TIDMWBS
RNS Number : 2379B
West Bromwich Building Society
01 June 2023
West Bromwich Building Society
Preliminary results announcement for the year ended 31 March
2023
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 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 2023
The West Brom today announces its results for the financial year
ended 31 March 2023. Key highlights of the financial year
include:
-- Savers rewarded with rates that were, by the end of the year,
almost double the average rates paid by the market(1) equivalent to
a savings member mutual benefit of GBP33.2m, more than three times
higher than the prior year benefit of GBP9.0m.
-- In a market first, we aligned our approach for existing
customers on our Standard Variable Rate (SVR) to that of new
mortgage customers, with a lower rate for borrowers with a greater
proportion of equity in their homes. Around 90% of owner occupier
mortgage customers experienced savings on their interest rates,
with the majority seeing a reduction of 0.75% at the time of
introduction.
-- This means an SVR borrower at the West Brom would save circa
GBP1,400(2) a year for each GBP100,000 borrowed compared with an
average market SVR of 7.12%(3) .
-- GBP691m in new mortgage lending (2021/22: GBP756m), with 67%
of loans for house purchase supporting first-time buyers onto the
property ladder (2021/22: 54%).
-- Statutory profit before tax of GBP31.8m (2021/22: GBP23.2m),
driven by strong net interest income and fair value gains. This
statutory profit includes the net recovery of GBP5.6m of previously
written off costs relating to the development of an online savings
platform; our underlying profit, which excludes this and the hedge
ineffectiveness impact was GBP21.2m (2021/22: GBP26.6m), the
reduction primarily driven by provisioning set aside for potential
future credit losses.
-- Strong capital position maintained with an increased Common
Equity Tier 1 (CET 1) capital ratio of 18.7% (2021/22: 17.0%) and a
Leverage Ratio of 7.9% (2021/22: 7.3%).
-- Awarded the highest accolade in the Financial Adviser Service
Awards for the 5(th) consecutive year. Shortlisted in four
categories of the Moneyfacts 2022 awards including Best Building
Society Mortgage Provider, Best First-Time Buyer Mortgage Provider,
Best Variable Rate Mortgage Provider and Best Building Society
Savings Provider.
-- Net Promoter Score(R)(4) (NPS) remained well above average at
+74 (2021/22: +81) with customer satisfaction at 95% (2021/22:
96%).
-- Supporting refugees from the Ukrainian conflict by providing
homes to house families impacted by the crisis.
-- Became the first building society in the UK, and the first
employer in the West Midlands, to receive
the Living Hours accreditation.
(1) Average market rates sourced from Bank of England Bankstats
table A6.1 March 2023
(2) Interest saving in first year by borrower with less than 75%
Loan to Value
(3) Average market revert rate sourced from Moneyfacts March
2023
(4) Net Promoter Score and NPS are trademarks of Satmetrix
Systems, Inc., Bain & Company, Inc., and Fred Reichheld.
Jonathan Westhoff, Chief Executive Officer, commented:
"It's great to report a strong performance as we continue to
work through significant challenges in our external environment.
Whilst our financial performance demonstrates our underlying
strength and resilience, and helps us to drive forward on our
Purpose-led agenda, perhaps most satisfaction comes from what we
have delivered for our members, demonstrating the tangible benefits
of being with a mutual that is true to its Purpose.
Over the last year, we've focused on ensuring our members enjoy
the benefits of belonging to the West Brom. We've taken action to
support our borrowing members by becoming the first lender in the
market to align our approach for existing members on our Standard
Variable Rate (SVR) to that of new mortgage members. This new
approach means that all owner occupier mortgage members reverting
to SVR at the end of their product term will have their rate
determined by their Loan to Value (LTV). Around 90% of people on
our SVR saw savings on their interest rates, with the majority
seeing a reduction of 0.75%. This provided real relief for many of
our members at a time when mortgage costs are increasing.
Working with our partners, we've also innovated by having
standard charging structures amended to return value. By
negotiating a reduced commission and agreeing a profit share
arrangement that is distributed back to our policy holders, members
taking their home and contents insurance through the West Brom
benefitted, on average, with a circa 8% reduction in their
insurance premiums.
For our savers, who this year have helped 3,413 members buy
their first home, we've continued to provide 'best buy' fixed
savings rates and have passed on rates that were almost double the
average rates paid by the market (1) . This means we saw the mutual
benefit increase to GBP33.2m this financial year, more than three
times more than last year (2021/22: GBP9.0m).
