West Brom Building Society
Annual Report and Accounts
For the year ended 31 March 2025
For life
in the
making
Strategic report
Governance
Financial statements
Risk management
Glossary
Contents
Our highlights
4
Strategic report
6
Chair’s review
7
CEO’s review
8
Who we are, our vision and values
10
Business model
11
Our strategy
12
Financial review of the year
24
Risk management
30
Risk management report
31
Climate-related Financial Disclosures
41
Governance
50
Corporate Governance report
51
Nominations Committee report
64
Audit Committee report
65
Remuneration Committee report
68
Directors’ report
77
Financial statements
82
Independent Auditors' report
83
Income Statements
93
Statements of Comprehensive Income
94
Statements of Financial Position
95
Statements of Changes in Members’
Interests and Equity
96
Statements of Cash Flows
98
Notes to the Accounts
100
Country-by-Country Reporting
156
Annual Business Statement
160
Glossary
163
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We achieved a record level of lending for homeownership,
up 19% over last year, meaning we’ve helped more people
buy their own home.
Our savers earned a total of £41.8m
more interest than if they’d received
the market average² savings rate
(2023/24: £38.6m). We welcomed
over 13,500 new savers (2023/24:
over 10,000), an increase
of more than one third.
Our
highlights
Profit before tax
£41.8m of benefits
to savings
customers
Record new
mortgage
lending
Award
winning
Profit before tax grew by 14% to
£36.5m, supporting our financial
strength with a Common Equity
Tier 1 (CET 1) capital ratio of 17.1%
(2023/24: 17.8%). On an underlying
basis, profit was broadly flat at
£36.5m (2023/24: £37.2m). This
capital strength is important because
it lets us support more people to buy
their own homes and means we can
continue to invest to deliver what
customers need for the future.
of the 2024/25
financial year include:
2023//24
2023/24
2024/25
2024/25
£36.5m
£32.1m
£1.1bn
£1.3bn
We were recognised for giving outstanding support
to first-time buyers with the First-Time Mortgage
Buyers’ Choice award for the second year in a row, and
highly commended as ISA Provider of the Year at the
Moneyfactscompare.co.uk awards 2025.
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We’re committed to delivering outstanding customer
experience. Our Net Promoter Score (NPS) increased
to +76 (2023/24: +75), and we were awarded the
Feefo Gold Trusted Service Award 2025.
1
Based on the average loan balance for a Society SVR borrower at 31 March
2025. Average market reversion rate of 7.68% sourced from Moneyfacts March
2025. Average Society rate based on SVR borrowers as at 31 March 2025.
2
Average market rates sourced from Bank of England Bankstats table A6.1
March 2025.
We helped 6,267 first-time buyers buy their own
home, that’s 34% more than last year.
An
outstanding
customer
experience
in savings
balances
Over
A hat-trick of
accreditations
from the Living
Wage Foundation
£5
billion
6,200
Our savers’ balances grew to
£5.1bn (2023/24: £4.7bn), a 9%
uplift on last year.
We became the first building society in the UK, and first
employer in the West Midlands, to be awarded all three
accreditations from the Living Wage Foundation, and were
officially recognised for providing fair pay, secure hours, and
a strong pension plan for our colleagues.
people buy their
first home
Helped
more than
Supporting our
community
We contributed nearly £50,000 (2023/24:£48,000)
to support local charities and communities, with
over 1,800 hours (2023/24: over 700 hours)
volunteered on community projects.
£1,300
Our market-first approach to Standard Variable Rate (SVR)
means existing mortgage customers who have a higher
amount of equity in their homes can have a reduced rate at
the end of their mortgage deal. On average, therefore, an SVR
mortgage customer at the West Brom would save around
£1,300 a year compared with an average market SVR
1
.
Borrowers
saved around
a year
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Recent global events have reminded us how
economies and supply chains can be adversely
impacted by situations that are remote
geographically and not within our control. Whilst the
UK economy, including the lives and prospects of
our customers, is not immune to these events, we’re
confident that with our financial and operational
strength, we’ll be there to continue to support them.
