TIDMWBS
RNS Number : 6084Q
West Bromwich Building Society
01 December 2016
WEST BROMWICH BUILDING SOCIETY
Announcement of half-year results for the six months
to 30 September 2016
The West Brom today announces its half-year results for the six
months to 30 September 2016.
Key highlights:
- Gross residential mortgage lending for the half year of
GBP441m, up nearly 50% from the previous year (30 September 2015:
GBP295m).
- Loss before tax of GBP23.7m for the six months to 30 September
2016 (30 September 2015: Profit GBP6.0m) after allowing for costs
of GBP27.5m relating to a one-off reimbursement of interest charged
on certain buy to let mortgages.
- Underlying profit before tax of GBP3.8m (30 September 2015: GBP1.3m).
- Members' savings balances maintained at GBP4.4bn (31 March 2016: GBP4.4bn).
- Strong capital position, with a Common Equity Tier 1 ratio of
13.8% (31 March 2016: 14.6%) and a particularly strong leverage
ratio of 7.2% (31 March 2016: 7.6%).
Following the disappointing outcome from the Court of Appeal
decision in overturning the previous High Court judgement in our
favour, our half year results include a one-off cost of GBP27.5m to
refund certain buy to let customers for a proportion of interest
charged since December 2013. As expected, and forecast when the
outcome of the legal case was announced, this has resulted in a
pre-tax loss of GBP23.7m for the half year.
The underlying business, however, continues to go from strength
to strength with increased advances of GBP441m (30 September 2015:
GBP295m) almost 50% higher than the previous half year, reduced
arrears across residential mortgages (falling from 1.07% of
mortgage balances at 31 March 2016 to 0.88% at 30 September 2016)
and further reductions in our non-core lending (Commercial lending
has reduced by GBP46m (6.8%) since the year-end to GBP634m). These
results demonstrate a sound performance of the underlying business,
with growth in underlying profitability, before the one-off impact
of the buy to let refund, from GBP1.3m for the 6 months to 30
September 2015 to GBP3.8m.
Our capital position is robust and liquidity remains strong,
with customer deposit balances being maintained.
The strength of the underlying progress that the Society has
made in the first six months of this financial year is pleasing. We
have continued to invest in developing the systems to support the
Society's ambitions of enhancing our ability to provide an
increasing number of members with the opportunity to fulfil their
ambitions for home ownership. At the same time we remain very aware
of the impact ultra-low investment rates continue to have on the
Society's savers. Although savers' rates have reduced, we have
ensured that the average rates paid by the Society have remained
above those for the sector.
Following the Brexit decision the economic environment has
become more uncertain, particularly in the commercial real estate
sector where the Society still has an exposure albeit significantly
less so than in previous years. This presents the most prominent
area of uncertainty for the second half of the financial year.
Despite this, we are confident that the Society will deliver on its
lending plans.
ENQUIRIES
the West Brom 0121 796 7785
Jonathan Westhoff - Chief Executive
Mark Gibbard - Group Finance & Operations Director
West Bromwich Building Society
Condensed consolidated
half-yearly financial information
30 September 2016
Chief Executive's BUSINESS Review
Performance
The Society has increased its new lending by nearly 50% in the
first half of 2016/17 and, before one-off costs, has improved its
underlying profitability. These costs relate to the well-publicised
overturning in June, by the Court of Appeal, of an earlier decision
of the High Court in respect of the Group's ability to vary the
interest charged on certain loans to property investor landlords
with multi-property portfolios. The result of this is that the
Group can no longer levy this additional interest and must
reimburse what has been charged thus far. This refund has been
made. The cost of this, GBP27.5m, which is charged as a one-off
item under the heading "Provisions for liabilities", has resulted
in the Society reporting a loss before tax of GBP23.7m for the six
months to 30 September 2016 (30 September 2015: Profit
GBP6.0m).
The table below is a comparison of the underlying performance
excluding the impact of the buy to let case, which shows that the
underlying net interest income and pre-tax profit have improved
against the comparative period.
Half 1 2016/17 Half 1 2015/16
--------------------------------- --------------------------------
Buy Buy
to let to let
As case As case
reported Impact* Underlying reported Impact* Underlying
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ---------- -------- ----------- --------- -------- -----------
Net interest income 26.8 (1.2) 25.6 29.9 (4.7) 25.2
(Loss)/profit before
tax (23.7) 27.5 3.8 6.0 (4.7) 1.3
---------------------- ---------- -------- ----------- --------- -------- -----------
* Half 1 2016/17 included 2 months (Half 1 2015/16: 6 months) of
additional interest receivable which has been returned to borrowers
following the overturning of the buy to let case, as such this has
been deducted from net interest income in order to give a
like-for-like comparison.
Income Statement
The underlying net interest income at GBP25.6m for the half year
is up from GBP25.2m for the previous half year.
The result for the six months includes a revaluation gain of
GBP3.3m (30 September 2015: GBP2.5m) on the Group's portfolio of
residential investment properties, as a result of house price
increases in the period.
In the last six months management expenses have increased to
GBP25.0m compared with GBP22.7m (first half of 2015/16) primarily
as a result of the Society's continuing programme of investment.
This is reflected in an increase in the management expenses ratio
to 0.87% (30 September 2015: 0.82%).
Residential mortgages in arrears by more than three months, as a
percentage of balances outstanding, have reduced since 31 March
2016, from 1.07% to just 0.88%. This reflects both the high quality
of our residential lending book and stable economic conditions. All
lending undertaken since the Society re-entered the mortgage market
over three years ago has been subject to strict credit criteria
and, as a result, there are no loans originated in this period
which are three months or more in arrears at 30 September 2016.
This quality is reflected in a residential provision release of
GBP3.0m for the half year to 30 September 2016 (30 September 2015:
release GBP0.4m).
