TIDMWBS
RNS Number : 5111E
West Bromwich Building Society
31 May 2012
West Bromwich Building Society
Preliminary results announcement for the year ended 31 March
2012
The West Brom today announces its results for the financial year
ended 31 March 2012, reporting continued progress with its Back to
Basics strategy.
Key highlights from the 2011/12 financial year include:
- An increase in the Group's Core Tier 1 capital ratio from
12.8% to 13.3%, remaining one of the highest among UK banks and
building societies
- Strong levels of high quality liquidity balances maintained
- Market-leading rates delivered to our savings members, with
savers earning on average 1.86% higher than Bank Rate
- Retail savings inflows of GBP2.4bn, attracting some 52,300 new
savers, with residential mortgages covered 1.31 times by retail
deposits
- Net interest margin improved slightly to 0.47% (2010/11: 0.43%)
- A reduction of 38% in credit impairment charges
- Pre-tax losses further reduced, by 31% to GBP9.5m (2010/11: GBP13.8m)
Jonathan Westhoff, Chief Executive, commented:
"The West Brom has shown continued progress over the past year
in line with our Back to Basics strategy and its emphasis on the
core building society priorities of retail savings, investments and
prime residential mortgages. This has resulted in the Society once
again being able to reduce pre-tax losses and, more significantly,
deliver a strong improvement in underlying performance.
While turbulence and instability in the economy prevails, our
focus continues to be on providing our members with excellence in
products and service.
For savers, we have sought to cushion the consequences of the
challenging interest rate environment, where Bank Rate remains at
its historically low level, by consistently offering a range of
market-leading accounts. At the same time, the majority of our
residential mortgage borrowers have benefited significantly from
very low rates linked to Bank Rate.
We have made tremendous advances with our branch modernisation
programme, delivering a much improved quality of service. In
addition, we completed the necessary work to re-establish ourselves
in the prime residential mortgage market.
This willingness to invest in rejuvenating the branch network
also reflects the Society's confidence in our position as the
leading building society in Birmingham and the Black Country, and
the sixth largest in the UK."
31 May 2012
Enquiries:
The West Brom 0870 220 7785 Jonathan Westhoff - Chief Executive
Mark Gibbard - Group Finance Director
Chief Executive's Review
Performance
Given the challenging economic environment, it is pleasing to
report that the West Brom has again shown progress over the last
year. Our Back to Basics strategy and its emphasis on the core
building society priorities of retail savings, investments and
prime residential mortgages has delivered increased capital ratios
and strong levels of high quality liquidity.
The Group's financial results showed another improvement with a
reduction of some 31% in the pre-tax loss figure, to GBP9.5m.
An integral part of our Back to Basics strategy is looking after
the financial interests of our members through a range of savings
and investment products, alongside the offer of prime residential
mortgages.
Bank Rate remains historically low and while this does bring a
benefit for many of our residential mortgage borrowers it also
places pressure on those seeking to maximise the return on their
savings.
Our commitment to savers has seen the West Brom feature
consistently in the Best Buy tables over the course of the year,
providing competitive products to customers whichever way they
prefer to manage their accounts, be it through a branch, directly
by telephone or post, or via the internet.
The Society's ability to attract retail deposits which, in the
12 months to 31 March 2012, amounted to a gross inflow of some
GBP2.4bn, meant we were more than able to maintain the proportion
of our funding that comes directly from members' deposits. At 86.6%
of total funding, these deposits have enabled us to comfortably
fund residential mortgages at 1.31 times cover.
Shortly after the year end, we were able to complete a
securitisation transaction of residential mortgage assets, the
Society's first for six years, to diversify and extend the term of
our funding sources.
Non-core activities
At the heart of the Society's Back to Basics strategy is an
orderly withdrawal from those areas of operation into which we
previously diversified - notably commercial lending, residential
property letting and second charge lending.
Continued progress is evident, with a reduction of almost 30%,
to GBP1.2bn, over the last three years in the Group's total
exposure to commercial lending. Whilst maintaining a prudent level
of provisions against our commercial loans, we were able to reduce
the level of impairment charges in the year to GBP6.2m (2010/11:
GBP8.7m).
