TIDMNBSR
RNS Number : 4604Y
Newcastle Building Society
01 March 2012
NEWCASTLE BUILDING SOCIETY ANNOUNCES FINANCIAL RESULTS FOR THE
YEAR ENDED 31 DECEMBER 2011
Newcastle Building Society today announces its 2011 results,
which reflect the success of its revised strategy with an operating
profit before impairments, provisions and exceptional items of
GBP9.2m and a profit before tax of GBP0.1m.
Key highlights:
-- Operating profit before impairments, provisions and
exceptional items improved to GBP9.2m compared to an operating loss
of GBP0.3m for 2010;
-- Profit before tax of GBP0.1m compared to a loss before tax of GBP4.7m for 2010;
-- A further reduction in management expenses combined with an
increase in operating income of 22% resulted in an improved cost to
income ratio of 80% (2010: 101%);
-- Liquid assets ratio was strong at 29.2% increased from 25.2% at the end of 2010;
-- Capital ratios continued to improve with Solvency ratio at 15.0% (2010: 14.1%);
-- Solutions business volumes and profitability improved with a
50% growth in the number of accounts under management;
-- GBP185m reduction in higher risk legacy portfolios ahead of
our expectations including a 22% reduction in commercial investment
loan portfolio;
-- Against a more challenging economic backdrop the Society has
recognised a provisions charge of GBP12.3m (2010: GBP1.8m), mainly
in relation to the commercial portfolio;
-- The number of loans in 3 months arrears or more was 0.75%
across the whole mortgage portfolio (2010: 0.78%);
-- Sale of the Prepaid Card division of the Solutions business
in December 2011 with a gain on disposal recognised of GBP3.9m;
-- Customer satisfaction improved to 90%; and
-- Staff satisfaction indicator improved to 84%.
Chief Executive's Review
"The Society made steady progress during 2011 towards our
long-term objectives, set against a protracted period of economic
downturn. Our focus on ensuring long-term delivery to our members,
employees, support for local communities and Solutions business
customers has meant the Society has continued to build on the
successes of 2010, as well as deliver results ahead of our
strategic plan.
Steady Financial Progress
The Society's profitability showed significant improvement in
2011. This was supported by a fall in management expenses and an
increase in operating income (by 22%), which gave an improved cost
to income ratio of 80% (compared to 101% in 2010). Additionally,
our capital ratios continued to improve year-on-year. At the end of
2011 solvency ratio was 15.0% up from 14.1% in 2010, and Tier 1
capital was up from 10.7% to 11.7%. Liquidity also continues to be
very strong at 29.2%.
Given the continuing challenges within the economy, we have
performed an in-depth review of the potential risk attached to
legacy assets held by the Society. As a result, we have recognised
a substantial provisions charge of GBP12.3m to protect the business
in the years ahead. We have also recognised a charge of GBP1.4m in
2011 in relation to the levy imposed by the Financial Services
Compensation Scheme, which reflects a higher funding cost that is
expected to arise.
Traditional Building Society model supported through
diversification
Our strategy recognises the challenges still facing the economy,
financial services generally and individuals. We have and will
continue to focus on our key strengths and our long-term strategic
focus remains to be a traditional building society supported by
diversification through our Solutions business and supported by
prudent cost management. This has served us well in 2011 and I am
confident will continue to do so in the years ahead.
As part of our ongoing business simplification objectives, we
sold the Prepaid Cards division of the Solutions business in
December 2011 with a gain on disposal recognised of GBP3.9m. As
part of the sale, it was important to us to secure all the jobs and
keep them within the North East; we are delighted that the Buyer,
Wirecard AG, has established a subsidiary within the North East and
will continue to invest in this business.
We continued to simplify the group structure in 2011; repaying
the commercial securitisation programme at the first call option in
February and unwinding the GBP500m Covered Bond programme in July
2011 following repayment of the notes. This was also supported by a
reduction in our legacy mortgage portfolios with GBP185m of
repayments; including a 22% fall in commercial investment exposures
and 17% decrease in buy to let loans.