Against this backdrop, our Purpose, to support the
financial wellbeing of our customers by providing
a safe and good return on the savings they entrust
with us, and promote homeownership, has never felt
more relevant. I’m proud to say that your Society
has continued to deliver on that Purpose, achieving
a record year for homeownership lending, and with
a particular focus on helping first-time buyers and
those who need the most support. It’s a strong
reminder that mutual organisations like ours have a
vital role to play in today’s housing market.
There’s been some changes to our Board during the
year. Anne Gunther and David Dyer, stepped down
in July 2024, and I want to thank them both for
the knowledge, experience and commitment they
brought to their roles.
Shortly after the financial year end there were some
further changes. Julie Hopes and Russell Galley
stepped down from the Board, and Lynne Shamwana
will be stepping down after our AGM in July. Julie
and Lynne have served on the Board for nine and
six years respectively, and I thank them both for
their considerable contribution and commitment
throughout. Russell had only been with us a
relatively short period and resigned due to personal
circumstances. Although his tenure was brief, Russell
made a valued contribution to the Board. We’re sorry
to see him step down but fully respect his decision
and wish him and his family all the best for the future.
Lynne Atkin has joined the Board and will be
appointed Chair of the Remuneration Committee,
once the relevant regulatory approvals are in place.
Lynne brings with her extensive experience in senior
leadership roles across the financial services sector,
having previously served as Human Resources
Director at Barclays Bank UK. She is currently a
Trustee of Action for Children.
As we enter the new financial year from a position
of significant financial strength, we’re well placed to
build on the positive momentum of recent years. We
expect the mortgage and savings markets to remain
highly competitive, but we’re confident in our ability
to grow sustainably while continuing to deliver a high
level of service to customers.
Our strategy reflects this confidence, with continued
investment in our people, processes and technology.
As we progress our digital transformation, we remain
focused firmly on securing the long-term success
of our Society and ensuring we meet the changing
needs of customers – not just today, but for many
years to come.
Looking ahead, the economic landscape may remain
uncertain, but our direction of travel is clear. We’ll
continue to put customers first, offer straightforward,
good-value products, and play a part in making
homeownership more accessible.
On behalf of my Board colleagues, I’d like to thank our
members for their continued trust, and colleagues for
their dedication, care and professionalism throughout
the year.
John Maltby
Chair
28 May 2025
Fellow members, the past year
has brought some welcome
signs of relief for households,
with inflation easing and interest
rates expected to fall further.
But for many, uncertainty
remains a fact of life.
Chair’s review
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we’re proud to have continued to offer so many a
route into buying their first home, whilst delivering
great value to those who’ve entrusted their
savings with us and funded those homeownership
aspirations.
We’ve seen the government commit to a strong
housing agenda, with the headline being a national
target to build 1.5 million homes over the next five
years, and an additional investment of £2bn into
social and affordable housing. Whilst the detail of
how this will be delivered has yet to emerge fully,
it’s a welcome intent and will, if delivered, help
alleviate some of the supply side of the housing
challenge. Yet for many, affordability remains a
barrier to buying a home, and it’s here that our
Purpose has most impact through supporting
potential homeowners to overcome this hurdle.
Honouring a 250-year legacy
This year also marks 250 years since the first
building society was founded at the Golden Cross
Inn in Birmingham, during the early years of the
industrial revolution. It serves as a reminder not only
of the strength of our heritage, but of the enduring
value of mutuality. At West Brom Building Society
we’re continuing that legacy, our focus remains
firmly on supporting customers, and we’ve seen
that commitment reflected in our results.
