RNS Number : 2720C
Bradford & Bingley PLC
29 August 2008
Interim Financial Report
For the 6 months ended 30 June 2008
29 August 2008
The financial information in this document is unaudited and does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The comparative figures included in this document for the financial year ended 31 December 2007 are not Bradford & Bingley plc's statutory accounts for that financial year. Those accounts have been reported on by Bradford & Bingley plc's auditor and delivered to the Registrar of Companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985. This document may contain forward-looking statements with respect to certain plans and current goals and expectations relating to the future financial conditions, business performance and results of Bradford & Bingley plc. 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 Bradford & Bingley plc including, amongst other things, UK domestic and global economic and business conditions, market related risks such as fluctuation in interest rates and exchange rates, inflation, deflation, the impact of competition, changes in customer preferences, risks concerning borrower credit quality, delays in implementing proposals, the timing, impact and other uncertainties of future acquisitions or other combinations within relevant industries, the policies and actions of regulatory authorities, the impact of tax or other legislation and other regulations in the jurisdictions in which Bradford & Bingley plc and its affiliates operate. As a result, Bradford & Bingley plc’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.
Interim Financial Report for the 6 months ended 30 June 2008
Commenting on the results, Rod Kent, Chairman, said:
'In the light of the turbulence in the banking and housing sectors, the first six months of this year have been very challenging for B&B. Although we clearly signalled this at our announcement on 2nd June, the results for the half year are, of course, disappointing.
The Board's priority has been to ensure that we can continue to fund our business safely and we have achieved this. With a strong capital base following our rights issue, our new Chief Executive, Richard Pym, will review our plans for the business to enable us to continue to operate effectively in these economic conditions.'
Key Points
- continue to fund business successfully
- continued importance of Retail deposit
- prudent levels of liquidity.
- Board continues to be cautious on the economy and trading
- Trends in arrears and net interest margin expected to continue
- Reduction in mortgage balances planned
- Currently working with GMAC-RFC to renegotiate our contract
- Review of cost reductions underway
- Continue to build our strong franchise in the savings and buy-to-let markets
- New Chief Executive to set out plans for the business in the autumn.
Background and recent progress
As background to these results, at the beginning of June when Steven Crawshaw stepped down as Chief Executive due to ill health and we issued a Trading Statement, the Board established four specific short-term priorities:
-
to find a new Chief Executive;
-
to undertake a review of the quality of management information;
-
to improve the speed of reaction to such management information; and
-
to complete the Rights Issue.
Progress has been made on all four objectives:
-
On 18 August the Board was delighted to announce the immediate appointment of Richard Pym as the new Chief Executive. He has highly relevant experience and is ideal for the role.
-
PwC were appointed in June to conduct a review of our management information systems and quality of reporting. Their report showed that the accuracy and reliability of our management information were not an issue, but the speed at which the information was disseminated, interpreted and included in internal forecasting was too slow.
-
Key information is now being disseminated much more rapidly to senior management on a daily and weekly basis. The Board now receives flash reports on the previous month's trading within 10 working days. PwC continue to help us to improve our forecasting systems and models.
-
The Rights Issue has now been completed and monies received by the Company.
Profit and earnings per share
Underlying profit before tax was £70.2m (1H 2007: £181.3m). Underlying earnings per share were 8.5p (1H 2007: 20.5p). As previously announced, the Board has approved an amount of £43.4m, currently equivalent to 3.0p per share which will be paid in shares as a scrip interim dividend.
In order to provide a clear understanding of the ongoing performance of the Group, we report on underlying profits which exclude certain items resulting from strategic decisions, material one-off items, hedge ineffectiveness or movements in fair value. Items excluded from underlying profit in the first half of the year include an impairment charge in the structured investment portfolio of £64.8m, realised losses on sale of structured investments of £27.2m, a hedge ineffectiveness gain of £8.7m and other fair value charges on treasury instruments of £63.0m. Also excluded were the gains on the repurchase of debt of £29.4m and the release in April of £20.0m of provision previously provided for compensation costs for misselling of investments and endowments.
Statutory loss before tax was £26.7m (1H 2007: £180.4m profit). Statutory loss per share was 2.8p (1H 2007: earnings per share 20.4p). These items are explained on pages 9 and 10 and a reconciliation of statutory to underlying profit is provided on pages 11 and 12.
Income
The Group's net interest income reduced by 9% to £246.7m (1H 2007: £271.2m). Adjusting for the disposal of the majority of our commercial loan book and Housing Association loan portfolio in the second half of 2007, net interest income was broadly flat year-on-year, with lower interest margins offset by the growth in our residential lending book.
In line with previous guidance, the Group's net interest margin declined by 12 basis points to 0.98% (FY 2007: 1.10%). The margin decline was the result of three factors. Firstly, there was a lag in recovering higher funding costs through new business pricing as the effect of repricing liabilities is felt more quickly than the repricing of assets. Secondly, the rate of mortgage redemptions slowed significantly with the net redemption rate during the first half running at 12.4% (FY 2007: 18.5%). Thirdly, competition for retail savings has intensified in the past year with the result that the cuts in base rate have not been reflected in market pricing of new retail deposits.
Underlying non-interest income reduced as expected during the first half to £41.5m (1H 2007: £55.2m), due to lower income from wealth and investment sales, lower mortgage administration charges and our withdrawal from commercial property lending.
For further information see Notes 3 and 4.
Costs
Underlying costs increased by 3% to £143.4m (1H 2007: £139.8m), with an increase in the underlying cost:income ratio to 49.8% (1H 2007: 42.8%). To support our focus on retail savings, we increased spend on advertising, launching a campaign in June. During the first half of 2008 we reduced the number of mortgage advisers in the branches from 160 to 50, due to lower mortgage volumes, which will benefit underlying costs in the second half.
The Company is currently reviewing further opportunities to reduce the Group's cost base.
For further information see Note 5.
Credit quality and impairment
Arrears have continued to increase as expected reflecting tough economic conditions, and we anticipate this trend will continue throughout the second half. Mortgages 3 months or more in arrears in the organic mortgage book rose to 1.78% (FY 2007: 1.20%). Within our acquired mortgage book the number increased to 5.11% (FY 2007: 3.04%). The total number of cases across the whole mortgage book 3 months or more in arrears was 2.29% (FY 2007: 1.48%). In addition, properties in possession as a proportion of total loans were 0.19% (FY 2007: 0.15%).
The credit impairment charge for the first half of the year was £74.6m (1H 2007: £5.3m). The increase in this charge is due mainly to the growth in mortgages 3 months or more in arrears. Regionally weighted house price deflation of 5% in the first six months accounts for £10m of the charge, and £18m relates to a number of organised mortgage frauds. The impairment provision at 30 June stood at £101.5m (FY 2007: £54.8m) representing 0.25% of residential loans (FY 2007: 0.14%).
We have taken action in the collections area to detect early arrears cases, improve collections processes and increase staffing levels. We have also reduced mortgage acquisitions to the minimum possible under our contracts, and are conducting more intensive due diligence on these portfolios to ensure that purchased loans conform more closely to underwriting standards implicit in mortgages originated by Bradford & Bingley.
Credit criteria have been tightened during the period, including capping the maximum LTV for self-cert to 75% and extending LTV-based pricing on buy-to-let loans. The average loan-to-value across our whole residential lending portfolio adjusted for house price inflation is 60% (1H 2007: 55%) with only 5% of the book above 95% LTV. The average LTV on new lending in the first half was 77% (1H 2007: 74%), reflecting the completion of the loans originated at the end of 2007 and early this year, before the adjustment of lending criteria.
For further information see Notes 11, 12 and 13.
Structured Finance Portfolio
The structured finance portfolio stood at £747m at 30 June, net of fair value adjustments, impairments and embedded derivatives. This compares to £847m at the end of April and £1,126m at the end of December 2007. £223m of this reduction during the first half has come from disposals, of which £68m was made in May and June.
Since the end of June, synthetic CDOs with a value of £22m (net of embedded derivatives) have been sold at a loss on sale of £3m. As a result of these sales, we no longer have any synthetic investments being valued through the Income Statement. Around 60% of the remaining current structured finance portfolio consists of Principal Protected Notes.
We will continue to reduce further our exposure to these assets.
Lending balances
Residential loans outstanding grew by £1.9bn during the first half of the year, with residential balances at £41.3bn (FY 2007: £39.4bn). Our appetite for new lending has slowed during the period, reflecting higher customer retention and continued tightness in term funding markets. Net lending in May and June was a little over half the rate of the previous four months. We have reduced mortgage originations by focusing on higher quality loans and increasing price in line with the market. Mortgage acquisitions have also been scaled back to the minimum. Gross new residential lending fell to £4.4bn from £7.2bn in the first half of last year. Three quarters of this gross lending was originated by Bradford & Bingley with one quarter acquired. Net new lending fell to £1.9bn from £4.5bn a year ago. This represented some 8% of the UK mortgage market compared to our share of outstanding balances of 3.4%. Of this total, £1.7bn (1H 2007: £2.6bn) was originated through intermediaries and direct channels, and £0.2bn (1H 2007: £1.9bn) was acquired, reflecting lower volumes of acquisitions and significantly higher redemption rates on acquired loans than those originated by Bradford & Bingley. Net mortgage redemptions have been running at 12.4% during the first half of the year, compared to 18.5% for FY 2007. The level of redemptions in our organic book was 10% (1H 2007: 16%) compared to 21% (1H 2007: 24%) in the acquired book.
For further information see Note 10.
Mortgage acquisition agreements
We have agreed with Kensington to vary the Forward Sale Agreement originally signed in April 2007. Under the original agreement, 12 portfolios have been acquired with an aggregate value of £850m and there was a commitment to purchase a further £1,150m of mortgages by March 2009. Under the revised agreement, Bradford & Bingley will acquire a maximum aggregate value of £1,282m by April 2011. The contract has thereby been extended by 25 months and the value increased by £132m. The acquired loans will continue to be on similar credit terms and pricing to those originated through our direct and intermediary specialist lending channels.
We are currently working with GMAC-RFC to renegotiate our contract to take into account the changing economic conditions.
Funding
As a focused business within a sector that is currently going through a cyclical downturn, Bradford & Bingley has experienced a particularly challenging first half. We have witnessed unprecedented financial dislocation, with wholesale medium-term funding markets being difficult to access since last summer. Despite this widespread dislocation, we have successfully funded the bank.
At the end of June, total customer deposits of £24.5bn funded 58% of customer loans (1H 2007: 58%). Retail savings balances increased by £1.2bn since the end of the year to £22.2bn. The investment and focus on our branch based deposits has been effective, with balances increasing by 13% to £16.2bn during the first six months and 22% since June 2007. We had a strong ISA season and were also successful with fixed-rate bonds. Intense coverage of events in June and July, including the reduction in the Company's credit rating and the withdrawal of TPG, was followed by some withdrawal of customer deposits. This abated in August and we are again experiencing savings balance growth in the UK. Offshore deposits are more sensitive to credit ratings and have declined gradually over the past year.
Committed secured medium term funding at £2.0bn was arranged at the beginning of the year and half of this was drawn in June. We continue to package mortgage collateral into securities that support our main secured funding vehicles: Aire Valley Master Trust, Bradford & Bingley Covered Bonds LLP and Bowler Finance plc. These vehicles are well funded and collateralised and are proving effective. In tandem with retail deposits, these secured funding channels will continue to feature in our funding plans. The reduction in the Group's short term credit rating in June has made short term borrowings a less attractive source of funding and we expect to replace the bulk of these liabilities with secured medium term funds by the end of the year.
For further information see Note 14.
Mortgage product and distribution strategy
The buy-to-let market remains supported by tenant demand, increasing rents and falling voids. Rental yields lifted in the first half of the year to 6.1% (1H 2007: 5.6%). The buy-to-let market as a whole grew by 8.5% to £132bn, which equates to 11% of the total mortgage market. We grew buy-to-let balances by £1.6bn in the first half and our market share of balances remained stable at 19% (FY 2007: 19%).
The average LTV of buy-to-let loans completing in the first half was 78% (1H 2007: 76%), which included loans on 2007 pricing and criteria. The average indexed LTV across the buy-to-let book is 69% (1H 2007: 65%) with an average loan size of £122,000 (1H 2007: £119,000).
During the first half, we made significant changes to our self-cert offering by cutting the maximum LTV from 90% to 75%, and focusing on longer term deals. The average LTV of self-cert lending was 82% on completed loans (1H 2007: 83%) and the average indexed LTV across the self-cert book is 75% (1H 2007: 72%) with an average loan size of £156,500. In recent months, our focus in the specialist market has been on buy-to-let loans, and we anticipate this focus to continue. As a consequence, self-cert origination will continue to fall in the second half of the year.
We recently announced changes to our intermediary distribution. We have narrowed our range of distribution outlets, no longer accepting business from the majority of packagers, and have reduced the number of key accounts by 70%. These reductions will allow us to manage channels and deals on a 'limited tranche' basis, giving more profitable, better controlled distribution with lower costs, lower risks and tighter management of volume and quality.
Capital
The recent rights issue is complete and the £400m raised ensures that we are one of the best capitalised UK banks. The Board believes that the raising of capital was the right course of action to strengthen our capital base and mitigate the impact of the reductions in value of certain of the Group's treasury investments over the past 8 months. On a proforma basis, the rights issue increases our tier 1 capital ratio to 9.9%, our core tier 1 ratio to 9.1% and our total capital ratio to 16.3%. Our tier 1 target ratio is between 8% and 10%.
Dividend
Approval was given by shareholders at the EGM on 17 July 2008 for the interim dividend to be paid in shares. The Board has approved an interim dividend amount of £43.4m, currently equivalent to 3.0p per share for distribution on 6 October 2008 to shareholders on the register at the close of business on 3 October 2008. The price used to calculate shareholders' entitlement to new shares, has been determined by the mid market price per share at the close of business yesterday, 28 August 2008. Regarding the final 2008 dividend to be paid in May 2009, as previously announced the Board will take a decision closer to the date, taking into account trading and economic conditions at that point. In normal trading circumstances, over the medium term the Board will target dividend cover of between 2.0 and 2.5 times underlying earnings.
People
We have witnessed particularly testing times during the first half of the year, and the Board would like to thank all colleagues at Bradford & Bingley for their continued dedication, professionalism and team-work during this time.
