TIDMWBS
RNS Number : 3923O
West Bromwich Building Society
27 May 2015
West Bromwich Building Society
Preliminary results announcement for the year ended 31 March
2015
Forward Looking Statements
Statements in this document are forward looking with respect to
plans, goals and expectations relating to the future financial
position, business performance and results of the West Brom.
Although the West Brom believes that the expectations reflected in
these forward looking statements are reasonable, we can give no
assurance that these expectations will prove to be an accurate
reflection of actual results. By their nature, all forward looking
statements involve risk and uncertainty because they relate to
future events and circumstances that are beyond the control of the
West Brom including, amongst other things, UK domestic and global
economic and business conditions, market related risks such as
fluctuation in interest rates and exchange rates,
inflation/deflation, the impact of competition, changes in customer
preferences, risks concerning borrower credit quality, delays in
implementing proposals, the timing, impact and other uncertainties
of future acquisitions or other combinations within relevant
industries, the policies and actions of regulatory authorities, the
impact of tax or other legislation and other regulations in the
jurisdictions in which the West Brom operates. As a result, the
West Brom's actual future financial condition, business performance
and results may differ materially from the plans, goals and
expectations expressed or implied in these forward looking
statements. Due to such risks and uncertainties the West Brom
cautions readers not to place undue reliance on such forward
looking statements. We undertake no obligation to update any
forward looking statements whether as a result of new information,
future events or otherwise.
WEST BROMWICH BUILDING SOCIETY
Preliminary results announcement
for the year ended 31 March 2015
The West Brom today announces its results for the financial year
ended 31 March 2015, reporting substantial growth in residential
mortgage lending and pre-tax profits of GBP12.4m.
Key highlights include:
- Gross residential mortgage lending of GBP446m, which is more
than double the amount of lending carried out in our last financial
year (2013/14: GBP214m)
- Significantly increased pre-tax profits of GBP12.4m (2013/14: GBP2.1m)
- A rise in the net interest margin to 1.15% (2013/14: 0.81%)
- An increase in the Group's strong Common Equity Tier 1 capital
ratio to 14.4% (2013/14: 13.4%)
- Plans progressing for a move to new, purpose-built head office
premises in West Bromwich later in the year
- We achieved the Investors in People Gold Award in recognition
of our commitment to people development.
Jonathan Westhoff, Chief Executive, commented:
It is very pleasing to report further progress in the West
Brom's performance. After returning to profit last year for the
first time since the financial crisis, we have built on this
achievement and significantly increased pre-tax profits to
GBP12.4m.
We continue to reduce the impact of legacy issues such as
commercial lending, while generating substantial volumes of new
business, particularly in response to demand for residential
mortgages to support homebuyers.
Growing consumer confidence and economic stability has created a
perfect backdrop for us to bolster our residential mortgage
lending. Indeed volumes of gross lending for home ownership are
more than double what we delivered in 2013/14.
We have been active in assisting borrowers in our regional
heartland fulfil their aspirations for buying their own homes, and
strong relationships with our intermediary partners also gives us
national reach elsewhere in England and Wales.
The West Brom also remains a safe home for members' savings and
we have striven to maintain a competitive position in the rates of
interest we can offer.
During the year we consolidated and simplified our portfolio of
savings products, making it easier for members to track their
money, and boosted rates for those with funds in our lowest paying
accounts. We support the new initiatives announced by the
government such as Help to Buy and fully flexible ISAs and we
expect that these will be made available once full details are
confirmed.
The transition of the Society over the last five years, away
from its historic diversification into non-core activities and back
to a building society focused on the fundamental needs of its
members, is very satisfying.
Looking ahead we are optimistic about our future prospects,
buoyed by growth in residential lending and a planned move to new,
purpose-built head office premises in our home town of West
Bromwich. Due for completion later this year, the facility at
Providence Place will accurately reflect our position as the
region's leading building society and a major local employer.
ENQUIRIES:
The West Brom 0121 500 7785
Mark Gibbard
Group Finance & Operations Director
Chief Executive's Review
Performance
I am very pleased to report we have built on the improved
performance seen in the previous year, with a significant increase
in pre-tax profit. We have continued to deliver on the objectives
set in our strategy of realigning the business to return to the
traditional building society model. The UK's strengthening economy
has inspired consumer confidence and resulted in increased demand
in the housing market. We are delighted that we have been able to
support our members' home ownership aspirations and can report a
more than doubling of our gross lending on residential
mortgages.
Profit before tax improved from GBP2.1m to GBP12.4m. The main
driver for this is a rise in the net interest margin from 0.81% to
1.15%.