Delivering a strong performance
We achieved record lending of £1.3bn for
homeownership this year, resulting in a 38%
increase in net lending for homeownership to
£757m, which was supported by a £401m increase
in customers’ savings balances. This has helped
deliver a profit before tax of £36.5m, an increase of
Navigating the changing economic
landscape
Most of the year has continued to benefit from a
more moderate economic backdrop than in previous
years, with inflation easing and interest rates
falling. However, the fragility of the economy was
highlighted by the impact of wider global issues that
we’ve recently witnessed.
Throughout the West Brom’s 176-year history, we’ve
remained aware of our role in supporting customers
in navigating such changing conditions. That’s why
CEO’s review
14% from the previous year, providing the ongoing
capital strength that supports the delivery of our
Purpose and the underpinning investment that
keeps us as relevant today as we have been through
176 years of change.
We helped 6,267 first-time buyers purchase their
own home, that’s 34% more than last year. Through
our shared ownership proposition, we attracted
2,654 customers, who whilst not ready to buy their
home outright, have bought a share of their home.
This approach to buying a first home has become a
welcome option for many, as shown by our lending
via this route increasing by 29% year on year. We
continue to provide a wider range of options for
first-time buyers, such as the recently introduced
low-deposit new build mortgage.
We’re proud to offer so
many a route into buying
their first home, whilst
delivering great value to
those who’ve entrusted
their savings with us.
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To support our colleagues, we gained the
Living Wage Foundation’s triple accreditation,
with the Living Pension accreditation being
the third standard we added to our offering as
an employer. This means colleagues benefit
from the Real Living Wage, Living Pension and
Living Hours standards, which made us the first
building society in the country, and the first
employer in the West Midlands, to gain all three
standards.
Moving forward
Looking ahead we’ll face continued challenges,
from competitive pressures in the mortgage
market, to uncertainty around potentially
damaging ISA reforms, and the wider economic
environment which may be impacted by the
recent world trade situation. In addition, we also
face cost challenges, not least the significant
cost of the recent changes to employer’s national
insurance rates. While these may affect some
aspects of our performance going forward, we
remain determined to deliver on the needs of our
customers.
Our strategy will remain focused on delivering
on our Purpose, which is to support the financial
wellbeing of our customers by providing a safe
and good return on the savings they entrust with
us, and promote homeownership.
I want to thank all our colleagues, in every part of
the business, as well as our Member and Employee
Councils, for their hard work and dedication and,
especially our members for their continued support.
Jonathan Westhoff
Chief Executive Officer
28 May 2025
Putting customers first
Our determination to offer this focus on
homeownership and provide an excellent service to
customers and our mortgage broker relationships
hasn’t gone unnoticed. We were delighted to receive
a Moneyfacts award recognising our support for
first-time buyers for a second year running. We also
received a Gold Trusted Service Award from Feefo
which, along with a customer rating of 4.7 out of 5,
shows we set high standards for ourselves. We were
also recognised by the Good Business Charter for
dedication to customer commitment.
We continued to deliver great value for savers. With
our savings rates on average, 0.86% above the market
average
2
, customers received £41.8m more in interest
than they would have on average rates elsewhere.
That’s a real and meaningful difference at a time
when every pound matters. This year over 13,500 new
savers joined our Society, a 34% increase on last year.
Strengthening communities
We remain committed to our branches across the
region and the crucial role they play in supporting our
customers and their local communities.
We continued working in our communities to have a
positive impact contributing nearly £50,000 through
fundraising, grants and donations across 80 local
charities and communities. With over 1,800 hours
volunteered on various community projects, we also
delivered financial education sessions to over 2,000
children and young adults . Our partnership with
Birmingham based charity Jericho is helping support
employment opportunities, and we look forward to
continuing to work with them throughout this year.
2
Average market rates sourced from Bank of England Bankstats table A6.1 March 2025.
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Our new vision is that our
customers and communities own
a more secure future.
Our new vision sums up what we’re all working
towards: a more secure future for everyone. We
believe everyone should have financial security,
whether that’s property or savings.
What we value
Put simply, values are the things we believe in.
Our six values keep us on track and help
us stay true to our roots.