Steven Crawshaw stepped down as Chief Executive at the beginning of June due to ill-health caused by a severe cardio-vascular condition. The Board would like to thank him for his service to the company and to send him our best wishes for his recovery.
Outlook
The Board remains cautious on trading for the second half of the year.
In the light of continuing weakness in the housing market and the wider economy, we continue to expect arrears and repossessions to increase for the remainder of the year, although we will be putting further resources into tackling the problem.
The impact of higher funding costs will not be fully offset by the volume of new lending and so we continue to expect that our net interest margin will reduce further. The outlook for the net interest margin over the full year is at the lower end of the 90-95 bps guidance we gave in June.
In terms of lending, the main area of focus remains buy-to-let, where tenant demand remains strong and rents are rising. However, we plan to reduce mortgage volumes in the second half and into 2009 until more favourable economic conditions return. The Board therefore expects lending balances to reduce during the second half of the year. We are in negotiations with GMAC as to the future of our agreement with them.
Bradford & Bingley is adapting its business to an extraordinary market climate. We are undertaking a further review of our cost base and we are maintaining our prudent approach to funding, with retail deposits remaining a focus.
Bradford & Bingley has a strong franchise in its core savings and buy-to-let markets. The buy-to-let market continues to hold up well and these loans account for some 60% of our total balances and are experiencing lower arrears than other parts of our portfolio.
Our new Chief Executive, Richard Pym, brings a wealth of experience to our business, and he will set out the plans for the business in the autumn.
Items excluded from underlying profits
In order to enable stakeholders to obtain a clear view of the ongoing performance of the Group, the Board excludes certain items that are the result of long-term strategic decisions and/or the impacts of unusual or extreme external events and accounting volatility that can have a distorting effect on financial performance in single reporting periods. Profit excluding such items is defined as underlying profit. The following items are not included in underlying profit.
For further information see the tables on pages 11 and 12.
Compensation costs for mis-selling of investments and endowments
In June 2006 a provision of £89.4m was charged to account for the costs of claims for misselling of endowment and investment products by the Group's closed independent financial advisory business. The level of claims and payments from this provision has been below that originally anticipated at the time the provision was made. Therefore, £20m of the provision was released. The provision remaining at 30 June 2008 was £28.2m, as reported in the trading statement on 2 June, and we remain comfortable that this is appropriate.
Structured Finance Portfolio
As at 30 June 2008, the net carrying value of the structured finance portfolio was £747.2m compared to £1,126.1m as at 31 December 2007. Of this, £415.2m are investments in Principal Protected Notes. Investments in SIVs and in CDOs have reduced in value to £9.0m (FY 2007: £63.5m) and £55.8m (FY 2007: £171.0m) respectively.
We continue to monitor all investments in the portfolio closely and, where there is evidence that an asset is impaired, the asset is valued at current market prices with any reduction in value recorded in the Income Statement as an Impairment Charge. During the first half, the amount of impairment was £64.8m (FY 2007: 94.4m).
During the first half, the fair value of embedded derivatives predominantly linked to synthetic CDOs within the structured investment portfolio, has fallen by £63.0m (FY 2007: £49.7m). This change in value is recorded in the Income Statement.
We value all assets in the portfolio using the available market price and have taken steps to minimise the level of exposure wherever possible. Consequently, assets with a value at sale of £222.8m have been sold incurring a loss on sale of £27.2m.
Hedge ineffectiveness
Hedge ineffectiveness represents the amounts of accounting fair value difference in the future cash flows of hedged items compared to the hedging instruments. The majority of these items are fixed rate mortgage and savings related swaps and from an economic perspective are matched to customer balances. Over time, this value will revert to zero as the hedged items mature. However, in each accounting period there may be accounting volatility arising from small mis-matches in the timing of the payments and receipts on these hedged amounts. During the first half the value of hedge ineffectiveness recorded in the Income Statement was a profit of £8.7m (1H 2007: loss of £0.9m, FY 2007: loss of £23.5m).
Gains on repurchase of debt
During the six months to June 2008, the Group has repurchased previously issued debt instruments in the market realising gains of £29.4m. The pricing of these instruments, due to reduced liquidity, provided the opportunity to generate a profit on purchase that mitigated losses arising on sales of assets in the Structured Finance Portfolio. No further repurchase transactions are envisaged.
Fair value movements in reserves
In compliance with International Financial Reporting Standards, certain fair value movements are accounted for in the Balance Sheet as movements in Reserves.
All of the Group's wholesale assets are held as available-for-sale with any movements in value of these assets being recorded in the available-for-sale reserve unless they become impaired. In addition to the amounts recorded in the Income Statement and explained in the preceding paragraphs, the Group has recorded a reduction in reserves of £80.7m after tax (1H 2007: £3.6m, FY 2007: £60.4m) in respect of the fair value movement on these items.
The Group uses cash flow hedge accounting in respect of some of its swaps. Movements in the value of these swaps in the first half has created an increase in reserves after tax of £113.3m (1H 2007: increase £76.4m, FY 2007: decrease £81.0m). Changes in the value of these swaps leads to volatility in the Group's reserves.
Analysis of Profits and Earnings Per Share
In order to enable stakeholders to obtain a clear view of the ongoing performance of the Group, the Board also provides information which excludes certain items that are the result of long-term strategic decisions and/or the impacts of unusual and extreme external events and accounting volatility arising from movements in market values of financial instruments that can have a distorting effect on financial performance in single reporting periods. Profit excluding such items is defined as underlying profit. The items not included in underlying profit in the first half of 2008 are the impairment of wholesale assets, hedge ineffectiveness, realised gains less losses on structured investments and debt, release of surplus provision for compensation claims and fair value movements on treasury instruments. In 2007, the loss on sale of commercial and housing association loans was not included in underlying profit. These items are discussed in detail on pages 9 and 10. An explanation of the 'Underlying' and 'Statutory' accounting bases is provided on page 12.
Details of the profit before tax, profit for the financial period and earnings per share ('EPS') on each basis are presented in the following table:
|
|
|
6 months to
30 June
2008
|
6 months to
30 June
2007
|
12 months to
31 December
2007
|
|
|
|
|
|
|
|
Statutory Basis
|
|
|
|
|
|
(Loss)/profit before taxation
|
£m
|
(26.7)
|
180.4
|
126.0
|
|
(Loss)/profit for the financial period
|
£m
|
(17.2)
|
129.0
|
93.2
|
|
Basic EPS
|
p
|
(2.8)
|
20.4
|
14.9
|
|
|
|
|
|
|
|
Underlying Basis
|
|
|
|
|
|
Underlying profit before taxation
|
£m
|
70.2
|
181.3
|
351.6
|
|
Underlying profit for the financial period
|
£m
|
52.1
|
129.6
|
251.1
|
|
Underlying basic EPS
|
p
|
8.5
|
20.5
|
40.2
|
Reconciliation of Statutory and Underlying Measurements
|
|
|
6 months to
30 June
2008
|
6 months to
30 June
2007
|
12 months to
31 December
2007
|
|
|
|
|
|
|
|
Profit before taxation
|
|
|
|
|
|
|
|
|
|
|
|
Statutory (loss)/ profit before taxation
|
£m
|
(26.7)
|
180.4
|
126.0
|
|
Release of surplus provision for compensation claims
|
£m
|
(20.0)
|
-
|
-
|
|
Fair value movements:
|
|
|
|
|
|
Embedded derivatives
|
£m
|
63.0
|
-
|
49.7
|
|
Hedge ineffectiveness
|
£m
|
(8.7)
|
0.9
|
23.5
|
|
Investment impairment loss
|
£m
|
64.8
|
-
|
94.4
|
|
Loss on sale of assets
|
£m
|
-
|
-
|
58.0
|
|
Realised losses on structured investments
|
£m
|
27.2
|
-
|
-
|
|
Realised gains less losses on debt repurchased
|
£m
|
(29.4)
|
-
|
-
|
|
Underlying profit before taxation
|
£m
|
70.2
|
181.3
|
351.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
Statutory (loss)/ profit for the financial period
|
£m
|
(17.2)
|
129.0
|
93.2
|
|
Release of surplus provision for compensation claims
|
£m
|
(14.3)
|
-
|
-
|
|
Fair value movements:
|
|
|
|
|
|
Embedded derivatives
|
£m
|
45.1
|
-
|
34.8
|
|
Hedge ineffectiveness
|
£m
|
(6.2)
|
0.6
|
16.4
|
|
Investment impairment loss
|
£m
|
46.3
|
-
|
66.1
|
|
Loss on sale of assets
|
£m
|
-
|
-
|
40.6
|
|
Realised losses on structured investments
|
£m
|
19.4
|
-
|
-
|
|
Realised gains less losses on debt repurchased
|
£m
|
(21.0)
|
-
|
-
|
|
Underlying profit for the financial period
|
£m
|
52.1
|
129.6
|
251.1
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares
|
m
|
611.5
|
631.2
|
624.2
|
|
Underlying earnings per share
|
p
|
8.5
|
20.5
|
40.2
|
|
|
|
|
|
|
Reconciliation of Statutory and Underlying Measurements (continued)
|
|
|
6 months to
30 June
2008
|
6 months to
30 June
2007
|
12 months to
31 December
2007
|
|
|
|
|
|
|
|
Taxation charge
|
|
|
|
|
|
|
|
|
|
|
|
Statutory taxation (credit)/charge
|
£m
|
(9.5)
|
51.4
|
32.8
|
|
Taxation of:
|
|
|
|
|
|
Release of surplus provision for compensation claims
|
£m
|
(5.7)
|
-
|
-
|
|
Fair value movements:
|
|
|
|
|
|
Embedded derivatives
|
£m
|
17.9
|
-
|
14.9
|
|
Hedge ineffectiveness
|
£m
|
(2.5)
|
0.3
|
7.1
|
|
Investment impairment loss
|
£m
|
18.5
|
-
|
28.3
|
|
Loss on sale of assets
|
£m
|
-
|
-
|
17.4
|
|
Realised losses on structured investments
|
£m
|
7.8
|
-
|
-
|
|
Realised gains less losses on debt repurchased
|
£m
|
(8.4)
|
-
|
-
|
|
Underlying taxation charge
|
£m
|
18.1
|
51.7
|
100.5
|
|
|
|
|
|
|
|
Underlying profit before taxation
|
£m
|
70.2
|
181.3
|
351.6
|
|
Underlying effective tax rate
|
%
|
25.8
|
28.5
|
28.6
|
|
|
|
|
|
|
Proforma Rights Issue Impact
|
|
|
As at 30 June
2008
|
Net proceeds of rights issue 1
|
Proforma
|
|
|
|
|
|
|
|
Shareholders' equity
|
£m
|
1,144
|
400
|
1,544
|
|
|
|
|
|
|
|
Wholesale assets
|
£m
|
8,037
|
400
|
8,437
|
|
|
|
|
|
|
|
Net assets per share
|
£
|
1.85
|
0.48
|
1.07
|
|
|
|
|
|
|
|
Risk weighted assets
|
£m
|
17,486
|
-
|
17,486
|
|
|
|
|
|
|
|
Core tier 1 capital2
|
£m
|
1,184
|
400
|
1,584
|
|
|
|
|
|
|
|
Total tier 1 capital
|
£m
|
1,332
|
400
|
1,732
|
|
|
|
|
|
|
|
Core tier 1 ratio
|
%
|
6.8
|
2.3
|
9.1
|
|
|
|
|
|
|
|
Total tier 1 capital ratio
|
%
|
7.6
|
2.3
|
9.9
|
|
|
|
|
|
|
|
Total capital ratio
|
%
|
14.0
|
2.3
|
16.3
|
|
|
|
|
|
|
1. New capital raised in August 2008.
2. Core tier 1 capital equals total tier 1 capital less innovative and non-innovative tier 1 instruments.
Further details of the rights issue are provided in note 18.
Accounting Bases
The Group's financial information is prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union and with the Disclosure and Transparency Rules of the UK FSA. This is the 'Statutory Basis' of presentation of the Group's financial information. In addition, information is presented on the 'Underlying Basis' which applies to certain measures of performance. The items not included in underlying profit are the loss on sale of commercial and housing association loans, the impairment of wholesale assets, hedge ineffectiveness, realised gains less losses on structured investments and debt, release of surplus provision for compensation claims and fair value movements on treasury instruments.
