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Bradford & Bingley has today released its Annual Report & Accounts for the year to 31 December 2009.
Richard Banks, Managing Director, commented:
"We have made substantial progress against our business objectives in 2009 and met all of the financial goals in our agreed business plan. The loss before tax of £196.0m for the year was £71.0m better than our original plan.
"We have completed our restructure to create an organisation that is fit for purpose to deliver a high quality service to our customers whilst reducing costs, minimising losses and delivering value to the taxpayer."
Summary
Financial information
Group loss before tax for 2009 was £196.0m. This is £71.0m lower than the figure of £267.0m forecast in the Business Plan and £82.0m lower than the comparable loss of £278.0m in 2008. (The reported 2008 statutory profit of £134.3m was positively impacted by two significant items, the £216.3m one-off gain on the sale of the retail deposit business to Abbey, and the £196.0m adjustment to net interest income due to the lengthening of expected lives of mortgage accounts. Removing these items gives a loss of £278.0m, a more appropriate base on which to compare 2008 and 2009 results.)
The Bank's tier 1 capital ratio ended the period at 8.7% (FY 2008: 8.9%), and no additional capital has been provided since nationalisation. The cost base reduced by £116.1m to £137.1m, a fall of 46% (FY 2008: £253.2m). The cost:asset ratio reduced to 0.29% (FY 2008: 0.50%).
Strategic Priorities
The Group has four strategic priorities:
1. Run down the Balance Sheet
The Group took a number of actions to facilitate mortgage redemptions, such as the introduction of an Early Redemption Charge waiver, which contributed to a reduction in lending balances of £2.8bn to £39.0bn (FY 2008: £41.8bn).
The residential mortgage redemption rate fell to 6.0% (FY 2008: 10.6%) which is reflective of the current low interest rate environment and reduced availability of mortgages across the market.
2. Minimise impairment and losses
The Group continues to work closely with those customers experiencing payment difficulties and arrears, whilst working to improve the performance of its collections and fraud management processes.
Support for customers experiencing payment difficulties
During 2009, the Group made over 12,000 mortgage arrangements to assist customers falling behind with their payments. All reasonable efforts are exhausted before commencing repossession proceedings, which is viewed as a last resort. The Group will not take possession of an owner-occupied property for a full six months after the customer first falls behind with their mortgage payments.
Where a buy-to-let landlord is in arrears, the Group endeavours to protect tenants by honouring the terms of all valid Assured Shorthold Tenancy agreements and instructing a Law of Property Act receiver to collect rent directly from the tenant, thereby enabling the tenant to stay in their home for the duration of any agreement.
Improve collections performance and manage fraud
The total number of cases three months or more in arrears or in possession equates to 5.54% of mortgage accounts (FY 2008: 4.60%; H1 2009: 5.88%). During the second half of the year arrears levels (particularly early arrears) fell as a result of lower interest rates and improved credit collection processes and this downward trend has continued in the early part of 2010. Overall, the performance in the arrears book is better than anticipated in the Group's Business Plan.
Prudent provisions for loan losses have been made resulting in a charge to the Income Statement for impairment of £593.7m (FY 2008: £507.7m). The Balance Sheet provision for residential loan impairment was £884.1m (FY 2008: £467.7m).
During the year, the Group conducted a thorough and systematic review of the mortgage book in order to highlight any suspected historic instances of mortgage fraud and professional negligence. For all such cases, the Group has made prudent and conservative provisions for the potential estimated losses.
The overall Balance Sheet provision for residential loan impairment therefore includes £388.4m (FY 2008: £173.9m) relating to potential losses from fraud and professional negligence. The Group is confident that the majority of the cases of fraud and professional negligence have now been identified and accounted for in the provision.
3. Restructure and realign the business
The restructure of the Group in order to realign the business behind its new objectives was completed in October with a renewed focus on risk management.
Administrative expenses and employment
Ongoing administrative expenses have reduced by £116.1m to £137.1m, a fall of 46% (FY 2008: £253.2m). At the same time, we have made significant investment in key areas such as arrears management. As expected, staff numbers remained similar to twelve months ago with 943 employees in total at the end of the period (FY 2008: 995).
Remuneration
Following nationalisation, remuneration packages have been substantially revised. The defined benefit pension scheme closed to future accruals at 31 December 2009 and all current members were offered the option to participate in a defined contribution scheme. A pay freeze was implemented in 2009 for senior management other than for promotion. Bonus entitlements were significantly reduced and the new bank payroll tax liability is £37,000. There are no long-term share or other incentive schemes in operation.
No Directors received a cash bonus in respect of 2009, that would have been payable in 2010. In February 2009, Bradford & Bingley Chairman, Richard Pym, waived his contractual entitlement to a guaranteed bonus of £187,500 that would have been payable with respect to 2009. Managing Director, Richard Banks, who joined Bradford & Bingley during 2009, voluntarily deferred his entitlement to a bonus payment of £10,000 for 2009, that would have been payable in 2010.
4. Provide transitional services to Abbey
The Group successfully provided services to Abbey in accordance with the terms of the Transitional Services Agreement which ended on 29 September 2009 enabling Bradford & Bingley to focus entirely on its own business.
ENDS
Enquiries
Bradford & Bingley Press Office:
+44 (0) 1274 554042
pressoffice@bbg.co.uk
Investor Relations:
+44 (0) 1274 806341
www.bbg.co.uk