Our Solutions division had a very successful year with 50%
growth in the number of accounts under management and new contracts
launched. We enter 2012 with a healthy pipeline of new business
from existing and new clients and both present the opportunity for
further growth in this part of our operations. We will continue to
pursue a controlled and balanced approach to this strategy thus
allowing us to concentrate our efforts further on our key
stakeholders.
Supporting and showing commitment to our Members
We have again enjoyed excellent support from our membership. In
excess of 25,000 new customers were welcomed to the Society, which
reflects a year when we had excellent products available.
To support our members who save, we added a range of competitive
products to our portfolio, many of which were Best Buy. This
includes our five year Fixed Rate Bond, Online Easy Saver and Bonus
ISA. We also introduced a range of competitive mortgage products; I
was particularly pleased that our first time buyer products were so
well received in a market place that needs to encourage more
activity amongst those seeking their first home.
Our Penrith branch was reopened during 2011 having spent eight
months operating from temporary premises following a flood as a
result of the extreme cold weather spell in December 2010. Local
needs and involvement of local members helped to develop plans for
the re-launch. Combine this with the experience gained when we
launched our flagship branch in Newcastle city centre and we have
created a blueprint for future branch development.
Customer satisfaction improved from 85% to 90% during 2011,
which is itself a pleasing result. However, we will always welcome
feedback and seek to develop ways where both delivery of quality
products and service levels are improved on a continual basis.
Staff Engagement
Our staff engagement programme, led by a group of staff
representatives from across the business aims to evaluate, develop
and build on key areas of the organisation as we seek to make the
Society one of the most rewarding places to work in the region.
We carried out our first annual employee satisfaction survey in
December 2010 followed by a second in December 2011. Our staff
responded magnificently in offering support and participation to
all areas of our employee strategies. That support has in turn
produced a significant improvement in our staff satisfaction
indicator to 84%.
In February 2011 the Society was re-accredited as an 'Investor
in People' for the sixteenth year; the Society being the first
building society to be accredited with this award. Additionally,
the Society awarded a pay increase to its staff on 1(st) April
2011, after a gap of two years, which was very much focussed on
lower paid staff.
Supporting and celebrating the communities in which we
operate
We continue to support the communities that we serve through our
branch network's engagement with local good causes, the corporate
sponsorships we are part of and the Society's charity of the year.
In addition, we have a fund with the Community Foundation, which
celebrated its 21st year and this enabled us to give Christmas
presents in December to 17 good causes. Our branches also launched
a Christmas art competition in local schools; with more than 100
winners rewarded with a trip to the theatre. A number of other
successful fund raising events have taken place throughout the year
too.
We launched a financial education programme for schools in our
region in 2011; this was kick-started with primary schools in
Middlesbrough and Whitley Bay, with positive feedback from all
involved, including the 200 11-year-old pupils we presented to. The
wider programme is in the process of being rolled out to other
regional schools.
Summary
The Society made steady progress during the year against our
long-term objectives. Our approach continues to position the
Society based on our cautious view of the outlook most likely to
prevail in the years ahead, a stance which has supported us well so
far. Our unrelenting focus will remain entirely fixed on ensuring
we deliver the best value and service possible to our members,
Solutions customers and employees, while supporting the communities
we serve."