Summary of Results
|
|
|
6 months to
30 June
2008
|
|
6 months to
30 June
2007
|
|
12 months to
31 December
2007
|
|
Key Performance Indicators
|
|
|
|
|
|
|
|
Underlying profit before taxation*
|
£m
|
70.2
|
|
181.3
|
|
351.6
|
|
(Loss)/profit before taxation
|
£m
|
(26.7)
|
|
180.4
|
|
126.0
|
|
Net interest margin
|
%
|
0.98
|
|
1.14
|
|
1.10
|
|
Underlying cost: income ratio**
|
%
|
49.8
|
|
42.8
|
|
42.8
|
|
Underlying earnings per share*
|
p
|
8.5
|
|
20.5
|
|
40.2
|
|
Basic earnings per share
|
p
|
(2.8)
|
|
20.4
|
|
14.9
|
|
Underlying return on equity*
|
%
|
8.8
|
|
17.3
|
|
19.1
|
|
Dividend per share
|
p
|
***
|
|
6.7
|
|
21.0
|
|
Indexed LTV
|
%
|
60
|
|
54
|
|
55
|
|
Residential:
|
|
|
|
|
|
|
|
Gross advances
|
£bn
|
4.4
|
|
7.2
|
|
14.0
|
|
Net advances
|
£bn
|
1.9
|
|
4.5
|
|
8.3
|
|
Redemptions
|
£bn
|
2.5
|
|
2.7
|
|
5.8
|
|
Redemptions (% opening book)
|
%
|
12.4
|
|
17.2
|
|
18.5
|
|
|
|
|
|
|
|
|
|
Funding Mix:
|
|
|
|
|
|
|
|
Retail
|
%
|
43
|
|
39
|
|
40
|
|
Wholesale
|
%
|
19
|
|
25
|
|
23
|
|
Securitised
|
%
|
18
|
|
17
|
|
17
|
|
Covered bonds
|
%
|
13
|
|
11
|
|
13
|
|
Capital/other
|
%
|
7
|
|
8
|
|
7
|
|
|
|
|
|
|
|
|
|
Asset Mix:
|
|
|
|
|
|
|
|
Buy-to-let
|
%
|
47
|
|
39
|
|
45
|
|
Self-cert
|
%
|
17
|
|
15
|
|
16
|
|
Other residential
|
%
|
15
|
|
14
|
|
15
|
|
Commercial and housing association
|
%
|
2
|
|
10
|
|
2
|
|
Wholesale/other
|
%
|
19
|
|
22
|
|
22
|
|
|
|
|
|
|
|
|
|
Lending balances - total
|
£bn
|
42.2
|
|
40.6
|
|
40.4
|
|
Residential
|
£bn
|
41.3
|
|
35.6
|
|
39.4
|
|
Commercial
|
£bn
|
0.9
|
|
2.8
|
|
0.9
|
|
Housing association
|
£bn
|
-
|
|
2.2
|
|
0.1
|
|
|
|
|
|
|
|
|
|
Retail savings balances - total
|
£bn
|
22.2
|
|
20.5
|
|
21.0
|
|
Branch based
|
£bn
|
16.2
|
|
13.3
|
|
14.4
|
|
Direct
|
£bn
|
4.0
|
|
4.2
|
|
4.2
|
|
Offshore
|
£bn
|
2.0
|
|
3.0
|
|
2.4
|
|
Customer deposits: customer loans
|
%
|
58.0
|
|
58.0
|
|
60.0
|
|
|
|
|
|
|
|
|
|
Capital Structure
|
|
|
|
|
|
|
|
Tier 1
|
£m
|
1,332.4
|
|
1,562.0
|
|
1,436.9
|
|
Tier 2
|
£m
|
1,206.5
|
|
1,226.4
|
|
1,227.1
|
|
Tier 1 ratio
|
%
|
7.6
|
|
8.5
|
|
8.6
|
|
Total capital ratio
|
%
|
14.0
|
|
14.7
|
|
15.1
|
|
Risk weighted assets
|
£bn
|
17.5
|
|
18.4
|
|
16.7
|
|
Pro-forma core tier 1 ratio****
|
%
|
9.1
|
|
n/a
|
|
n/a
|
|
Pro-forma total tier 1 capital ratio****
|
%
|
9.9
|
|
n/a
|
|
n/a
|
* The Underlying basis is defined and analyses of underlying profit, costs and earnings per share are provided on pages 11 and 12.
** Underlying cost: income ratio represents underlying administrative expenses divided by the sum of underlying net operating income and non-operating income.
*** A 2008 interim scrip dividend will be paid in shares; further details are provided in note 8.
**** These pro-forma ratios reflect the rights issue detailed in note 18.
Summary Income Statement
|
|
6 months to
30 June
2008
|
6 months to
30 June
2007
|
12 months to
31 December
2007
|
|
£m
|
|
|
|
|
|
|
|
|
|
Net interest income
|
246.7
|
271.2
|
547.7
|
|
Non interest income
|
41.5
|
55.2
|
106.6
|
|
Underlying net income
|
288.2
|
326.4
|
654.3
|
|
Realised gains less losses on structured investments and debt
|
2.2
|
-
|
-
|
|
Fair value movements:
|
|
|
|
|
Embedded derivatives
|
(63.0)
|
-
|
(49.7)
|
|
Hedge ineffectiveness
|
8.7
|
(0.9)
|
(23.5)
|
|
Net income
|
236.1
|
325.5
|
581.1
|
|
Administrative expenses:
|
|
|
|
|
Ongoing
|
(143.4)
|
(139.8)
|
(280.2)
|
|
Release of surplus provision for compensation claims
|
20.0
|
-
|
-
|
|
Loan impairment loss
|
(74.6)
|
(5.3)
|
(22.5)
|
|
Investment impairment loss
|
(64.8)
|
-
|
(94.4)
|
|
Loss on sale of assets
|
-
|
-
|
(58.0)
|
|
(Loss)/profit before taxation
|
(26.7)
|
180.4
|
126.0
|
|
Release of surplus provision for compensation claims
|
(20.0)
|
-
|
-
|
|
Fair value movements:
|
|
|
|
|
Embedded derivatives
|
63.0
|
-
|
49.7
|
|
Hedge ineffectiveness
|
(8.7)
|
0.9
|
23.5
|
|
Investment impairment loss
|
64.8
|
-
|
94.4
|
|
Loss on sale of assets
|
-
|
-
|
58.0
|
|
Realised losses on structured investments
|
27.2
|
-
|
-
|
|
Realised gains less losses on debt repurchased
|
(29.4)
|
-
|
-
|
|
Underlying profit before taxation
|
70.2
|
181.3
|
351.6
|
Summary Balance Sheet
|
As at
|
30 June
2008
|
30 June
2007
|
31 December
2007
|
|
£m
|
|
|
|
|
|
|
|
|
|
Loans and advances to customers:
|
|
|
|
|
Residential mortgages
|
41,288.9
|
35,607.5
|
39,422.3
|
|
Commercial and other secured loans
|
907.9
|
4,955.2
|
1,022.2
|
|
Wholesale assets
|
8,036.8
|
10,923.5
|
9,565.0
|
|
Fair value adjustments on portfolio hedging
|
(176.7)
|
(333.1)
|
(53.8)
|
|
Derivative financial instruments
|
1,958.8
|
772.4
|
1,175.4
|
|
Fixed and other assets
|
234.3
|
181.2
|
853.5
|
|
Total assets
|
52,250.0
|
52,106.7
|
51,984.6
|
|
|
|
|
|
|
Retail deposits
|
22,212.0
|
20,456.6
|
20,988.0
|
|
Non-retail deposits
|
26,647.0
|
27,381.0
|
27,547.1
|
|
Fair value adjustments on portfolio hedging
|
(21.5)
|
(18.2)
|
(5.9)
|
|
Derivative financial instruments
|
562.4
|
881.3
|
498.6
|
|
Other liabilities
|
348.3
|
495.3
|
330.7
|
|
Interest-bearing capital
|
1,357.4
|
1,340.3
|
1,415.3
|
|
Equity
|
1,144.4
|
1,570.4
|
1,210.8
|
|
Total equity and liabilities
|
52,250.0
|
52,106.7
|
51,984.6
|
Independent Review Report to Bradford & Bingley plc
Introduction
We have been engaged by the Company to review the condensed set of Financial Statements in the half-yearly Financial Report for the six months ended 30 June 2008 which comprises the Consolidated Income Statement, Consolidated Balance Sheet, Consolidated Statement of Recognised Income and Expense, Consolidated Cash Flow Statement and the related explanatory notes. We have read the other information contained in the half-yearly Financial Report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information in the condensed set of Financial Statements.
This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ('the DTR') of the UK's Financial Services Authority ('the UK FSA'). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report or for the conclusions we have reached.
Directors' responsibilities
The half-yearly Financial Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly Financial Report in accordance with the DTR of the UK FSA.
As disclosed in note 2, the annual Financial Statements of the Group are prepared in accordance with IFRS as adopted by the EU. The condensed set of Financial Statements included in this half-yearly Financial Report have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of Financial Statements in the half-yearly Financial Report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of Financial Statements in the half-yearly Financial Report for the six months to 30 June 2008 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.
KPMG Audit Plc
Chartered Accountants
Leeds
28 August 2008
Condensed Financial Statements
Consolidated Income Statement
|
|
6 months to
30 June
2008
|
6 months to
30 June
2007
|
12 months to
31 December
2007
|
|
£m
|
|
|
|
|
|
|
|
|
|
Interest receivable and similar income
|
1,526.4
|
1,410.2
|
2,967.5
|
|
Interest expense and similar charges
|
(1,279.7)
|
(1,139.0)
|
(2,419.8)
|
|
Net interest income
|
246.7
|
271.2
|
547.7
|
|
|
|
|
|
|
Fee and commission income
|
30.9
|
42.4
|
81.7
|
|
|
|
|
|
|
Realised gains less losses on financial instruments
|
0.3
|
0.3
|
6.5
|
|
Realised gains less losses on structured investments and debt
|
2.2
|
-
|
-
|
|
Fair value movements:
|
|
|
|
|
Embedded derivatives
|
(63.0)
|
-
|
(49.7)
|
|
Hedge ineffectiveness
|
8.7
|
(0.9)
|
(23.5)
|
|
Other operating income
|
2.8
|
3.7
|
9.6
|
|
Net operating income
|
228.6
|
316.7
|
572.3
|
|
|
|
|
|
|
Administrative expenses
|
|
|
|
|
- Ongoing
|
(143.4)
|
(139.8)
|
(280.2)
|
|
- Release of surplus provision for compensation claims
|
20.0
|
-
|
-
|
|
Loan impairment loss
|
(74.6)
|
(5.3)
|
(22.5)
|
|
Investment impairment loss
|
(64.8)
|
-
|
(94.4)
|
|
Loss on sale of assets
|
-
|
-
|
(58.0)
|
|
Non-operating income
|
7.5
|
8.8
|
8.8
|
|
(Loss)/profit before taxation
|
(26.7)
|
180.4
|
126.0
|
|
|
|
|
|
|
Taxation credit/(charge)
|
9.5
|
(51.4)
|
(32.8)
|
|
(Loss)/profit for the financial period
|
(17.2)
|
129.0
|
93.2
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
- Basic
|
(2.8)p
|
20.4p
|
14.9p
|
|
- Diluted
|
(2.8)p
|
20.4p
|
14.9p
|
|
|
|
|
|
The results above arise from continuing activities and are attributable to the equity shareholders.
Consolidated Balance Sheet
|
As at
|
30 June
2008
|
|
30 June
2007
|
|
31 December
2007
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and balances at central banks
|
193.6
|
|
195.8
|
|
209.2
|
|
Treasury bills
|
241.6
|
|
-
|
|
185.0
|
|
Loans and advances to banks
|
2,972.9
|
|
4,863.2
|
|
2,392.1
|
|
Loans and advances to customers
|
42,196.8
|
|
40,562.7
|
|
40,444.5
|
|
Fair value adjustments on portfolio hedging
|
(176.7)
|
|
(333.1)
|
|
(53.8)
|
|
Debt securities
|
4,628.7
|
|
5,864.5
|
|
6,778.7
|
|
Derivative financial instruments
|
1,958.8
|
|
772.4
|
|
1,175.4
|
|
Prepayments and accrued income
|
38.7
|
|
25.8
|
|
28.5
|
|
Other assets
|
12.8
|
|
7.8
|
|
653.7
|
|
Deferred tax assets
|
34.0
|
|
-
|
|
23.8
|
|
Property, plant and equipment
|
108.2
|
|
99.4
|
|
106.5
|
|
Intangible assets
|
40.6
|
|
48.2
|
|
41.0
|
|
|
|
|
|
|
|
|
Total assets
|
52,250.0
|
|
52,106.7
|
|
51,984.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits by banks
|
4,598.1
|
|
1,757.5
|
|
2,074.4
|
|
Customer accounts
|
24,463.1
|
|
23,594.6
|
|
24,152.6
|
|
Fair value adjustments on portfolio hedging
|
(21.5)
|
|
(18.2)
|
|
(5.9)
|
|
Derivative financial instruments
|
562.4
|
|
881.3
|
|
498.6
|
|
Debt securities in issue
|
19,797.8
|
|
22,485.5
|
|
22,308.1
|
|
Other liabilities
|
156.3
|
|
148.5
|
|
141.2
|
|
Accruals and deferred income
|
76.0
|
|
88.7
|
|
84.1
|
|
Current tax liabilities
|
74.3
|
|
127.5
|
|
23.7
|
|
Deferred tax liabilities
|
-
|
|
43.3
|
-
|
-
|
|
Post-retirement benefit obligations
|
11.1
|
|
7.7
|
|
22.0
|
|
Provisions
|
30.6
|
|
79.6
|
|
59.7
|
|
Subordinated liabilities
|
1,201.9
|
|
1,192.3
|
|
1,253.7
|
|
Other capital instruments
|
155.5
|
|
148.0
|
|
161.6
|
|
|
|
|
|
|
|
|
Total liabilities
|
51,105.6
|
|
50,536.3
|
|
50,773.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital and reserves attributable to equity holders:
|
|
|
|
|
|
|
- Share capital
|
154.4
|
|
158.6
|
|
154.4
|
|
- Share premium reserve
|
4.9
|
|
4.9
|
|
4.9
|
|
- Capital redemption reserve
|
29.2
|
|
25.0
|
|
29.2
|
|
- Other reserves
|
(89.7)
|
|
91.9
|
|
(122.3)
|
|
- Retained earnings
|
1,045.6
|
|
1,290.0
|
|
1,144.6
|
|
|
|
|
|
|
|
|
Total attributable equity
|
1,144.4
|
|
1,570.4
|
|
1,210.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity and liabilities
|
52,250.0
|
|
52,106.7
|
|
51,984.6
|
|
|
|
|
|
|
|
Consolidated Statement of Recognised Income and Expense
|
|
6 months to
30 June
2008
|
|
6 months to
30 June
2007
|
|
12 months to
31 December
2007
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale instruments:
|
|
|
|
|
|
|
- Net losses recognised in equity during the period
|
(137.3)
|
|
(4.6)
|
|
(82.9)
|
|
- Amounts transferred from equity and recognised in profit during the period
|
25.2
|
|
(0.4)
|
|
(3.4)
|
|
Cash flow hedges:
|
|
|
|
|
|
|
- Net gains/(losses) recognised in equity during the period
|
161.8
|
|
108.1
|