We know that the economic pressures are likely to impact our
colleagues as well as our members therefore, we have continued to
support them throughout the year. Across the winter months, over
70% of our colleagues benefitted from a one-off payment of
GBP1,200. This sits alongside our Financial Hardship Support Fund,
which exists to offer colleagues support in the event of a sudden,
unexpected financial burden.
Living costs look set to remain elevated for some time to come,
maintaining the pressure on households and businesses alike. We
will continue to use our financial strength responsibly to support
our members, colleagues and communities through these challenging
times, helping people to stay in their homes and save for the
future where possible.
Recent years have built a significant momentum, not measured by
our size or profitability, but by the true value we deliver to our
members, and I look forward to working with my new and existing
colleagues to deliver even more Purpose-led innovations as we
approach 175 years of mutuality at the West Brom."
(1) Average market rates sourced from Bank of England Bankstats
table A6.1 March 2023
Chief Executive Officer's Review
It's great to report a strong performance as we continue to work
through significant challenges in our external environment. Whilst
our financial performance demonstrates our underlying strength and
resilience, and helps us to drive forward on our Purpose-led
agenda, perhaps most satisfaction comes from what we have delivered
for our members, demonstrating the tangible benefits of being with
a mutual that is true to its Purpose.
This value reflects our focus on not only ensuring we deliver
great value through our products, but that we also innovate and
take the lead on changing market practices that have historically
either withheld value or put financial burdens on those least able
to afford it. Collectively, these initiatives make a real
impact.
Our Purpose-led activities
Over the last year, we've remained focused on ensuring our
members enjoy the benefits of belonging to the West Brom,
introducing a series of innovations, indeed sector firsts, that
have delivered significant value.
During the period, we took action to support our borrowing
members by becoming the first lender in the market to align our
approach for existing members on our Standard Variable Rate (SVR)
to that of new mortgage members. This new approach means that all
owner occupier mortgage members reverting to SVR at the end of
their product term will have their rate determined by their Loan to
Value (LTV), with a lower rate for those with more equity in their
property. Around 90% of owner occupier mortgage members on our SVR
saw savings on their interest rates, with the majority seeing a
reduction of 0.75%. This has provided real relief for our members
at a time when mortgage costs are increasing. A borrower on SVR at
the West Brom would save circa GBP1,400(2) a year for each
GBP100,000 borrowed compared with an average market SVR of 7.12%(3)
.
Working with our partners we have also innovated by having
standard charging structures amended to return value. The new
commission structure combined with a profit share arrangement that
is distributed back to our policy holders means that members taking
their home and contents insurance through the West Brom benefitted,
on average, with a circa 8% reduction in their insurance
premiums.
For our savers, who this year have helped 3,413 members buy
their first home, we have continued to provide 'best buy' fixed
savings rates and responded to the increase in interest rates led
by the Bank of England Bank Rate, with improved variable saving
rates so that they were almost double the average rates paid by the
market(1) . This means we saw the savings member mutual benefit
increase from GBP9.0m to GBP33.2m this financial year. We have also
gone above and beyond our statutory duties by individually
notifying members of any material rate increases to their savings
rates to ensure that their product remains appropriate. For those
members that wish to benefit from investing with the advantage of
independent financial advice, through our partnership with Wren
Sterling, we have again negotiated a changed commission structure,
which results in a reduction of circa 25% to their ongoing service
(annual) charge. On the average investment this is a benefit of
GBP180 per year per investor.
And finally, to support those borrowers who find themselves in
financial difficulty and are not able to meet their payments we no
longer ch arge any additional fees, more commonly referred to as
'arrears fees', to cover internal costs.
(1) Average market rates sourced from Bank of England Bankstats
table A6.1 March 2023
(2) Interest saving in first year by borrower with less than 75%
Loan to Value
(3) Average market revert rate sourced from Moneyfacts March
2023
Providing a range of channels for our members is important to us
and we have invested heavily in technology throughout the year. In
December, we launched a new savings portal for our branch and
direct members, giving them more immediate access to their
accounts. This is not about moving everything online, but instead
giving our members a choice of channels to suit their individual
needs, and forms part of a wider technology transformation
programme.