The total impairment charge of GBP0.8m for the half year (30
September 2015: GBP4.1m) includes a charge of GBP3.8m (30 September
2015: GBP4.5m) relating to the Commercial loan book, which is a
market we have exited and where we are continuing to manage down
our remaining exposure. Outstanding balances have reduced by GBP46m
(6.8%) since the year-end to GBP634m. Provisions set aside for
potential losses in this book equated to 6.7% of total loan
balances outstanding (31 March 2016: 6.5%).
In addition to the GBP27.5m one-off cost of refunding interest
to buy to let landlords following the Court of Appeal ruling, the
provisions for liabilities charge includes the Financial Services
Compensation Scheme (FSCS) levy of GBP1.3m. This is a considerable
reduction on the charge to 30 September 2015 of GBP2.5m as FSCS has
confirmed that no capital levy is anticipated. A further GBP0.5m
has been set aside for potential Payment Protection Insurance (PPI)
claims (30 September 2015: GBP0.9m) to allow for potential costs
through to a deadline of June 2019 which is anticipated to be
introduced.
The buy to let legal case has affected the tax charge because it
has pushed out the expected time to recover the existing deferred
tax asset. Consequently no tax credit is recognised against the
loss for the half year and a charge of GBP6.8m has been recorded to
write down the value of the brought forward deferred tax asset to a
level we anticipate will be recovered in the next 5 years.
Balance Sheet
Growth in prime residential lending continued with advances of
GBP441m almost a 50% increase on the comparable period (30
September 2015: GBP295m). Nearly 20% of this was lending to first
time buyers (30 September 2015: 20.5%).
As a traditional building society, the West Brom continues to be
funded predominantly by retail savings with balances of GBP4.4bn,
unchanged from the year end. At 30 September 2016, 85.2% (31 March
2016: 84.8%) of total shares and borrowings were in the form of
members' retail deposits.
Throughout the period the Society has maintained its liquid
assets at an appropriate level and quality to ensure that it can
meet its financial obligations under both normal and severe, but
plausible, stressed scenarios. At 30 September 2016 the liquidity
ratio was 14.9% (31 March 2016: 17.3%).
All of the Society's treasury investments were rated single A or
better or held with a Global Systemically Important Counterparty.
The Group has no exposure to those markets where concerns have been
expressed, including non-UK sovereign debt or to any mortgage
market outside the UK. There were no impairment charges against
liquid assets during the current or comparative periods.
The table below shows an analysis of the Group's liquidity
portfolio:
30-Sep-16 30-Sep-15 31-Mar-16
GBPm % GBPm % GBPm %
Extremely High Quality
Liquidity Assets
- Cash and balances with
the Bank of England 138.4 19.1 96.8 15.8 208.7 25.2
- Treasury Bills 26.9 3.7 20.0 3.3 - -
- Supranationals 71.7 9.9 55.4 9.0 53.5 6.4
- Covered Bonds 123.9 17.1 81.1 13.2 124.0 14.9
- Mortgage Backed Securities 120.3 16.6 79.0 12.9 109.4 13.2
------------- ------ ------ ------ ------ ------
Total Extremely High Quality
Liquidity Assets 481.2 66.4 332.3 54.2 495.6 59.7
Other securities - rated
single A or better 38.0 5.2 86.8 14.1 123.2 14.9
Subsidiary/other liquidity 205.7 28.4 194.6 31.7 210.7 25.4
------------------------------ ------------- ------ ------ ------ ------ ------
Total liquidity 724.9 100.0 613.7 100.0 829.5 100.0
------------------------------ ------------- ------ ------ ------ ------ ------
Capital
Capital is held to provide protection for depositors at levels
which exceed internal and minimum regulatory requirements at all
times.
The following table details the Group's capital ratios at 30
September 2016 and 31 March 2016:
Transitional Transitional
CRD IV Full implementation CRD IV Full implementation
rules of CRD IV rules of CRD IV
30-Sep-16 30-Sep-16 31-Mar-16 31-Mar-16
% % % %
Common Equity Tier 1 (as a
percentage of RWA) 13.8 13.8 14.6 14.6
Tier 1 (as a percentage of
RWA) 15.5 13.8 16.2 14.6
Total capital (as a percentage
of RWA) 16.1 14.5 16.9 15.3
Leverage ratio 7.2 6.5 7.6 6.9
-------------------------------- ------------- -------------------- ------------- --------------------
The two key measures of capital, under the legislative reforms
introduced in 2014 to strengthen regulatory standards on capital
adequacy, are the Common Equity Tier 1 (CET1) and the leverage
ratio, both currently calculated under CRD IV transitional rules
but with the impact of full implementation also shown. The leverage
ratio is based on total assets (including all structured entities)
and a number of regulatory adjustments.
The Group's Common Equity Tier 1 capital ratio remains strong at
13.8% (31 March 2016: 14.6%) but has reduced as a result of the buy
to let interest refund. The leverage ratio at 7.2% (31 March 2016:
7.6%) remains significantly above the current regulatory minimum of
3.0%.
Member value
The low interest rate environment is creating opportunities for
homeowners to borrow at increasingly competitive rates. We offer
considerable choice for mortgage customers, with our fixed rates
now extending to terms of up to ten years for those who appreciate
the certainty of knowing what their repayments will be.
Many of our mortgage products also incorporate incentives that
help bring down the overall cost of borrowing, such as the removal
of completion fees and valuation charges, as well as paying
cashback upon completion. Such an approach is particularly welcomed
by first time buyers, who can then focus their efforts purely on
saving money for a suitable deposit on their home.
While beneficial to borrowers, we appreciate that current market
conditions are very challenging for our saving members. This
situation has not been helped by a further reduction in Bank Base
Rate which has resulted in many providers, including ourselves,
having to review the returns they can realistically offer.
We are doing what we can to minimise the impact on savers and
still have options for members to earn a little more by investing
in fixed rate bonds or accounts with a limited number of
withdrawals. Our regular savings accounts are also an excellent way
to build up a savings pot over the course of a year through monthly
deposits.
Savings and mortgages continue to be our core proposition to
members, but during the period we have been proactive in other
areas too. We relaunched our later life proposition by bringing in
new partners so that members can access important services such as
funeral planning and will writing.