|
(110.5)
|
|
- Amounts transferred to profit and loss for the period
|
(4.6)
|
|
(2.8)
|
|
(2.8)
|
|
Actuarial gains on post-retirement benefit obligations
|
4.6
|
|
69.6
|
|
53.3
|
|
Taxation on the above items taken directly to equity
|
(13.8)
|
|
(48.3)
|
|
42.8
|
|
Net income/(expense) recognised directly in equity
|
35.9
|
|
121.6
|
|
(103.5)
|
|
(Loss)/profit for the financial period
|
(17.2)
|
|
129.0
|
|
93.2
|
|
Total recognised income and expense for the financial period
|
18.7
|
|
250.6
|
|
(10.3)
|
Consolidated Cash Flow Statement
|
|
6 months to
30 June
2008
|
|
6 months to
30 June
2007
|
|
12 months to
31 December
2007
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
(Loss)/profit for the financial period
|
(17.2)
|
|
129.0
|
|
93.2
|
|
Adjustments to reconcile net (loss)/profit to cash flow from/(used in) operating activities:
|
|
|
|
|
|
|
Income tax (credit)/charge
|
(9.5)
|
|
51.4
|
|
32.8
|
|
Depreciation and amortisation
|
10.2
|
|
11.1
|
|
22.6
|
|
Loan impairment loss
|
75.5
|
|
8.0
|
|
29.3
|
|
Investment impairment loss
|
64.8
|
|
-
|
|
94.4
|
|
Recoveries of loans and advances previously written off
|
(0.9)
|
|
(2.7)
|
|
(6.8)
|
|
Loss on sale of assets
|
-
|
|
-
|
|
58.0
|
|
Interest on subordinated liabilities and other capital instruments
|
45.4
|
45.5
|
91.7
|
|
Net profit on sale of property, plant and equipment and intangible assets
|
(7.7)
|
(10.7)
|
(4.3)
|
|
Gains less losses on sale of debt securities
|
25.2
|
|
(0.4)
|
|
(3.4)
|
|
Cash flows from operating activities before changes in operating assets and liabilities
|
185.8
|
|
231.2
|
|
407.5
|
|
Net (increase)/decrease in operating assets:
|
|
|
|
|
|
|
Loans and advances to banks and customers
|
(898.4)
|
|
(1,755.4)
|
|
(3,395.3)
|
|
Net proceeds from sale of assets
|
645.9
|
|
-
|
|
3,294.8
|
|
Acquisitions of mortgage portfolios
|
(1,070.4)
|
|
(2,469.7)
|
|
(4,337.9)
|
|
Debt securities
|
68.2
|
|
(73.8)
|
|
(119.3)
|
|
Derivative financial instruments
|
(783.4)
|
|
(481.4)
|
|
(884.4)
|
|
Prepayments and accrued income
|
(10.2)
|
|
(0.8)
|
|
(3.5)
|
|
Other assets
|
(5.0)
|
|
13.5
|
|
(632.4)
|
|
Net increase/(decrease) in operating liabilities:
|
|
|
|
|
|
|
Deposits by banks and customer accounts
|
1,362.0
|
|
1,691.9
|
|
2,396.0
|
|
Derivative financial instruments
|
63.8
|
|
387.9
|
|
5.2
|
|
Debt securities in issue
|
(1,614.7)
|
|
1,022.5
|
|
(701.5)
|
|
Other liabilities
|
4.2
|
|
(42.6)
|
|
(35.6)
|
|
Accruals and deferred income
|
(120.3)
|
|
(59.7)
|
|
210.1
|
|
Provisions
|
(29.1)
|
|
(15.2)
|
|
(35.1)
|
|
Income taxes received/(paid)
|
36.1
|
|
(19.2)
|
|
(80.4)
|
|
Other non-cash items
|
99.2
|
|
341.0
|
|
(165.9)
|
|
Net cash used in operating activities
|
(2,066.3)
|
|
(1,229.8)
|
|
(4,077.7)
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
Purchase of property, plant and equipment and intangible assets
|
(15.4)
|
|
(15.7)
|
|
(34.3)
|
|
Proceeds from sale of property, plant and equipment
|
11.6
|
|
13.7
|
|
14.5
|
|
Net cash used in investing activities
|
(3.8)
|
|
(2.0)
|
|
(19.8)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
Purchase of own shares held to satisfy employee share plans
|
-
|
|
(18.7)
|
|
(18.7)
|
|
Purchase of own shares for cancellation
|
-
|
|
-
|
|
(58.6)
|
|
Proceeds from disposal of own shares
|
2.7
|
|
4.8
|
|
5.2
|
|
Net proceeds from secured funding
|
1,500.0
|
|
4,182.0
|
|
6,437.7
|
|
Repayments of secured funding
|
(808.9)
|
|
(559.3)
|
|
(1,374.2)
|
|
Interest paid on subordinated liabilities and other capital instruments
|
(47.7)
|
|
(35.7)
|
|
(79.7)
|
|
Dividends paid
|
(87.9)
|
|
(84.7)
|
|
(126.5)
|
|
Net cash from financing activities
|
558.2
|
|
3,488.4
|
|
4,785.2
|
|
Net (decrease)/increase in cash and cash equivalents
|
(1,511.9)
|
|
2,256.6
|
|
687.7
|
|
Cash and cash equivalents at beginning of period
|
4,335.3
|
|
3,647.6
|
|
3,647.6
|
|
Cash and cash equivalents at end of period
|
2,823.4
|
|
5,904.2
|
|
4,335.3
|
|
|
|
|
|
|
|
|
Represented by cash and assets with original maturity of three months or less within:
|
|
|
|
|
|
|
Cash and balances at central banks
|
15.5
|
|
9.3
|
|
21.0
|
|
Treasury bills
|
241.6
|
|
-
|
|
185.0
|
|
Loans and advances to banks
|
2,566.3
|
|
4,863.2
|
|
2,137.5
|
|
Debt securities
|
-
|
|
1,031.7
|
|
1,991.8
|
|
|
2,823.4
|
|
5,904.2
|
|
4,335.3
|
|
|
|
|
|
|
|
|
Balances maintained with the Bank of England
|
178.1
|
|
186.5
|
|
188.2
|
|
|
|
|
|
|
|
The Group is required to maintain balances with the Bank of England, as shown above. These balances are not included in cash and cash equivalents for the purposes of the Cash Flow Statement.
1. Reporting entity
Bradford & Bingley plc ('the Company') is a public limited company incorporated in the UK under the Companies Act 1985. The financial information in this Interim Financial Report consolidates the Company and its subsidiaries (including special purpose vehicles), together referred to as 'the Group'. The Group's consolidated financial statements for the year ended 31 December 2007 are included in the Group's 2007 Annual Report & Accounts available on the Group's website www.bbg.co.uk.
2. Basis of preparation
The information in this document does not include all of the disclosures required by IFRS in full annual financial statements and it should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2007 which were prepared in accordance with IFRS as adopted by the EU. In preparing this financial information there have been no material changes to the accounting policies previously applied by the Group in preparing, and detailed in, its Annual Report & Accounts for the year ended 31 December 2007. The Group's defined benefit pension plan had a surplus of £8.2m at 30 June 2008, but in line with the principles of IAS 19 'Employee Benefits', and having regard to the principles of IFRIC 14 'IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction' this surplus has been capped at nil for the purposes of this Interim Financial Report because the Group does not have a clear unconditional right to a refund or a reduction in contributions to the plan. The tax charge for the period has been calculated using the expected effective tax rate for the full year 2008. This Interim Financial Report has been prepared in accordance with IAS 34 'Interim Financial Reporting'.
3. Net interest income
|
|
6 months to
30 June
2008
|
|
6 months to
30 June
2007
|
|
12 months to
31 December
2007
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
247
|
|
271
|
|
548
|
|
Average interest-earning assets ('IEA')
|
50,911
|
|
48,124
|
|
49,743
|
|
Financed by:
|
|
|
|
|
|
|
Interest-bearing liabilities
|
49,243
|
|
46,140
|
|
47,904
|
|
Interest-free liabilities
|
1,668
|
|
1,984
|
|
1,839
|
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
|
Average rates
|
|
|
|
|
|
|
Gross yield on IEA
|
6.05
|
|
5.91
|
|
5.96
|
|
Cost of interest-bearing liabilities
|
(5.25)
|
|
(4.97)
|
|
(5.05)
|
|
Interest spread
|
0.80
|
|
0.94
|
|
0.91
|
|
Contribution of interest-free liabilities
|
0.18
|
|
0.20
|
|
0.19
|
|
Net interest margin
|
0.98
|
|
1.14
|
|
1.10
|
|
|
|
|
|
|
|
|
Average bank base rate
|
5.19
|
|
5.32
|
|
5.51
|
|
Average 3-month LIBOR
|
5.81
|
|
5.65
|
|
6.00
|
|
Average 3-year swap rate
|
5.36
|
|
5.81
|
|
5.81
|
4. Fee and commission income
|
|
6 months to
30 June
2008
|
6 months to
30 June
2007
|
12 months to
31 December
2007
|
|
£m
|
|
|
|
|
Lending related
|
9.4
|
15.5
|
28.7
|
|
Investment
|
12.0
|
16.0
|
30.8
|
|
General insurance
|
8.4
|
9.8
|
19.9
|
|
Other
|
1.1
|
1.1
|
2.3
|
|
Total
|
30.9
|
42.4
|
81.7
|
5. Administrative expenses
|
|
6 months to
30 June
2008
|
6 months to
30 June
2007
|
12 months to
31 December
2007
|
|
£m
|
|
|
|
|
Staff related costs
|
62.2
|
61.5
|
121.0
|
|
Premises
|
10.7
|
10.0
|
20.5
|
|
Marketing
|
11.6
|
10.4
|
19.7
|
|
Depreciation and amortisation
|
10.2
|
11.1
|
23.7
|
|
Other operating costs
|
48.7
|
46.8
|
95.3
|
|
Ongoing
|
143.4
|
139.8
|
280.2
|
|
Release of surplus provision for compensation claims
|
(20.0)
|
-
|
-
|
|
Total
|
123.4
|
139.8
|
280.2
|
Compensation costs: during the period the rate of compensation claims fell and the level of provision remaining was reassessed. Consequently £20.0m of the provision was released.
6. Taxation
|
|
6 months to
30 June
2008
|
6 months to
30 June
2007
|
12 months to
31 December
2007
|
|
£m
|
|
|
|
|
|
|
|
|
|
(Loss)/profit before taxation
|
(26.7)
|
180.4
|
126.0
|
|
|
|
|
|
|
UK corporation tax at 28.5% (2007: 30.0%)
|
7.6
|
(54.1)
|
(37.8)
|
|
Effects of:
|
|
|
|
|
Expenses not deductible for taxation
|
(2.8)
|
(1.7)
|
(4.3)
|
|
Lower rate on overseas earnings
|
4.7
|
4.2
|
7.2
|
|
Rate change
|
-
|
-
|
0.7
|
|
Adjustments in respect of previous periods
|
-
|
0.2
|
1.4
|
|
Total taxation credit/(charge) for the financial period
|
9.5
|
(51.4)
|
(32.8)
|
|
Effective tax rate (%)
|
35.6
|
28.5
|
26.0
|
The tax credit/(charge) for the period includes an overseas tax charge of £15.2m (1H 2007: £9.2m, FY 2007: £22.1m). Deferred tax appropriately reflects the change to the standard rate of UK corporation tax from 30% to 28% which became effective 1 April 2008. The weighted standard rate of UK corporation tax for 2008 is 28.5%. The tax charge for the period has been calculated using the expected effective tax rate for the full year 2008.
7. Earnings per share
|
|
6 months to
30 June
2008
|
6 months to
30 June
2007
|
12 months to
31 December
2007
|
|
|
|
|
|
|
Basic (p)
|
(2.8)
|
20.4
|
14.9
|
|
Diluted (p)
|
(2.8)
|
20.4
|
14.9
|
|
|
|
|
|
|
Earnings per share is calculated using the following amounts of profit attributable to equity shareholders:
|
|
|
|
|
|
|
|
|
|
(Loss)/profit for the financial period (£m)
|
(17.2)
|
129.0
|
93.2
|
|
|
|
|
|
|
Shares (m)
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares in issue
|
611.5
|
631.2
|
624.2
|
|
Dilutive effect of ordinary shares issuable under
Company share schemes
|
-
|
1.3
|
0.8
|
|
Diluted weighted average number of ordinary shares
|
611.5
|
632.5
|
625.0
|
Shares acquired by employee share trusts, which are deducted from equity shareholders' funds, have been excluded from the calculation of earnings per share as they are treated as if they are cancelled until such time as they vest unconditionally to the employee.
8. Dividends
|
|
6 months to
30 June
2008
|
6 months to
30 June
2007
|
12 months to
31 December
2007
|
|
£m
|
|
|
|
|
|
|
|
|
|
Dividends paid
|
87.9
|
84.7
|
126.5
|
A 2007 final dividend of 14.3 pence per share (2006: 13.4 pence) was paid on 2 May 2008 to shareholders on the register at the close of business on 25 March 2008, making a total dividend in respect of 2007 of 21.0 pence per share (2006: 20.0 pence). A 2008 interim dividend will be paid on 6 October 2008. This dividend will be in the form of new shares; each shareholder will receive a number of shares, the number being calculated in relation to their shareholding at the close of business on 3 October 2008. The total number of shares issued will be calculated to be worth £43.4m based on the mid-market share price at the close of business on 28 August 2008, currently equivalent to 3.0p per share. In accordance with IAS 10 'Events after the Balance Sheet Date' the interim dividend was not accrued at 30 June 2008 as it was not a liability as at that date.
