shares (PPDS) are entitled to
receive a distribution, at the discretion of the Society, of up to
25% of the Group's post-tax profits in the future (calculated prior
to payment of the PPDS dividend). No such distribution may be made
if the cumulative reserves are in deficit.
13 Related party transactions
Related party transactions for the six months to 30 September
2013 are within the normal course of business and of a similar
nature to those for the last financial year, full details of which
are disclosed in the Annual Report and Accounts for the year ended
31 March 2013.
14 Subscribed capital
30-Sep-13 30-Sep-12 31-Mar-13
unaudited unaudited audited
GBPm GBPm GBPm
Permanent interest bearing shares 74.9 74.9 74.9
----------------------------------- ---------- ---------- ----------
In a winding up or dissolution of the Society the claims of the
holders of permanent interest bearing shares (PIBS) would rank
behind all other creditors of the Society, with the exception of
holders of profit participating deferred shares (PPDS) with which
the PIBS rank pari-passu, and the claims of members holding shares
as to principal and interest. The holders of PIBS are not entitled
to any share in any final surplus upon winding up or dissolution of
the Society.
With respect to future interest payments, as a condition of the
PPDS, the Society has undertaken to pay an amount which, when
annualised, represents the lower of: 6.15% of the outstanding
principal amount of the PIBS and the dividend yield attributable to
the PPDS with respect to the prior financial year ending 31 March
whose payment is at the discretion of the Society.
15 Financial instruments
Fair values of financial assets and financial liabilities
The table below compares the carrying and fair values of the
Group's non-derivative financial instruments by category at the
reporting date. Where available, market values have been used to
determine fair values. Where market values are not available, fair
values have been calculated by discounting cash flows at prevailing
interest rates.
30-Sep-13 30-Sep-13
unaudited unaudited
Carrying
value Fair value
GBPm GBPm
Financial assets
Cash and balances with the Bank of
England 203.7 203.7
Investment securities 557.5 557.5
Loans and advances to credit institutions 188.4 188.4
Loans and advances to customers 4,805.6 4,606.9
Financial liabilities
Shares 4,369.1 4,356.3
Amounts due to credit institutions 15.7 15.7
Amounts due to other customers 134.9 134.9
Debt securities in issue 855.1 833.5
------------------------------------------- -------------------- --------------
a) Loans and advances to customers
The fair value of loans and advances to customers has been
calculated on an individual loan basis taking into account factors
such as impairment and interest rates. It is not considered
appropriate to value them collectively as a portfolio sale.
Impairment is calculated on an incurred loss basis except to the
extent that acquired mortgage books have been fair valued on a
basis which makes allowances for anticipated losses over the
remaining life of the loans.
b) Deposits and borrowings
The estimated fair value of deposits with no stated maturity,
which includes non-interest bearing deposits, is the amount
repayable on demand.
The estimated fair value of fixed interest-bearing deposits and
other borrowings without quoted market price is based on discounted
cash flows using interest rates for new debts with similar
remaining maturity.
c) Debt securities in issue
The aggregate fair values are calculated based on quoted market
prices. For those notes where quoted market prices are not
available, a discounted cash flow model is used based on a current
yield curve appropriate for the remaining term to maturity.
The fair values have been calculated on a product basis and as
such do not necessarily represent the value that could have been
obtained for a portfolio if it were sold at 30 September 2013.
Fair value measurement
The following table summarises the fair value measurement basis
used for assets and liabilities held on the statement of financial
position at fair value:
Level Level
At 30 September 2013 (unaudited) 1 2 Level 3 Total
GBPm GBPm GBPm GBPm
Financial assets
Investment securities 557.5 - - 557.5
Loans and advances to customers - 61.3 - 61.3
Derivative financial instruments - 29.3 - 29.3
557.5 90.6 - 648.1
---------------------------------- ------ ------ -------- ------
Financial liabilities
Debt securities in issue - 54.5 - 54.5
Derivative financial instruments - 72.8 - 72.8
- 127.3 - 127.3
---------------------------------- ------ ------ -------- ------
Level 1: Quoted prices (unadjusted) in active markets for
identical assets or liabilities.
Level 2: Valuation techniques where all inputs are taken from
observable market data, either directly (i.e. as prices) or
indirectly (i.e. derived from prices).
Level 3: Valuation techniques where significant inputs are not
based on observable market data. None of the Group's financial
assets or liabilities are valued using this technique.
Valuation techniques include net present value and discounted
cash flow models, comparison to similar instruments for which
market observable prices exist and other valuation models.
Assumptions and market observable inputs used in valuation
techniques include risk-free and benchmark interest rates, equity
index prices and expected price volatilities. The objective of
valuation techniques is to arrive at a fair value determination
that reflects the price of the financial instrument at the
reporting date that would have been determined by market
participants acting at arm's length.
Observable prices are those that have been seen either from
counterparties or from market pricing sources including Bloomberg.
The use of these depends upon the liquidity of the relevant
market.
16 Statement of Directors' responsibilities
The Directors confirm that this condensed set of financial
statements has been prepared in accordance with IAS 34 as adopted
by the European Union, and that the half-yearly management report
herein includes a fair review of the information required by DTR
4.2.7R and DTR 4.2.8R.
The Directors of West Bromwich Building Society are listed in
the West Bromwich Building Society Annual Report for the year ended
31 March 2013.
By order of the Board
Jonathan Westhoff
Chief Executive
Mark Gibbard
Group Finance Director
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR PGGPUGUPWGAM
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