We intend to exit the residential letting operation - West
Bromwich Homes - when market conditions are opportune. However, the
current state of the property market is not likely to lead to a
portfolio sale in the near future. Thanks to more efficient
management the division reported a very pleasing increase in its
underlying trading profit, to GBP0.6m (2010/11: GBP0.2m).
In terms of the Group's second charge mortgage business -
Insignia - it was decided, in 2009, that we would not do any
further lending. Since then, careful management of the existing
loans has seen balances reduce from GBP56.1m to GBP39.6m.
Moving ahead with confidence
A renewed emphasis on the Society's strengths as a traditional
regionally-based building society does not preclude innovation and
development.
We have lived up to our promise of upgrading our branch network,
and the feedback from staff and customers alike suggests the
project has exceeded expectations. The modernisation programme has
given West Brom branches a vibrant profile that is more than a
match for our competitors in high streets across the region.
The Society took another step forward after completing the
necessary work to re-establish ourselves in the prime residential
mortgage market. This involved the implementation of a new highly
automated processing and support system, which is now live and
enabling the delivery of a new range of mortgage products.
It is still very much our intention to relocate the Society to
new head office premises. Progress has been frustrating and
negotiations with potential partners have been protracted. However,
we are clear that we will only sign up for premises that are right
for our business and are in the best long-term interests of our
members and staff.
Outlook - playing to our strengths
The overall economic situation both here in the UK and across
much of Europe remains unsettled and it would be unwise to predict
any immediate upturn. This will have inevitable repercussions for
the financial services sector, especially if Bank Rate remains at
its all-time low level, and means that the Society's financial
performance will continue to be constrained.
Our strengths are embodied in our Back to Basics strategy, which
has produced a framework for stability and renewal. The Society's
performance over the last year does give some grounds for optimism,
while the impressive modernisation of our branches and the
re-establishment of the West Brom in the prime residential mortgage
market are two noteworthy achievements that will stand us in good
stead going forward.
Jonathan Westhoff
Chief Executive
31 May 2012
Income Statement
for the year ended 31 March 2012
Group Group
2012 2011
GBPm GBPm
Interest receivable and similar income 180.8 190.7
Interest expense and similar charges (145.9) (156.3)
------------------------------------------------- -------------------- --------
Net interest receivable 34.9 34.4
Fees and commissions receivable 6.1 5.7
Other operating income 4.4 4.1
------------------------------------------------- -------------------- --------
Total operating income 45.4 44.2
Fair value losses on financial instruments (3.0) (9.1)
Net realised profits from financial instruments 5.2 15.6
------------------------------------------------- -------------------- --------
Total income 47.6 50.7
Administrative expenses - ongoing (38.2) (36.1)
Administrative expenses - restructuring (0.1) (0.3)
Depreciation and amortisation (4.7) (5.0)
------------------------------------------------- -------------------- --------
Operating profit before impairments, provisions
and revaluation losses 4.6 9.3
Losses on investment properties (1.0) (1.9)
Impairment losses on loans and advances (10.5) (16.8)
Provisions for liabilities - FSCS Levy (2.9) (2.2)
Provisions for liabilities - other 0.3 (1.5)
------------------------------------------------- -------------------- --------
Loss before tax (9.5) (13.1)
Taxation 0.3 3.4
-------------------------------------------------
Loss for the financial year from continuing
operations (9.2) (9.7)
------------------------------------------------- -------------------- --------
Discontinued operations
Loss from discontinued operations - (0.7)
Loss for the financial year (9.2) (10.4)
================================================= ==================== ========
Statement of Comprehensive Income
for the year ended 31 March 2012
Group Group
2012 2011
GBPm GBPm
Loss for the financial year (9.2) (10.4)
------------------------------------------------ ------- -------
Other comprehensive income
Available for sale investments
Valuation gain taken to equity 10.5 14.0