We've also been working towards the new Consumer Duty regulation
that comes into force in July 2023. As a mutual, we've always had a
focus on delivering good member outcomes but we believe this is a
step in the right direction in terms of holding all firms to a
minimum standard, leading to improved practices across the sector.
For us Consumer Duty is another opportunity to listen to our
members, learn from others and evolve in line with member
expectations so that we can continue to serve them and our
communities.
Building on our financial strength
Our strong financial performance this year demonstrates the
underlying strength and resilience of the Society and helps us to
drive forward on our Purpose-led agenda, supporting those
underserved and/or overcharged by the market.
We have delivered a strong performance this year, with statutory
profit before tax ending the year at GBP31.8m (2021/22: GBP23.2m),
supported by strong net interest income, fair value gains on
financial instruments and recovery of previously written off costs.
On an underlying basis, after excluding hedge ineffectiveness and
the one-off cost recovery, underlying profit reduced to GBP21.2m
(2021/22: GBP26.6m). Charges for expected credit losses have
increased in the current year, focused on the remaining legacy
Commercial Real Estate exposures which are more susceptible to
uncertainty in the macroeconomic environment.
Our profitability and management of risk contributes to our
overall financial resilience and strengthens the Society's capital
position. Our Common Equity Tier 1 (CET 1) capital ratio, a key
measure of capital, ended the year at 18.7% (2021/22: 17.0%).
Supporting our colleagues and communities
The drive and determination of our colleagues to serve our
members is second to none and they've made the West Brom the
thriving, Purpose-led organisation it is today.
We know that the economic pressures are likely to impact our
colleagues as well as our members therefore we've continued to
support them throughout the year. Across the winter months, over
70% of our colleagues benefitted from one-off support payments
totalling GBP1,200. This sits alongside our Financial Hardship
Support Fund, which exists to offer colleagues help in the event of
a sudden, unexpected financial burden.
We were also proud to be recognised as a Living Hours employer
this year - the first building society in the country and the first
employer in the West Midlands to achieve this standard. The Living
Hours standard requires employers to pay a real Living Wage and
provide colleagues with the security and stability of hours they
require to meet their everyday needs. This builds on our existing
real Living Wage accreditation and recognises the work we do to
ensure all colleagues are paid a wage they can live on.
Despite the backdrop of a highly competitive labour market, our
belief in attracting and retaining a broad range of individuals has
remained unchanged to ensure that we benefit from the best talent.
Our equity, diversity and inclusion (ED&I) work continues and
is essential to bringing richness of thought, resulting in a more
successful business. Through Connect, our colleague network, we've
forged partnerships with a number of organisations to support our
work in this area, including Penn Hall School in Wolverhampton and
Queen Alexandra College in Birmingham.
We remain committed to investing in the communities in which we
operate and have showed our support in a variety of ways. We have
raised over GBP10,000 for our charity partner, Barnardo's, this
year and have backed various appeals by the Disasters Emergency
Committee through our branch network. In addition, we continue to
provide grant funding to local worthy causes through the Mercian
Community Trust.
Last year, we also provided 11 properties from our rental
portfolio and accommodation above our branches for the Homes for
Ukraine scheme. To date, we have housed 23 refugees and are geared
up to provide employment support where needed.
Outlook
Living costs look set to remain elevated for some time to come,
maintaining the pressure on households and businesses alike. We
will continue to use our financial strength responsibly to support
our members, colleagues and communities through these challenging
times, helping people to stay in their homes and save for the
future where possible.
Recent years have built a significant momentum, not measured by
our size or profitability, but by the true value we deliver to our
members, and I look forward to working with my new and existing
colleagues to deliver even more Purpose-led innovations as we
approach 175 years of mutuality at the West Brom.