Financial advice is available in our branches through
independent advisers from Wren Sterling and selected sites have
hosted free open days so that members can find out more in an
informal environment without any obligation to invest.
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 Board's agreed risk appetite.
The Directors have 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, basis, operational,
retail conduct and pension liability (the Society's Risk Appetite
Statements).
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
2016, with the exception of what was previously referred to as the
risk of the buy to let judgement being overturned; this event has
now occurred. There have been no significant changes in the
Society's approach to risk management during the six months ended
30 September 2016.
Outlook
The Society will continue to build on its prime residential
lending, helping our borrowing members to purchase their own homes,
funded by our savings members who can rest assured that their
savings are safe.
Following the vote to leave the EU we have experienced some
market volatility and the economic environment has become more
uncertain, particularly in the commercial real estate sector where
the Society still has an exposure albeit significantly less so than
in previous years. The residential lending market does, however,
remain robust.
The further reduction in the Bank Base Rate to 0.25% has had an
adverse impact on savers and is likely to increase competition in
the mortgage market which may put pressure on the net interest
margin.
Despite the disappointment of the buy to let judgement, I am
pleased with the underlying progress that the Society has made in
the first six months of this financial year. We expect to see
further growth in our residential lending and ongoing investment in
our mortgage and savings systems to support sustainable growth and
continue to improve the customer experience for our members.
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 2016
6 months 6 months Year
ended ended ended
30-Sep-16 30-Sep-15 31-Mar-16
unaudited unaudited audited
Notes GBPm GBPm GBPm
Interest receivable and similar income 57.5 63.4 126.7
Interest expense and similar charges (30.7) (33.5) (66.7)
Net interest receivable 26.8 29.9 60.0
Fees and commissions receivable 1.2 1.5 3.7
Other operating income 2.1 1.9 3.9
Total operating income 30.1 33.3 67.6
Fair value (losses)/gains on financial
instruments (2.3) 0.1 (1.0)
Net realised profits 0.3 0.3 0.6
Total income 28.1 33.7 67.2
Administrative expenses (22.0) (20.6) (42.0)
Depreciation and amortisation 10 (3.0) (2.1) (5.1)
Operating profit before revaluation
gains, impairment and provisions 3.1 11.0 20.1
Gains on investment properties 3.3 2.5 5.5
Impairment on loans and advances 6 (0.8) (4.1) (8.1)
Provisions for liabilities 7 (29.3) (3.4) (4.0)
(Loss)/Profit before tax (23.7) 6.0 13.5
Taxation 17 (6.8) (1.3) (4.1)
(Loss)/Profit for the period (30.5) 4.7 9.4
---------------------------------------- ------ ---------- ---------- ----------
Condensed consolidated half-yearly Statement of Comprehensive
Income
for the six months ended 30 September 2016
6 months 6 months Year
ended ended ended
30-Sep-16 30-Sep-15 31-Mar-16
unaudited unaudited audited
GBPm GBPm GBPm
(Loss)/Profit for the period (30.5) 4.7 9.4
--------------------------------------------------- ---------------- ---------------- -----------------
Other comprehensive income
Items that may subsequently be reclassified
to profit or loss
Available for sale investments
Valuation gain/(loss) taken to equity 0.6 (1.6) (2.2)
Amounts transferred to Income Statement (0.3) (0.3) (0.6)
Cash flow hedge losses taken to equity (0.6) (0.3) (0.2)
Taxation - 0.4 0.2
Items that will not subsequently be reclassified
to profit or loss
Actuarial losses on defined benefit obligations - - (0.9)
Taxation - - 0.1
--------------------------------------------------- ---------------- ---------------- -----------------
Other comprehensive loss for the period,
net of tax (0.3) (1.8) (3.6)
--------------------------------------------------- ---------------- ---------------- -----------------
Total comprehensive (loss)/income for the
period (30.8) 2.9 5.8
--------------------------------------------------- ---------------- ---------------- -----------------
As a percentage of mean total assets % % %
(Loss)/Profit for the period (0.53) 0.08 0.17
Management expenses (annualised) 0.87 0.82 0.83
--------------------------------------------------- ---------------- ---------------- -----------------
Condensed consolidated half-yearly Statement of Financial
Position
at 30 September 2016
30-Sep-16 30-Sep-15 31-Mar-16
unaudited unaudited audited
Notes GBPm GBPm GBPm
Assets
Cash and balances with the Bank
of England 145.5 103.8 215.4
Loans and advances to credit institutions 198.6 187.6 204.0
Investment securities 380.8 322.3 410.1
Derivative financial instruments 8.2 10.3 8.9
Loans and advances to customers 8 4,816.2 4,692.3 4,739.0
Deferred tax assets 14.4 23.1 20.4
Trade and other receivables 3.9 3.0 2.7
Intangible assets 10 9.6 7.1 8.2
Investment properties 11 126.9 120.7 123.7
Property, plant and equipment 10 31.9 33.0 33.9
Retirement benefit assets 0.7 - 0.8
------------------------------------------ ----- ----------------------- ---------------------- -----------------
Total assets 5,736.7 5,503.2 5,767.1
------------------------------------------ ----- ----------------------- ---------------------- -----------------
Liabilities
Shares 9 4,398.9 4,048.1 4,385.1
Amounts due to credit institutions 279.0 282.0 259.0
Amounts due to other customers 179.0 149.5 157.0
Derivative financial instruments 89.8 68.9 77.1
Debt securities in issue 12 306.3 438.1 368.6
Deferred tax liabilities 5.4 4.5 4.7
Trade and other payables 8.5 10.0 15.2
Provisions for liabilities 7 2.9 2.5 2.7
Retirement benefit obligations - 4.8 -
------------------------------------------ ----- ----------------------- ---------------------- -----------------
Total liabilities 5,269.8 5,008.4 5,269.4
------------------------------------------ ----- ----------------------- ---------------------- -----------------
Equity
Profit participating deferred shares 13 171.9 178.3 179.5
Subscribed capital 15 74.9 74.9 74.9
General reserves 216.4 236.6 239.3
Revaluation reserve 3.4 3.4 3.4
