West Bromwich Building Society

 

              Announcement of half-year results for the six months
         to 30 September 2024

 

West Brom Building Society announces record homeowner lending including 39% growth in first time buyer mortgages

 

The West Brom Building Society has reported record levels of homeowner lending in the first half of the financial year, with mortgages to first time buyers increasing by 39%, exceeding the current market growth of 24%¹.

 

First time buyers made up 66% of all new mortgage customers (62% in 2023), helping over 3,000 customers purchase their first home, while contributing to the Society's highest-ever level of homeowner lending, up 41% to £646m, in the first six months of the financial year.

 

The Society also announced strong pre-tax profits of £17.2m, an increase of 26% from the same period last year.

 

Jonathan Westhoff, Chief Executive Officer, at West Brom Building Society said: "This year we've celebrated 175 years of helping people achieve their ambition of buying a home and saving to help secure their future. We're especially proud to have helped over 3,000 first time buyers secure their own homes, a 41% increase compared with the same period last year.

 

"We've extended our offering for those with smaller deposits through our new build mortgage range, alongside our continued support for alternative routes to buying a home, such as shared ownership. These options, as well as our Differentiated Standard Variable Rate approach, have helped us achieve our highest ever homeowner lending in the first six months of a financial year.

 

"On the savings side, we've welcomed over 7,000 new savers, an increase of 127% from the same period last year and maintained rates around a third higher than market average rates² - demonstrating our commitment to providing value to all our members as a building society. This means savers have earned an additional £21.8m in interest above average market savings rates² (6 months to 30 September 2023: £19.6m).

 

"Beyond this performance we've built on our commitment to making a positive impact in our communities. In the period, we've provided 750 students across 18 schools with financial education sessions. We've also partnered with Birmingham based charity, Jericho, to support employment opportunities and engaged with 40 charities through our employee volunteer network. This is at the heart of what we do and why we do it.

 

"While the UK economy continues to show modest growth amid global uncertainty, with easing inflation lowering interest rates and mortgage costs, the market remains challenging. With a new government in place and ongoing economic pressures impacting household finances, it is encouraging the housing market has demonstrated resilience with house prices holding steady.

 

"Despite these challenges our strong financial performance, reflected in a 26% increase in pre-tax profits supports our capital strength and, therefore, capability to continue to support the vital segments in which we have grown strongly."

 

 

Key highlights to the end of September 2024:

 

·    Lent £646m of mortgages to people so they can buy their own home. This is an increase of 41%, and the highest amount of home ownership lending reached in the first half of a financial year during the Society's 175 year history (30 September 2023: £458m)

 

·    Helped 3,125 first time buyers buy their own home, 41% more than the same period  last year.

 

·    Delivered £23.7m of member benefits to customers:

o  Savers earned a total of £21.8m in interest over the average savings rates in the market² (30 September 2023: £19.6m), welcoming 7,640 new savers to the Society, an increase of 127%.

o  Mortgage customers paying the Society's unique Differentiated Standard Variable Rate paid £1.9m less interest than if they had paid the average rate offered by the market³ at the end of their mortgage deal (30 September 2023: £1.3m).

 

·    Profit before tax grew by 26% to £17.2m (30 September 2023: £13.6m) with a Common Equity Tier 1 ratio of 17.1% (31 March 2024: 17.8%). This strong capital position means the Society can continue to support more people to buy their own homes and invest for future customers.

 

·    Since April 2024, the financial education team, made up of staff volunteers, has reached 750 students across 18 local schools. The team has also developed a new financial education session to help support vulnerable adults who are experiencing financial hardship.

 

·      The Society announced its new partnership with Birmingham based charity Jericho - who work to provide vital support and activities to those experiencing isolation, by supporting recovery, inclusion, and employability.

 

 

 

ENDS

 

1 UK Finance mortgage completion reporting for September tables BTL22, S1 final.

2 Weighted average market rates sourced from Bank of England Bankstats table A6.1 April 24 to Sept 24.

3 Weighted average market reversion rate sourced from Moneyfacts April 24 to Sept 24.

 

For more information, please contact:

Corporate Communications Manager, West Brom Building Society:
Becky.Hume@westbrom.co.uk

07484 515676

 

Notes to editors
About the West Brom

The West Brom is the UK's eighth largest building society and is a leading provider of financial services. Proudly independent, West Brom Building Society is owned by and run for the benefit of its customers. Since its foundation in 1849, the Society's fundamental principles have been, and remain, to offer people the opportunity to buy their own homes and save for the future.

West Bromwich Building Society

Condensed consolidated

half-yearly financial information

30 September 2024

 

Chief Executive Officer's business review

 

The first half of our financial year has continued to bring changes, opportunities and challenges, and it's been a poignant time particularly as we reflect and celebrate our 175th anniversary. We've had a successful six months during a time where the economy reacted to the first change of Government since 2010, and the Bank of England reduced Bank Rate for the first time in four years.

 

We've lent a record level of £646m of homeowner mortgages during the first half of our financial year (30 September 2023: £458m) and helped 4,716 customers buy their own home (30 September 2023: 3,497). These amounts become especially meaningful as 66% of these customers were first time buyers. Overall, our lending to first time buyers has increased by 39%, at a time where lending to first time buyers across the mortgage market only increased by 24%³.

 

We're passionate about helping more people buy their first home so we've also introduced a 'new build' mortgage range to support more customers who have a smaller deposit and want to buy a new build property.

 

Our record level of lending was supported by high numbers of existing customers choosing to keep their mortgage with us, giving us strong growth in our residential mortgage book of £354m in the first half year of our financial year (30 September 2023: £81.0m).

 

For existing mortgage customers our market-first approach to Standard Variable Rate (SVR), where customers with more equity in their homes are offered a lower rate to switch to at the end of their initial deal, means we can offer customers good value compared to average market SVRs². As mortgage rates have been quite volatile over the past six months this approach has given our customers more flexibility and time before remortgaging. During the first half of our financial year our customers on SVR paid a total of £1.9m less than they would have done on the market average SVR² (30 September 2023: £1.3m).  On average our rates were around 25% below the market average.

 

We've welcomed 7,640 new savers to the Society (30 September 2023: 3,372), an increase of 127%. Our savings rates on average are around one third above the market average¹, which means overall our customers have received £21.8m more interest than if they'd have been on average savings rates¹ (30 September 2023: £19.6m).

 

 

 

 

 

1 Weighted average market rates sourced from Bank of England Bankstats table A6.1 April 24 to Sept 24.

2 Weighted average market reversion rate sourced from Moneyfacts April 24 to Sept 24.

3 UK Finance mortgage completion reporting for September tables BTL22, S1 final.

 

Many of our new savers came through our new products such as our Four Access Saver and Double Access ISA, which give customers more flexibility and better rates for their savings. We've also continued to improve our digital savings portal so that our customers can open and manage their accounts online. These new products and improvements to our digital savings experience has attracted 4,500 new customers, and we now have over 25,000 existing customers managing their accounts online.

 

Our strong profit before tax of £17.2m has helped to grow our capital reserves and means we can continue to support more people to buy their own homes and invest for our future customers (30 September 2023: £13.6m).

 

Last Autumn we completed a major strategic review to lay out our vision and direction for the next five years and we're now in the first year of delivering our refreshed strategy. At the heart of this is a significant investment in our people and technology to enhance our digital services. Over the past six months we've been running a process to select our technology partners and to recruit and develop the skills we'll need to implement these new digital services. The second half of our financial year will see us start on a major multi-year programme of implementation.

 

As we invest in this major digital programme, including a £2.0m investment in the period to support its delivery, we're still committed to offering customers the choice of how they wish to be served and will continue to develop products and services for online, on the phone and in our 34 branches. As part of this we've launched a refreshed brand, celebrating our heritage in the West Midlands, with a more contemporary look. And 175 years on, since 20 local people set up the 'West Bromwich Permanent Building Society', we're proud to be bringing 'Building Society' back into our name.

 

 

Our vision and strategy

 

For this phase of our strategy, our new vision is underpinned by five pillars to guide our strategic direction. Our vision is that:

 

Our customers and communities own a more secure future.