Jonathan Westhoff
Chief Executive Officer
31 May 2023
Income Statement
for the year ended 31 March 2023 Group Group
2023 2022
GBPm GBPm
Interest receivable and similar income
Calculated using the effective interest
method 145.9 100.0
On instruments measured at fair value through
profit or loss 28.3 (12.7)
-------------------------------------------------- ------- -------
Total interest receivable and similar income 174.2 87.3
Interest expense and similar charges (91.0) (25.2)
-------------------------------------------------- ------- -------
Net interest receivable 83.2 62.1
Fees and commissions receivable 1.4 1.9
Other operating income 4.4 3.7
Fair value gains on financial instruments 6.6 10.6
-------------------------------------------------- ------- -------
Total income 95.6 78.3
Administrative expenses (39.9) (45.5)
Depreciation and amortisation (5.8) (7.4)
-------------------------------------------------- ------- -------
Operating profit before revaluation gains,
impairment and provisions 49.9 25.4
Gains on investment properties 6.0 5.8
Impairment on loans and advances (24.1) (8.1)
Provisions for liabilities - 0.1
-------------------------------------------------- ------- -------
Profit before tax 31.8 23.2
Taxation (5.6) 1.2
--------------------------------------------------
Profit for the financial year 26.2 24.4
================================================== ======= =======
Statement of Comprehensive Income
for the year ended 31 March 2023 Group Group
2023 2022
GBPm GBPm
Profit for the financial year 26.2 24.4
-------------------------------------------------- ------- -------
Other comprehensive income/(expense)
Items that may subsequently be reclassified
to profit or loss
Fair value through other comprehensive income
investments
Valuation losses taken to equity (0.3) (1.0)
Taxation 0.1 0.2
Items that will not subsequently be reclassified
to profit or loss
Gains on revaluation of land and buildings 0.6 -
Actuarial (losses)/gains on defined benefit
obligations (10.8) 9.6
Taxation 2.2 (2.9)
-------------------------------------------------- ------- -------
Other comprehensive (expense)/income for
the financial year, net of tax (8.2) 5.9
-------------------------------------------------- -------
Total comprehensive income for the financial
year 18.0 30.3
================================================== ======= =======
Statement of Financial Position
at 31 March 2023
Group Group
2023 2022
GBPm GBPm
Assets
Cash and balances with the Bank of England 598.2 652.0
Loans and advances to credit institutions 72.8 73.2
Investment securities 315.6 286.9
Derivative financial instruments 100.5 52.4
Loans and advances to customers 4,370.3 4,778.3
Deferred tax assets 25.0 27.1
Trade and other receivables 10.7 2.2
Intangible assets 9.9 10.2
Investment properties 152.7 147.3
Property, plant and equipment 22.7 22.8
Retirement benefit asset 10.9 14.9
Total assets 5,689.3 6,067.3
=================================================== ========= =========
Liabilities
Shares 4,306.3 4,183.6
Amounts due to credit institutions 826.2 1,116.7
Amounts due to other customers 63.1 114.6
Derivative financial instruments 6.7 11.5
Debt securities in issue - 171.2
Current tax liabilities 0.6 0.3
Deferred tax liabilities 15.4 14.7
Trade and other payables 17.1 14.0
Provisions for liabilities 0.5 0.5
Subordinated liabilities 22.9 22.9
Total liabilities 5,258.8 5,650.0
Members' interests and equity
Core capital deferred shares 127.0 127.0
Subscribed capital 7.8 7.8
General reserves 292.4 279.1
Revaluation reserve 3.3 3.1
Fair value reserve - 0.3
--------------------------------------------------- --------- ---------
Total members' interests and equity 430.5 417.3
Total members' interests, equity and liabilities 5,689.3 6,067.3
=================================================== ========= =========
Statement of Changes in Members'
Interests and Equity
for the year ended 31 March
2023
Core
capital Fair
deferred Subscribed General Revaluation value
shares capital reserves reserve reserve Total
Group GBPm GBPm GBPm GBPm GBPm GBPm
At 1 April 2022 127.0 7.8 279.1 3.1 0.3 417.3
Profit for the financial year - - 26.2 - - 26.2
Other comprehensive income
for the year (net of tax)
Retirement benefit obligations - - (8.5) - - (8.5)
Gains on revaluation of land
and buildings - - - 0.6 - 0.6
Realisation of previous revaluation
gains - - 0.4 (0.4) - -
Fair value through other comprehensive
income investments - - - - (0.3) (0.3)
Total other comprehensive
income - - (8.1) 0.2 (0.3) (8.2)
---------------------------------------- ---------- ----------- ---------- ------------ --------- ------
Total comprehensive income
for the year - - 18.1 0.2 (0.3) 18.0
Distribution to the holders