Available for sale reserve 1.2 2.0 0.9
Cash flow hedging reserve (0.9) (0.4) (0.3)
------------------------------------------ ----- ----------------------- ---------------------- -----------------
Total equity attributable to members 466.9 494.8 497.7
------------------------------------------ ----- ----------------------- ---------------------- -----------------
Total liabilities and equity 5,736.7 5,503.2 5,767.1
------------------------------------------ ----- ----------------------- ---------------------- -----------------
As a percentage of shares and borrowings % % %
Gross capital 9.6 11.0 10.4
Free capital 6.6 7.9 7.3
Total liquidity 14.9 13.7 17.3
------------------------------------------ ----- ----------------------- ---------------------- -----------------
Condensed consolidated Statement of Changes in Members'
Interest
for the six months ended 30 September 2016
6 months ended 30 September 2016 (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 2016 179.5 74.9 239.3 3.4 0.9 (0.3) 497.7
Loss for the period (7.6) - (22.9) - - - (30.5)
Other comprehensive
income/(loss)
for the period
Available for sale
investments:
current period movement
net of tax - - - - 0.3 - 0.3
Cash flow hedge losses - - - - - (0.6) (0.6)
------------------------------ --------------- ----------- ---------- ------------ ---------- --------- -------
Total other comprehensive
income/(loss) - - - - 0.3 (0.6) (0.3)
------------------------------ --------------- ----------- ---------- ------------ ---------- --------- -------
Total comprehensive
(loss)/income
for the period (7.6) - (22.9) - 0.3 (0.6) (30.8)
------------------------------ --------------- ----------- ---------- ------------ ---------- --------- -------
At 30 September 2016 171.9 74.9 216.4 3.4 1.2 (0.9) 466.9
------------------------------ --------------- ----------- ---------- ------------ ---------- --------- -------
6 months ended 30 September 2015
(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 2015 177.1 74.9 233.1 3.4 3.5 (0.1) 491.9
Profit for the period 1.2 - 3.5 - - - 4.7
Other comprehensive loss
for the period
Available for sale
investments:
current period movement
net of tax - - - - (1.5) - (1.5)
Cash flow hedge losses - - - - - (0.3) (0.3)
------------------------------ --------------- ----------- ---------- ------------ ---------- --------- -------
Total other comprehensive
loss - - - - (1.5) (0.3) (1.8)
------------------------------ --------------- ----------- ---------- ------------ ---------- --------- -------
Total comprehensive
income/(loss)
for the period 1.2 - 3.5 - (1.5) (0.3) 2.9
------------------------------ --------------- ----------- ---------- ------------ ---------- --------- -------
At 30 September 2015 178.3 74.9 236.6 3.4 2.0 (0.4) 494.8
------------------------------ --------------- ----------- ---------- ------------ ---------- --------- -------
Year ended 31 March 2016
(audited)
Profit Available Cash
participating for flow
deferred Subscribed General Revaluation sale hedging
shares capital reserves reserve reserve reserve Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 April 2015 177.1 74.9 233.1 3.4 3.5 (0.1) 491.9
Profit for the period 2.4 - 7.0 - - - 9.4
Other comprehensive loss
for the period
Available for sale
investments:
current period movement
net of tax - - - - (2.6) - (2.6)
Actuarial losses on defined
benefit obligations - - (0.8) - - - (0.8)
Cash flow hedge losses - - - - - (0.2) (0.2)
Total other comprehensive
loss - - (0.8) - (2.6) (0.2) (3.6)
------------------------------- --------------- ----------- ---------- ------------ ---------- --------- ------
Total comprehensive
income/(loss)
for the period 2.4 - 6.2 - (2.6) (0.2) 5.8
------------------------------- --------------- ----------- ---------- ------------ ---------- --------- ------
At 31 March 2016 179.5 74.9 239.3 3.4 0.9 (0.3) 497.7
------------------------------- --------------- ----------- ---------- ------------ ---------- --------- ------
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 2016
6 months 6 months Year
ended ended ended
30-Sep-16 30-Sep-15 31-Mar-16
unaudited unaudited audited
GBPm GBPm GBPm
Net cash (outflow)/inflow from operating
activities (below) (40.0) (69.1) 220.3
------------------------------------------- ------------------- ------------------ -------------------
Cash flows from investing activities
Purchase of investment securities (115.5) (114.4) (386.7)
Proceeds from disposal of investment
securities 118.0 122.0 298.0
Proceeds from disposal of investment
properties 0.1 0.4 0.4
Purchase of property, plant and equipment
and intangible assets (2.9) (5.0) (8.8)
Proceeds from disposal of property,
plant and equipment 0.5 - -
Net cash flows from investing activities 0.2 3.0 (97.1)
------------------------------------------- ------------------- ------------------ -------------------
Cash flows from financing activities
Repayment of mortgage backed loan notes (62.7) (29.0) (98.5)
Net cash flows from financing activities (62.7) (29.0) (98.5)
------------------------------------------- ------------------- ------------------ -------------------
Net (decrease)/increase in cash and
cash equivalents (102.5) (95.1) 24.7
Cash and cash equivalents at beginning
of period 468.8 444.1 444.1
------------------------------------------- ------------------- ------------------ -------------------
Cash and cash equivalents at end of
period 366.3 349.0 468.8
------------------------------------------- ------------------- ------------------ -------------------
For the purposes of the cash flow statement, cash and cash
equivalents comprise the following balances with less than 90 days
maturity:
30-Sep-16 30-Sep-15 31-Mar-16
unaudited unaudited audited
GBPm GBPm GBPm
Cash and cash equivalents
Cash in hand (including Bank of England
Reserve account) 138.4 96.8 208.7
Loans and advances to credit institutions 198.6 187.6 204.0
Investment securities 29.3 64.6 56.1
------------------------------------------- ----------------- ---------------- ------------------
366.3 349.0 468.8
------------------------------------------ ----------------- ---------------- ------------------
The Group is required to maintain certain mandatory balances
with the Bank of England which, at 30 September 2016, amounted to
GBP7.1m (30 September 2015: GBP7.0m and 31 March 2016: GBP6.7m).