Jim Willens
Chief Executive
29(th) February 2012
NEWCASTLE BUILDING SOCIETY
PRELIMINARY ANNOUNCEMENT for the year ended 31 December 2011
CONSOLIDATED INCOME STATEMENTS
2011 2010
GBPm GBPm
Interest receivable and similar income 103.2 101.0
Interest expense and similar charges (85.7) (83.2)
Net interest receivable 17.5 17.8
Other income and charges 26.6 18.8
Gains less losses from financial instruments 0.6 -
Administrative expenses (32.6) (33.7)
Depreciation (2.9) (3.2)
Operating profit before impairments, provisions
and exceptional items 9.2 (0.3)
Impairment losses on loans and advances
to banks (0.2) 2.1
Impairment losses on debt securities 0.9 0.3
Impairment losses on loans and advances
to customers (12.3) (1.8)
FSCS levy (1.4) -
Repositioning Programme - (4.0)
Other provisions for liabilities and charges - (1.0)
Gain on disposal of Prepaid Cards Business 3.9 -
Profit/(loss) for the year before taxation 0.1 (4.7)
Taxation (expense)/credit (0.8) 1.0
Loss for the financial year (0.7) (3.7)
------- -------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
2011 2010
GBPm GBPm
Loss for the financial year (0.7) (3.7)
Other comprehensive (expense)/income:
Movement on available for sale reserve (0.5) 1.0
Actuarial loss on retirement benefit obligations (3.9) (0.5)
Taxation on items taken directly through
reserves 1.1 (0.1)
Other comprehensive (expense)/income for
the financial year, net of tax (3.3) 0.4
------ ------
Total comprehensive expense for the financial
year (4.0) (3.3)
------ ------
CONSOLIDATED BALANCE SHEETS
2011 2010
ASSETS GBPm GBPm
Liquid assets 1,180.9 823.9
Derivative financial instruments 44.3 34.2
Loans and advances to customers 2,976.6 3,325.1
Fair value adjustments for hedged risk 57.9 50.8
Assets pledged as collateral 85.1 105.4
Property, plant and equipment 23.9 26.1
Investment properties 15.9 14.3
Other assets 33.9 39.0
TOTAL ASSETS 4,418.5 4,418.8
-------------- --------
2011 2010
LIABILITIES GBPm GBPm
Shares 3,761.4 3,593.0
Fair value adjustments for hedged risk 28.7 20.8
Deposits and debt securities 280.8 457.4
Derivative financial instruments 57.4 54.2
Other liabilities 29.8 29.1
Subordinated liabilities 58.7 58.6
Subscribed capital 29.6 29.6
Reserves 172.1 176.1
TOTAL LIABILITIES 4,418.5 4,418.8
-------------- --------
CONSOLIDATED CASH FLOW STATEMENTS
2011 2010
GBPm GBPm
Cash flows from operating activities 314.7 (92.3)
Payment into defined benefit pension scheme (2.4) (0.4)
Net cash flows from operating activities 312.3 (92.7)
-------- --------
Cash flows from investing activities
Purchase of property, plant and equipment (1.0) (1.4)
Purchase of investment properties (1.7) (0.2)
Sale of property, plant and equipment 0.4 1.6
Purchase of investment securities (939.6) (832.0)
Sale and maturity of investment securities 645.2 612.2
Cash received on sale of Prepaid Cards business 7.5 -
Net cash flows from investing activities (289.2) (218.9)
-------- --------
Cash flows from financing activities
Interest paid on subordinated liabilities (2.2) (1.1)
Interest paid on subscribed capital (3.6) (3.6)
Repayments under finance lease agreements (0.2) (0.2)
Net cash flows from financing activities (6.0) (4.9)
-------- --------
Net increase/(decrease) in cash 17.1 (317.1)
Cash and cash equivalents at start of year 360.9 678.0
Cash and cash equivalents at end of year 378.0 360.9
-------- --------
SUMMARY OF KEY FINANCIAL RATIOS
2011 2010
% %
Gross capital as a percentage of shares and
borrowings 6.44 6.65
Liquid assets as a percentage of shares and
borrowings 29.2 25.2
Loss for the year as a percentage of mean
total assets (0.02) (0.08)
Management expenses for the year as a percentage
of mean total assets 0.80 0.82
This information is provided by RNS
The company news service from the London Stock Exchange
END
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