of core capital deferred shares - - (4.8) - - (4.8)
---------- ----------- ---------- ------------ --------- ------
At 31 March 2023 127.0 7.8 292.4 3.3 - 430.5
======================================== ========== =========== ========== ============ ========= ======
Core
capital Fair
deferred Subscribed General Revaluation value
shares capital reserves reserve reserve Total
Group GBPm GBPm GBPm GBPm GBPm GBPm
At 1 April 2021 127.0 7.8 250.7 3.3 1.1 389.9
Profit for the financial year - - 24.4 - - 24.4
Other comprehensive income
for the year (net of tax)
Retirement benefit obligations - - 6.9 - - 6.9
Realisation of previous revaluation
gains - - - (0.2) - (0.2)
Fair value through other comprehensive
income investments - - - - (0.8) (0.8)
Total other comprehensive
income - - 6.9 (0.2) (0.8) 5.9
---------------------------------------- ---------- ----------- ---------- ------------ --------- ------
Total comprehensive income
for the year - - 31.3 (0.2) (0.8) 30.3
Distribution to the holders
of core capital deferred shares - - (2.9) - - (2.9)
---------- ----------- ---------- ------------ --------- ------
At 31 March 2022 127.0 7.8 279.1 3.1 0.3 417.3
======================================== ========== =========== ========== ============ ========= ======
Statement of Cash Flows
for the year ended 31 March 2023 Group Group
2023 2022
GBPm GBPm
Net cash inflow from operating activities
(below) 161.3 365.7
------------------------------------------------- -------- ----------
Cash flows from investing activities
Purchase of investment securities (240.5) (101.9)
Proceeds from disposal of investment securities 211.4 86.5
Proceeds from disposal of investment properties 2.1 2.1
Purchase of property, plant and equipment
and intangible assets (7.8) (5.1)
Net cash outflows from investing activities (34.8) (18.4)
------------------------------------------------- -------- ----------
Cash flows from financing activities
Repayment of debt securities in issue (172.0) (47.4)
Interest paid on subordinated liabilities (2.5) (2.5)
Payment of lease liabilities (0.3) (0.4)
Distribution to the holders of core capital
deferred shares (4.8) (2.9)
Net cash outflows from financing activities (179.6) (53.2)
------------------------------------------------- -------- ----------
Net (decrease)/increase in cash (53.1) 294.1
Cash and cash equivalents at beginning of
year 710.1 416.0
Cash and cash equivalents at end of year 657.0 710.1
================================================= ======== ==========
Group Group
2023 2022
GBPm GBPm
Analysis of cash and cash equivalents
Cash in hand (including Bank of England
Reserve account) 584.2 636.9
Loans and advances to credit institutions 72.8 73.2
657.0 710.1
================================================= ======== ==========
Group Group
2023 2022
GBPm GBPm
Cash flows from operating activities
Profit before tax 31.8 23.2
Adjustments for non-cash items included
in profit before tax
Impairment on loans and advances 24.1 8.1
Depreciation, amortisation and impairment 7.7 13.0
Disposal of property, plant and equipment - (0.1)
Revaluations of investment properties (6.0) (5.8)
Changes in provisions for liabilities - (0.1)
Interest on subordinated liabilities 2.5 2.5
Fair value losses/(gains) on equity release
portfolio 0.5 (0.2)
Interest paid on lease liabilities - 0.1
Changes in fair value 40.0 63.7
-------------------------------------------------
100.6 104.4
Changes in operating assets and liabilities
Loans and advances to customers 343.3 2.5
Loans and advances to credit institutions 1.1 (3.3)
Derivative financial instruments (52.9) (74.9)
Shares 122.7 (50.5)
Deposits and other borrowings (341.2) 389.3
Trade and other receivables (8.5) 0.4
Trade and other payables 3.2 1.8
Retirement benefit obligations (6.8) (4.2)
Tax received (0.2) 0.2
Net cash inflow from operating activities 161.3 365.7
================================================= ======== ==========
Ratios
for the year ended 31 March 2023 Group Statutory
2023 limit
% %
Lending limit 6.8 25.0
Funding limit 17.1 50.0
------------------------------------------------- -------- ----------
Group Group
2023 2022
% %
As a percentage of shares and borrowings:
Gross capital 8.73 7.88
Free capital 5.16 4.65
Liquid assets 18.99 18.12
As a percentage of mean total assets:
Profit for the financial year 0.45 0.41
Net interest margin 1.42 1.05
Management expenses 0.78 0.89
------------------------------------------------- -------- ----------
Group Group
2023 2022
% %
Common Equity Tier 1 capital ratio 18.7 17.0
Common Equity Tier 1 capital ratio before
IFRS 9 transitional relief 18.3 16.2
------------------------------------------------- -------- ----------
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