Who we are,
our vision
and values
We know solid futures don’t
happen overnight. We help our
customers build the life they
want - bit by bit.
From owning a home or having savings they can
rely on, we’ve been helping them make it happen
for over 175 years. We’ve navigated our fair share
of rainy days, and we refuse to let setbacks hold
us back. We don’t use a one-size-fits all approach.
Instead, we dig deeper so that we understand what
our customers need from us.
Better together
Working together we
know we can
do anything.
Be passionate
We strive to make
a difference and to
do the best for our
customers.
Be real
We are what you
see, authentic,
transparent and
straightforward to
deal with.
Do it today
We do what we say
we’ll do, proactively,
efficiently, and with
thought to what is
delivered.
Care
We do right by our
stakeholders, whether
customers, colleagues,
suppliers or the wider
community.
Own it
We take responsibility
for delivering to the
highest standards in
all that we do.
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Business
model
As a mutual we’re owned by our
customers not shareholders,
and we call these our members.
This means that we focus on doing what’s best
for members, rather than profits for investors. We
reinvest profits into improving our products and
services and to support our customers, colleagues
and communities. In short, we exist to benefit the
people who use us – just as much today as when we
were founded 176 years ago.
Our Purpose is at the heart of our business model –
to support the financial wellbeing of our customers
by providing a safe and good return on the savings
they entrust with us and promote homeownership.
The money savers deposit with us helps us to lend
money to our mortgage customers so they can
buy a home. In return, the income we get from our
mortgage customers means we can give better
rates and service to savers, as we do not pay
shareholders in the way a PLC bank would.
Our business model is aligned to our Purpose:
Funding
Most of our funding
comes from savers’
deposits.
Lending
We use our funding,
that is mainly our
savers’ deposits, to
help customers into
homeownership.
Income
Most of the income
we make comes from
net interest income.
This is the difference
between the amount of
interest we get from our
mortgage customers, and
the amount of interest
we give to our savings
customers.
Costs
Some of the income
we make is used
to run our Society,
branches and head
office, as well as
paying colleagues
and suppliers.
Profits
Because we’re a
building society
rather than a bank, we
re-invest our profits so
we can support more
people to buy their own
home and to invest in
developing the business
for the future.
We also own a property portfolio of 734 homes. We strive to operate this business to the highest standards as a landlord
and support our tenants into owning their homes. These properties make a profit for the Society from rent and through any
increases in house values. We reach our customers through 34 branches, over the phone with our West Midlands based contact
centre, our network of mortgage brokers, and digitally on our website and online savings portal.
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The five pillars are:
Our strategy
We’re in the first year of delivering our
refreshed strategy, called ‘Making Tomorrow’.
Over the next five years, we’ll develop our business to continue to meet our
customers’ expectations, and to reach more people.
The Making Tomorrow strategy is built on our strengths and is underpinned
by five strategic pillars that guide the activities of our Society.
We’ll help our
customers
achieve a more
secure future
We offer products and
services, underpinned
by a great customer
experience, that helps
customers to achieve
their goals.
We’re customer
centric, and
purpose driven
We’re committed to
doing the right thing for
all our customers. We put
customers’ needs at the
heart of our decision-
making, and our culture
supports our colleagues
to do what’s best for our
customers.
We’ll strengthen
our communities
We support customers
in our region and play
an active role in helping
communities thrive.
We’ll modernise
our digital and
technology estate
We’ll embrace sustainable
and reliable technology
to stay up to date
with the increasingly
digital world and meet
customers’ expectations
to serve them how and
when they want.
We’ll keep our
business secure
and sustainable
for the future
We remain financially
strong and committed to
social and environmental
sustainability.
1
2
4
3
5
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1
We’ll help our
customers achieve a
more secure future
We offer products and services, underpinned
by a great customer experience, that helps customers
to achieve their goals.