9. Wholesale assets
|
As at
|
30 June
2008
|
30 June
2007
|
31 December
2007
|
|
£m
|
|
|
|
|
Cash and balances at central banks
|
193.6
|
195.8
|
209.2
|
|
|
|
|
|
|
Treasury bills
|
241.6
|
-
|
185.0
|
|
|
|
|
|
|
Loans and advances to banks:
|
|
|
|
|
- Reverse repos
|
832.1
|
55.1
|
253.4
|
|
- Bank and time deposits
|
754.9
|
3,247.1
|
1,344.6
|
|
- Cash and other collateral
|
1,385.9
|
1,561.0
|
794.1
|
|
|
2,972.9
|
4,863.2
|
2,392.1
|
|
Debt securities:
|
|
|
|
|
Liquidity portfolio:
|
|
|
|
|
- UK Government securities
|
1,152.6
|
370.8
|
1,518.8
|
|
- Bank and supranational bonds
|
1,324.8
|
1,258.0
|
1,398.8
|
|
- Bank certificates of deposit
|
-
|
1,443.2
|
1,223.6
|
|
- UK and European AAA MBS
|
1,103.6
|
1,233.0
|
1,204.3
|
|
- Other asset backed securities
|
221.3
|
242.7
|
257.4
|
|
|
3,802.3
|
4,547.7
|
5,602.9
|
|
Structured finance portfolio:
|
|
|
|
|
- Principal protected notes
|
415.2
|
611.6
|
582.0
|
|
- CDOs and CLOs
|
341.8
|
511.2
|
456.6
|
|
- SIVs
|
9.0
|
133.2
|
63.5
|
|
- Credit funds
|
60.4
|
60.8
|
73.7
|
|
|
826.4
|
1,316.8
|
1,175.8
|
|
|
4,628.7
|
5,864.5
|
6,778.7
|
|
Total
|
8,036.8
|
10,923.5
|
9,565.0
|
|
Embedded derivatives
|
(79.2)
|
-
|
(49.7)
|
|
Total market value of wholesale assets
|
7,957.6
|
10,923.5
|
9,515.3
|
|
Structured finance portfolio net of embedded derivatives
|
747.2
|
1,316.8
|
1,126.1
|
|
|
|
|
|
9. Wholesale assets (continued)
|
Structured finance portfolio at 30 June 2008
|
|
|
Total £m
|
AAA
|
AA
|
A
|
BBB
|
CCC & Below
|
Total
|
|
PPNs
|
415.2
|
54%
|
42%
|
4%
|
-
|
-
|
100%
|
|
Non synth CDOs
|
27.2
|
22%
|
44%
|
14%
|
20%
|
-
|
100%
|
|
Synthetic CDOs
|
107.8
|
7%
|
36%
|
24%
|
24%
|
9%
|
100%
|
|
Non synth CLOs
|
166.5
|
45%
|
52%
|
-
|
3%
|
-
|
100%
|
|
Synthetic CLOs
|
40.3
|
71%
|
-
|
20%
|
9%
|
-
|
100%
|
|
SIVs
|
9.0
|
-
|
-
|
-
|
-
|
100%
|
100%
|
|
Credit funds
|
60.4
|
-
|
-
|
60%
|
40%
|
-
|
100%
|
|
Total
|
826.4
|
41%
|
38%
|
11%
|
8%
|
2%
|
100%
|
Net value of investments containing embedded derivatives
At 30 June 2008
|
Value of synthetic CDO assets
|
£m
107.8
|
|
Embedded derivatives in synthetic CDOs
|
(79.2)
|
|
Net value of synthetic CDOs
|
28.6
|
|
Value of synthetic CLO assets
|
40.3
|
|
Embedded derivatives in synthetic CLOs
|
-
|
|
Net value of synthetic CLOs
|
40.3
|
|
Fair value of structured finance portfolio
|
826.4
|
|
Embedded derivatives
|
(79.2)
|
|
Net value of structured finance portfolio
|
747.2
|
Embedded derivatives within synthetic CDOs and CLOs are recorded as liabilities on the Balance Sheet.
|
Analysis of investment by geographic region
|
|
|
Total £m
|
UK
|
Europe
|
US
|
Other
|
Total
|
|
PPNs
|
415.2
|
55%
|
40%
|
4%
|
1%
|
100%
|
|
Non synth CDOs
|
27.2
|
4%
|
47%
|
47%
|
2%
|
100%
|
|
Synthetic CDOs
|
107.8
|
7%
|
13%
|
80%
|
-
|
100%
|
|
Non synth CLOs
|
166.5
|
-
|
64%
|
36%
|
-
|
100%
|
|
Synthetic CLOs
|
40.3
|
-
|
71%
|
29%
|
-
|
100%
|
|
SIVs
|
9.0
|
19%
|
25%
|
48%
|
8%
|
100%
|
|
Credit funds
|
60.4
|
-
|
100%
|
-
|
-
|
100%
|
|
Total
|
826.4
|
29%
|
47%
|
23%
|
1%
|
100%
|
|
Analysis of investment by type of asset
|
|
|
Total
£m
|
Mortgage Backed Securities
|
Asset Backed Securities
|
Corporate Loans
|
Other
|
Total
|
|
PPNs
|
415.2
|
-
|
5%
|
80%
|
15%
|
100%
|
|
Non synth CDOs
|
27.2
|
80%
|
-
|
20%
|
-
|
100%
|
|
Synthetic CDOs
|
107.8
|
71%
|
-
|
29%
|
-
|
100%
|
|
Non synth CLOs
|
166.5
|
-
|
-
|
100%
|
-
|
100%
|
|
Synthetic CLOs
|
40.3
|
-
|
-
|
100%
|
-
|
100%
|
|
SIVs
|
9.0
|
-
|
100%
|
-
|
-
|
100%
|
|
Credit funds
|
60.4
|
-
|
-
|
79%
|
21%
|
100%
|
|
Total
|
826.4
|
12%
|
4%
|
75%
|
9%
|
100%
|
9. Wholesale assets (continued)
|
Structured finance portfolio at 30 June 2007
|
|
|
Total £m
|
AAA
|
AA
|
A
|
BBB
|
CCC & Below
|
Total
|
|
PPNs
|
611.6
|
31%
|
53%
|
16%
|
-
|
-
|
100%
|
|
Non synth CDOs
|
66.2
|
40%
|
38%
|
22%
|
-
|
-
|
100%
|
|
Synthetic CDOs
|
205.7
|
79%
|
10%
|
5%
|
6%
|
-
|
100%
|
|
Non synth CLOs
|
175.3
|
52%
|
44%
|
-
|
4%
|
-
|
100%
|
|
Synthetic CLOs
|
64.0
|
74%
|
-
|
18%
|
8%
|
-
|
100%
|
|
SIVs
|
133.2
|
-
|
-
|
-
|
100%
|
-
|
100%
|
|
Credit funds
|
60.8
|
-
|
-
|
61%
|
39%
|
-
|
100%
|
|
Total
|
1,316.8
|
39%
|
34%
|
13%
|
14%
|
-
|
100%
|
Net value of investments containing embedded derivatives
At 30 June 2007
|
Value of synthetic CDO assets
|
£m
205.7
|
|
Embedded derivatives in synthetic CDOs
|
-
|
|
Net value of synthetic CDOs
|
205.7
|
|
Value of synthetic CLO assets
|
64.0
|
|
Embedded derivatives in synthetic CLOs
|
-
|
|
Net value of synthetic CLOs
|
64.0
|
|
Fair value of structured finance portfolio
|
1,316.8
|
|
Embedded derivatives
|
-
|
|
Net value of structured finance portfolio
|
1,316.8
|
Embedded derivatives within synthetic CDOs and CLOs are recorded as liabilities on the Balance Sheet.
|
Analysis of investment by geographic region
|
|
|
Total £m
|
UK
|
Europe
|
US
|
Other
|
Total
|
|
PPNs
|
611.6
|
42%
|
46%
|
3%
|
9%
|
100%
|
|
Non synth CDOs
|
66.2
|
-
|
19%
|
81%
|
-
|
100%
|
|
Synthetic CDOs
|
205.7
|
8%
|
21%
|
71%
|
-
|
100%
|
|
Non synth CLOs
|
175.3
|
-
|
60%
|
40%
|
-
|
100%
|
|
Synthetic CLOs
|
64.0
|
-
|
42%
|
58%
|
-
|
100%
|
|
SIVs
|
133.2
|
21%
|
18%
|
52%
|
9%
|
100%
|
|
Credit funds
|
60.8
|
-
|
100%
|
-
|
-
|
100%
|
|
Total
|
1,316.8
|
23%
|
42%
|
30%
|
5%
|
100%
|
|
Analysis of investment by type of asset
|
|
|
Total
£m
|
Mortgage Backed Securities
|
Asset Backed Securities
|
Corporate Loans
|
Other
|
Total
|
|
PPNs
|
611.6
|
-
|
3%
|
51%
|
46%
|
100%
|
|
Non synth CDOs
|
66.2
|
100%
|
-
|
-
|
-
|
100%
|
|
Synthetic CDOs
|
205.7
|
42%
|
-
|
58%
|
-
|
100%
|
|
Non synth CLOs
|
175.3
|
-
|
-
|
100%
|
-
|
100%
|
|
Synthetic CLOs
|
64.0
|
-
|
-
|
100%
|
-
|
100%
|
|
SIVs
|
133.2
|
-
|
100%
|
-
|
-
|
100%
|
|
Credit funds
|
60.8
|
-
|
-
|
78%
|
22%
|
100%
|
|
Total
|
1,316.8
|
12%
|
12%
|
54%
|
22%
|
100%
|
9. Wholesale assets (continued)
|
Structured finance portfolio at 31 December 2007
|
|
|
Total £m
|
AAA
|
AA
|
A
|
BBB
|
CCC & Below
|
Total
|
|
PPNs
|
582.0
|
41%
|
51%
|
8%
|
-
|
-
|
100%
|
|
Non synth CDOs
|
31.2
|
31%
|
55%
|
14%
|
-
|
-
|
100%
|
|
Synthetic CDOs
|
187.2
|
84%
|
8%
|
2%
|
6%
|
-
|
100%
|
|
Non synth CLOs
|
173.5
|
52%
|
44%
|
-
|
4%
|
-
|
100%
|
|
Synthetic CLOs
|
64.7
|
74%
|
-
|
17%
|
9%
|
-
|
100%
|
|
SIVs
|
63.5
|
-
|
-
|
-
|
-
|
100%
|
100%
|
|
Credit funds
|
73.7
|
-
|
8%
|
60%
|
32%
|
-
|
100%
|
|
Total
|
1,175.8
|
46%
|
35%
|
10%
|
4%
|
5%
|
100%
|
Net value of investments containing embedded derivatives
At 31 December 2007
|
Value of synthetic CDO assets
|
£m
187.2
|
|
Embedded derivatives in synthetic CDOs
|
(47.4)
|
|
Net value of synthetic CDOs
|
139.8
|
|
Value of synthetic CLO assets
|
64.7
|
|
Embedded derivatives in synthetic CLOs
|
(2.3)
|
|
Net value of synthetic CLOs
|
62.4
|
|
Fair value of structured finance portfolio
|
1,175.8
|
|
Embedded derivatives
|
(49.7)
|
|
Net value of structured finance portfolio
|
1,126.1
|
Embedded derivatives within synthetic CDOs and CLOs are recorded as liabilities on the Balance Sheet.
|
Analysis of investment by geographic region
|
|
|
Total £m
|
UK
|
Europe
|
US
|
Other
|
Total
|
|
PPNs
|
582.0
|
48%
|
48%
|
3%
|
1%
|
100%
|
|
Non synth CDOs
|
31.2
|
-
|
42%
|
58%
|
-
|
100%
|
|
Synthetic CDOs
|
187.2
|
-
|
26%
|
74%
|
-
|
100%
|
|
Non synth CLOs
|
173.5
|
-
|
62%
|
38%
|
-
|
100%
|
|
Synthetic CLOs
|
64.7
|
-
|
43%
|
57%
|
-
|
100%
|
|
SIVs
|
63.5
|
21%
|
19%
|
52%
|
8%
|
100%
|
|
Credit funds
|
73.7
|
9%
|
91%
|
-
|
-
|
100%
|
|
Total
|
1,175.8
|
25%
|
48%
|
26%
|
1%
|
100%
|
|
Analysis of investment by type of asset
|
|
|
Total
£m
|
Mortgage Backed Securities
|
Asset Backed Securities
|
Corporate Loans
|
Other
|
Total
|
|
PPNs
|
582.0
|
-
|
3%
|
62%
|
35%
|
100%
|
|
Non synth CDOs
|
31.2
|
100%
|
-
|
-
|
-
|
100%
|
|
Synthetic CDOs
|
187.2
|
40%
|
-
|
60%
|
-
|
100%
|
|
Non synth CLOs
|
173.5
|
-
|
-
|
100%
|
-
|
100%
|
|
Synthetic CLOs
|
64.7
|
-
|
-
|
100%
|
-
|
100%
|
|
SIVs
|
63.5
|
-
|
100%
|
-
|
-
|
100%
|
|
Credit funds
|
73.7
|
-
|
-
|
74%
|
26%
|
100%
|
|
Total
|
1,175.8
|
9%
|
7%
|
65%
|
19%
|
100%
|
10. Lending - mortgage movements
|
|
6 months 30 June 2008
|
At 30 June 2008
|
|
|
New mortgages
|
Net advances
|
Balances
|
|
|
£m
|
%
|
£m
|
£m
|
%
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic
|
|
|
|
|
|
|
Buy-to-let
|
2,276.6
|
69
|
1,412.7
|
22,363.7
|
68
|
|
Self-cert
|
598.3
|
18
|
156.8
|
5,644.9
|
17
|
|
Standard and other specialist
|
412.5
|
13
|
115.2
|
5,040.8
|
15
|
|
Total
|
3,287.4
|
100
|
1,684.7
|
33,049.4
|
100
|
|
|
|
|
|
|
|
|
Acquired
|
|
|
|
|
|
|
Buy-to-let
|
237.9
|
22
|
111.9
|
2,347.8
|
28
|
|
Self-cert
|
447.5
|
42
|
(4.4)
|
3,354.2
|
41
|
|
Standard and other specialist
|
385.0
|
36
|
113.8
|
2,537.5
|
31
|
|
Total
|
1,070.4
|
100
|
221.3
|
8,239.5
|
100
|
|
|
|
|
|
|
|
|
Buy-to-let
|
2,514.5
|
58
|
1,524.6
|
24,711.5
|
60
|
|
Self-cert
|
1,045.8
|
24
|
152.4
|
8,999.1
|
22
|
|
Standard and other specialist
|
797.5
|
18
|
229.0
|
7,578.3
|
18
|
|
Total residential
|
4,357.8
|
100
|
1,906.0
|
41,288.9
|
100
|
|
|
|
|
|
|
|
|
Residential
|
4,357.8
|
99
|
1,906.0
|
41,288.9
|
98
|
|
Commercial property and housing associations
|
21.1
|
1
|
(103.0)
|
907.9
|
2
|
|
Total
|
4,378.9
|
100
|
1,803.0
|
42,196.8
|
100
|
|
|
6 months to 30 June 2007
|
At 30 June 2007
|
|
|
New mortgages
|
Net advances
|
Balances
|
|
|
£m
|
%
|
£m
|
£m
|
%
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic
|
|
|
|
|
|
|
Buy-to-let
|
3,116.7
|
66
|
1,935.8
|
18,924.4
|
66
|
|
Self-cert
|
1,060.9
|
22
|
573.1
|
5,211.4
|
18
|
|
Standard and other specialist
|
553.3
|
12
|
118.1
|
4,693.1
|
16
|
|
Total
|
4,730.9
|
100
|
2,627.0
|
28,828.9
|
100
|
|
|
|
|
|
|
|
|
Acquired
|
|
|
|
|
|
|
Buy-to-let
|
497.7
|
20
|
369.7
|
1,587.4
|
23
|
|
Self-cert
|
841.0
|
34
|
565.5
|
2,817.3
|
42
|
|
Standard and other specialist
|
1,131.0
|
46
|
954.7
|
2,373.9
|
35
|
|
Total
|
2,469.7
|
100
|
1,889.9
|
6,778.6
|
100
|
|
|
|
|
|
|
|
|
Buy-to-let
|
3,614.4
|
50
|
2,305.5
|
20,511.8
|
58
|
|
Self-cert
|
1,901.9
|
27
|
1,138.6
|
8,028.7
|
23
|
|
Standard and other specialist
|
1,684.3
|
23
|
1,072.8
|
7,067.0
|
19
|
|
Total residential
|
7,200.6
|
100
|
4,516.9
|
35,607.5
|
100
|
|
|
|
|
|
|
|
|
Residential
|
7,200.6
|
94
|
4,516.9
|
35,607.5
|
88
|
|
Commercial property and housing associations
|
477.9
|
6
|
(48.5)
|
4,955.2
|
12
|
|
Total
|
7,678.5
|
100
|
4,468.4
|
40,562.7
|
100
|
10. Lending - mortgage movements (continued)
|
|
12 months to 31 December 2007
|
At 31 December 2007
|
|
|
New mortgages
|
Net advances
|
Balances
|
|
|
£m
|
%
|
£m
|
£m
|
%
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic
|
|
|
|
|
|
|
Buy-to-let
|
6,494.8
|
67
|
3,965.8
|
20,960.8
|
67
|
|
Self-cert
|
1,966.4
