Britannia announce strong first half year performance

Britannia Building Society announced a strong performance for the first half of the year as it confirmed the completion of its 150 million takeover of the Bristol & West savings business and branch network.

Operating profit and lending were on plan and arrears remained at low levels. Sales of investments, life insurance and personal loans all increased.

In May, Britannia announced it was to buy the Bristol & West savings business of approximately 4.5bn of retail funding and branch network from Bank of Ireland for 150m. Following approval from the High Court and the Financial Services Authority, the purchase was concluded on September 21 2005.

Bristol & Wests 850,000 savings customers have become members of Britannia in the first re-mutualisation of a former building society.

The acquisition will provide Britannia with a platform for further growth. Bristol & Wests branch network complements Britannias network and the increased customer base provides increased opportunities to offer a full range of products, using Britannias well developed customer relationship approach.

The Society has moved into 65 towns and neighbourhoods where it was not previously present, with Bristol & Wests focus on the South and West complementing Britannias strong North West, Midlands, London and East Anglian profile. This will offer new business opportunities, as well as added convenience for Britannia members. Cost savings will arise through merging branches, more efficient processing, systems integration and economies of scale.

Bristol & Wests customers have become members and co-owners of Britannia. They will be transferred into Britannia accounts over the next few months – many will be better off as a result and Britannia has pledged that none will be worse off. Britannias phased integration of the new business is expected to take about a year.

In order to fund the Bristol and West deal, Britannia has raised 200m of tier one capital through a new issue of Permanent Interest Bearing Shares. Britannia can repay the transaction, which was oversubscribed, in 10 years.

Profit before tax and Britannia Membership Reward was up at 72.6 from 69m on June 30 2004. As a mutual society, Britannia aims to make only the profit necessary to maintain financial strength and it continued its policy of passing on to members the benefits of operational efficiency and mutual status through competitive pricing. This result reflected an improved performance in both the Member Business and BCIG.

The Group anticipated and planned for the downturn in the housing market and lending targets were set accordingly. Mortgage completions were on target at more than 2bn and reasonably buoyant application levels mean the Group expects to exceed the full year plan.

Quality of lending remained high. Just 3.3% of Group residential lending for the half year was at more than 90% LTV with the average mortgage LTV at 56.6%.

95.2% of lending is at multiples of 3.5 times salary or less, reducing the risk of losses. Britannias continued focus on quality lending meant that arrears over 12 months remained negligible, less than 1m.

The new deal with AXA Sun Life to provide life, pension, protection and investment products through the Britannia branch network has begun very well, with significant sales increases across the range.
A continued strong focus on cost control saw the cost asset ratio fall from 0.83% to 0.75%. This was achieved alongside extra investment in people and systems to support increased business at Platform and WMS.

Customer satisfaction scores increased compared to the same period last year, and independent research confirms levels of employee satisfaction at Britannia are among the best in the industry.

Neville Richardson, Britannia group chief executive, says: “These strong results show we continue to compete effectively in our target markets and are delivering consistently good performance for our members.

“Weve avoided high-risk lending, which could have caused problems in the current subdued market, while maintaining healthy profit levels and investing in service. Keeping margins low and products competitively priced shows that our unique mutual model is working for our members.

“The Bristol & West deal is great news for our members and great news for Bristol & Wests customers. Strategic deals like this do not come along very often and it will significantly increase the size and scope of Britannias business, delivering significant additional opportunities for growth.

“This is the first re-mutualisation. As a result Bristol & Wests customers will enjoy all the benefits of owning their savings provider including a commitment to keeping an extensive branch network, competitive rates, a one-member, one-vote constitution and eligibility for an annual share of profits in due course through our Britannia Membership Reward.”