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 2016
6 months 6 months Year
ended ended ended
30-Sep-16 30-Sep-15 31-Mar-16
unaudited unaudited audited
GBPm GBPm GBPm
Cash flows from operating activities
(Loss)/Profit on ordinary activities
before tax from continuing activities (23.7) 6.0 13.5
Movement in prepayments and accrued
income (1.2) (0.5) (0.2)
Movement in accruals and deferred
income (4.9) (3.5) (0.4)
Impairment on loans and advances 0.8 4.1 8.1
Depreciation and amortisation 3.0 2.1 5.1
Revaluation of investment properties (3.3) (2.5) (5.5)
Movement in provisions for liabilities 0.2 0.3 0.5
Movement in derivative financial instruments 13.4 (3.2) 6.4
Movement in fair value adjustments (13.3) 12.5 (2.3)
Change in retirement benefit obligations 0.1 (2.7) (9.2)
---------------------------------------------- -------------------- ------------------ ---------------------
(28.9) 12.6 16.0
Cash flows from operating activities before
changes in operating assets and liabilities
Movement in loans and advances to
customers (64.6) (35.9) (72.4)
Movements in loans and advances to
credit institutions (0.4) 0.3 0.6
Movement in shares 13.7 67.6 407.1
Movement in deposits and other borrowings 42.0 (114.2) (129.7)
Movement in trade and other receivables - 0.2 2.4
Movement in trade and other payables (1.8) 0.7 (3.7)
Tax paid - (0.4) -
--------------------------------------------- -------------------- ------------------ ---------------------
Net cash (outflow)/inflow from operating
activities (40.0) (69.1) 220.3
---------------------------------------------- -------------------- ------------------ ---------------------
Notes to condensed consolidated half-yearly financial
information
for the six months ended 30 September 2016
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
2016 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 auditor and the report of the auditor was (i) unqualified,
and (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their
report.
The consolidated half-yearly financial information for the six
months to 30 September 2016 and 30 September 2015 is unaudited and
has not been reviewed by the Group's auditor.
2 Basis of preparation
This condensed consolidated half-yearly financial report for the
six months ended 30 September 2016 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 2016, which have
been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union.
3 Going concern
Details of the Group's objectives, policies and processes for
managing its exposure to risk are contained in the Risk Management
Report of the 2016 Annual Report and Accounts. The Directors also
include a statement in the Directors' Report in respect of going
concern on page 24 of the 2016 Annual Report and Accounts.
The Directors have reviewed the plans and forecasts for the
Group giving consideration to liquidity and capital adequacy,
together with the outlook for the UK economy following the vote to
leave the European Union. Following on from the loss of the buy to
let legal case, the Group had sufficient capital set aside to cover
for such eventuality and remains in a strong capital position, at a
level significantly in excess of regulatory requirements. In this
context the Directors consider the Group has adequate liquidity to
meet both the normal demands of the business and the requirements
which might arise in stressed circumstances for the foreseeable
future. Accordingly they continue to adopt the going concern basis
in preparing these half-yearly financial results.
4 Accounting policies
The accounting policies adopted by the Group in the preparation
of its 2016 Interim Financial Report are consistent with those
disclosed in the Annual Report and Accounts for the year ended 31
March 2016.
A number of minor amendments were made to some accounting
standards that have no material impact on the preparation of the
2016 Interim Accounts.
5 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 2016 Consolidation Total
(unaudited) Retail Commercial Property adjustments Group
GBPm GBPm GBPm GBPm GBPm
Income
Interest receivable and similar
income 57.5 8.3 - (8.3) 57.5
Interest expense and similar charges (30.0) (7.5) (1.6) 8.4 (30.7)
--------------------------------------- ------- ---------- -------- ------------- -------
Net interest receivable/(expense) 27.5 0.8 (1.6) 0.1 26.8
Fees and commissions receivable 1.2 - - - 1.2
Other operating (expense)/income (0.1) - 2.2 - 2.1
--------------------------------------- ------- ---------- -------- ------------- -------
Total operating income 28.6 0.8 0.6 0.1 30.1
Fair value (losses)/gains on financial
instruments (3.1) 0.1 - 0.7 (2.3)
Net realised profits 0.3 - - - 0.3
--------------------------------------- ------- ---------- -------- ------------- -------
Total income 25.8 0.9 0.6 0.8 28.1
Administrative expenses (21.1) (0.8) (0.1) - (22.0)
Depreciation and amortisation (3.0) - - - (3.0)
--------------------------------------- ------- ---------- -------- ------------- -------
Operating profit before revaluation
gains, impairment and provisions 1.7 0.1 0.5 0.8 3.1
Gains on investment properties - - 3.3 - 3.3
Impairment on loans and advances 3.0 (3.8) - - (0.8)
Provisions for liabilities (29.3) - - - (29.3)
--------------------------------------- ------- ---------- -------- ------------- -------
(Loss)/Profit before tax (24.6) (3.7) 3.8 0.8 (23.7)
--------------------------------------- ------- ---------- -------- ------------- -------
Total assets 5,927.0 520.9 131.2 (842.4) 5,736.7
--------------------------------------- ------- ---------- -------- ------------- -------
Total liabilities 5,447.1 619.5 89.4 (886.2) 5,269.8
--------------------------------------- ------- ---------- -------- ------------- -------
Capital expenditure 2.9 - - - 2.9
--------------------------------------- ------- ---------- -------- ------------- -------
6 months ended 30 September 2015 Consolidation Total
(unaudited) Retail Commercial Property adjustments Group
GBPm GBPm GBPm GBPm GBPm
Income