 

We believe our customers should be able to own their financial future whether that's through a mortgage, savings, or both.

 

Our five strategic pillars are:

 

1.   Help our customers achieve a more financially secure future

We offer products, services and a customer experience that enables our customers to achieve a more secure financial future.

 

2.   Strengthening our communities

As a regional Society, we support customers in the region and play an active role in helping our local communities thrive.

 

3.   We are customer centric and purpose driven

We have colleagues and a culture that strive to do the right thing for our customers, and we're committed to making our Society a place where our people can flourish and develop.

 

4.   Modernise our digital and technology estate

We'll embrace sustainable and reliable technology to stay up to date with our increasingly digital world and meet our customers' expectations to serve them how and when they want.

 

5.   Keep our business secure and sustainable for the future

We'll remain financially resilient and committed to social and environmental sustainability practices.

 

At the end of the financial year, we'll provide an update on the progress we're making against

these pillars.

 

 

Building on our financial strength

 

Our strong set of financial results for the six months up to 30 September 2024 means we've the financial strength to offer existing and future customers products and services that work for them. Our profit before tax for the first six months was £17.2m (30 September 2023: £13.6m), a 26% increase on the same period in 2023.

 

On an underlying basis, after adding back the one-off cost of buying back Tier 2 subordinated debt last year, our profit before tax reduced slightly from £18.7m to £17.2m. This reduction is the result of lower net interest income and higher administrative expenses as we invest in our digital transformation, and are partially offset by reduced impairment costs and an improved revaluation gain on our investment property portfolio.

 

Our net interest receivable reduced by £6.5m as the interest we pay to our savings customers increased by 30% whilst we saw a smaller increase of only 14% in the interest we earn on mortgages. 

 

A slight increase in house prices and a modest improvement in the economic outlook were the main reasons for a £1.0m release of impairment provisions for credit losses on residential loans (30 September 2023: release £1.1m).  We also recorded a reduced charge of £1.7m against our closed commercial lending book (30 September 2023: charge £8.1m) which further increased the provision coverage to 45.2% (31 March 2024: 43.4%).

 

Our administrative expenses rose by 16.2% to £32.3m (30 September 2023: £27.8m) meaning our management expense ratio increased from 0.95% to 1.04%. This was largely because of an increase in the number of colleagues needed to support the Society's digital strategy and we've invested £2.0m to support the delivery of transformation in the period. This is an investment in our future and ensures we're able to provide services to our customers how and when they want.

 

Our investment in residential property saw a small revaluation gain of £1.1m (30 September 2023: loss £2.5m) as the housing market proved to be resilient and bounced back from the small fall in prices seen 12 months earlier.

 

In September, we raised £300m of wholesale funding through a successful residential mortgage-backed security issuance. The deal was well received by the financial markets and represents a valuable diversification of funding to complement our retail savings and support our lending ambitions.

 

Our capital position remains strong, and at the end of September 2024, our Common Equity Tier 1 ratio was 17.1% (31 March 2024: 17.8%) showing our financial strength and enabling us to invest in the digital programme we're undertaking.

 

Regulatory capital resources

 

	Transitional basis (including unaudited interim profit)1	Transitional basis (excluding unaudited interim profit)1	Transitional basis (including audited year-end profit)1
	30-Sep-24	30-Sep-24	31-Mar-24
	£m	£m	£m
Members' interests and equity	447.9	435.0	444.7
Permanent interest bearing shares (PIBS) deduction	(3.9)	(3.9)	(7.8)
Other adjustments2	(34.8)	(34.8)	(34.6)
Common Equity Tier 1 (CET 1) capital	409.2	396.3	402.3
Additional Tier 1 capital	-	-	-
Total Tier 1 capital	409.2	396.3	402.3
Tier 2 capital3	2.0	2.0	2.0
Total regulatory capital resources	411.2	398.3	404.3
Risk weighted assets (RWA)	2,390.1	2,390.1	2,258.8
Leverage ratio exposure including claims on central banks	6,392.5	6,392.5	5,939.0
Leverage ratio exposure excluding claims on central banks	5,832.8	5,832.8	5,399.0
Capital ratios
	%	%	%
Common Equity Tier 1 ratio (as a percentage of RWA)	17.1	16.6	17.8
Common Equity Tier 1 before IFRS 9 transitional arrangements (as a percentage of RWA)	17.1	16.6	17.8
Tier 1 ratio (as a percentage of RWA)	17.1	16.6	17.8
Total capital ratio (as a percentage of RWA)	17.2	16.7	17.9
Leverage ratio including claims on central banks	6.4	6.2	6.8
Leverage ratio excluding claims on central banks	7.0	6.8	7.5

 

¹ The 'Transitional' basis includes the effect of IFRS 9 transitional arrangements. For regulatory reporting purposes, profit is not recognised as capital until audited.

² Other adjustments mainly comprise IFRS 9 transitional arrangements and deductions for intangible assets, deferred tax assets and the retirement benefit asset.

³ Tier 2 capital comprises subordinated liabilities excluding accrued interest.

 

 

Supporting our people

 

Delivering the transformation project needs the support of our colleagues, as well as bringing in new skills. Our flexible model of employment means we can access and recruit key skills from a broader catchment area.  This has increased the number of colleagues at the Society to 736 (30 September 2023: 699).

 

Our commitment to develop our colleagues has been recognised with the Investors in People Gold accreditation for the ninth year in a row. We continue to invest in our colleagues' development to encourage a culture of growth and innovation, with 23 completing apprenticeships from Level 3 to Level 7.

 

Our colleague-led Connect group works to promote equity, inclusion and diversity within the Society, broadening the understanding and acceptance of the differences between us. Connect has several working groups including our established LGBTQ+, Black Colleague Focus Group, and Dyslexia Support Group and we're proud to be introducing a new Women's network very soon.

 

We're committed to supporting social mobility, so we've signed up to the Business in the Community's 'Ban the Box' campaign. This makes it easier for anyone with a criminal record to apply for a role with us, managing any potential conflict or risk to the business on a role-by-role basis.

 

 

Supporting our communities

 

Since April 2024, as part of our ongoing commitment to provide financial education, we've been able to reach 750 students in 18 schools. We've also developed a new financial education session to help support vulnerable adults who are experiencing financial hardship.

 

Earlier this year, we announced our partnership with Jericho, an incredible Birmingham based charity that helps people facing challenges in our community. They provide vital support and activities to help reduce isolation, support recovery, and promote inclusion to transform lives and help people become more employable.

 

We've supported over 40 different charities in our local communities over the last six months through fundraising, grants, and donations. Our colleagues have further supported these charities through over 790 hours of volunteering within the local community.

 

 

Principal risks and uncertainties

 

Right now, there's a lot of uncertainty in the economy and the wider world.

 

This report provides an update on the principal risks and uncertainties set out on pages 38 to 55 of the 2024 Annual Report and Accounts, with a focus only on key developments during the first six months.

 

Business environment and economic conditions

 

The outlook for the UK economy is one of modest, but stable, growth although there remains significant global uncertainties linked to conflicts in Ukraine and the Middle East.

 

Despite the potential effects of both the Autumn Budget and of the threat of future US trade tariffs on the UK economy, inflationary pressures have started to ease and mortgage rates have fallen from their peak. Many people face financial pressures as their household finances, including mortgage and housing costs, continue to be strained.

 

Despite these pressures the housing market has shown resilience and house prices remain relatively stable.

 

Principal risks

 

The principal risks affecting our Society remain consistent with those included in the 2024 Annual Report and Accounts. Our focus remains on credit risk, margin compression risk and operational resilience as well as a significant de-risking of our Pension liability risk. The Board monitors these areas closely using our risk management framework.

 

No new principal risks have been identified.

 

Credit risk

 

We're committed to working with our mortgage customers to keep them in their home and to make sure repossession is only ever as a last resort. Where we provide help to customers in the form of forbearance, we go beyond the minimum requirements set out by the Financial Conduct Authority and we continue to develop our approach to support customers in financial difficulty.