The result for the year includes a GBP5.5m gain (2013/14:
GBP5.1m gain) on the revaluation of the West Bromwich Homes
investment property portfolio as a result of the house price
increases we have seen in the year.
The Society's return to the residential lending market gained
momentum with gross lending more than doubling to GBP446m (2013/14:
GBP214m). Within this, 21% supported first time buyers.
Exposure to non-core commercial lending has continued to reduce.
Since the Society exited the market in 2008/9, total exposure has
reduced from GBP1.7bn to GBP0.8bn, of which GBP0.13bn is
securitised.
The level of accounts in arrears by three months or more in our
core residential mortgage book has remained low at 1.34%, in line
with the sector average.
The return to profit, and the substitution of prime, residential
lending for the higher risk legacy assets has resulted in the
continued strengthening of the Society's capital position. The
Common Equity Tier 1 capital ratio, benefiting also from capital
treatments effective from 1(st) January 2015, under European
regulations, increased to 14.4% (2013/14: 13.4%).
Strategic investment
Later this year the Society's Head Office will relocate to
Providence Place in West Bromwich. This modern, environmentally
friendly and functional workplace together with our continued
investment in our core infrastructure and mortgage system, will
ensure the business can grow, and is equipped with all the
facilities needed to provide the efficient, friendly and
professional service our members expect.
Members and mutuality
The Board remains committed to the core building society
principles. As a mutual organisation the delivery and preservation
of member value underpins all decisions.
Being guided by this model of a traditional building society,
the West Brom looks after the interests of its members by offering
prime residential mortgages, retail savings and investments which
meet their specific needs.
In 2014 I reported that the rates on certain buy to let loans
were increased, within the original terms and conditions of the
mortgages. The increase was made to reflect changing market
conditions and the need for the Society to carry out our business
prudently, efficiently, competitively and in the best interests of
all of our members. A number of borrowers formed an action group
and challenged this in a legal case. I am pleased to say that the
Court upheld the Society's position. Whilst the trial judge did not
feel that there was any merit in an appeal, the action group wish
to pursue one, and we await to hear when that might be.
As a demonstration of the Society's desire to support our
borrowing members, during the course of the year, the Standard
Variable Rate was reduced to 3.99%.
However, it has been another challenging year for savers with
retail market rates falling. We continue to strive to balance the
needs of our savings and mortgages members, and have tried to
contain the reduction in rates, but we do have to respond to market
pricing otherwise we generate retail savings inflows which we are
unable to use given the level of demand for mortgages which is
still at less than 60% of its 2007 peak. We did rationalise our
savings product range in 2014/15 to offer a simple, clear range and
whilst this did involve reducing the rates on some of our leading
products more customers saw their rates increase than decrease.
Valuing members' views
Mutuality means that the Society is owned by and run for the
benefit of its members, which is why finding out their views and
opinions is of paramount importance.
I host Members' ViewPoint events in a variety of the Society's
core locations, offering the opportunity for members to provide
feedback on a range of subjects. These events offer valuable
insight from our members and are used to help refine our products
and services. In the financial year three events were held.
During 2014/15 we have continued to measure customer
satisfaction. On average 9.4 out of 10 customers were satisfied
with their experience when contacting the West Brom. When asked if
they would recommend the West Brom to their family and friends, an
impressive three quarters of customers confirmed that they
would.
During the year we launched our Customer Panel where members are
canvassed for their views on our products and services and give
feedback on how we can improve the way we operate. This is done via
short on-line surveys, and is open to any West Brom mortgage or
savings customer aged 16 or over. Some 2,000 members have now
joined this panel.
At the Society's Annual General Meeting (AGM), members can also
voice their views, ask questions on key issues and vote on the
election of the West Brom's Board of Directors and other
resolutions.
Outlook
Reflecting on the materially increased profitability,
strengthened capital position and improving economic environment,
the West Brom can face the future with considerable optimism.
Whilst there remain some legacy issues to resolve, which might
result in some volatility in financial performance in future years,
the trend remains very positive.
Residential mortgage activities are expected to increase in
2015/16 as the Society supports yet more members with their home
ownership aspirations, all within a framework of responsible
lending.
Going forward, the West Brom will continue its programme of
strategic investment. Having completely renewed our branch network
and lending capabilities, we look forward to unveiling the new Head
Office later in the year.