Interest receivable and similar
income 62.2 9.6 - (8.4) 63.4
Interest expense and similar charges (32.5) (7.7) (1.6) 8.3 (33.5)
--------------------------------------- ------- ---------- -------- ------------- -------
Net interest receivable/(expense) 29.7 1.9 (1.6) (0.1) 29.9
Fees and commissions receivable 1.5 - - - 1.5
Other operating (expense)/income (0.2) - 2.1 - 1.9
--------------------------------------- ------- ---------- -------- ------------- -------
Total operating income 31.0 1.9 0.5 (0.1) 33.3
Fair value (losses)/gains on financial
instruments (0.8) 0.4 - 0.5 0.1
Net realised profits 0.3 - - - 0.3
--------------------------------------- ------- ---------- -------- ------------- -------
Total income 30.5 2.3 0.5 0.4 33.7
Administrative expenses (19.6) (0.9) (0.1) - (20.6)
Depreciation and amortisation (2.1) - - - (2.1)
--------------------------------------- ------- ---------- -------- ------------- -------
Operating profit before revaluation
gains, impairment and provisions 8.8 1.4 0.4 0.4 11.0
Gains on investment properties - - 2.5 - 2.5
Impairment on loans and advances 0.4 (4.5) - - (4.1)
Provisions for liabilities (3.4) - - - (3.4)
--------------------------------------- ------- ---------- -------- ------------- -------
Profit/(Loss) before tax 5.8 (3.1) 2.9 0.4 6.0
--------------------------------------- ------- ---------- -------- ------------- -------
Total assets 5,664.7 620.4 126.0 (907.9) 5,503.2
--------------------------------------- ------- ---------- -------- ------------- -------
Total liabilities 5,126.6 712.5 91.6 (922.3) 5,008.4
--------------------------------------- ------- ---------- -------- ------------- -------
Capital expenditure 5.0 - - - 5.0
--------------------------------------- ------- ---------- -------- ------------- -------
Consolidation Total
Year ended 31 March 2016 (audited) Retail Commercial Property adjustments Group
GBPm GBPm GBPm GBPm GBPm
Income
Interest receivable and similar
income 123.2 19.4 - (15.9) 126.7
Interest expense and similar charges (65.0) (14.7) (2.9) 15.9 (66.7)
--------------------------------------- ------- ---------- -------- ------------- -------
Net interest receivable/(expense) 58.2 4.7 (2.9) - 60.0
Fees and commissions receivable 3.7 - - - 3.7
Other operating income 30.5 - 4.1 (30.7) 3.9
--------------------------------------- ------- ---------- -------- ------------- -------
Total operating income 92.4 4.7 1.2 (30.7) 67.6
Fair value (losses)/gains on financial
instruments (1.2) 0.6 - (0.4) (1.0)
Net realised profits 0.6 - - - 0.6
--------------------------------------- ------- ---------- -------- ------------- -------
Total income 91.8 5.3 1.2 (31.1) 67.2
Administrative expenses (40.1) (1.7) (0.2) - (42.0)
Depreciation and amortisation (5.1) - - - (5.1)
--------------------------------------- ------- ---------- -------- ------------- -------
Operating profit before revaluation
gains, impairment and provisions 46.6 3.6 1.0 (31.1) 20.1
Gains on investment properties - - 5.5 - 5.5
Impairment on loans and advances (0.2) (7.9) - - (8.1)
Provisions for liabilities (34.8) - - 30.8 (4.0)
--------------------------------------- ------- ---------- -------- ------------- -------
Profit/(Loss) before tax 11.6 (4.3) 6.5 (0.3) 13.5
--------------------------------------- ------- ---------- -------- ------------- -------
Total assets 5,944.9 542.7 128.1 (848.6) 5,767.1
--------------------------------------- ------- ---------- -------- ------------- -------
Total liabilities 5,434.6 637.5 90.3 (893.0) 5,269.4
--------------------------------------- ------- ---------- -------- ------------- -------
Capital expenditure 10.0 - - - 10.0
--------------------------------------- ------- ---------- -------- ------------- -------
6 Allowance for losses on loans and advances to customers
6 months 6 months Year
ended ended ended
30-Sep-16 30-Sep-15 31-Mar-16
unaudited unaudited audited
GBPm GBPm GBPm
Impairment charge for the period 0.8 4.1 8.1
-------------------------------------------- --------- --------- ---------
Impairment provision at end of period
Loans fully secured on residential property 17.4 22.3 20.8
Other loans 42.6 43.8 43.9
-------------------------------------------- --------- --------- ---------
Total 60.0 66.1 64.7
-------------------------------------------- --------- --------- ---------
7 Provisions for liabilities
6 months ended 30 September 2016
(unaudited) Buy to
let FSCS Other Total
GBPm GBPm GBPm GBPm
At beginning of
period - 1.4 1.3 2.7
Utilised in the
period (27.5) (1.4) (0.2) (29.1)
Charge for the
period 27.5 1.3 0.5 29.3
At end of period - 1.3 1.6 2.9
------------------------------------ ---- ------- ------ ------ -------
6 months ended 30 September 2015
(unaudited) Buy to
let FSCS Other Total
GBPm GBPm GBPm GBPm
At beginning of
period - 1.8 0.4 2.2
Utilised in the
period - (3.0) (0.1) (3.1)
Charge for the period - 2.5 0.9 3.4
At end of period - 1.3 1.2 2.5
----------------------------------- ----- ------- ------ ------ -------
Year ended 31 March 2016
(audited) Buy to
let FSCS Other Total
GBPm GBPm GBPm GBPm
At beginning of
period - 1.8 0.4 2.2
Utilised in the
period - (3.0) (0.5) (3.5)
Charge for the period - 2.6 1.4 4.0
At end of period - 1.4 1.3 2.7
----------------------------------- ----- ------- ------ ------ -------
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 met these claims by way of loans received from HM
Treasury. The terms of these loans were interest only for the first
three years, and the FSCS recovers the interest cost, together with
ongoing management expenses, by way of annual management levies on
members.
The Society FSCS provision reflects market participation up to
the reporting date.
Buy to let provision
In December 2013, West Bromwich Mortgage Company Limited (the
Company) chose to vary the interest rate margin charged for certain
multi-property landlords in line with the terms and conditions of
their buy to let mortgages. Certain impacted parties initiated
legal proceedings against the Company to challenge this increase.