|
20
|
851.4
|
5,491.9
|
17
|
|
Standard and other specialist
|
1,241.4
|
13
|
423.2
|
4,959.6
|
16
|
|
Total
|
9,702.6
|
100
|
5,240.4
|
31,412.3
|
100
|
|
|
|
|
|
|
|
|
Acquired
|
|
|
|
|
|
|
Buy-to-let
|
1,216.8
|
28
|
929.8
|
2,172.1
|
27
|
|
Self-cert
|
1,352.4
|
31
|
763.8
|
3,048.2
|
38
|
|
Standard and other specialist
|
1,768.7
|
41
|
1,338.4
|
2,789.7
|
35
|
|
Total
|
4,337.9
|
100
|
3,032.0
|
8,010.0
|
100
|
|
|
|
|
|
|
|
|
Buy-to-let
|
7,711.6
|
55
|
4,895.6
|
23,132.9
|
59
|
|
Self-cert
|
3,318.8
|
24
|
1,615.2
|
8,540.1
|
22
|
|
Standard and other specialist
|
3,010.1
|
21
|
1,761.6
|
7,749.3
|
19
|
|
Total residential
|
14,040.5
|
100
|
8,272.4
|
39,422.3
|
100
|
|
|
|
|
|
|
|
|
Residential
|
14,040.5
|
94
|
8,272.4
|
39,422.3
|
97
|
|
Commercial property and housing associations
|
937.8
|
6
|
(3,954.6)
|
1,022.2
|
3
|
|
Total
|
14,978.3
|
100
|
4,317.8
|
40,444.5
|
100
|
11. Loan impairment loss
|
|
On residential mortgages
|
On commercial property and housing association loans
|
Total
|
|
6 months to 30 June 2008
|
|
|
|
|
£m
|
|
|
|
|
Allowances for credit losses against loans and advances to customers have been made as follows:
|
|
|
|
|
Opening provision at 1 January 2008
|
54.8
|
0.1
|
54.9
|
|
Movements during the period:
|
|
|
|
|
- Write-offs
|
(28.8)
|
-
|
(28.8)
|
|
- Loan impairment charge
|
77.3
|
-
|
77.3
|
|
- Discount unwind
|
(1.8)
|
-
|
(1.8)
|
|
Net movements during the period
|
46.7
|
-
|
46.7
|
|
|
|
|
|
|
Closing provision at 30 June 2008
|
101.5
|
0.1
|
101.6
|
|
|
|
|
|
|
The Income Statement charge comprises:
|
|
|
|
|
Loan impairment charge
|
77.3
|
-
|
77.3
|
|
Recoveries
|
(0.9)
|
-
|
(0.9)
|
|
Discount unwind
|
(1.8)
|
-
|
(1.8)
|
|
Total Income Statement charge
|
74.6
|
-
|
74.6
|
|
|
On residential mortgages
|
On commercial property and housing association loans
|
Total
|
|
6 months to 30 June 2007
|
|
|
|
|
£m
|
|
|
|
|
Allowances for credit losses against loans and advances to customers have been made as follows:
|
|
|
|
|
Opening provision at 1 January 2007
|
47.8
|
1.6
|
49.4
|
|
Movements during the period:
|
|
|
|
|
- Write-offs
|
(8.8)
|
-
|
(8.8)
|
|
- Loan impairment charge
|
9.0
|
(1.4)
|
7.6
|
|
- Discount unwind
|
0.4
|
-
|
0.4
|
|
Net movements during the period
|
0.6
|
(1.4)
|
(0.8)
|
|
|
|
|
|
|
Closing provision at 30 June 2007
|
48.4
|
0.2
|
48.6
|
|
|
|
|
|
|
The Income Statement charge comprises:
|
|
|
|
|
Loan impairment charge/(credit)
|
9.0
|
(1.4)
|
7.6
|
|
Recoveries
|
(2.7)
|
-
|
(2.7)
|
|
Discount unwind
|
0.4
|
-
|
0.4
|
|
Total Income Statement charge/(credit)
|
6.7
|
(1.4)
|
5.3
|
|
|
On residential mortgages
|
On commercial property and housing association loans
|
Total
|
|
12 months to 31 December 2007
|
|
|
|
|
£m
|
|
|
|
|
Allowances for credit losses against loans and advances to customers have been made as follows:
|
|
|
|
|
Opening provision at 1 January 2007
|
47.8
|
1.6
|
49.4
|
|
Movements during the year:
|
|
|
|
|
- Write-offs
|
(23.8)
|
-
|
(23.8)
|
|
- Loan impairment charge
|
30.4
|
(1.5)
|
28.9
|
|
- Discount unwind
|
0.4
|
-
|
0.4
|
|
Net movements during the year
|
7.0
|
(1.5)
|
5.5
|
|
|
|
|
|
|
Closing provision at 31 December 2007
|
54.8
|
0.1
|
54.9
|
|
|
|
|
|
|
The Income Statement charge comprises:
|
|
|
|
|
Loan impairment charge/(credit)
|
30.4
|
(1.5)
|
28.9
|
|
Recoveries
|
(6.8)
|
-
|
(6.8)
|
|
Discount unwind
|
0.4
|
-
|
0.4
|
|
Total Income Statement charge/(credit)
|
24.0
|
(1.5)
|
22.5
|
In the Balance Sheet these impairment allowances are deducted from the carrying values of the impaired assets.
12. Arrears and possessions on residential mortgages
|
At
|
|
30 June
2008
|
|
30 June
2007
|
|
31 December
2007
|
|
Arrears
|
|
|
|
|
|
|
|
Over 3 months
|
|
|
|
|
|
|
|
Number of cases
|
Number
|
8,854
|
|
4,661
|
|
5,610
|
|
Proportion of total
|
%
|
2.29
|
|
1.30
|
|
1.48
|
|
Asset value
|
£m
|
1,185.8
|
|
575.1
|
|
731.2
|
|
Proportion of book
|
%
|
2.87
|
|
1.62
|
|
1.85
|
|
|
|
|
|
|
|
|
|
Possessions
|
|
|
|
|
|
|
|
Number of cases
|
Number
|
717
|
|
471
|
|
560
|
|
Proportion of total
|
%
|
0.19
|
|
0.13
|
|
0.15
|
|
Asset value
|
£m
|
122.0
|
|
79.6
|
|
97.0
|
|
Proportion of book
|
%
|
0.30
|
|
0.22
|
|
0.25
|
|
|
|
|
|
|
|
|
|
Total arrears and possessions
|
|
|
|
|
|
|
|
Number of cases
|
Number
|
9,571
|
|
5,132
|
|
6,170
|
|
Proportion of total
|
%
|
2.48
|
|
1.43
|
|
1.63
|
|
Asset value
|
£m
|
1,307.8
|
|
654.7
|
|
828.2
|
|
Proportion of book
|
%
|
3.17
|
|
1.84
|
|
2.10
|
|
|
|
|
|
|
|
|
|
Residential loan impairment balance
|
|
|
|
|
|
|
|
As % of residential balances
|
%
|
0.25
|
|
0.14
|
|
0.14
|
|
As % of residential arrears and possessions
|
%
|
7.76
|
|
7.39
|
|
6.62
|
|
|
|
|
|
|
|
|
Analysis of accounts in 3 + months in arrears by product
|
At
|
|
30 June
2008
|
|
30 June
2007
|
|
31 December
2007
|
|
Arrears
|
|
|
|
|
|
|
|
Buy-to-let
|
|
|
|
|
|
|
|
Number of cases
|
Number
|
3,776
|
|
1,475
|
|
1,995
|
|
Proportion of total
|
%
|
1.86
|
|
0.85
|
|
1.04
|
|
Asset value
|
£m
|
563.1
|
|
219.3
|
|
299.9
|
|
Proportion of book
|
%
|
2.28
|
|
1.07
|
|
1.30
|
|
|
|
|
|
|
|
|
|
Self-cert
|
|
|
|
|
|
|
|
Number of cases
|
Number
|
2,110
|
|
1,368
|
|
1,433
|
|
Proportion of total
|
%
|
3.67
|
|
2.58
|
|
2.59
|
|
Asset value
|
£m
|
346.9
|
|
210.7
|
|
233.9
|
|
Proportion of book
|
%
|
3.85
|
|
2.62
|
|
2.74
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
Number of cases
|
Number
|
2,968
|
|
1,818
|
|
2,182
|
|
Proportion of total
|
%
|
2.35
|
|
1.37
|
|
1.65
|
|
Asset value
|
£m
|
275.8
|
|
145.1
|
|
197.3
|
|
Proportion of book
|
%
|
3.64
|
|
2.05
|
|
2.55
|
|
|
|
|
|
|
|
|
12. Arrears and possessions on residential mortgages (continued)
Analysis of accounts in 3+ months in arrears: organic loans
|
At
|
|
30 June
2008
|
|
30 June
2007
|
|
31 December
2007
|
|
Arrears
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
Number of cases
|
Number
|
5,837
|
|
3,384
|
|
3,838
|
|
Proportion of total
|
%
|
1.78
|
|
1.10
|
|
1.20
|
|
Asset value
|
£m
|
714.4
|
|
385.3
|
|
452.0
|
|
Proportion of book
|
%
|
2.16
|
|
1.34
|
|
1.46
|
|
|
|
|
|
|
|
|
|
Buy-to-let
|
|
|
|
|
|
|
|
Number of cases
|
Number
|
2,954
|
|
1,277
|
|
1,621
|
|
Proportion of total
|
%
|
1.61
|
|
0.81
|
|
0.93
|
|
Asset value
|
£m
|
444.3
|
|
193.3
|
|
242.3
|
|
Proportion of book
|
%
|
1.99
|
|
1.02
|
|
1.17
|
|
|
|
|
|
|
|
|
|
Self-cert
|
|
|
|
|
|
|
|
Number of cases
|
Number
|
1,066
|
|
816
|
|
834
|
|
Proportion of total
|
%
|
3.01
|
|
2.39
|
|
2.37
|
|
Asset value
|
£m
|
173.8
|
|
125.7
|
|
135.4
|
|
Proportion of book
|
%
|
3.08
|
|
2.41
|
|
2.48
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
Number of cases
|
Number
|
1,817
|
|
1,291
|
|
1,383
|
|
Proportion of total
|
%
|
1.68
|
|
1.12
|
|
1.23
|
|
Asset value
|
£m
|
96.3
|
|
66.3
|
|
74.3
|
|
Proportion of book
|
%
|
1.91
|
|
1.41
|
|
1.50
|
|
|
|
|
|
|
|
|
Analysis of accounts in 3+ months in arrears: acquired loans
|
At
|
|
30 June
2008
|
|
30 June
2007
|
|
31 December
2007
|
|
Arrears
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
Number of cases
|
Number
|
3,017
|
|
1,277
|
|
1,772
|
|
Proportion of total
|
%
|
5.11
|
|
2.51
|
|
3.04
|
|
Asset value
|
£m
|
471.4
|
|
189.8
|
|
279.2
|
|
Proportion of book
|
%
|
5.72
|
|
2.80
|
|
3.49
|
|
|
|
|
|
|
|
|
|
Buy-to-let
|
|
|
|
|
|
|
|
Number of cases
|
Number
|
822
|
|
198
|
|
374
|
|
Proportion of total
|
%
|
4.29
|
|
1.39
|
|
2.06
|
|
Asset value
|
£m
|
118.8
|
|
26.0
|
|
57.6
|
|
Proportion of book
|
%
|
5.06
|
|
1.64
|
|
2.65
|
|
|
|
|
|
|
|
|
|
Self-cert
|
|
|
|
|
|
|
|
Number of cases
|
Number
|
1,044
|
|
552
|
|
599
|
|
Proportion of total
|
%
|
4.79
|
|
2.92
|
|
2.98
|
|
Asset value
|
£m
|
173.1
|
|
85.0
|
|
98.5
|
|
Proportion of book
|
%
|
5.16
|
|
3.02
|
|
3.23
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
Number of cases
|
Number
|
1,151
|
|
527
|
|
799
|
|
Proportion of total
|
%
|
6.37
|
|
2.98
|
|
3.96
|
|
Asset value
|
£m
|
179.5
|
|
78.8
|
|
123.1
|
|
Proportion of book
|
%
|
7.07
|
|
3.32
|
|
4.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12. Arrears and possessions on residential mortgages (continued)
Further information regarding the credit quality of loans and advances to customers:
|
|
On residential mortgages
|
On commercial property and housing association loans
|
Total
|
|
At 30 June 2008
|
|
|
|
|
£m
|
|
|
|
|
|
|
|
|
|
Neither past due nor impaired
|
38,559.0
|
908.0
|
39,467.0
|
|
|
|
|
|
|
Past due but not impaired
|
|
|
|
|
- up to 3 months
|
1,523.6
|
-
|
1,523.6
|
|
- 3 to 6 months
|
633.2
|
-
|
633.2
|
|
- 6 to 12 months
|
397.1
|
-
|
397.1
|
|
Individually impaired
|
277.5
|
-
|
277.5
|
|
|
41,390.4
|
908.0
|
42,298.4
|
|
Impairment allowances
|
(101.5)
|
(0.1)
|
(101.6)
|
|
Loans and advances to customers net of impairment allowances
|
41,288.9
|
907.9
|
42,196.8
|
|
|
|
|
|
|
Impairment allowances
|
|
|
|
|
Individual
|
52.2
|
-
|
52.2
|
|
Collective
|
49.3
|
0.1
|
49.4
|
|
Total
|
101.5
|
0.1
|
101.6
|
|
|
On residential mortgages
|
On commercial property and housing association loans
|
Total
|
|
At 30 June 2007
|
|
|
|
|
£m
|
|
|
|
|
|
|
|
|
|
Neither past due nor impaired
|
33,786.2
|
4,955.4
|
38,741.6
|
|
|
|
|
|
|
Past due but not impaired
|
|
|
|
|
- up to 3 months
|
1,215.1
|
-
|
1,215.1
|
|
- 3 to 6 months
|
350.8
|
-
|
350.8
|
|
- 6 to 12 months
|
185.9
|
-
|
185.9
|
|
Individually impaired
|
117.9
|
-
|
117.9
|
|
|
35,655.9
|
4,955.4
|
40,611.3
|
|
Impairment allowances
|
(48.4)
|
(0.2)
|
(48.6)
|
|
Loans and advances to customers net of impairment allowances
|
35,607.5
|
4,955.2
|
40,562.7
|
|
|
|
|
|
|
Impairment allowances
|
|
|
|
|
Individual
|
15.0
|
-
|
15.0
|
|
Collective
|
33.4
|
0.2
|
33.6
|
|
Total
|
48.4
|
0.2
|
48.6
|
12. Arrears and possessions on residential mortgages (continued)
|
|
On residential mortgages
|
On commercial property and housing association loans
|
Total
|
|
At 31 December 2007
|
|
|
|
|
£m
|
|
|
|
|
|
|
|
|
|
Neither past due nor impaired
|
37,212.7
|
1,022.3
|
38,235.0
|
|
|
|
|
|
|
Past due but not impaired
|
|
|
|
|
- up to 3 months
|
1,436.2
|
-
|
1,436.2
|
|
- 3 to 6 months
|
464.6
|
-
|
464.6
|
|
- 6 to 12 months
|
208.2
|
-
|
208.2
|
|
Individually impaired
|
155.4
|
-
|
155.4
|
|
|
39,477.1
|
1,022.3
|
40,499.4
|
|
Impairment allowances
|
(54.8)
|
(0.1)
|
(54.9)
|
|
Loans and advances to customers net of impairment allowances
|
39,422.3
|
1,022.2
|
40,444.5
|
|
|
|
|
|
|
Impairment allowances
|
|
|
|
|
Individual
|
20.0
|
-
|
20.0
|
|
Collective
|
34.8
|
0.1
|
34.9
|
|
Total
|
54.8
|
0.1
|
54.9
|
|
|
|
|
|
No loans which would otherwise be presented as past due nor impaired are excluded from those amounts presented above as a result of renegotiation.