Jonathan Westhoff
Chief Executive
27 May 2015
Income Statement
for the year ended 31 March 2015 Group Group
2015 2014
GBPm GBPm
Interest receivable and similar
income 136.9 135.9
Interest expense and similar
charges (72.2) (87.7)
------------------------------------- ---------------------- --------
Net interest receivable 64.7 48.2
Fees and commissions receivable 4.2 5.7
Other operating income 3.8 3.6
------------------------------------- ---------------------- --------
Total operating income 72.7 57.5
Fair value (losses)/gains on
financial instruments (16.3) 4.6
Net realised profits/(losses) 0.1 (0.2)
------------------------------------- ---------------------- --------
Total income 56.5 61.9
Administrative expenses (40.6) (40.6)
Depreciation and amortisation (5.4) (4.4)
------------------------------------- ---------------------- --------
Operating profit before revaluation
gains, impairments and provisions 10.5 16.9
Gains on investment properties 5.5 5.1
Impairment on loans and advances (0.2) (13.6)
Provisions for liabilities (3.4) (6.3)
------------------------------------- ---------------------- --------
Profit before tax 12.4 2.1
Taxation (3.2) (1.1)
-------------------------------------
Profit for the financial year 9.2 1.0
===================================== ====================== ========
Statement of Comprehensive Income
for the year ended 31 March 2015 Group Group
2015 2014
GBPm GBPm
Profit for the financial year 9.2 1.0
------------------------------------- ---------------------- --------
Other comprehensive income
Items that may subsequently be
reclassified to profit or loss
Available for sale investments
Valuation loss taken to equity (1.0) (6.2)
Amounts transferred (from)/to
Income Statement (0.1) 0.2
Cash flow hedge (losses)/gains
taken to equity (0.3) 0.2
Taxation 0.2 1.0
Items that will not subsequently
be reclassified to profit or
loss
Gains on revaluation of land
and buildings - 0.5
Remeasurement losses on defined
benefit obligations (10.7) (6.2)
Taxation 2.1 1.4
------------------------------------- ---------------------- --------
Other comprehensive income for
the financial year, net of tax (9.8) (9.1)
------------------------------------- ----------------------
Total comprehensive income for
the financial year (0.6) (8.1)
===================================== ====================== ========
Statement of Financial Position
at 31 March 2015 Group Group
2015 2014
GBPm GBPm
Assets
Cash and balances with the Bank
of England 260.8 136.3
Loans and advances to credit
institutions 186.5 169.4
Investment securities 274.3 461.6
Derivative financial instruments 19.0 33.8
Loans and advances to customers 4,677.4 4,680.5
Deferred tax assets 23.9 23.8
Trade and other receivables 2.7 2.8
Intangible assets 7.0 8.7
Investment properties 118.6 115.2
Property, plant and equipment 30.2 18.4
Total assets 5,600.4 5,650.5
===================================== ====================== ========
Liabilities
Shares 3,988.0 4,235.6
Amounts due to credit institutions 393.3 113.2
Amounts due to other customers 152.4 121.0
Derivative financial instruments 80.8 62.0
Debt securities in issue 467.1 602.5
Deferred tax liabilities 4.5 3.6
Trade and other payables 12.7 13.6
Provisions for liabilities 2.2 5.1
Retirement benefit obligations 7.5 1.4
------------------------------------- --------
Total liabilities 5,108.5 5,158.0
Equity
Profit participating deferred
shares 177.1 174.7
Subscribed capital 74.9 74.9
General reserves 233.1 234.9
Revaluation reserve 3.4 3.4
Available for sale reserve 3.5 4.4
Cash flow hedging reserve (0.1) 0.2
------------------------------------- ---------------------- --------
Total equity attributable to
members 491.9 492.5
Total liabilities and equity 5,600.4 5,650.5
===================================== ====================== ========
Statement of
Changes in Members'
Interest
for the year
ended 31 March
2015
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 2014 174.7 74.9 234.9 3.4 4.4 0.2 492.5
Profit for the
financial year 2.4 - 6.8 - - - 9.2
Other comprehensive
income for the
period
Available for
sale investments:
current year
movement net
of tax - - - - (0.9) - (0.9)
Remeasurement
losses on defined
benefit obligations - - (8.6) - - - (8.6)
Cash flow hedge
losses - - - - - (0.3) (0.3)
Total other comprehensive
income - - (8.6) - (0.9) (0.3) (9.8)
--------------------------- --------------- ----------- ---------- ------------ ---------- --------- ------
Total comprehensive
income for the
year 2.4 - (1.8) - (0.9) (0.3) (0.6)
---------------------------
At 31 March 2015 177.1 74.9 233.1 3.4 3.5 (0.1) 491.9
=========================== =============== =========== ========== ============ ========== ========= ======