 

The number of mortgage customers falling behind with payments, as measured by our core residential arrears of 0.97%, is marginally higher than the industry average of 0.93%⁴ (31 March 2024: 0.89% and 0.91%). This figure is increased by the relatively higher arrears in our closed buy to let lending. Arrears in our homeowner lending are significantly lower at 0.60% at 30 September 2024 (31 March 2024: 0.57%), well below the industry average for homeowner lending of 0.97% (31 March 2024: 0.94%)⁴.

 

Our closed commercial lending remains particularly susceptible to future economic shock. The combination of provisions set aside and capital we've allocated directly to these exposures remains significant, and the provision coverage stands at 45.2% (31 March 2024: 43.4%).

 

Margin compression risk

 

The volatile interest rate environment has seen an increase in the risk of margin compression and, as explained on page 5, we did see our net interest receivable reduce over the last year. 

 

The wholesale funding raised in September 2024 reduces our reliance on retail funding from savers and helps to diversify this risk.

 

Operational resilience

 

In the face of increasing external risks, ensuring we continue to provide the services our customers rely upon remains a key focus. Our approach has included testing of severe but plausible scenarios and is continuously evolving to make sure our operations remain resilient whilst also meeting the expectations of our regulators. During the period we've had no incidents that have materially impacted our services to customers, and we continue to respond to increasing cyberthreats by ensuring our customers' data is kept safe and secure.

 

Pension liability risk

 

We took a significant step to de-risk volatility in our pension liability by purchasing an insurance policy to cover the future payments due to defined benefit pensioners. This provides greater certainty for the Society by transferring many of the associated risks to the insurer and securing benefits for the scheme's pensioners.

 

 

 

4 As reported by UK Finance a trade association for the UK banking and financial services sector.

 

 

 

 

Outlook

 

As the structural imbalance between housing demand and supply remains in the UK, we are enthusiastic about the Government's commitment to increase the housing supply and their manifesto pledge to double the size of the mutual sector. We're committed to expanding the ways we can help those who are underserved own a home and will be launching further mortgage products to help customers struggling to save for a house deposit.

 

Over the next six months and beyond, we'll be progressing with our technology transformation programme initially focused on developing digital savings in collaboration with our selected technology partners. We'll also continue to enhance our existing savings portal by improving the registration process and the services we offer.

 

Whether members are looking to own their first home or build up savings they can rely on, we'll continue to make this happen, as we have done for 175 years.

 

 

 

 

Jonathan Westhoff

Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

Forward-looking statements

 

Certain statements in this half-yearly report are forward-looking. 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 our control. As a result, our 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.

 

 

 

Condensed consolidated half-yearly financial information

30 September 2024

 

 

Condensed consolidated half-yearly Income Statement

for the six months ended 30 September 2024

 

		6 months		6 months		Year
		ended		ended		ended
		30-Sep-24		30-Sep-23		31-Mar-24
		unaudited		unaudited		audited
	Notes	£m		£m		£m
Interest receivable and similar income
Calculated using the effective interest method		135.8		106.9		229.4
On instruments measured at fair value through profit or loss		21.2		31.1		57.6
Total interest receivable and similar income		157.0		138.0		287.0
Interest expense and similar charges		(109.6)		(84.1)		(183.4)
Net interest receivable		47.4		53.9		103.6
Fees and commissions receivable		0.4		0.6		1.1
Other operating income		2.1		2.3		4.6
Fair value (losses)/gains on financial instruments		(0.9)		0.7		(0.4)
Total income		49.0		57.5		108.9
Administrative expenses		(29.1)		(25.2)		(54.0)
Depreciation and amortisation	10	(3.2)		(2.6)		(5.5)
Operating profit before revaluation losses, impairment and provisions		16.7		29.7		49.4
Gains/(losses) on investment properties	11	1.1		(2.5)		2.5
Impairment on loans and advances	6	(0.7)		(8.5)		(14.7)
Cost on debt buyback	16	-		(5.1)		(5.1)
Provisions for liabilities	7	0.1		-		-
Profit before tax		17.2		13.6		32.1
Taxation		(4.3)		(3.5)		(7.7)
Profit for the period		12.9		10.1		24.4

Condensed consolidated half-yearly Statement of Comprehensive Income

for the six months ended 30 September 2024

 

				6 months		6 months		Year
				ended		ended		ended
				30-Sep-24		30-Sep-23		31-Mar-24
				unaudited		unaudited		audited
				£m		£m		£m
Profit for the period				12.9		10.1		24.4
Other comprehensive income
Items that may subsequently be reclassified to profit or loss
Fair value through other comprehensive income investments
	Valuation gains taken to equity			-		0.5		1.3
Taxation				-		(0.1)		(0.3)
Items that will not subsequently be reclassified to profit or loss
Actuarial losses on defined benefit obligations				(4.3)		-		(7.2)
Taxation				1.0		-		1.7
Other comprehensive income for the period, net of tax				(3.3)		0.4		(4.5)
Total comprehensive income for the period				9.6		10.5		19.9

 

 

Condensed consolidated half-yearly Statement of Financial Position

at 30 September 2024

 

		30-Sep-24		30-Sep-23		31-Mar-24
		unaudited		unaudited		audited
	Notes	£m		£m		£m
Assets
Cash and balances with the Bank of England		547.3		446.3		491.6
Loans and advances to credit institutions		71.0		45.9		46.3
Investment securities		376.2		403.7		391.5
Derivative financial instruments		46.5		107.3		61.8
Loans and advances to customers	8	5,159.3		4,432.7		4,785.1
Deferred tax assets		15.7		21.6		19.0
Trade and other receivables		4.2		3.7		3.9
Intangible assets	10	17.6		11.6		13.9
Investment properties	11	145.1		145.9		148.7
Property, plant and equipment	10	21.4		22.1		21.8
Retirement benefit assets	9	1.6		10.9		6.1
Total assets		6,405.9		5,651.7		5,989.7
Liabilities
Shares		4,933.6		4,391.0		4,670.6
Amounts due to credit institutions		627.4		645.7		788.2
Amounts due to other customers		36.2		137.2		37.0
Derivative financial instruments		27.8		5.0		12.8
Debt securities in issue	12	300.4		-		-
Current tax liabilities		0.9		0.6		2.0
Deferred tax liabilities		13.1		15.6		14.2
Trade and other payables		16.2		16.0		17.6
Provisions for liabilities	7	0.3		0.5		0.5
Subordinated liabilities	16	2.1		2.1		2.1
Total liabilities		5,958.0		5,213.7		5,545.0
Members' interests and equity
Core capital deferred shares	13	127.0		127.0		127.0
Subscribed capital	15	3.9		7.8		7.8
General reserves		312.8		299.5		305.7
Revaluation reserve		3.2		3.3		3.2
Fair value reserve		1.0		0.4		1.0
Total members' interests and equity		447.9		438.0		444.7
Total members' interests, equity and liabilities		6,405.9		5,651.7		5,989.7

 

 

 

 

 

Condensed consolidated Statement of Changes in Members' Interests and Equity

for the six months ended 30 September 2024

 

6 months ended 30 September 2024 (unaudited)	Core capital deferred shares	Subscribed capital	General reserves	Revaluation reserve	Fair value reserve	Total
	£m	£m	£m	£m	£m	£m
At 1 April 2024	127.0	7.8	305.7	3.2	1.0	444.7
Profit for the period	-	-	12.9	-	-	12.9
Other comprehensive income - Retirement benefit obligations	-	-	(3.3)	-	-	(3.3)
Total comprehensive income for the period	-	-	9.6	-	-	9.6
Distribution to the holders of core capital deferred shares	-	-	(2.9)	-	-	(2.9)
Buyback and cancellation of subscribed capital	-	(3.9)	0.4	-	-	(3.5)
At 30 September 2024	127.0	3.9	312.8	3.2	1.0	447.9
6 months ended 30 September 2023 (unaudited)	Core capital deferred shares	Subscribed capital	General reserves	Revaluation reserve	Fair value reserve	Total
	£m	£m	£m	£m	£m	£m
At 1 April 2023	127.0	7.8	292.4	3.3	-	430.5
Profit for the period	-	-	10.1	-	-	10.1
Other comprehensive income - Fair value of investments	-	-	-	-	0.4	0.4
Total comprehensive income for the period	-	-	10.1	-	0.4	10.5
Distribution to the holders of core capital deferred shares	-	-	(3.0)	-	-	(3.0)
At 30 September 2023	127.0	7.8	299.5	3.3	0.4	438.0
Year ended 31 March 2024 (audited)	Core capital deferred shares	Subscribed capital	General reserves	Revaluation reserve	Fair value reserve	Total
	£m	£m	£m	£m	£m	£m
At 1 April 2023	127.0	7.8	292.4	3.3	-	430.5
Profit for the financial year	-	-	24.4	-	-	24.4
Other comprehensive income for the year (net of tax)
Retirement benefit obligations	-	-	(5.5)	-	-	(5.5)
Realisation of previous revaluation gains	-	-	0.1	(0.1)	-	-
Fair value through other comprehensive income investments	-	-	-	-	1.0	1.0
Total other comprehensive income	-	-	(5.4)	(0.1)	1.0	(4.5)
Total comprehensive income for the year	-	-	19.0	(0.1)	1.0	19.9
Distribution to the holders of core capital deferred shares	-	-	(5.7)	-	-	(5.7)
At 31 March 2024	127.0	7.8	305.7	3.2	1.0	444.7