Amounts transferred to Income Statement (5.2) (15.6)
Actuarial (loss)/gain on retirement benefit
obligations (4.3) 0.7
Cash flow hedge gains/(losses) taken to equity 0.1 (0.3)
Tax on items taken directly to equity (0.5) 1.1
------------------------------------------------ ------- -------
Other comprehensive income for the financial
year, net of tax 0.6 (0.1)
------------------------------------------------ ------- -------
Total comprehensive income for the financial
year (8.6) (10.5)
================================================ ======= =======
Statement of Financial Position
at 31 March 2012
Group Group
2012 2011
GBPm GBPm
Assets
Cash and balances with the Bank of England 769.2 385.4
Loans and advances to credit institutions 117.5 124.7
Investment securities 924.5 918.6
Derivative financial instruments 64.5 73.4
Loans and advances to customers 5,373.6 5,880.1
Current tax assets - 1.9
Deferred tax assets 25.7 23.8
Trade and other receivables 4.3 5.8
Intangible assets 7.5 7.2
Investment properties 112.7 113.7
Property, plant and equipment 17.6 12.6
Retirement benefit assets - 1.8
-------------------------------------------- -------------------- -----------------------
Total assets 7,417.1 7,549.0
============================================ ==================== =======================
Liabilities
Shares 5,672.8 5,711.9
Amounts due to credit institutions 48.6 64.3
Amounts due to other customers 129.7 131.6
Derivative financial instruments 107.8 79.8
Debt securities in issue 927.4 1,025.3
Deferred tax liabilities 8.2 6.2
Trade and other payables 19.9 18.6
Provisions for liabilities 6.4 6.8
Retirement benefit obligations 0.4 -
-------------------------------------------- -------------------- -----------------------
Total liabilities 6,921.2 7,044.5
Equity
Profit participating deferred shares 175.0 177.3
Subscribed capital 74.9 74.9
General reserves 241.1 251.3
Revaluation reserve 3.7 3.7
Available for sale reserve 1.2 (2.6)
Cash flow hedging reserve - (0.1)
-------------------------------------------- -------------------- -----------------------
Total equity attributable to members 495.9 504.5
-------------------------------------------- -------------------- -----------------------
Total liabilities and equity 7,417.1 7,549.0
============================================ ==================== =======================
Included above are GBP262.8m of commercial mortgage balances
held in two bankruptcy remote Special Purpose Entities (SPEs),
Sandwell Commercial Finance No. 1 Plc (Sandwell 1) and Sandwell
Commercial Finance No. 2 Plc (Sandwell 2). The Group's exposure to
losses in Sandwell 1 and Sandwell 2 is capped by a first loss at
GBP3.75m and GBP7.0m respectively. Loans and advances to customers
are shown net of provisions of GBP5.3m in Sandwell 1 and GBP15.2m
in Sandwell 2. The excess over the first loss has been deducted
from the carrying value of debt securities which funded the
SPEs.
Statement of Changes in Members' Interest
for the year ended 31 March 2012
Profit Available Cash
participating for flow
deferred Subscribed General Revaluation sale hedging
shares capital reserves reserve reserve reserve Total
Group GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 April 2011 177.3 74.9 251.3 3.7 (2.6) (0.1) 504.5
Loss for the financial
year (2.3) - (6.9) - - - (9.2)
Other comprehensive
income for the period
Available for sale
investments: valuation
gain taken to equity - - - - 3.8 - 3.8
Actuarial loss on
retirement benefit
obligations - - (3.3) - - - (3.3)
Cash flow hedge
gains taken to equity - - - - - 0.1 0.1
Total other comprehensive
income - - (3.3) - 3.8 0.1 0.6
--------------------------- --------------- ----------- ---------- ------------ ---------- --------- -------
Total comprehensive
income for the year (2.3) - (10.2) - 3.8 0.1 (8.6)
---------------------------
At 31 March 2012 175.0 74.9 241.1 3.7 1.2 - 495.9
=========================== =============== =========== ========== ============ ========== ========= =======
Profit Cash
participating Available flow
deferred Subscribed General Revaluation for sale hedging
shares capital reserves reserve reserve reserve Total
Group GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 April 2010 179.9 74.9 258.5 3.8 (2.3) 0.2 515.0
Loss for the financial
year (2.6) - (7.8) - - - (10.4)
Other comprehensive
income for the period
Available for sale
investments: valuation
loss taken to equity - - - - (0.3) - (0.3)
Realisation of previous
revaluation gains - - 0.1 (0.1) - - -
Actuarial gain on
retirement benefit
obligations - - 0.5 - - - 0.5
Cash flow hedge
losses taken to
