TIDMWBS
RNS Number : 1308H
West Bromwich Building Society
27 November 2015
WEST BROMWICH BUILDING SOCIETY
Announcement of half-year results for the six months
to 30 September 2015
The West Brom today announces its half-year results for the six
months to 30 September 2015.
Key highlights:
- Profit before tax of GBP6.0m for the six months to 30
September 2015 (30 September 2014: GBP6.0m)
- Net interest margin improved to 1.08% (30 September 2014: 1.05%)
- Gross residential mortgage lending of GBP295m (30 September 2014: GBP300m)
- Growth in members' savings balances to GBP4.05bn (31 March 2015: GBP3.99bn)
- Strong capital position
Jonathan Westhoff, Chief Executive, commented:
These results demonstrate a sound performance, with the West
Brom's profit levels maintained year on year.
We continue to make funds available for homebuyers, advancing
GBP295m of gross prime residential lending during the period, and
are well on track to exceed the full year figure of GBP446m in
completions for 2014/15.
Much of this is down to our increased presence and growing
reputation in the intermediary market, which enables us to broaden
our lending to a wider geographical area. We pride ourselves on
delivering a high standard of service to our intermediary partners
so that they can recommend the Society's mortgage products to their
clients with confidence. This is reflected in the four star rating
we achieved in this month's Financial Adviser Service Awards.
Arrears levels for mortgages issued since the Society re-entered
the market in 2012 are negligible and none of these accounts are
currently at three months or more in arrears.
For savings members we have kept our offering competitive
through a range of branch, direct and internet accounts. Our
products are simple to understand and in some cases returns are
tiered so that we reward those who are able to save more with our
very best rates.
It is pleasing to have seen an increase in retail savings
balances since the end of our last full financial year, which means
that the vast majority of new mortgage lending is funded by retail
deposits.
Savers are also making use of the current opportunities for
tax-free saving, with an increase of just over 15% achieved in ISA
balances amongst our membership. In light of this, we anticipate
members will welcome changes scheduled for next year to the rules
governing taxation for savings income. The government estimates
that 95% of the population will no longer pay tax on their savings
once the new Personal Savings Allowance is introduced in April
2016.
Looking ahead to the coming months, the West Brom will stay
focused on delivering all round member value and we expect to see
further growth in our residential lending. We will continue to
invest in our mortgage and savings systems in order to facilitate
this.
We also eagerly await the unveiling of our new West Bromwich
head office at Providence Place. Completion is expected shortly,
after which we can begin the fit-out and transition phase with a
view to moving colleagues across by the end of the financial
year.
ENQUIRIES
the West Brom 0121 500 7785
Jonathan Westhoff - Chief Executive
Mark Gibbard - Group Finance & Operations Director
West Bromwich Building Society
Condensed consolidated
half-yearly financial information
30 September 2015
Chief Executive's BUSINESS Review
Performance
Profit before tax for the six months to 30 September 2015 was
GBP6.0m (30 September 2014: GBP6.0m) demonstrating a sound profit
performance.
Net interest margin improved to 1.08% (30 September 2014:
1.05%). Although down on the full year margin for 2014/15 of 1.15%,
this latter figure was boosted by the recognition of recoverable
default interest on a number of impaired commercial loans.
The result for the six months includes a revaluation gain of
GBP2.5m (30 September 2014: GBP4.9m) on the Group's portfolio of
residential rental properties, as a result of the house price
increases we have experienced in the period.
Management expenses for the six months to 30 September 2015 have
been held flat compared with the first half of 2014/15. Whilst
continuing to invest in the future of the business, we have
delivered efficiency savings, enabling us to hold down costs. As a
result, and despite a reduction in the average assets, which are
the denominator in this ratio, the management expenses ratio has
been held broadly flat at 0.82% (30 September 2014: 0.81%).