 

 

 

Condensed consolidated half-yearly Statement of Cash Flows

for the six months ended 30 September 2024

 

		6 months		6 months		Year
		ended		ended		ended
		30-Sep-24		30-Sep-23		31-Mar-24
		unaudited		unaudited		audited
		£m		£m		£m
Net cash (outflow)/inflow from operating activities (below)		(300.4)		(69.5)		(13.8)
Cash flows from investing activities
Purchase of investment securities		(142.3)		(117.9)		(333.0)
Proceeds from disposal of investment securities		165.4		90.9		258.4
Proceeds from disposal of investment properties		5.4		4.7		7.4
Purchase of property, plant and equipment, intangible assets and investment properties		(7.2)		(4.0)		(9.7)
Net cash flows from investing activities		21.3		(26.3)		(76.9)
Cash flows from financing activities
Repurchase of subordinated liabilities		-		(20.4)		(20.4)
Purchase of debt securities in issue		300.4		3.5		-
Interest paid on subordinated liabilities		(0.1)		(1.6)		(1.8)
Payment of lease liabilities		(0.2)		(0.2)		(0.4)
Distribution to the holders of core capital deferred shares		(2.9)		(3.0)		(5.8)
Buyback and cancellation of subscribed capital		(3.9)		-		-
Net cash flows from financing activities		293.3		(21.7)		(28.4)
Net increase/(decrease) in cash		14.2		(117.5)		(119.1)
Cash and cash equivalents at beginning of period		640.4		657.0		657.0

 

For the purposes of the cash flow statement, cash and cash equivalents comprise the following balances with maturities of three months or less from the date of acquisition:

 

 

		30-Sep-24		30-Sep-23		31-Mar-24
		unaudited		unaudited		audited
		£m		£m		£m
Cash and cash equivalents
Cash in hand (including Bank of England Reserve account)		547.3		432.9		491.6
Loans and advances to credit institutions		71.0		45.9		46.3
Investment securities		36.3		60.7		-
		654.6		539.5		537.9

 

The Group is required to maintain certain mandatory balances with the Bank of England which, at 30 September 2024, amounted to £nil (30 September 2023: £13.4m and 31 March 2024: £nil). Cash ratio deposits are mandatory deposits with the Bank of England which are not available for use in the Group's day-to-day operations. The Cash ratio deposit scheme was closed in 2023/24 and replaced by the Bank of England Levy. The movement in these balances is included within cash flows from operating activities.

 

The Group's loans and advances to credit institutions includes £nil (30 September 2023: £nil and 31 March 2024: £nil) of balances belonging to the Society's structured entities which are not available for general use by the Society

 

 

		6 months		6 months		Year
		ended		ended		ended
		30-Sep-24		30-Sep-23		31-Mar-24
		unaudited		unaudited		audited
		£m		£m		£m
Cash flows from operating activities
Profit before tax		17.2		13.6		32.1
Adjustments for non-cash items included in profit before tax
Impairment on loans and advances		(1.2)		8.5		14.7
Depreciation, amortisation and impairment		3.2		2.6		5.5
Disposal of property, plant and equipment		-		-		0.1
Revaluation (gains)/losses on investment properties and related disposals		(1.1)		2.5		(2.5)
Changes in provision for liabilities		(0.2)		-		-
Interest on subordinated liabilities		0.1		0.6		0.8
Fair value (gains)/losses on equity release portfolio		-		(0.2)		(0.2)
Changes in fair value		(26.1)		9.4		(36.7)
		(8.1)		37.0		13.8
Changes in operating assets and liabilities
Loans and advances to customers		(347.0)		(79.4)		(391.9)
Loans and advances to credit institutions		-		0.6		14.0
Derivative financial instruments		30.3		(8.5)		44.8
Shares		263.0		84.7		364.3
Deposits and other borrowings		(161.6)		(109.9)		(64.1)
Trade and other receivables		(0.3)		7.0		6.8
Trade and other payables		(75.1)		(1.0)		0.9
Retirement benefit obligations		1.2		-		(2.4)
Tax paid		(2.8)		-		-
Net cash (outflow)/ inflow from operating activities		(300.4)		(69.5)		(13.8)

 

 

 

 

 

 

Notes to condensed consolidated half-yearly financial information

for the six months ended 30 September 2024

 

1 General information

 

These half-yearly financial results do not constitute statutory accounts within the meaning of the Building Societies Act 1986. A copy of the statutory accounts for the year ended 31 March 2024 has been delivered to the Financial Conduct Authority and the relevant information in this report has been extracted from these statutory accounts. The statutory accounts for the year ended 31 March 2024 have been reported on by the Group's auditor and the report of the auditor was (i) unqualified, and (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report.

 

The consolidated half-yearly financial information for the six months to 30 September 2024 and 30 September 2023 is unaudited and has not been reviewed by the Group's auditor.

 

2 Basis of preparation

 

This condensed consolidated half-yearly financial report for the six months ended 30 September 2024 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and in accordance with the UK adopted International Accounting Standards (IAS 34 'Interim Financial Reporting'). The half-yearly condensed consolidated financial report should be read in conjunction with the Annual Report and Accounts for the year ended 31 March 2024, which have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

 

3 Going concern and business viability statement

 

Details of the Group's objectives, policies and processes for managing its exposure to risk are contained in the Risk Management Report of the 2023/24 Annual Report and Accounts. The Directors also include statements in the Directors' Report in respect of going concern and longer-term business viability on page 70 and 71 of the 2023/24 Annual Report and Accounts.

 

The Directors have reviewed the latest plans and forecasts for the Group giving consideration to liquidity and capital adequacy. They are satisfied that the Group has adequate resources to meet both the normal demands of the business and the requirements which might arise in stressed circumstances for the next 12 months and that the longer-term business viability statement in the 2023/24 Annual Report and Accounts remains appropriate. Accordingly they continue to adopt the going concern basis in preparing these half-yearly financial results.

 

4 Accounting policies

 

The accounting policies adopted by the Group in the consolidated half-yearly information are consistent with those disclosed in the Annual Report & Accounts for the year ended 31 March 2024 (details provided on page 112 to 124).

 

Critical accounting estimates and judgements in applying accounting policies

In the process of applying accounting policies, the Group makes various judgements, estimates and assumptions which affect the amounts recognised in the financial statements. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

For the half year accounts, tax has been charged on the statutory profit before tax at the UK standard rate of 25%. A full review of the tax position of the Society and its subsidiaries will be carried out at the year end date. The significant judgements in applying accounting policies and key sources of estimation uncertainty at 30 September 2024 are unchanged from those existing at 31 March 2024.

5 Business segments

 

Operating segments are reported in accordance with the internal reporting provided to the Group Board (the chief operating decision maker), which is responsible for allocating resources to the reportable segments and assessing their performance.

 

The Group has three main business segments:

 

   • Retail - incorporating residential lending, savings, investments and protection; 

   • Commercial real estate - primarily representing loans for commercial property investment; and

   • Property - a portfolio of residential properties for rent.

 

Central Group operations have been included in Retail and comprise risk management, finance, treasury services, human resources and computer services, none of which constitute a separately reportable segment.