Secure futures
Over the past 12 months we welcomed 13,706 new
savers, an increase of 34% compared to last year
(2023/24: 10,250). Our competitive savings rates
helped our customers’ money work harder for them
and were, on average, 0.86% above the market
average
2
. This means that savers received £41.8m
more than if they’d been on average savings rates
(2023/24: £38.6m).
Many new customers this year joined us through a
range of options that gave flexibility and better rates.
Supporting homebuyers
Buying your first home is a dream for many people and
we’re thrilled to have helped 6,267 customers do just
that (2023/24: 4,684). This meant that 48% of our new
lending was to first-time buyers, significantly higher
than the mortgage market average of 35%
4
.
Of our first-time buyers, 35% chose shared
ownership as a route to own their home. We also
introduced a range of low deposit mortgages
designed for customers looking to buy a new build
home.
We continued with our market first approach
to Standard Variable Rate (SVR). This means
customers who have more equity in their homes are
offered a lower rate to switch to at the end of their
mortgage term. By offering this, customers get a
bit of breathing space to find the right mortgage
deal before remortgaging. This means an average
customer on SVR would save approximately £1,300
a year compared with an average market SVR
1
.
In February we were recognised for our outstanding
support of first-time buyers with the First-Time
Mortgage Buyers’ Choice award for the second
year in a row, and highly commended as ISA
Provider of the Year at the Moneyfactscompare.
co.uk awards 2025.
With a great customer experience
We know how important it is to offer customers
the choice of how they want to be served, and we’ll
continue to deliver services online, on the phone
through our West Bromwich based contact centre,
and in our 34 branches. We remain committed to our
branch network and the crucial role they provide for
so many of our customers.
Our commitment to customer satisfaction is
shown in our Net Promoter Score (NPS) which has
increased to +76 (2023/24: +75). NPS helps us
understand how happy our customers are and how
likely they are to recommend us to others; it’s used
by millions of businesses, across all industries, all over
the world.
Hearing directly from customers helps us improve.
We have over 1,500 members on our customer panel
who give us valuable feedback on our products
and services. Their insights have helped us improve
the overall customer experience and make sure we
communicate in a clear and balanced way. We know
financial information can be difficult to understand,
and we’ve continued to simplify our communications
to help customers who find numbers challenging.
Here’s what we’ve achieved so far:
1
Based on the average loan balance for a Society SVR borrower at 31 March 2025. Average market reversion rate of 7.68% sourced from Moneyfacts March 2025. Average Society rate based on SVR borrowers as at 31 March 2025.
2
Average market rates sourced from Bank of England Bankstats table A6.1 March 2025.
4
UK Finance mortgage completion reporting for March tables, S1 final.
4.7
We achieved
out of 5-star
rating on Feefo.
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Refreshing our brand
To enable us to continue to grow and support
more new customers, we have to stay relevant.
In October we updated our brand to be more
contemporary and bring to life the purpose and
values of the Society. The new look celebrates
our West Midlands roots, our values, and our
customers. We were also proud, 176 years on from
when 20 local people set up the ‘West Bromwich
Permanent Building Society’, to bring ‘Building
Society’ back into our name.
We were
awarded the
We’ve helped
first-time buyers buy their
own home, that’s 34% more
than last year.
6,267
Feefo
Gold Trusted
Service Award
Celebrating success
To help our customers make informed choices,
we partnered with Feefo, an independent
online review platform. We’re delighted to
have received the Feefo Gold Trusted Service
Award 2025, in recognition of us consistently
delivering outstanding customer experience. We
also earned a 4.7 out of 5-star rating based on
real customer reviews, highlighting the quality
of our service. You can read more about what
customers are saying about us on our website.
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Performance
Performance
Measure
Delivering our Purpose of home ownership,
this is the value of residential lending
advanced this year.
Measure
Gross residential homeowner lending less
repayments of principal and redemptions.
Gross residential lending, at £1,259m, increased by 18%
compared to last year reflecting our commitment to help more
people to buy their own home.