To 31 March 2016, the rate uplift contributed GBP25.1m to Group
interest receivable. Following our successful defence of this
challenge in the High Court a final judgement was made in the Court
of Appeal in June 2016 which ruled against the Company.
Subsequently, refunds have been issued to affected customers along
with interest.
Other provisions
Other provisions include an allowance for customer claims
relating to Payment Protection Insurance (PPI) redress. The charge
to September 2016 represents the amounts expected to be settled
based on an anticipated introduction of a deadline for PPI
claims.
8 Loans and advances to customers
30-Sep-16 30-Sep-15 31-Mar-16
unaudited unaudited audited
GBPm GBPm GBPm
Loans and receivables
Loans fully secured on residential
property 4,242.1 4,025.5 4,131.2
Other loans
Loans fully secured
on land 542.8 640.4 584.4
Other loans 0.1 0.1 0.1
4,785.0 4,666.0 4,715.7
At fair value through
profit or loss
Other loans
Loans fully secured
on land 18.8 36.0 26.0
4,803.8 4,702.0 4,741.7
----------------------------------- --------------- --------------- ---------------
Fair value adjustment for
hedged risk 72.4 56.4 62.0
Less: impairment provisions (60.0) (66.1) (64.7)
4,816.2 4,692.3 4,739.0
----------------------------------- --------------- --------------- ---------------
Included within loans and advances to customers are GBP633.5m
(31 March 2016: GBP679.6m) of Commercial lending balances of which
GBP76.4m (31 March 2016: GBP92.1m) have been sold by the Group to
bankruptcy remote structured entities. A further GBP1,081.5m (31
March 2016: GBP1,165.8m) of residential mortgage balances, included
within loans and advances to customers, have also been sold by the
Group to structured entities. The structured entities have been
funded by issuing mortgage backed securities (MBSs) of which
GBP845.3m (31 March 2016: GBP889.9m) are held by the Group.
The Group has made subordinated loans to the structured entities
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 structured
entities 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.
9 Shares
30-Sep-16 30-Sep-15 31-Mar-16
unaudited unaudited audited
GBPm GBPm GBPm
Held by individuals 4,391.2 4,038.0 4,377.4
Other shares 1.1 1.1 1.1
Fair value adjustment for hedged
risk 6.6 9.0 6.6
--------------------------------- --------- --------- ---------
4,398.9 4,048.1 4,385.1
--------------------------------- --------- --------- ---------
10 Property, plant, equipment and intangible assets
Intangible Tangible
assets assets
6 months ended 30 September 2016 (unaudited) GBPm GBPm
Net book value at 1 April 2016 8.2 33.9
Additions 2.8 0.1
Disposals - (0.5)
Depreciation, amortisation, impairment and other (1.4) (1.6)
movements
-------------------------------------------------- -------------- -------------
Net book value at 30 September 2016 9.6 31.9
-------------------------------------------------- -------------- -------------
Intangible Tangible
assets assets
6 months ended 30 September 2015 (unaudited) GBPm GBPm
Net book value at 1 April 2015 7.0 30.2
Additions 1.3 3.7
Depreciation, amortisation, impairment and other
movements (1.2) (0.9)
-------------------------------------------------- -------------- -------------
Net book value at 30 September 2015 7.1 33.0
-------------------------------------------------- -------------- -------------
Intangible Tangible
assets assets
Year ended 31 March 2016 (audited) GBPm GBPm
Net book value at 1 April 2015 7.0 30.2
Additions 4.0 6.0
Depreciation, amortisation, impairment and other
movements (2.8) (2.3)
-------------------------------------------------- -------------- -------------
Net book value at 31 March 2016 8.2 33.9
-------------------------------------------------- -------------- -------------
Capital commitments
The Group has placed contracts amounting to a total of GBP1.6m
(31 March 2016: GBP4.2m) for future expenditure that was not
provided in the financial statements.
11 Investment properties
6 months 6 months Year
ended ended ended
30-Sep-16 30-Sep-15 31-Mar-16
unaudited unaudited audited
GBPm GBPm GBPm
Valuation
At beginning of period 123.7 118.6 118.6
Disposals (0.1) (0.4) (0.4)
Revaluation gains 3.3 2.5 5.5
At end of period 126.9 120.7 123.7
----------------------- --------- --------- ---------
12 Debt securities in issue
30-Sep-16 30-Sep-15 31-Mar-16
unaudited unaudited audited
GBPm GBPm GBPm
Non-recourse finance on securitised
advances 306.3 438.1 368.6
------------------------------------ --------- --------- ---------
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.
13 Profit participating deferred shares
30-Sep-16 30-Sep-15 31-Mar-16
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 (4.6) (7.0) (7.0)
Share of (loss)/profit for the period (7.6) 1.2 2.4
-------------------------------------- --------- --------- ---------
(12.2) (5.8) (4.6)
-------------------------------------- --------- --------- ---------
Net value at end of period 171.9 178.3 179.5
-------------------------------------- --------- --------- ---------
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.
14 Related party transactions
Related party transactions for the six months to 30 September
2016 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 2016.
15 Subscribed capital
30-Sep-16 30-Sep-15 31-Mar-16
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.
16 Financial instruments
Fair values of financial assets and financial liabilities
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The Group determines
fair values by the following three tier valuation hierarchy:
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.
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.
Financial assets and financial liabilities held at amortised
cost
The tables below show the fair values of the Group's financial
assets and liabilities held at amortised cost in the Statement of
Financial Position, analysed according to the fair value hierarchy
described above.