 

There were no changes to reportable segments during the period.

 

Transactions between the business segments are carried out at arm's length. The revenue from external parties reported to the Group Board is measured in a manner consistent with that in the consolidated Income Statement.

 

Funds are ordinarily allocated between segments, resulting in funding cost transfers disclosed in inter-segment net interest income. Interest charged for these funds is based on the Group's cost of capital. Central administrative costs are also allocated between segments and are disclosed in inter-segment administrative expenses. There are no other material items of income or expense between the business segments.

 

The Group does not consider its operations to be cyclical or seasonal in nature.

 

6 months ended 30 September 2024 (unaudited)	Retail	Commercial real estate	Property	Consolidation adjustments	Total Group
	£m	£m	£m	£m	£m
Interest receivable and similar income
Calculated using the effective interest method	139.4	4.9	-	(8.5)	135.8
On instruments measured at fair value through profit or loss	21.2	-	-	-	21.2
Total interest receivable and similar income	160.6	4.9	-	(8.5)	157.0
Interest expense and similar charges	(109.7)	(7.2)	(1.2)	8.5	(109.6)
Net interest receivable/(expense)	50.9	(2.3)	(1.2)	-	47.4
Fees and commissions receivable	0.4	-	-	-	0.4
Other operating income	0.2	-	1.9	-	2.1
Fair value gains/(losses) on financial instruments	0.2	(1.1)	-	-	(0.9)
Total income	51.7	(3.4)	0.7	-	49.0
Administrative expenses	(28.7)	(0.2)	(0.2)	-	(29.1)
Depreciation and amortisation	(3.2)	-	-	-	(3.2)
Operating profit/ (loss) before revaluation losses, impairment and provisions	19.8	(3.6)	0.5	-	16.7
Loss on investment properties	-	-	1.1	-	1.1
Impairment on loans and advances	1.0	(1.7)	-	-	(0.7)
Provisions for liabilities	0.1	-	-	-	0.1
Profit/(Loss) before tax	20.9	(5.3)	1.6	-	17.2
Total assets	6,510.7	145.2	148.5	(398.5)	6,405.9
Total liabilities	6,100.0	368.7	113.1	(623.8)	5,958.0

 

 

 

6 months ended 30 September 2023 (unaudited)	Retail	Commercial real estate	Property	Consolidation adjustments	Total Group
	£m	£m	£m	£m	£m
Interest receivable and similar income
Calculated using the effective interest method	110.5	4.5	-	(8.1)	106.9
On instruments measured at fair value through profit or loss	31.1	-	-	-	31.1
Total interest receivable and similar income	141.6	4.5	-	(8.1)	138.0
Interest expense and similar charges	(84.2)	(6.7)	(1.4)	8.2	(84.1)
Net interest receivable/(expense)	57.4	(2.2)	(1.4)	0.1	53.9
Fees and commissions receivable	0.6	-	-	-	0.6
Other operating income	0.3	-	2.0	-	2.3
Fair value gains on financial instruments	1.1	(0.4)	-	-	0.7
Total income	59.4	(2.6)	0.6	0.1	57.5
Administrative expenses	(24.5)	(0.6)	(0.1)	-	(25.2)
Depreciation and amortisation	(2.6)	-	-	-	(2.6)
Operating profit/(loss) before revaluation gains, impairment and provisions	32.3	(3.2)	0.5	0.1	29.7
Gains on investment properties	-	-	(2.5)	-	(2.5)
Impairment on loans and advances	(0.9)	(7.6)	-	-	(8.5)
Cost on debt buyback	(5.1)	-	-	-	(5.1)
Profit/(Loss) before tax	26.3	(10.8)	(2.0)	0.1	13.6
Total assets	5,780.3	150.1	149.5	(428.2)	5,651.7
Total liabilities	5,369.6	372.7	120.7	(649.3)	5,213.7

 

 

 

Year ended 31 March 2024 (audited)	Retail	Commercial real estate	Property	Consolidation adjustments	Total Group
	£m	£m	£m	£m	£m
Interest receivable and similar income
Calculated using the effective interest method	238.1	8.3	-	(17.0)	229.4
On instruments measured at fair value through profit or loss	57.5	0.1	-	-	57.6
Total interest receivable and similar income	295.6	8.4	-	(17.0)	287.0
Interest expense and similar charges	(183.3)	(14.4)	(2.7)	17.0	(183.4)
Net interest receivable/(expense)	112.3	(6.0)	(2.7)	-	103.6
Fees and commissions receivable	1.1	-	-	-	1.1
Other operating income	0.5	-	4.1	-	4.6
Fair value gains on financial instruments	(2.3)	1.9	-	-	(0.4)
Total income	111.6	(4.1)	1.4	-	108.9
Administrative expenses	(52.9)	(0.9)	(0.2)	-	(54.0)
Depreciation and amortisation	(5.5)	-	-	-	(5.5)
Operating profit before revaluation gains, impairment and provisions	53.2	(5.0)	1.2	-	49.4
Gains on investment properties	-	-	2.5	-	2.5
Impairment on loans and advances	(0.5)	(14.2)	-	-	(14.7)
Provisions for liabilities	(5.1)	-	-	-	(5.1)
Profit/(Loss) before tax	47.6	(19.2)	3.7	-	32.1
Total assets	6,100.3	148.9	152.1	(411.6)	5,989.7
Total liabilities	5,694.6	370.7	118.4	(638.7)	5,545.0

 

 

6 Allowance for losses on loans and advances to customers

 

							6 months	6 months	Year
							ended	ended	ended
							30-Sep-24	30-Sep-23	31-Mar-24
							unaudited	unaudited	audited
							£m	£m	£m
Impairment charge for the period							0.7	8.5	14.7
Impairment provision at end of period
Loans fully secured on residential property							10.1	11.0	10.9
Loans fully secured on land							91.7	86.5	92.1
Total							101.8	97.5	103.0

 

In accordance with IFRS 9, 'Financial instruments', forecasts of future economic conditions are integral to the Expected Credit Loss (ECL) calculations. At 30 September 2024, the Group modelled four forward-looking macroeconomic scenarios: central, upside, downside and severe with the respective probability weightings the same as those applied at 31 March 2024 following review. The Group's scenario weightings as at 30 September 2024 are 50% for the central scenario, 5% for the upside scenario, 30% for the downside scenario and 15% for the severe scenario (31 March 2024 and 30 September 2023: central scenario 50%, upside scenario 5%, downside scenario 30% and severe scenario 15%). Individual economic variables within the scenarios are regularly reviewed and updated to reflect the current economic outlook.

 

In addition to the scenario weightings and account-specific factors that impact cashflows, the key model assumption for commercial provisioning is considered to be the exit yield requirement, which is used to estimate the cash flows arising from realisation of the property values on sale. While interest rates also have a significant impact on the ECL, via the discount factor applied in the model, compensating economic hedge arrangements would substantially offset the movement in profit or loss terms with an opposing fair value movement. Compared with the central economic forecast, the exit yield requirement for each loan increases by 0.8% and 1.9% in the downside and severe scenarios respectively and reduces by 0.2% in the upside scenario. This compares to an average exit yield of 8%.

 

Presented below is the sensitivity to the total residential and commercial ECL provision arising from the application of 100% weighting to each scenario. 

 

 

	Scenario weighting		Current scenario (%)			Increase/ (decrease) in provision with 100% scenario weighting (£m)	Increase/(decrease) in provision with 10% increase in weighting *(£m)
			2024/5	2025/6	5 year average
Central scenario	50%	Bank Rate	4.3	3.5	3.7	(7.3)	-
		HPI	1.1	1.5	2.6
		Unemployment	4.4	4.5	4.5
		GDP	1.1	1.4	1.4
						(9.9)	(0.3)
Upside scenario	5%	Bank Rate	4.5	3.5	3.5
		HPI	3.3	5.1	4.6
		Unemployment	4.1	3.9	3.9
		GDP	1.4	1.9	2.1
						5.4	1.3
Downside scenario	30%	Bank Rate	6.3	6.0	5.5
		HPI	(3.6)	(6.0)	(0.8)
		Unemployment	4.6	5.2	5.9
		GDP	-	0.8	0.8
						16.7	2.4
Severe scenario	15%	Bank Rate	6.5	1.5	1.8
		HPI	(5.1)	(13.8)	(3.7)
		Unemployment	7.6	8.3	7.8
		GDP	(2.0)	(2.0)	0.3

*(increase in 10% weighting with a corresponding reduction in the central scenario).