In respect of loans and advances to customers, the Group holds collateral in the form of mortgages over residential properties. The fair value of this collateral was as follows:
|
At
|
30 June
2008
|
30 June
2007
|
31 December
2007
|
|
£m
|
|
|
|
|
|
|
|
|
|
Neither past due nor impaired
|
64,906.3
|
62,454.3
|
70,423.3
|
|
Past due but not impaired
|
3,593.3
|
2,785.1
|
3,278.5
|
|
Individually impaired
|
322.9
|
150.7
|
195.1
|
|
|
68,822.5
|
65,390.1
|
73,896.9
|
If the collateral amount on each individual loan were capped at the amount of the balance outstanding, and any surplus of collateral values over balances outstanding ignored, the fair value of collateral held would be as follows:
|
At
|
30 June
2008
|
30 June
2007
|
31 December
2007
|
|
£m
|
|
|
|
|
|
|
|
|
|
Neither past due nor impaired
|
38,538.6
|
32,953.7
|
37,212.7
|
|
Past due but not impaired
|
2,553.5
|
1,749.3
|
2,107.8
|
|
Individually impaired
|
264.1
|
111.4
|
146.5
|
|
|
41,356.2
|
34,814.4
|
39,467.0
|
|
|
|
|
|
|
The individually impaired balances above include the following carrying amount of assets in possession, capped at the balance outstanding
|
111.1
|
72.4
|
88.1
|
Despite two 25bps base rate decreases since December 2007, taking base rates to 5.00%, arrears levels have continued to increase, as predicted. The total number of cases three months or more in arrears or in possession has increased to 9,571 (31 December 2007: 6,170) amounting to 2.48% (31 December 2007: 1.63%) of the total book.
13. Average loan to value ratios
|
|
6 months to
30 June
2008
|
6 months to
30 June
2007
|
12 months to
31 December
2007
|
|
Residential new lending LTV (%)
|
77
|
74
|
74
|
|
At
|
30 June
2008
|
30 June
2007
|
31 December
2007
|
|
Indexed average loan to value (LTV)
|
%
|
%
|
%
|
|
|
|
|
|
|
Neither past due nor impaired
|
59.4
|
54.1
|
52.8
|
|
Past due but not impaired
|
71.1
|
62.8
|
64.3
|
|
Individually impaired
|
85.9
|
78.3
|
79.6
|
|
Total book
|
60.0
|
54.5
|
55.3
|
14. Secured funding
|
At 30 June 2008
|
Date of
Transaction
|
Securitised
assets
|
Secured
funding
|
|
£m
|
|
|
|
|
Securitisations
|
|
|
|
|
Aire Valley Finance (No.2) plc
|
October 2000
|
309.0
|
286.8
|
|
Aire Valley Mortgages 2004-1 plc
|
October 2004
|
638.3
|
638.3
|
|
Aire Valley Mortgages 2005-1 plc
|
April 2005
|
499.0
|
499.0
|
|
Aire Valley Mortgages 2006-1 plc
|
August 2006
|
2,430.1
|
2,430.1
|
|
Aire Valley Warehousing 3 Ltd
|
December 2006
|
1,000.0
|
1,000.0
|
|
Aire Valley Mortgages 2007-1 plc
|
May 2007
|
2,495.1
|
2,495.1
|
|
Aire Valley Mortgages 2007-2 plc
|
November 2007
|
1,156.3
|
1,156.3
|
|
Bradford & Bingley Warehousing No.1 LLP
|
June 2008
|
1,826.0
|
1,000.0
|
|
|
|
10,353.8
|
9,505.6
|
|
Covered Bonds
|
|
|
|
|
Bradford & Bingley Covered Bonds LLP
|
May 2004
|
2,247.1
|
1,342.0
|
|
Bradford & Bingley Covered Bonds LLP
|
May 2006
|
3,421.5
|
2,043.4
|
|
Bradford & Bingley Covered Bonds LLP
|
June 2006
|
383.9
|
229.3
|
|
Bradford & Bingley Covered Bonds LLP
|
October 2006
|
565.6
|
337.8
|
|
Bradford & Bingley Covered Bonds LLP
|
June 2007
|
2,473.1
|
1,477.0
|
|
Bradford & Bingley Covered Bonds LLP
|
July 2007
|
246.0
|
146.9
|
|
Bradford & Bingley Covered Bonds LLP
|
September 2007
|
837.1
|
500.0
|
|
Bradford & Bingley Covered Bonds LLP
|
October 2007
|
702.8
|
419.7
|
|
Bradford & Bingley Covered Bonds LLP
|
January 2008
|
837.2
|
500.0
|
|
|
|
11,714.3
|
6,996.1
|
|
Total
|
|
22,068.1
|
16,501.7
|
In June 2008 Bradford & Bingley Warehousing No.1 LLP agreed a loan facility with Barclays Bank PLC of £1,000.0m with maturity in April 2012.
The Covered Bond programme issued further loan notes during the period.
In January 2008: GBP 500.0m with bullet maturity in Oct 2012.
In May 2008: EUR 55.0m of the May 2006 issue, CHF 14.9m of the June 2006 issue, CHF 128.3m of the October 2006 issue, EUR 311.4m of the June 2007 issue and CHF 79.8m of the July 2007 issue were repurchased and cancelled.
All of the Group's Special Purpose Vehicle entities are fully consolidated line by line into the Group's Income Statement and Balance Sheet.
There were net redemptions of £1,617.5m of other debt securities during the period.
14. Secured funding (continued)
|
At 30 June 2007
|
Date of
Transaction
|
Securitised
assets
|
Secured
funding
|
|
£m
|
|
|
|
|
Securitisations
|
|
|
|
|
Aire Valley Finance (No.2) plc
|
October 2000
|
396.4
|
393.9
|
|
Aire Valley Mortgages 2004-1 plc
|
October 2004
|
1,275.0
|
1,275.0
|
|
Aire Valley Mortgages 2005-1 plc
|
April 2005
|
998.5
|
998.5
|
|
Aire Valley Mortgages 2006-1 plc
|
August 2006
|
2,430.1
|
2,430.1
|
|
Aire Valley Warehousing 3 Ltd
|
December 2006
|
1,000.0
|
1,000.0
|
|
Aire Valley Mortgages 2007-1 plc
|
May 2007
|
2,495.1
|
2,495.1
|
|
|
|
8,595.1
|
8,592.6
|
|
Covered Bonds
|
|
|
|
|
Bradford & Bingley Covered Bonds LLP
|
May 2004
|
2,173.6
|
1,342.0
|
|
Bradford & Bingley Covered Bonds LLP
|
May 2006
|
3,372.4
|
2,082.1
|
|
Bradford & Bingley Covered Bonds LLP
|
June 2006
|
393.1
|
242.7
|
|
Bradford & Bingley Covered Bonds LLP
|
October 2006
|
686.1
|
423.5
|
|
Bradford & Bingley Covered Bonds LLP
|
June 2007
|
2,732.2
|
1,686.9
|
|
|
|
9,357.4
|
5,777.2
|
|
Total
|
|
17,952.5
|
14,369.8
|
|
At 31 December 2007
|
Date of
Transaction
|
Securitised
assets
|
Secured
funding
|
|
£m
|
|
|
|
|
Securitisations
|
|
|
|
|
Aire Valley Finance (No.2) plc
|
October 2000
|
356.4
|
333.6
|
|
Aire Valley Mortgages 2004-1 plc
|
October 2004
|
775.0
|
775.0
|
|
Aire Valley Mortgages 2005-1 plc
|
April 2005
|
782.3
|
782.3
|
|
Aire Valley Mortgages 2006-1 plc
|
August 2006
|
2,430.1
|
2,430.1
|
|
Aire Valley Warehousing 3 Ltd
|
December 2006
|
1,000.0
|
1,000.0
|
|
Aire Valley Mortgages 2007-1 plc
|
May 2007
|
2,495.1
|
2,495.1
|
|
Aire Valley Mortgages 2007-2 plc
|
November 2007
|
1,156.3
|
1,156.3
|
|
|
|
8,995.2
|
8,972.4
|
|
Covered Bonds
|
|
|
|
|
Bradford & Bingley Covered Bonds LLP
|
May 2004
|
2,129.2
|
1,342.0
|
|
Bradford & Bingley Covered Bonds LLP
|
May 2006
|
3,303.5
|
2,082.1
|
|
Bradford & Bingley Covered Bonds LLP
|
June 2006
|
374.5
|
236.0
|
|
Bradford & Bingley Covered Bonds LLP
|
October 2006
|
621.6
|
391.8
|
|
Bradford & Bingley Covered Bonds LLP
|
June 2007
|
2,676.5
|
1,686.9
|
|
Bradford & Bingley Covered Bonds LLP
|
July 2007
|
285.1
|
179.7
|
|
Bradford & Bingley Covered Bonds LLP
|
September 2007
|
793.4
|
500.0
|
|
Bradford & Bingley Covered Bonds LLP
|
October 2007
|
665.9
|
419.7
|
|
|
|
10,849.7
|
6,838.2
|
|
Total
|
|
19,844.9
|
15,810.6
|
15. Reconciliation of changes in equity
|
6 months to 30 June 2008
|
Share capital
|
Share premium reserve
|
Capital redemption reserve
|
Available-for-sale reserve
|
Cash flow hedge reserve
|
Retained earnings
|
Attributable
to equity
holders
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2008
|
154.4
|
4.9
|
29.2
|
(61.9)
|
(60.4)
|
1,144.6
|
1,210.8
|
|
Net change in available-for-sale instruments
|
-
|
-
|
-
|
(80.7)
|
-
|
-
|
(80.7)
|
|
Net change in cash flow hedges
|
-
|
-
|
-
|
-
|
113.3
|
-
|
113.3
|
|
Actuarial gains on post-retirement benefit obligations
|
-
|
-
|
-
|
-
|
-
|
3.3
|
3.3
|
|
Net (losses)/gains not recognised in the Income Statement
|
-
|
-
|
-
|
(80.7)
|
113.3
|
3.3
|
35.9
|
|
Loss for the financial period
|
-
|
-
|
-
|
-
|
-
|
(17.2)
|
(17.2)
|
|
Total recognised income
|
-
|
-
|
-
|
(80.7)
|
113.3
|
(13.9)
|
18.7
|
|
Dividends
|
-
|
-
|
-
|
-
|
-
|
(87.9)
|
(87.9)
|
|
Use of own shares on exercise of employee options and for other employee share plans
|
-
|
-
|
-
|
-
|
-
|
2.7
|
2.7
|
|
Fair value of share options taken to share option reserve
|
-
|
-
|
-
|
-
|
-
|
2.8
|
2.8
|
|
Deficit on share option exercises
|
-
|
-
|
-
|
-
|
-
|
(2.7)
|
(2.7)
|
|
At 30 June 2008
|
154.4
|
4.9
|
29.2
|
(142.6)
|
52.9
|
1,045.6
|
1,144.4
|
|
6 months to 30 June 2007
|
Share capital
|
Share premium reserve
|
Capital redemption reserve
|
Available-for-sale reserve
|
Cash flow hedge reserve
|
Retained earnings
|
Attributable
to equity
holders
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2007
|
158.6
|
4.9
|
25.0
|
(1.5)
|
20.6
|
1,212.3
|
1,419.9
|
|
Net change in available-for-sale instruments
|
-
|
-
|
-
|
(3.6)
|
-
|
-
|
(3.6)
|
|
Net change in cash flow hedges
|
-
|
-
|
-
|
-
|
76.4
|
-
|
76.4
|
|
Actuarial gains on post-retirement benefit obligations
|
-
|
-
|
-
|
-
|
-
|
48.8
|
48.8
|
|
Net (losses)/gains not recognised in the Income Statement
|
-
|
-
|
-
|
(3.6)
|
76.4
|
48.8
|
121.6
|
|
Profit for the financial period
|
-
|
-
|
-
|
-
|
-
|
129.0
|
129.0
|
|
Total recognised income
|
-
|
-
|
-
|
(3.6)
|
76.4
|
177.8
|
250.6
|
|
Dividends
|
-
|
-
|
-
|
-
|
-
|
(84.7)
|
(84.7)
|
|
Use of own shares on exercise of employee options and for other employee share plans
|
-
|
-
|
-
|
-
|
-
|
4.8
|
4.8
|
|
Fair value of share options taken to share option reserve
|
-
|
-
|
-
|
-
|
-
|
2.6
|
2.6
|
|
Deficit on share option exercises
|
-
|
-
|
-
|
-
|
-
|
(4.1)
|
(4.1)
|
|
Purchase and cancellation of own shares
|
-
|
-
|
-
|
-
|
-
|
(18.7)
|
(18.7)
|
|
At 30 June 2007
|
158.6
|
4.9
|
25.0
|
(5.1)
|
97.0
|
1,290.0
|
1,570.4
|
15. Reconciliation of changes in equity (continued)
|
12 months to 31 December 2007
|
Share capital
|
Share premium reserve
|
Capital redemption reserve
|
Available-for-sale reserve
|
Cash flow hedge reserve
|
Retained earnings
|
Attributable
to equity
holders
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2007
|
158.6
|
4.9
|
25.0
|
(1.5)
|
20.6
|
1,212.3
|
1,419.9
|
|
Net change in available-for-sale instruments
|
-
|
-
|
-
|
(60.4)
|
-
|
-
|
(60.4)
|
|
Net change in cash flow hedges
|
-
|
-
|
-
|
-
|
(81.0)
|
-
|
(81.0)
|
|
Actuarial gains on post-retirement benefit obligations
|
-
|
-
|
-
|
-
|
-
|
37.9
|
37.9
|
|
Net (losses)/gains not recognised in the Income Statement
|
-
|
-
|
-
|
(60.4)
|
(81.0)
|
37.9
|
(103.5)
|
|
Profit for the financial year
|
-
|
-
|
-
|
-
|
-
|
93.2
|
93.2
|
|
Total recognised income
|
-
|
-
|
-
|
(60.4)
|
(81.0)
|
131.1
|
(10.3)
|
|
Dividends
|
-
|
-
|
-
|
-
|
-
|
(126.5)
|
(126.5)
|
|
Use of own shares on exercise of employee options and for other employee share plans
|
-
|
-
|
-
|
-
|
-
|
5.2
|
5.2
|
|
Fair value of share options taken to share option reserve
|
-
|
-
|
-
|
-
|
-
|
4.6
|
4.6
|
|
Deficit on share option exercises
|
-
|
-
|
-
|
-
|
-
|
(4.8)
|
(4.8)
|
|
Purchase of own shares held to satisfy employee share plans
|
-
|
-
|
-
|
-
|
-
|
(18.7)
|
(18.7)
|
|
Purchase and cancellation of own shares
|
(4.2)
|
-
|
4.2
|
-
|
-
|
(58.6)
|
(58.6)
|
|
At 31 December 2007
|
154.4
|
4.9
|
29.2
|
(61.9)
|
(60.4)
|
1,144.6
|
1,210.8
|
16. Capital structure
|
At
|
30 June
2008
|
|
30 June
2007
|
|
31 December
2007
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1
|
|
|
|
|
|
|
Share capital and reserves
|
1,144.4
|
|
1,570.4
|
|
1,210.8
|
|
Adjustments
|
49.1
|
|
(140.2)
|
|
81.3
|
|
Net pension deficit
|
(10.0)
|
|
(17.1)
|
|
(4.0)
|
|
Innovative tier 1
|
148.9
|
|
148.9
|
|
148.8
|
|
Total tier 1 capital
|
1,332.4
|
|
1,562.0
|
|
1,436.9
|
|
|
|
|
|
|
|
|
Upper tier 2 capital
|
584.3
|
|
579.3
|
|
580.1
|
|
Lower tier 2 capital
|
622.2
|
|
647.1
|
|
647.0
