TIDMWBS
RNS Number : 2321I
West Bromwich Building Society
28 May 2014
West Bromwich Building Society
Preliminary results announcement for the year ended 31 March
2014
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 2014
The West Brom today announces its results for the financial year
ended 31 March 2014, reporting a welcome return to profit.
Key highlights from the 2013/14 financial year include:
-- A return to profit, with pre-tax profits of GBP2.1m (2012/13 restated: loss of GBP9.1m).
-- A strong improvement in net interest margin to 0.81% (2012/13: 0.49%).
-- Following a return to the residential lending market, gross
lending of GBP213.6m (2012/13: GBP19.3m).
-- An increase in the Group's strong Common Equity Tier 1 capital ratio from 12.8% to 13.4%.
-- Retail savings inflows of GBP1.5bn, attracting 18,417 new
savers, with residential mortgages covered 1.10 times by retail
deposits.
Jonathan Westhoff, Chief Executive, commented:
"The return to profit is a landmark achievement and a direct
result of the 'Back to Basics' strategy we implemented in 2009. At
the same time we have further strengthened our capital position,
creating the right conditions for a period of sustainable
growth.
We remain resolute in our adherence to the traditional building
society model and the delivery of long-term value for members.
Residential lending activity in particular has gathered pace over
the last year, underpinned by a new mortgage processing platform
and a suite of products that appeal to both new and existing
borrowers.
In recognising the importance of supporting members to achieve a
secure financial future, the West Brom has remained one of the few
high street providers to offer face to face financial advice. We
have partnered with Towergate Financial who can now search the
entire market to find the optimum financial solutions according to
customers' specific needs.
We also recognise the need for strategic investment to
facilitate further growth and deliver member value. Having recently
enhanced our mortgage processing platform and branch network,
attention now turns to our new Head Office currently under
construction in West Bromwich town centre.
Due for completion in 2015, this building will represent a
modern, efficient and environmentally friendly base from which the
business can expand with our people fully equipped to support and
serve our membership.
Our return to profit, strengthened capital position and the
improving economic environment mean that West Brom can face the
future with considerable optimism."
28 May 2014
Enquiries:
The West Brom 0870 220 7785
Jonathan Westhoff - Chief Executive
Mark Gibbard - Group Finance Director
Chief Executive's Review
Performance
The UK economic recovery has followed a steady upward path
during the past year -reflected in renewed market confidence.
Against this backdrop, the Society delivered another very
encouraging year with a return to profit - a landmark achievement
and a direct result of the 'Back to Basics' strategy implemented in
2009. Through delivery of this strategy we have maintained a
constant commitment to the traditional building society model and
the delivery of long-term value for our members.
Profit before tax was GBP2.1m (2012/13 restated: loss of
GBP9.1m), with the prime driver being a rise in the net interest
margin to 0.81% (2012/13: 0.49%). The improvement in 2013/14 was in
part due to the government economic stimulus, which resulted in the
cost of funding starting to reduce in the second half of the
financial year. However, in relative terms these funding costs
remain significantly above pre-crisis levels, and hence, to offset
in part the impact of this, rates on certain buy to let loans were
increased. The result for the year also includes a GBP5.1m gain on
the revaluation of the investment property portfolio, evidencing
the improving economic landscape and the upward trend in UK
property prices.
In maintaining a balanced and stable funding base, the majority
of the Society's funding requirements were met by retail savings
balances supported by cost effective wholesale funding. During May
2013 the Society took advantage of the opportunity to obtain term
wholesale funding and raised GBP380m via a residential mortgage
backed securitisation.
Underpinned by a new mortgage processing platform and a
comprehensive suite of products, the Society's return to the
residential lending market gathered pace with gross lending of
GBP213.6m (2012/13: GBP19.3m). Our unwavering commitment to
reducing exposure to non-core lending has resulted in total lending
assets reducing by GBP290.6m.
Aligned to the principles of a traditional building society and
fundamental to the Society's return to profit, the replacement of
legacy higher risk assets with lower risk prime residential
mortgages has resulted in the continued strengthening of the
Society's capital position. This progress has delivered an
improvement in the Common Equity Tier 1 capital ratio (the key
measure of financial resilience) to 13.4% (2012/13: 12.8%).