 

The tables below analyse the movement in residential impairment provisions by IFRS 9 stage.

 

 

							Stage 1	Stage 2	Stage 3	Total
6 months ended 30 September 2024 (unaudited)							£m	£m	£m	£m
Residential expected credit loss allowance
At 1 April 2024							1.1	6.1	3.7	10.9
Transfers due to increased credit risk:
From stage 1 to stage 2							(0.1)	0.9	-	0.8
From stage 1 to stage 3							-	-	0.1	0.1
From stage 2 to stage 3							-	(0.1)	0.2	0.1
Transfers due to decreased credit risk:
From stage 2 to stage 1							0.1	(0.1)	-	-
From stage 3 to stage 2							-	-	(0.1)	(0.1)
Remeasurement of expected credit losses with no stage transfer							0.1	(0.5)	0.3	(0.1)
Redemptions							(0.1)	(0.1)	(0.6)	(0.8)
Other movements							(0.1)	(0.2)	(0.5)	(0.8)
Movement in provision overlays							(0.1)	0.1	-	-
At 30 September 2024							0.9	6.1	3.1	10.1
							Stage 1	Stage 2	Stage 3	Total
6 months ended 30 September 2023 (unaudited)							£m	£m	£m	£m
Residential expected credit loss allowance
At 1 April 2023							1.1	6.7	2.4	10.2
Transfers due to increased credit risk:
From stage 1 to stage 2							-	0.7	-	0.7
From stage 1 to stage 3							(0.1)	-	0.3	0.2
From stage 2 to stage 3							-	(0.1)	0.3	0.2
Transfers due to decreased credit risk:
From stage 2 to stage 1							-	(0.1)	-	(0.1)
Remeasurement of expected credit losses with no stage transfer							0.5	-	0.1	0.6
Redemptions							(0.2)	-	(0.2)	(0.4)
Amounts written off							(0.1)	-	0.2	0.1
Other movements							0.1	-	(0.2)	(0.1)
Movement in provision overlays							(0.2)	(0.2)	-	(0.4)
At 30 September 2023							1.1	7.0	2.9	11.0

 

 

							Stage 1	Stage 2	Stage 3	Total
Year ended 31 March 2024 (audited)							£m	£m	£m	£m
Residential expected credit loss allowance
At 1 April 2023							1.1	6.7	2.4	10.2
Transfers due to increased credit risk:
From stage 1 to stage 2							(0.1)	1.6	-	1.5
From stage 1 to stage 3							(0.1)	-	0.6	0.5
From stage 2 to stage 3							-	(0.2)	0.7	0.5
Transfers due to decreased credit risk:
From stage 2 to stage 1							-	(0.2)	-	(0.2)
From stage 3 to stage 2							-	0.1	(0.1)	-
Remeasurement of expected credit losses with no stage transfer							0.4	(0.2)	1.0	1.2
Redemptions							(0.2)	(0.1)	(0.5)	(0.8)
Amounts written off							-	-	(0.3)	(0.3)
Other movements							0.2	(0.1)	(0.1)	-
Movement in provision overlays							(0.2)	(1.5)	-	(1.7)
At 31 March 2024							1.1	6.1	3.7	10.9

 

The tables below analyse the movement in commercial impairment provisions by IFRS 9 stage.

 

							Stage 1	Stage 2	Stage 3	Total
6 months ended 30 September 2024 (unaudited)							£m	£m	£m	£m
Commercial expected credit loss allowance
At 1 April 2024							0.1	1.1	90.9	92.1
Transfers due to decreased credit risk:
From stage 2 to stage 1							0.9	(1.0)	-	(0.1)
Remeasurement of expected credit losses with no stage transfer							0.1	-	1.6	1.7
Amounts written off							-	-	(2.0)	(2.0)
At 30 September 2024							1.1	0.1	90.5	91.7
							Stage 1	Stage 2	Stage 3	Total
6 months ended 30 September 2023 (unaudited)							£m	£m	£m	£m
Commercial expected credit loss allowance
At 1 April 2023							-	0.2	79.0	79.2
Transfers due to decreased credit risk:
From stage 2 to stage 1							0.1	(0.2)	-	(0.1)
From stage 3 to stage 2							-	0.5	(0.5)	-
Remeasurement of expected credit losses with no stage transfer							-	-	9.0	9.0
Movement in provision overlays							-	-	(1.6)	(1.6)
At 30 September 2023							0.1	0.5	85.9	86.5

 

 

							Stage 1	Stage 2	Stage 3	Total
Year ended 31 March 2024 (audited)							£m	£m	£m	£m
Commercial expected credit loss allowance
At 1 April 2023							-	0.2	79.0	79.2
Transfers due to decreased credit risk:
From stage 2 to stage 1							0.1	(0.2)	-	(0.1)
From stage 3 to stage 2							-	1.1	(0.6)	0.5
Remeasurement of expected credit losses with no stage transfer							-	-	14.9	14.9
Amounts written off							-	-	(0.8)	(0.8)
Movement in provision overlays							-	-	(1.6)	(1.6)
At 31 March 2024							0.1	1.1	90.9	92.1

 

 

7 Provisions for liabilities

 

							6 months	6 months	Year
							ended	ended	ended
							30-Sep-24	30-Sep-23	31-Mar-24
							unaudited	unaudited	audited
							£m	£m	£m
At beginning of period							0.4	0.5	0.5
Release for the period							(0.1)	-	-
At end of period							0.3	0.5	0.5

 

Provisions for liabilities

Provisions for liabilities represent the Group's best estimate of customer redress payable. The calculation is based on a series of assumptions, including the number of affected accounts, appropriate level of remediation and resulting administrative costs.

 

 

8 Loans and advances to customers

 

						30-Sep-24		30-Sep-23		31-Mar-24
						unaudited		unaudited		audited
						£m		£m		£m
Amortised cost
Loans fully secured on residential property						5,055.6		4,381.6		4,701.4
Loans fully secured on land						214.0		227.7		220.6
						5,269.6		4,609.3		4,922.0
Fair value through profit or loss
Loans fully secured on residential property						6.4		7.7		7.0
						5,276.0		4,617.0		4,929.0
Fair value adjustment for hedged risk						(14.9)		(86.8)		(40.9)
Less: impairment provisions						(101.8)		(97.5)		(103.0)
						5,159.3		4,432.7		4,785.1

 

 

Included within loans and advances to customers are £216.3m (31 March 2024: £223.0m) of commercial lending balances of which £4.6m (31 March 2024: £5.0m) have been sold by the Group to bankrupt remote structured entities. 

 

The tables below illustrate the IFRS 9 staging distribution of residential and commercial loans and advances to customers held at amortised cost and related expected credit loss provisions. Stage 2 loans have been further analysed to show those which are more than 30 days past due, the IFRS 9 backstop for identifying a Significant Increase in Credit Risk (SICR) and those which meet other SICR criteria.  For the purposes of this disclosure, gross exposures and expected credit loss provisions are rounded to the nearest £0.1m whereas the provision coverage percentages are based on the underlying data prior to rounding.