We're committed to delivering our Purpose which supports
responsible lending and delivers an appropriate level of return
from our diverse product range.
The net lending for homeownership increased by 38% driven
by increased gross lending, particularly in the first-time buyer
market, as well as strong retention of our mortgage book as the
accounts came to the end of their incentive periods.
18%
38%
2025
2024
2023
2022
2021
2025
2024
2023
2022
2021
£1,259m
£757m
£1,066m
£549m
£756m
£116m
£691m
-£117m
£784m
£256m
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We were also recognised by the Good Business
Charter for our dedication to customer
commitment. This recognition highlights our
emphasis on trust, transparency, and fairness
in financial services. We remain committed to
improving financial literacy, supporting vulnerable
customers, and engaging with our community.
Key performance indicators
We monitor performance and goals using key
performance indicators (KPIs). These help us to
keep on track with our strategic ambitions.
Gross residential
lending
Net lending for
homeownership
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Measure
Our average savings rate above the rest of the
market is paid in mutual benefit to our savings
customers.
Measure
A measure of how likely a customer is to
recommend our products and services.
The NPS ranges between -100 and +100.
Savings customers
mutual benefit
Net Promoter Score –
customer satisfaction
Performance
Performance
Over the last five years we’ve continued to increase the benefits
paid to our customers. We paid our customers almost one third
higher than the average rates paid by the market
2
, delivering
£41.8m in mutual benefit to our savings customers.
NPS has remained consistently high.
£41.8m
+76
2025
2024
2023
2022
2021
2025
2024
2023
2022
2021
£41.8m
+76
£38.6m
+75
£9.0m
+81
£33.2m
+74
£5.3m
+76
2
Average market rates sourced from Bank of England Bankstats table A6.1 March 2025.
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We ran financial education
sessions for over
children and young adults.
We've given over
2,000
1,800
volunteering hours.
We awarded over
£20,000
in local grants to 43 different
charities and community groups.
17
2
We’ll strengthen
our communities
We support customers in our region and play an
active role in helping communities thrive.
Our roots run deep in our community – and we’ve
focussed on giving back to the people who live
and work around us.
For many, getting a job is a major step towards
building a secure future. But sometimes, even
that first step can be a struggle. That’s why we’ve
partnered with Jericho, an incredible local charity
that provides work opportunities for people facing
challenges right here on our doorstep. Through this
incredible partnership, we’ve offered opportunities
for work placements, as well as raising over
£12,000 to support the amazing work they do.
Together, we’re helping individuals own a more
secure future.
We continue to support local charities and
community groups through the Mercian
Community Trust grant scheme. Thanks to the
generosity of Community Account holders, we’ve
awarded over £20,000 in grants to 43 different
charities and community groups.
Giving time
Giving time is also important. Each year, we
encourage our colleagues to spend two days
volunteering in the community. In the past 12
months we’ve given more than 1,800 hours
to local charities including Compton Hospice,
Square Peg Activities, Mary Steven’s Hospice,
Light Church Food Bank, Black Country Women’s
Aid, and Deighton Court Care Home.
We’re helping children and young adults feel
more confident about managing their money.
We believe all young people should have access
to financial education and feel empowered to
make informed decisions. Over the past year
we’ve delivered financial workshops to more than
2,000 local students including:
• Money-Go-Round – an interactive session
for primary school children to learn the
basic value of money and a tailored version
for children with additional learning needs.
• Financial Fitness - a workshop to prepare
students for managing their finances
when they leave school or college.
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We’re customer
centric, and purpose
driven
We’re committed to doing the right thing for all our
customers. We put customers' needs at the heart
of our decision making, and our diverse culture
and focus on people development supports our
colleagues to do what’s best for our customers.
Investing in our people
We’ve been supporting our colleagues as they
navigate the changes brought by our refreshed
strategy. Alongside regular meetings and colleague
communications, we’ve introduced a ‘Leading
change’ programme. This initiative is designed to
help our managers develop change management
skills and strengthen their resilience.