equity - - - - - (0.3) (0.3)
Total other comprehensive
income - - 0.6 (0.1) (0.3) (0.3) (0.1)
--------------------------- --------------- ----------- ---------- ------------ ---------- --------- -------
Total comprehensive
income for the year (2.6) - (7.2) (0.1) (0.3) (0.3) (10.5)
--------------------------- --------------- ----------- ---------- ------------ ---------- --------- -------
At 31 March 2011 177.3 74.9 251.3 3.7 (2.6) (0.1) 504.5
=========================== =============== =========== ========== ============ ========== ========= =======
Statement of Cash Flows
for the year ended 31 March 2012
Group Group
2012 2011
GBPm GBPm
Net cash inflow/(outflow) from operating activities
(see below) 465.8 (368.8)
---------------------------------------------------------- ---------- ----------
Cash flows from investing activities
Purchase of investment securities (2,018.8) (3,756.7)
Proceeds from disposal of investment securities 2,201.4 3,781.9
Purchase of property, plant and equipment and
intangible assets (10.3) (4.4)
Proceeds from disposal of property, plant and
equipment 0.2 1.7
Purchase of investment property - (0.3)
Proceeds from disposal of investment properties - 0.7
---------------------------------------------------------- ---------- ----------
Net cash flows from investing activities 172.5 22.9
---------------------------------------------------------- ---------- ----------
Cash flows from financing activities
Net (repayment)/issue of other debt securities (27.6) 216.0
Repayment of mortgage backed loan notes (52.1) (63.1)
---------------------------------------------------------- ---------- ----------
Net cash flows from financing activities (79.7) 152.9
---------------------------------------------------------- ---------- ----------
Net increase/(decrease) in cash 558.6 (193.0)
Cash and cash equivalents at beginning of year 575.2 768.2
Cash and cash equivalents at end of year 1,133.8 575.2
========================================================== ========== ==========
Group Group
2012 2011
GBPm GBPm
Analysis of cash balances
Cash in hand (including Bank of England reserve
account) 763.7 379.6
Loans and advances to credit institutions 116.1 124.7
Investment securities 254.0 70.9
1,133.8 575.2
========================================================== ========== ==========
Group Group
2012 2011
GBPm GBPm
Cash flows from operating activities
Loss on ordinary activities before tax from continuing
activities (9.5) (13.1)
Loss on ordinary activities before tax from discontinued
activities - (0.7)
Movement in prepayments and accrued income (0.8) 0.4
Movement in accruals and deferred income 4.3 (3.1)
Impairment losses on loans and advances 10.5 16.8
Depreciation and amortisation 4.7 5.0
Disposal of fixed assets and investment properties - (0.4)
Revaluations of investment properties, land and
buildings 1.0 1.9
Movement in provisions for liabilities (0.4) 0.8
Movement in derivative financial instruments 36.9 (11.9)
Movement in fair value adjustments (15.0) 11.9
Change in retirement benefit obligations (2.1) (3.1)
---------------------------------------------------------- ---------- ----------
Cash flows from operating activities before changes
in operating assets and liabilities 29.6 4.5
Movement in loans and advances to customers 517.1 518.0
Movement in loans and advances to credit institutions (1.1) -
Movement in shares (38.1) (831.8)
Movement in deposits and other borrowings (42.8) (70.4)
Movement in trade and other receivables 2.3 (0.2)
Movement in trade and other payables (3.3) 11.1
Tax received 2.1 -
Net cash inflow/(outflow) from operating activities 465.8 (368.8)
========================================================== ========== ==========
Ratios
for the year ended 31 March 2012 Group Statutory
2012 limit
% %
Lending limit 19.1 25.0
Funding limit 13.4 50.0
------------------------------------------------ ------------------- ---------------------
Group Group
2012 2011
% %
As a percentage of shares and borrowings:
Gross capital 7.57 7.58
Free capital 5.83 5.86
Liquid assets 27.64 21.47
As a percentage of mean total assets:
Loss for the financial year (0.12) (0.13)
Management expenses 0.57 0.52
------------------------------------------------ ------------------- ---------------------
Core liquidity buffer as a percentage of total
liquidity 62.4 47.0
Solvency ratio 16.2 15.6
Tier 1 capital ratio 15.7 15.1
Core Tier 1 capital ratio 13.3 12.8
------------------------------------------------ ------------------- ---------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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