Strategic investment
While cost effectiveness remains a priority, strategic
investment is essential to facilitate growth and deliver an
efficient operation which will generate member value in the
future.
This year we have invested further in our mortgage platform,
focusing on delivering a high quality intermediary system. Our
overhaul of the mortgage operations now means that the Society has
a scalable operation, sufficient to support lending plans for the
years to come.
Head Office staff will move premises in 2015 to Providence Place
within West Bromwich. This new building represents a modern,
efficient and environmentally friendly base from which the business
can expand with our people fully equipped to support and serve our
membership.
Putting members first
The Board's commitment to core building society principles
directs the Society's strategy. As a mutual organisation the
delivery and preservation of member value underpins all
decisions.
Throughout 2013/14, the West Brom has continued to support
members in purchasing their own homes by consistently offering a
range of competitive mortgages. We have responded to the difficulty
many prospective homeowners have in raising large deposits by
opening up accessibility to higher loan to value (LTV) products.
With 14% of our lending in 2013/14 to first time buyers (up to 90%
LTV), the extent of this support is clearly seen.
During the year the effect of the low interest rate environment
on savers was exacerbated, with savings rates falling further
across the market. The West Brom has sought to moderate the effect
on its savers by keeping rates competitive, maintaining a presence
in the Best Buy tables and ensuring rates paid to existing savers
average 0.95% higher than Bank Rate.
The Financial Conduct Authority's Retail Distribution Review has
led to many banks and building societies ceasing their provision of
financial planning services. However, in recognising the importance
of providing our customers with this valuable service, we partnered
with Towergate Financial - a leading national financial advisor -
to give members independent financial advice and access to the full
spectrum of financial products.
Mutuality - valuing members' views
Being a building society means that the Society is owned by and
run for the benefit of its members, which is why finding out their
views and opinions is of paramount importance.
Through the past year, we have continued to employ a variety of
methods to engage with our members and listen to their views. The
Society's AGM provides members with an opportunity to voice their
views and ask questions on key issues.
This year, I have hosted three 'Members' Viewpoint' events,
where feedback was provided on a range of subjects - a valuable
insight for us. Also during the year, a survey measuring the
satisfaction of members who have completed a mortgage with us was
launched.
Outlook
Reflecting on the return to profit, strengthened capital
position, our strong investment in infrastructure and improving
economic environment, the West Brom can face the future with
considerable optimism. Whilst there remain some legacy issues to
resolve, which might result in some volatility in financial
performance in future years, the trend remains very positive.
Residential mortgage activities are expected to increase in
2014/15 as the Society supports yet more members with their home
ownership aspirations, all within a framework of responsible
lending.
Going forward, the West Brom will continue its programme of
investment. Having completely renewed our branch network and
lending capabilities, we look forward to unveiling the new Head
Office in Spring 2015.