 

						Gross exposure		Expected credit loss provision		Provision coverage
At 30 September 2024 (unaudited)						£m		£m		%
Residential loans held at amortised cost
Stage 1						4,288.3		0.9		0.02%
Stage 2
> 30 days past due						17.2		0.3		1.74%
Other SICR indicators						661.1		1.8		0.27%
Provision overlays						-		4.0		-
Stage 3						88.4		3.1		3.51%
						5,055.0		10.1		0.20%
						Gross exposure		Expected credit loss provision		Provision coverage
At 30 September 2023 (unaudited)						£m		£m		%
Residential loans held at amortised cost
Stage 1						3,901.3		1.1		0.03%
Stage 2
> 30 days past due						18.4		0.4		2.17%
Other SICR indicators						385.2		1.4		0.36%
Provision overlays						-		5.2		-
Stage 3						76.0		2.9		3.82%
						4,380.9		11.0		0.25%
						Gross exposure		Expected credit loss provision		Provision coverage
At 31 March 2024 (audited)						£m		£m		%
Residential loans held at amortised cost
Stage 1						4,008.7		1.1		0.03%
Stage 2
> 30 days past due						16.7		0.2		1.20%
Other SICR indicators						590.9		2.0		0.34%
Provision overlays						-		3.9		-
Stage 3						84.8		3.7		4.36%
						4,701.1		10.9		0.23%

 

 

						Gross exposure		Expected credit loss provision		Provision coverage
At 30 September 2024 (unaudited)						£m		£m		%
Commercial loans held at amortised cost
Stage 1						33.6		1.1		3.27%
Stage 2
Other SICR indicators						1.3		0.1		7.45%
Stage 3						179.7		90.5		50.36%
						214.6		91.7		42.73%
						Gross exposure		Expected credit loss provision		Provision coverage
At 30 September 2023 (unaudited)						£m		£m		%
Commercial loans held at amortised cost
Stage 1						26.0		0.1		0.50%
Stage 2
Other SICR indicators						8.7		0.5		5.75%
Stage 3						195.6		85.9		43.92%
						230.3		86.5		37.56%
						Gross exposure		Expected credit loss provision		Provision coverage
At 31 March 2024 (audited)						£m		£m		%
Commercial loans held at amortised cost
Stage 1						29.6		0.1		0.34%
Stage 2
Other SICR indicators						7.2		1.1		15.48%
Stage 3						186.8		90.9		48.66%
						223.6		92.1		41.20%

 

 

9 Retirement benefit obligations

 

		6 months	Year	Year	Year	Year
		ended	ended	ended	ended	ended
		30-Sep-24	31-Mar-24	31-Mar-23	31-Mar-22	31-Mar-21
		unaudited	audited	audited	audited	audited
		£m	£m	£m	£m	£m
Group
Net defined benefit pension scheme asset		(1.6)	(6.1)	(10.9)	(14.9)	(1.1)

 

The amounts recognised in the Statement of Financial Position are as follows:

 

		6 months	Year	Year
		ended	ended	ended
		30-Sep-24	31-Mar-24	31-Mar-23
		unaudited	audited	audited
Group		£m	£m	£m
Interest cost		3.8	3.9	3.0
Interest receivable on plan assets		(3.9)	(4.5)	(3.5)
Running costs		0.3	0.5	0.5
Total pension fund cost		0.2	(0.1)	-

 

 

The amounts recognised in the Statement of Comprehensive Income are as follows:

		6 months	Year
		ended	ended
		30-Sep-24	31-Mar-24
		unaudited	audited
Group		£m	£m
Group
Actuarial (gains)/losses arising from:
Financial assumptions		(2.6)	(1.2)
Demographic assumptions		-	(0.7)
Experience adjustments		(3.0)	0.4
Loss on plan assets (excluding interest)		9.9	8.7
Total amount recognised in Other Comprehensive Income		4.3	7.2

 

During the period the defined benefit Staff Retirement Scheme (SRS) underwent a Buy In, whereby an insurance policy was purchased in relation to the scheme. This provides greater certainty for the Society by transferring many of the associated risks to the insurance market, whilst securing all SRS pension member benefits with a highly regarded insurer.

 

At 31 March 2024 assets of £3.6m were held by the SRS to cover the potential cost of equalising payments to early retirees which arose due to an inconsistency in legal documents dating back as far as 2005. In June 2024 the High Court found in our favour, extinguishing the potential liability. The extinguishing of this liability has been recognised as a gain in the Statement of Comprehensive Income and reverses the charge recognised in 2022/23. The Society is seeking to recover the costs incurred, in making this successful High Court claim, from our legal representatives at that time.

 

 

10 Property, plant, equipment and intangible assets

 

						Intangible assets		Property, plant and equipment
6 months ended 30 September 2024 (unaudited)						£m		£m
Net book value at 1 April 2024						13.9		21.8
Additions						5.9		0.6
Depreciation, amortisation, impairment and other movements						(2.2)		(1.0)
Net book value at 30 September 2024						17.6		21.4
						Intangible assets		Property, plant and equipment
6 months ended 30 September 2023 (unaudited)						£m		£m
Net book value at 1 April 2023						9.9		22.7
Additions						3.4		0.3
Depreciation, amortisation, impairment and other movements						1.7		(0.9)
Net book value at 30 September 2023						15.0		22.1
						Intangible assets		Property, plant and equipment
Year ended 31 March 2024 (audited)						£m		£m
Net book value at 1 April 2023						9.9		22.7
Additions						7.6		1.1
Disposals						0.2		-
Depreciation, amortisation, impairment and other movements						(3.6)		(2.0)
Write off of previously capitalised costs						(0.2)		-
Net book value at 31 March 2024						13.9		21.8

 

Capital commitments

The Group has placed contracts amounting to a total of £1.3m (30 September 2023: £0.6m) for future expenditure that was not provided in the financial statements.

 

 

11 Investment properties

 

				6 months		6 months		Year
				ended		ended		ended
				30-Sep-24		30-Sep-23		31-Mar-24
				unaudited		unaudited		audited
				£m		£m		£m
Valuation
At beginning of period				148.7		152.7		152.7
Additions				0.7		0.4		1.0
Disposals				(5.4)		(4.7)		(7.5)
Revaluation gains/(losses)				1.1		(2.5)		2.5
At end of period				145.1		145.9		148.7

 

 

12 Debt securities in issue

 

					30-Sep-24		30-Sep-23		31-Mar-24
					unaudited		unaudited		audited
					£m		£m		£m
Non-recourse finance on securitised advances					300.4		-		-

 

The non-recourse finance comprises mortgage backed floating rate notes (the Notes) secured over portfolios of mortgage loans secured by first charges over residential properties in the United Kingdom.

 

 

13 Core capital deferred shares

 

			Number of shares		CCDS nominal amount		Share premium		Total
					£m		£m		£m
At 30 September 2024 (unaudited)			1,288,813		1.3		125.7		127.0
At 30 September 2023 (unaudited)			1,288,813		1.3		125.7		127.0
At 31 March 2024 (audited)			1,288,813		1.3		125.7		127.0

 

CCDS are perpetual instruments and a form of Common Equity Tier 1 (CET 1) capital.

 

CCDS are the most junior-ranking capital instrument of the Society, ranking behind the claims of all depositors, payables and investing members. 

 

Each holder of CCDS has one vote, regardless of the number of CCDS held.

 

The CCDS holders are entitled to receive a distribution at the discretion of the Society. The total distribution paid on each CCDS in respect of any given financial year of the Society is subject to a cap provided for in the Rules of the Society and adjusted annually for inflation.

 

A final distribution of £2.25 per CCDS in respect of the period to 31 March 2024 was paid in August 2024. This distribution has been recognised in the Statement of Changes in Members' Interests and Equity.

 

Subsequent to the balance sheet date, the Directors have announced their intention to declare an interim distribution of £2.25 per CCDS in respect of the period to 30 September 2024 which would be paid in February 2025. The interim distribution is not reflected in the members reserves of these financial statements as distributions to the CCDS holders are recognised with reference to the date they are declared, although they are accrued for in capital calculations.

 

 

14 Related party transactions

 

Related party transactions for the six months to 30 September 2024 are within the normal course of business and of a similar nature to those for the last financial year, full details of which are disclosed in the Annual Report and Accounts for the year ended 31 March 2024, with the exception that new securities were issued through Kenrick No.4 Plc.

 

 

15 Subscribed capital

 

			30-Sep-24		30-Sep-23		31-Mar-24
			unaudited		unaudited		audited
			£m		£m		£m
Permanent Interest Bearing Shares
At beginning of year			7.8		7.8		7.8
Purchase and cancellation of PIBS			(3.9)		-		-
At end of year			3.9		7.8		7.8

 

The 6.15% Permanent Interest Bearing Shares (PIBS) comprise 3,938 PIBS of £1,000 each issued at a price of 99.828% of their principal amount, with the issue premium amortised. In August 2024 the Society purchased and cancelled 3,909 of its remaining PIBS.