The GBP3.4m provision for liabilities comprises the Financial
Services Compensation Scheme (FSCS) levy of GBP2.5m (30 September
2014: GBP3.6m) and an amount set aside for potential Payment
Protection Insurance (PPI) claims of GBP0.9m. We have recently seen
an increase in PPI claims being upheld by the Ombudsman. The charge
is based on an estimate of the future costs we may see. The Society
has only sold regular, monthly premium Mortgage Payment Protection
Insurance, which was not a compulsory element of any mortgage
product, so the PPI costs we have experienced, even allowing for
this charge, remain considerably below those of many other
lenders.
The Society has continued to build on its objective to position
the West Brom as a major provider of homeowner financing, advancing
GBP295m of gross prime residential lending. Whilst this figure is
in line with performance in the comparative period for the 2014/15
financial year, we expect our second half performance to mean that
we exceed the total of GBP446m for 2014/15.
At 14.5%, (31 March 2015: 14.4%) the Group's Common Equity Tier
1 capital ratio remains strong and evidences the progress the
Society continues to make in reducing non-core lending balances.
The leverage ratio at 8.1% is unchanged from the March year end and
remains significantly above the current regulatory minimum of
3%.
Residential mortgage arrears have reduced since 31 March 2015,
from 1.63% to just 1.41% for mortgages in arrears by more than
three months. 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 accounts at three months or more in
arrears at 30 September 2015 on loans originated in this period.
This quality is reflected in a residential provision release of
GBP0.4m for the half year to 30 September 2015 (30 September 2014:
charge GBP0.3m).
The total impairment charge of GBP4.1m for the half year (30
September 2014: GBP1.8m) includes a charge of GBP4.5m relating to
the Commercial loan book, which we continue to manage down in a
controlled exit from this market. The balances have reduced by
GBP94.1m (11.6%) since the year-end to GBP718.0m. Provisions set
aside for potential losses in this book equated to 6.2% of total
commercial loan balances (31 March 2015: 5.7%).
Member value
For mortgage borrowers, we have broadened our product range by
adding a choice of highly competitive discounted mortgages to our
established selection of two, three and five year fixed rates, with
regular mentions in the Best Buy tables.
The Society continues to strengthen its partnerships in the
intermediary sector, securing greater geographical reach for
mortgage lending outside our West Midlands heartland. We have
redesigned and improved the West Brom for Intermediaries website to
support online mortgage applications via brokers. The West Brom
received commendations in both the Moneyfacts Awards and the
Personal Finance Awards for the quality of its fixed rate
mortgages.
While still a challenging market, we have endeavoured to support
savings members by offering competitive rates of interest,
resulting in growth in members' savings balances to GBP4.05bn (31
March 2015: GBP3.99bn).
We have added to our range of web-based savings accounts for
those who prefer to manage their money online. Our recently
launched WeBSave Easy Saver accounts, both taxable and tax-free,
have tiered interest rates which reward those who are able to save
more with a market leading return and have proven to be the most
popular products with our members for the 6 month period.
Funding
As a traditional building society, West Brom continues to be
funded predominantly by retail savings with balances of GBP4.05bn
(31 March 2015: GBP3.99bn). At 30 September 2015, 82.3% (31 March
2015: 79.7%) of total shares and borrowings were in the form of
members' retail deposits.
Liquidity
Throughout the period the Society has managed its liquidity
position to meet all regulatory and internal requirements without
holding excess funds, as this would have an adverse impact on
interest margins due to the low returns generated by holding liquid
assets. During the six months to 30 September 2015 the Society has
reduced its liquidity to GBP613.7m (31 March 2015: GBP721.6m)
resulting in a liquidity ratio of 13.7% (31 March 2015: 15.9%).
At 30 September 2015 and 31 March 2015, all of the Society's
treasury investments were rated single A or better with no exposure
to any non-UK sovereigns or mortgage markets. There were no
impairment charges against liquid assets during the current or
comparative periods.
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