Jonathan Westhoff
Chief Executive
28 May 2014
Income Statement
for the year ended 31 March 2014 Group Group
2014 2013*
GBPm GBPm
Interest receivable and similar income 135.9 161.1
Interest expense and similar charges (87.7) (127.4)
-------------------------------------------------- ------- --------------
Net interest receivable 48.2 33.7
Fees and commissions receivable 5.7 5.6
Other operating income 3.6 4.3
-------------------------------------------------- ------- --------------
Total operating income 57.5 43.6
Fair value gains/(losses) on financial
instruments 4.6 (1.7)
Net realised (losses)/profits (0.2) 7.3
-------------------------------------------------- ------- --------------
Total income 61.9 49.2
Administrative expenses (40.6) (39.3)
Depreciation and amortisation (4.4) (5.6)
-------------------------------------------------- ------- --------------
Operating profit before impairments, provisions
and revaluation gains/(losses) 16.9 4.3
Gains/(Losses) on investment properties 5.1 (0.2)
Impairment on loans and advances (13.6) (10.8)
Provisions for liabilities (6.3) (2.4)
-------------------------------------------------- ------- --------------
Profit/(Loss) before tax 2.1 (9.1)
Taxation (1.1) 4.4
--------------------------------------------------
Profit/(Loss) for the financial year 1.0 (4.7)
================================================== ======= ==============
Statement of Comprehensive Income
for the year ended 31 March 2014 Group Group
2014 2013*
GBPm GBPm
Profit/(Loss) for the financial year 1.0 (4.7)
-------------------------------------------------- ------- --------------
Other comprehensive income
Items that may subsequently be reclassified
to profit or loss
Available for sale investments
Valuation (loss)/gain taken to equity (6.2) 15.6
Amounts transferred to Income Statement 0.2 (4.8)
Gains on revaluation of land and buildings 0.5 -
Cash flow hedge gains taken to equity 0.2 -
Taxation 1.0 (2.6)
Items that will not subsequently be reclassified
to profit or loss
Actuarial loss on retirement benefit obligations (6.2) (1.7)
Taxation 1.4 0.4
-------------------------------------------------- ------- --------------
Other comprehensive income for the financial
year, net of tax (9.1) 6.9
-------------------------------------------------- -------
Total comprehensive income for the financial
year (8.1) 2.2
================================================== ======= ==============
Statement of Financial Position
at 31 March 2014 Group Group
2014 2013*
GBPm GBPm
Assets
Cash and balances with the Bank of England 136.3 392.3
Loans and advances to credit institutions 169.4 147.1
Investment securities 461.6 499.5
Derivative financial instruments 33.8 29.5
Loans and advances to customers 4,680.5 4,971.1
Deferred tax assets 23.8 23.2
Trade and other receivables 2.8 2.8
Intangible assets 8.7 7.9
Investment properties 115.2 112.5
Property, plant and equipment 18.4 16.5
Retirement benefit assets - 0.4
Total assets 5,650.5 6,202.8
============================================= ============= ==============
Liabilities
Shares 4,235.6 4,652.2
Amounts due to credit institutions 38.7 28.5
Amounts due to other customers 121.0 193.0
Derivative financial instruments 62.0 99.4
Debt securities in issue 677.0 709.1
Deferred tax liabilities 3.6 4.3
Trade and other payables 13.6 12.5
Provisions for liabilities 5.1 3.2
Retirement benefit obligations 1.4 -
--------------------------------------------- --------------
Total liabilities 5,158.0 5,702.2
Equity
Profit participating deferred shares 174.7 174.4
Subscribed capital 74.9 74.9
General reserves 234.9 238.2
Revaluation reserve 3.4 3.7
Available for sale reserve 4.4 9.4
Cash flow hedging reserve 0.2 -
--------------------------------------------- ------------- --------------
Total equity attributable to members 492.5 500.6
Total liabilities and equity 5,650.5 6,202.8
============================================= ============= ==============
Statement of Changes
in Members' Interest
for the year ended 31
March 2014
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 2013 (restated) 174.4 74.9 238.2 3.7 9.4 - 500.6
Profit for the financial
year 0.3 - 0.7 - - - 1.0
Other comprehensive
income for the period
Available for sale
investments:
current year movement
net of tax - - - - (5.0) - (5.0)
Actuarial loss on retirement
benefit obligations - - (4.8) - - - (4.8)
Gain on revaluation
of land and buildings - - - 0.5 - - 0.5
Realisation of previous
revaluation gains - - 0.8 (0.8) - - -
Cash flow hedge gains - - - - - 0.2 0.2
Total other comprehensive
income - - (4.0) (0.3) (5.0) 0.2 (9.1)
----------------------------- --------------- ----------- ----------- ------------ ---------- --------- -------
Total comprehensive