|
|
Total tier 2 capital
|
1,206.5
|
|
1,226.4
|
|
1,227.1
|
|
|
|
|
|
|
|
|
Deductions
|
(85.5)
|
|
(75.4)
|
|
(146.7)
|
|
Total capital
|
2,453.4
|
|
2,713.0
|
|
2,517.3
|
|
|
|
|
|
|
|
|
Tier 1 ratio (%)
|
7.6
|
|
8.5
|
|
8.6
|
|
Total capital ratio (%)
|
14.0
|
|
14.7
|
|
15.1
|
Innovative tier 1 and tier 2 subordinated liabilities exclude any adjustments arising from the hedging of these instruments that are included in the Balance Sheet. Risk weighted assets are calculated according to the credit risk element of Pillar I of the Basel II Standardised approach.
17. Staff numbers
|
|
6 months to
30 June
2008
|
|
6 months to
30 June
2007
|
|
12 months to
31 December
2007
|
|
Period end total headcount
|
3,091
|
|
3,129
|
|
3,228
|
|
|
|
|
|
|
|
|
Average headcount
|
|
|
|
|
|
|
Full time
|
2,483
|
|
2,478
|
|
2,451
|
|
Part time
|
700
|
|
698
|
|
691
|
|
|
|
|
|
|
|
|
Average full time equivalent
|
2,874
|
|
2,883
|
|
2,862
|
18. Events after the Balance Sheet date
At the Extraordinary General Meeting held on 17 July 2008 the shareholders approved the rights issue which the Directors had proposed. The shareholders were given the right to acquire 67 new ordinary shares for every 50 held, at price of 55 pence per share. The new shares were admitted to trading, nil paid, on 18 July. The rights issue raised approximately £400m net of expenses.
The Directors have proposed that a 2008 interim dividend be paid in shares as a scrip issue, as detailed in note 8.
19. Related party disclosures
Transactions during the period with the Group's key management personnel and other related parties were similar in nature to those during the year ended 31 December 2007.
20. Estimates
The preparation of the Group's Interim Financial Report requires estimates, assumptions and judgements to be made which affect the reported results and balances. Actual outcomes may differ from these estimates with a consequent impact on the results of future periods. In the main, the significant estimates, assumptions and judgements made in preparing the Group's Interim Financial Report were the same as those applied in the preparation of the Group's consolidated financial statements for the year ended 31 December 2007. The actuarial assumptions used in calculating the value of post-retirement benefit assets and obligations have been updated in line with the advice of qualified actuaries; the discount rate applied at 30 June 2008 was 6.7%, future pension increases assumed to be 3.9% and rate of salary increase assumed to be 5.9%. The value of all debt securities carried at 30 June 2008 was derived from market prices; no internal valuation models were used. Assumptions used in calculating provisions for loan impairment have been updated to reflect market conditons, including in respect of house price inflation, forced sale discount and probability of borrower default. If average house prices were 10% lower than the values as at 30 June 2008 or if arrears were 50bp higher than as at 30 June 2008 the reported impairment charge would have been increased by around £25m or £20m respectively.
21. Risks and uncertainties
The Directors are aware of the following material risks and uncertainties which may affect the Group during the remainder of 2008. There may be other risks that are not summarised below that the Directors are not aware of or that the Directors do not consider material. The business, financial condition or results of operations of the Group could be adversely affected by any of these risks. Further discussion of the Group's risk management and control were provided on pages 18-21 of the Group's 2007 Annual Report and Accounts.
Risks relating to the Group's business
-
The Group's mortgage loans are secured on properties; mortgage loans at 30 June 2008 totalled £42.2bn. If a borrower fails to make scheduled payments against a mortgage loan, the Group may have to resort to taking the property into possession and selling it. The Group may still make a loss even after selling the property. The risk of defaults by borrowers could increase as a result of a downturn in the general economy, an increase in unemployment, increases in general market interest rates, fixed or discounted mortgage rates coming to an end and many other factors. The risk of the Group making losses on repossessions could increase as a result of falling or static UK house prices or a decrease in the volume of property transactions in the market. At 30 June 2008 the Group held 717 properties in possession with a total value of £122.0m, and during the 6 months to 30 June 2008 the Group recognised a charge of £74.6m in respect of estimated losses during the period on mortgage loans. There is also the risk that there may be increases in general incidents of financial crime, or specifically targeted incidents of crime against the Group, including valuer and solicitor fraud in new mortgage lending.
-
The Group charges interest on its mortgage loans and pays interest and dividends on the capital and other funding which it uses in its business. Changes in market interest rates, or competition in the market, may adversely affect the interest rates which the Group is able to charge and also affect the cost of the Group's funding, and hence affect the Group's net income and profitability. During the 6 months to 30 June 2008 the Group made an average of 0.98% margin between interest earned and interest paid.
-
The Group carries investments in the Balance Sheet at their fair value. The carrying values of the investments and the Group's reported profits could be affected by changes in values of investments, and during the 6 months to 30 June 2008 the Group recognised a charge of £64.8m in respect of estimated impairment of investments.
-
The Group is subject to regulatory supervision, company and banking legislation, tax legislation and interpretation, and other regulations. Changes in any of these could result in changes to the Group's operations, the costs it faces, the products and services it offers, or the value of its assets. There is also the risk that the Group may fail to comply with legislative or regulatory requirements, or could be the subject of legal action by customers, suppliers or other parties, which could cause the Group to incur costs and reputational damage.
-
Damage to the Group's reputation could reduce demand for the Group's lending and savings products. The Group's reputation could be damaged by adverse publicity regarding the Group's liquidity, customer service standards or other factors. The Group's customer satisfaction score for 2007 was 93%, as measured by surveys and other methods.
-
The Group's business operations rely on many internal factors including the ability to implement and maintain effective systems to process the large number of transactions it enters into with customers, the accuracy and completeness of information about customers and counterparties, maintaining agreements with third parties for services provided and recruiting, and retaining and developing appropriate senior management and skilled personnel. Weaknesses in these personnel, services, systems and information could prevent the Group from operating its business effectively and efficiently, reducing profitability or in extreme cases preventing the Group from functioning.
-
Failures in the banking system, including failures of other banks or of IT infrastructures, could adversely affect the whole banking sector, impacting the Group's ability to carry on its business.
Funding and liquidity risks
-
Funding risk is the risk that the Group may not have sufficient funding to continue or to grow its business. Lack of sufficient funding could arise if net cash inflows from retail deposits or wholesale funding markets were less than anticipated, or redemptions of mortgages were slower than anticipated; any of these could leave the Group with insufficient funding to support the desired level of mortgage lending. The level of retail deposits flows is dependent on interest rates offered and customer sentiment. Wholesale funding could become less accessible due to market conditions or to changes in the Group's credit ratings, amongst other factors. As with all mortgage lenders, the majority of the Group's mortgage loans are long term, and although a large proportion of borrowers tend to repay their loans before the contractual maturity date they are not obliged to do so; loans may have contractual lives of as long as 25 years. At 30 June 2008 the Group had retail deposits of £22.2bn and wholesale funding of £26.6bn.
-
Liquidity risk is the risk that the Group may need to make payments out but is unable to access sufficient cash at the right time to do so. To mitigate liquidity risk the Group has a policy of carrying high quality investments which are readily convertible into cash, at a level sufficient to cover several months' cash requirements during a period of severe stress.
-
Responsibility Statement of the Directors in Respect of the Interim Financial Report
We confirm that to the best of our knowledge:
the interim financial report includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of Financial Statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last Annual Report that could do so.
The Directors who served during the 6 months to 30 June 2008 were as follows:
Rod Kent
Steven Crawshaw (resigned from the Board 31 May 2008)
Nicholas Cosh
Stephen Webster
Ian Cheshire
Robert Dickie (resigned 21 April 2008)
Louise Patten
Chris Willford
Roger Hattam
Mark Stevens
Michael Buckley
Signed on behalf of the Directors by
Rod Kent
Chairman
Chris Willford
Group Finance Director
28 August 2008
Shareholder Information
Shareholders' interests in shares at 30 June 2008*
|
Size of holding
|
Number of shareholders
|
%
|
Number of
shares
|
%
|
|
|
|
|
|
|
|
1 - 250
|
831,084
|
88.99
|
205,875,256
|
33.33
|
|
251 - 500
|
78,117
|
8.36
|
31,322,880
|
5.07
|
|
501 - 1,000
|
13,993
|
1.50
|
10,243,613
|
1.66
|
|
1,001 - 5,000
|
9,023
|
0.97
|
18,778,954
|
3.04
|
|
5,001 - 10,000
|
823
|
0.10
|
6,007,635
|
0.97
|
|
10,001 - 100,000
|
596
|
0.06
|
16,734,541
|
2.71
|
|
100,001 - 200,000
|
71
|
0.01
|
10,069,366
|
1.63
|
|
200,001 - 500,000
|
70
|
0.01
|
23,579,466
|
3.82
|
|
500,001 - 1,000,000
|
42
|
0.00
|
28,959,415
|
4.69
|
|
1,000,001 - 5,000,000
|
41
|
0.00
|
85,635,226
|
13.86
|
|
5,000,001 and over
|
22
|
0.00
|
180,468,182
|
29.22
|
|
Total
|
933,882
|
100
|
617,674,534
|
100
|
*The interests above include holdings in the Bradford & Bingley Nominee Account, certificated and uncertificated holdings.
At the close of business on 30 June 2008 the share price of Bradford & Bingley plc was 64.50p and the market capitalisation was £0.4bn.
A presentation of the Bradford & Bingley's 2008 Interim Results for investors and analysts will be given at 0930 hours on 29 August which will be broadcast live via the following web address:
www.bbg.co.uk
Contacts
This information is provided by RNS
The company news service from the London Stock Exchange
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