 

A resolution was passed in September 2024 to make an interest payment on the PIBS of 1.5414%, which was paid on 5 October 2024. This was in line with the indicative distribution policy, as detailed in the statement issued on 20 January 2020 and available on the Society's website.

 

 

16 Subordinated liabilities

 

			30-Sep-24		30-Sep-23		31-Mar-24
			unaudited		unaudited		audited
			£m		£m		£m
Subordinated notes due 2038 - 11.0%			2.1		2.1		2.1

 

The Society's subordinated notes rank behind all other creditors of the Society, with the exception of holders of CCDS and PIBS.

 

 

17 Financial instruments

 

Fair values of financial assets and financial liabilities

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Group determines fair values by the following three tier valuation hierarchy:

 

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2: Valuation techniques where all inputs are taken from observable market data, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

 

Level 3: Valuation techniques where significant inputs are not based on observable market data.

 

Valuation techniques include net present value and discounted cash flow models, comparison to similar instruments for which market observable prices exist and other valuation models. Assumptions and market observable inputs used in valuation techniques include risk-free and benchmark interest rates, equity index prices and expected price volatilities. The objective of valuation techniques is to arrive at a fair value determination that reflects the price of the financial instrument at the reporting date that would have been determined by market participants acting at arm's length. Observable prices are those that have been seen either from counterparties or from market pricing sources including Bloomberg. The use of these depends upon the liquidity of the relevant market.

 

The carrying value of cash and balances with the Bank of England are assumed to approximate their fair value.

 

Financial assets and financial liabilities held at amortised cost

 

The tables below show the fair values of the Group's financial assets and liabilities held at amortised cost in the Statement of Financial Position, analysed according to the fair value hierarchy described above.

 

At 30 September 2024 (unaudited)			Carrying	Fair value	Fair value	Fair value	Fair value
			value	Level 1	Level 2	Level 3	Total
			£m	£m	£m	£m	£m
Financial assets
Loans and advances to credit institutions			71.0	-	71.0	-	71.0
Loans and advances to customers			5,152.9	-	-	5,229.9	5,229.9
			5,223.9	-	71.0	5,229.9	5,300.9
Financial liabilities
Shares			4,933.6	-	-	4,923.5	4,923.5
Amounts due to credit institutions			627.4	-	627.4	-	627.4
Amounts due to other customers			36.2	-	31.3	4.8	36.1
Debt securities in issue			300.4	300.1	-	-	300.1
Subordinated liabilities			2.1	-	2.1	-	2.1
			5,899.7	300.1	660.8	4,928.3	5,889.2
At 30 September 2023 (unaudited)			Carrying	Fair value	Fair value	Fair value	Fair value
			value	Level 1	Level 2	Level 3	Total
			£m	£m	£m	£m	£m
Financial assets
Loans and advances to credit institutions			45.9	-	45.9	-	45.9
Loans and advances to customers			4,425.0	-	-	4,136.3	4,136.3
			4,470.9	-	45.9	4,136.3	4,182.2
Financial liabilities
Shares			4,391.0	-	-	4,322.1	4,322.1
Amounts due to credit institutions			645.7	-	645.7	-	645.7
Amounts due to other customers			137.2	-	131.8	5.1	136.9
Subordinated liabilities			2.1	-	2.5	-	2.5
			5,176.0	-	780.0	4,327.2	5,107.2
At 31 March 2024 (audited)			Carrying	Fair value	Fair value	Fair value	Fair value
			value	Level 1	Level 2	Level 3	Total
			£m	£m	£m	£m	£m
Financial assets
Loans and advances to credit institutions			46.3	-	46.3	-	46.3
Loans and advances to customers			4,778.1	-	-	4,866.9	4,866.9
			4,824.4	-	46.3	4,866.9	4,913.2
Financial liabilities
Shares			4,670.6	-	-	4,650.6	4,650.6
Amounts due to credit institutions			788.2	-	788.2	-	788.2
Amounts due to other customers			37.0	-	31.8	5.0	36.8
Subordinated liabilities			2.1	-	2.1	-	2.1
			5,497.9	-	822.1	4,655.6	5,477.7

 

a) Loans and advances to customers

The fair value of loans and advances to customers has been determined taking into account factors such as impairment and interest rates. The fair values have been calculated on a product basis and, as such, do not necessarily represent the value that could have been obtained for a portfolio if it were sold at 30 September 2024.

 

b) Shares and borrowings

The estimated fair value of deposits with no stated maturity, which includes non-interest bearing deposits, is the amount repayable on demand. The estimated fair value of fixed interest-bearing deposits and other borrowings without quoted market price is based on discounted cash flows using interest rates for new deposits with similar remaining maturity. The fair values have been calculated on a product basis and as such do not necessarily represent the value that could have been obtained for a portfolio if it were sold at 30 September 2024.

 

c) Debt securities in issue

The aggregate fair values are calculated based on quoted market prices. For those notes where quoted market prices are not available, a discounted cash flow model is used based on a current yield curve appropriate for the remaining term to maturity.

 

Financial assets and financial liabilities held at fair value

 

The tables below show the fair values of the Group's financial assets and liabilities held at fair value in the Statement of Financial Position, analysed according to the fair value hierarchy described previously.

 

 

At 30 September 2024 (unaudited)					Level 1	Level 2	Level 3	Total
					£m	£m	£m	£m
Financial assets
Investment securities
At fair value through other comprehensive income					375.9	-	-	375.9
At fair value through profit or loss					0.3	-	-	0.3
Derivative financial instruments					-	46.5	-	46.5
Loans and advances to customers					-	-	6.4	6.4
					376.2	46.5	6.4	429.1
Financial liabilities
Derivative financial instruments					-	27.8	-	27.8
At 30 September 2023 (unaudited)					Level 1	Level 2	Level 3	Total
					£m	£m	£m	£m
Financial assets
Investment securities
At fair value through other comprehensive income					403.3	-	-	403.3
At fair value through profit or loss					0.4	-	-	0.4
Derivative financial instruments					-	107.3	-	107.3
Loans and advances to customers					-	-	7.7	7.7
					403.7	107.3	7.7	518.7
Financial liabilities
Derivative financial instruments					-	5.0	-	5.0
At 31 March 2024 (audited)					Level 1	Level 2	Level 3	Total
					£m	£m	£m	£m
Financial assets
Investment securities
At fair value through other comprehensive income					391.1	-	-	391.1
At fair value through profit or loss					0.4	-	-	0.4
Derivative financial instruments					-	61.8	-	61.8
Loans and advances to customers					-	-	7.0	7.0
					391.5	61.8	7.0	460.3
Financial liabilities
Derivative financial instruments					-	12.8	-	12.8
					-	12.8	-	12.8
The table below analyses movements in the level 3 portfolio during the period.
						6 months	6 months	Year
						ended	ended	ended
						30-Sep-24	30-Sep-23	31-Mar-24
						unaudited	unaudited	audited
						£m	£m	£m
Equity release portfolio
At beginning of period						7.0	8.6	8.6
Items recognised in the Income Statement
Interest receivable and similar income						0.4	0.5	0.9
Changes in fair value						-	0.2	0.2
Redemption payments						(1.0)	(1.6)	(2.7)
At end of period						6.4	7.7	7.0

 

There have been no transfers of financial assets or liabilities between levels of the valuation hierarchy in the period.

 

 

18 Statement of Directors' responsibilities

 

The Directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting', and that the interim management report herein includes a fair review of the information required by:

• DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events during the first six months of the financial year and the description of principal risks and uncertainties for the remaining six months of the financial year; and

• DTR 4.2.8R of the Disclosure and Transparency Rules, being an indication of any material related party transactions that have taken place in the first six months of the financial year and any material changes in the related party transactions described in the last annual report.

 

The Directors of West Bromwich Building Society are listed in the West Bromwich Building Society Annual Report for the year ended 31 March 2024.

 

Signed on behalf of the Board of Directors:

 

 

Jonathan Westhoff                                                            Alex Pawley

Chief Executive Officer                                                       Chief Financial Officer

 

 

28 November 2024