Profit Available Cash
participating for flow
deferred Subscribed General Revaluation sale hedging
shares capital reserves reserve reserve reserve Total
Group GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 April 2013 174.4 74.9 238.2 3.7 9.4 - 500.6
Profit for the
financial year 0.3 - 0.7 - - - 1.0
Other comprehensive
income for the
period
Available for
sale investments:
current year
movement net
of tax - - - - (5.0) - (5.0)
Remeasurement
losses on defined
benefit obligations - - (4.8) - - - (4.8)
Gain on revaluation
of land and buildings - - - 0.5 - - 0.5
Realisation of
previous revaluation
gains - - 0.8 (0.8) - - -
Cash flow hedge
gains - - - - - 0.2 0.2
Total other comprehensive
income - - (4.0) (0.3) (5.0) 0.2 (9.1)
--------------------------- --------------- ----------- ---------- ------------ ---------- --------- ------
Total comprehensive
income for the
year 0.3 - (3.3) (0.3) (5.0) 0.2 (8.1)
--------------------------- --------------- ----------- ---------- ------------ ---------- --------- ------
At 31 March 2014 174.7 74.9 234.9 3.4 4.4 0.2 492.5
=========================== =============== =========== ========== ============ ========== ========= ======
Statement of Cash Flows
for the year ended 31 March 2015 Group Group
2015 2014
GBPm GBPm
Net cash inflow/(outflow) from
operating activities (below) 103.9 (537.3)
------------------------------------------ -------------------- ---------------
Cash flows from investing activities
Purchase of investment securities (187.9) (141.8)
Proceeds from disposal of investment
securities 305.6 229.3
Proceeds from disposal of investment
properties 2.1 2.3
Purchase of property, plant and
equipment and intangible assets (16.8) (6.2)
Proceeds from disposal of property,
plant and equipment - 0.5
Net cash flows from investing
activities 103.0 84.1
------------------------------------------ -------------------- ---------------
Cash flows from financing activities
Issue of mortgage backed loan
notes - 380.0
Repayment of mortgage backed
loan notes (134.1) (105.8)
Net cash flows from financing
activities (134.1) 274.2
------------------------------------------ -------------------- ---------------
Net increase/(decrease) in cash 72.8 (179.0)
Cash and cash equivalents at
beginning of year 371.3 550.3
Cash and cash equivalents at
end of year 444.1 371.3
========================================== ==================== ===============
Group Group
2015 2014
GBPm GBPm
Analysis of cash and cash equivalents
Cash in hand (including Bank
of England Reserve account) 253.6 128.1
Loans and advances to credit
institutions 186.5 169.4
Investment securities 4.0 73.8
444.1 371.3
========================================== ==================== ===============
Group Group
2015 2014
GBPm GBPm
Cash flows from operating activities
Profit on ordinary activities
before tax from continuing activities 12.4 2.1
Movement in prepayments and accrued
income 0.3 (0.1)
Movement in accruals and deferred
income - 1.2
Impairment on loans and advances (0.2) 13.6
Depreciation and amortisation 5.4 4.4
Revaluations of investment properties (5.5) (5.1)
Movement in provisions for liabilities (2.9) 1.9
Movement in derivative financial
instruments 33.6 (41.7)
Movement in fair value adjustments (14.0) 40.3
Change in retirement benefit
obligations (4.6) (4.4)
------------------------------------------ -------------------- ---------------
Cash flows from operating activities
before changes in operating assets
and liabilities 24.5 12.2
Movement in loans and advances
to customers 13.6 237.9
Movement in loans and advances
to credit institutions 1.0 (2.6)
Movement in shares (242.3) (418.9)
Movement in deposits and other
borrowings 308.5 (365.1)
Movement in trade and other receivables (0.2) 0.1
Movement in trade and other payables 0.3 (0.9)
Tax paid (1.5) -
Net cash inflow/(outflow) from
operating activities 103.9 (537.3)
========================================== ==================== ===============
Ratios
for the year ended 31 March 2015 Group Statutory
2015 limit
% %
Lending limit 17.1 25.0
Funding limit 12.1 50.0
------------------------------------------ -------------------- ---------------
Group Group
2015 2014
% %
As a percentage of shares and
borrowings:
Gross capital 10.85 11.01
Free capital 7.78 8.18
Liquid assets 15.92 17.15
As a percentage of mean total
assets:
Profit for the financial year 0.16 0.02
Management expenses 0.82 0.76
------------------------------------------ -------------------- ---------------
Group Group
2015 2014
% %
Common Equity Tier 1 capital
ratio 14.4 13.4
------------------------------------------ -------------------- ---------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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