6 months ended 30 September 2016
(unaudited) Carrying Fair value Fair value Fair value Fair value
Level Level Level
value 1 2 3 Total
GBPm GBPm GBPm GBPm GBPm
Financial assets
Cash and balances with the Bank
of England 145.5 145.5 - - 145.5
Loans and advances to credit
institutions 198.6 - 198.6 - 198.6
Loans and advances to customers 4,797.7 - - 4,755.5 4,755.5
--------------------------------------- ------------ --------------- --------------- --------------- ------------
5,141.8 145.5 198.6 4,755.5 5,099.6
--------------------------------------- ------------ --------------- --------------- --------------- ------------
Financial liabilities
Shares 4,398.9 - - 4,390.4 4,390.4
Amounts due to credit institutions 279.0 - 279.0 - 279.0
Amounts due to other customers 179.0 - 179.0 - 179.0
Debt securities in issue 288.5 272.7 8.1 - 280.8
--------------------------------------- ------------ --------------- --------------- --------------- ------------
5,145.4 272.7 466.1 4,390.4 5,129.2
--------------------------------------- ------------ --------------- --------------- --------------- ------------
6 months ended 30 September 2015
(unaudited) Carrying Fair value Fair value Fair value Fair value
Level Level Level
value 1 2 3 Total
GBPm GBPm GBPm GBPm GBPm
Financial assets
Cash and balances with the Bank
of England 103.8 103.8 - - 103.8
Loans and advances to credit
institutions 187.6 - 187.6 - 187.6
Loans and advances to customers 4,658.2 - - 4,649.7 4,649.7
------------------------------------- ------------- --------------- --------------- --------------- -------------
4,949.6 103.8 187.6 4,649.7 4,941.1
------------------------------------- ------------- --------------- --------------- --------------- -------------
Financial liabilities
Shares 4,048.1 - - 4,026.5 4,026.5
Amounts due to credit institutions 282.0 - 282.0 - 282.0
Amounts due to other customers 149.5 - 149.5 - 149.5
Debt securities in issue 407.7 393.9 8.2 - 402.1
------------------------------------- ------------- --------------- --------------- --------------- -------------
4,887.3 393.9 439.7 4,026.5 4,860.1
------------------------------------- ------------- --------------- --------------- --------------- -------------
Year ended 31 March 2016 (audited) Carrying Fair value Fair value Fair value Fair value
Level Level Level
value 1 2 3 Total
GBPm GBPm GBPm GBPm GBPm
Financial assets
Cash and balances with the Bank
of England 215.4 215.4 - - 215.4
Loans and advances to credit
institutions 204.0 - 204.0 - 204.0
Loans and advances to customers 4,715.4 - - 4,684.7 4,684.7
-------------------------------------- ------------- --------------- --------------- --------------- ------------
5,134.8 215.4 204.0 4,684.7 5,104.1
-------------------------------------- ------------- --------------- --------------- --------------- ------------
Financial liabilities
Shares 4,385.1 - - 4,371.6 4,371.6
Amounts due to credit institutions 259.0 - 259.0 - 259.0
Amounts due to other customers 157.0 - 157.0 - 157.0
Debt securities in issue 346.8 329.9 8.1 - 338.0
-------------------------------------- ------------- --------------- --------------- --------------- ------------
5,147.9 329.9 424.1 4,371.6 5,125.6
-------------------------------------- ------------- --------------- --------------- --------------- ------------
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. 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 2016.
b) Shares 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 deposits with similar remaining 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 2016.
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.
Financial assets and financial liabilities held at fair value
through profit or loss
The tables below show the fair values of the Group's financial
assets and liabilities held at fair value in the Statement of
Financial Position, analysed according to the fair value hierarchy
described previously.
Level Level
6 months ended 30 September 2016 (unaudited) 1 2 Total
GBPm GBPm GBPm
Financial assets
Investment securities 378.8 2.0 380.8
Derivative financial instruments - 8.2 8.2
Loans and advances to customers - 18.5 18.5
378.8 28.7 407.5
--------------------------------------------- --------------- ----------------- --------------
Financial liabilities
Derivative financial instruments - 89.8 89.8
Debt securities in issue - 17.8 17.8
- 107.6 107.6
--------------------------------------------- --------------- ----------------- --------------
Level Level
6 months ended 30 September 2015 (unaudited) 1 2 Total
GBPm GBPm GBPm
Financial assets
Investment securities 322.3 - 322.3
Derivative financial instruments - 10.3 10.3
Loans and advances to customers - 34.1 34.1
322.3 44.4 366.7
--------------------------------------------- --------------- --------------- -------------
Financial liabilities
Derivative financial instruments - 68.9 68.9
Debt securities in issue - 30.4 30.4
- 99.3 99.3
--------------------------------------------- --------------- --------------- -------------
Level
Year ended 31 March 2016 (audited) Level 1 2 Total
GBPm GBPm GBPm
Financial assets
Investment securities 359.0 51.1 410.1
Derivative financial instruments - 8.9 8.9
Loans and advances to customers - 23.6 23.6
359.0 83.6 442.6
----------------------------------- --------------- ----------------- -------------
Financial liabilities
Derivative financial instruments - 77.1 77.1
Debt securities in issue - 21.8 21.8
- 98.9 98.9
----------------------------------- --------------- ----------------- -------------
17 Deferred tax assets
Deferred tax assets are recognised only to the extent that
realisation of the related tax benefit against future taxable
profits is probable over the foreseeable future. The deferred tax
asset balances attributable to carried forward losses are expected
to be substantially recovered against future taxable profits (as
projected in the latest Strategic Plan) within five years.
The buy to let judgement has resulted in a loss for the half
year to 30 September 2016 and impacted on the recurring margin for
the affected mortgages. This has reduced the level of past losses
expected to be substantially recovered against future taxable
profits. The deferred tax asset arising on past losses is written
down to reflect this and no tax credit is recognised against the
loss for the half year. This has resulted in a tax charge of
GBP6.8m for the period.
18 Statement of Directors' responsibilities
The Directors confirm that this condensed set of financial
statements has been prepared in accordance with IAS 34 'Interim
Financial Reporting' as adopted by the European Union, and that the
interim 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 2016.
By order of the Board
Jonathan Westhoff
Chief Executive
Mark Gibbard
Group Finance & Operations Director
This information is provided by RNS
The company news service from the London Stock Exchange
END
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