income for the year 0.3 - (3.3) (0.3) (5.0) 0.2 (8.1)
-----------------------------
At 31 March 2014 174.7 74.9 234.9 3.4 4.4 0.2 492.5
============================= =============== =========== =========== ============ ========== ========= =======
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 (as
reported) 175.0 74.9 241.1 3.7 1.2 - 495.9
Change in accounting
policy 0.6 - 1.9 - - - 2.5
----------------------------- --------------- ----------- ----------- ------------ ---------- --------- -------
At 1 April 2012 (restated) 175.6 74.9 243.0 3.7 1.2 - 498.4
Loss for the financial
year (restated) (1.2) - (3.5) - - - (4.7)
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
(restated) (1.2) - (4.8) - 8.2 - 2.2
----------------------------- --------------- ----------- ----------- ------------ ---------- --------- -------
At 31 March 2013 (restated) 174.4 74.9 238.2 3.7 9.4 - 500.6
============================= =============== =========== =========== ============ ========== ========= =======
Statement of Cash Flows
for the year ended 31 March 2014 Group Group
2014 2013*
GBPm GBPm
Net cash outflow from operating activities
(below) (235.0) (566.8)
------------------------------------------------- ------------ ------------
Cash flows from investing activities
Purchase of investment securities (141.8) (672.1)
Proceeds from disposal of investment securities 229.3 870.7
Proceeds from disposal of investment properties 2.3 -
Purchase of property, plant and equipment
and intangible assets (6.2) (5.0)
Proceeds from disposal of property, plant
and equipment 0.5 0.2
Net cash flows from investing activities 84.1 193.8
------------------------------------------------- ------------ ------------
Cash flows from financing activities
Issue of mortgage backed loan notes 380.0 175.0
Repayment of mortgage backed loan notes (105.8) (67.3)
Net repayment of other debt securities (302.3) (318.2)
------------
Net cash flows from financing activities (28.1) (210.5)
------------------------------------------------- ------------ ------------
Net decrease in cash (179.0) (583.5)
Cash and cash equivalents at beginning
of year 550.3 1,133.8
Cash and cash equivalents at end of year 371.3 550.3
================================================= ============ ============
Group Group
2014 2013*
GBPm GBPm
Analysis of cash and cash equivalents
Cash in hand (including Bank of England
Reserve account) 128.1 386.8
Loans and advances to credit institutions 169.4 147.0
Investment securities 73.8 16.5
371.3 550.3
================================================= ============ ============
Group Group
2014 2013*
GBPm GBPm
Cash flows from operating activities
Profit/(Loss) on ordinary activities before
tax from continuing activities 2.1 (9.1)
Movement in prepayments and accrued income (0.1) 0.9
Movement in accruals and deferred income 1.2 (3.6)
Impairment on loans and advances 13.6 10.8
Depreciation and amortisation 4.4 5.6
Revaluations of investment properties (5.1) 0.2
Movement in provisions for liabilities 1.9 0.1
Movement in derivative financial instruments (41.7) 26.6
Movement in fair value adjustments 40.3 (11.8)
Change in retirement benefit obligations (4.4) (2.5)
------------------------------------------------- ------------ ------------
Cash flows from operating activities before
changes in operating assets and liabilities 12.2 17.2
Movement in loans and advances to customers 237.9 387.5
Movement in loans and advances to credit
institutions (2.6) 1.3
Movement in shares (418.9) (1,009.5)
Movement in deposits and other borrowings (62.8) 40.2
Movement in trade and other receivables 0.1 0.5
Movement in trade and other payables (0.9) (4.0)
Net cash outflow from operating activities (235.0) (566.8)
================================================= ============ ============
Ratios
for the year ended 31 March 2014 Group Statutory
2014 limit
% %
Lending limit 19.1 25.0
Funding limit 5.3 50.0
------------------------------------------------- ------------ ------------
Group Group
2014 2013*
% %
As a percentage of shares and borrowings:
Gross capital 11.01 9.53
Free capital 8.18 7.21
Liquid assets 17.15 19.77
As a percentage of mean total assets:
Profit/(Loss) for the financial year 0.02 (0.07)
Management expenses 0.76 0.66
------------------------------------------------- ------------ ------------
Group Group
2014 2013
% %
Common Equity Tier 1 capital ratio 13.4 12.8
------------------------------------------------- ------------ ------------
* Restated due to a change in accounting policy, following the
guidance set out in International Financial Reporting
Interpretations Committee (IFRIC) 21, 'Levies'.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR QKFDQKBKDFPB
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