For the ninth year in a row, we’ve been recognised
with the Investors in People Gold accreditation
reflecting how we invest in our people. We
know growing our skills and encouraging
innovation is key to our strategy and that’s why
we’ve supported 17 colleagues in successfully
completing apprenticeships.
We also launched a new accredited manager
training course to support professional
development, giving managers the skills they
need to build high performing teams.
Valuing diversity
We’re committed to equity, inclusion, and
diversity. Our colleague led Connect group
helps us to broaden awareness and embrace our
differences.
Connect has several dedicated working groups
including our established LGBTQ+ Group, Black
Colleague Focus Group, and Dyslexia Support
Group. In March 2025, we launched our Women’s
Inclusive Network, showing our commitment to
gender equality in the workplace.
To support social mobility, we joined Business in
the Community’s ‘Ban the Box’ campaign, making
it easier for anyone with a criminal record to
apply for a role with us. This initiative helps us
to recruit without bias, and we look at risks on a
role-by-role basis.
We were proud to be awarded the Living
Pension accreditation this year. This was a
fantastic achievement that complements our
existing Real Living Wage accreditation, Living
Hours accreditation and our ‘Beyond Living
Wage’ recognition award from the Living Wage
Foundation. This means that we’ve been officially
recognised for providing fair pay, secure hours
and a strong pension plan for our colleagues.
This milestone is particularly significant as it
makes us the first building society in the country,
and employer in the West Midlands, to achieve
all three accreditations demonstrating our
dedication to fair pay.
accreditation
for the ninth year in a row
A hat-trick
A hat-trick of accreditations from the
Living Wage Foundation and the first
building society in the country and first
employer in the West Midlands to be
awarded all three.
Living Pension accreditation
Living Hours accreditation
Real Living Wage accreditation
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Measure
We’re a signatory to the Women in Finance Charter and had initial targets
to maintain female representation of at least 30% on the Board and in
Senior Leadership.
Measure
We’re a signatory of the Race at Work Charter and during 2022
published our first Ethnicity Pay Gap report, one of the few
companies in financial services to do so, to achieve better
transparency and drive the diversity agenda. In 2021 we started
reporting ethnic representation across our colleague base and
management group.
Having 37% of other colleagues from ethnic minority backgrounds
helps us reflect the richly diverse communities we serve in our
heartland. Representation at Board level has increased, and whilst a
relatively small population, this is still an area of focus for the future.
Performance
2025
2024
2023
2022
2021
18%
9%
21%
37%
35%
33%
20%
32%
13%
18%
20%
16%
10%
22%
37%
Performance
We've continued to exceed our initial targets of 30% female
representation and we're tracking towards achieving 40% female
representation at both Board and Senior Leadership levels.
2025
2024
2023
2022
2021
37%
38%
38%
34%
33%
36%
36%
40%
40%
38%
Senior Leadership
Board
Ethnic minority – Board
Ethnic minority – Senior Leadership
Ethnic minority – Other colleagues
As a responsible employer, we welcomed the
changes made to the Employment Rights Act 2024,
which introduced meaningful improvements to
the workplace that support safe and fair working
environments for people working in the UK. With
the upcoming changes to family leave policies,
we proactively reviewed and enhanced family
leave benefits to support colleagues ahead of any
government changes.
Key performance indicators
We monitor our performance and goals using key
performance indicators (KPIs). These help us to keep
on track with our strategic ambitions.
We launched our
Women’s
Inclusive
Network.
Female
representation
Ethnic
representation
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4
We’ll modernise
our digital and
technology estate
We embrace sustainable and reliable technology to
stay up to date with an increasingly digital world and
meet our customers’ expectations to serve them how
and when they want.
At the heart of our strategy is a significant investment
in our people and technology to modernise our digital
services to meet our customers’ needs.
We recently announced that we’ll be working with
leading technology companies Deloitte and 10x to
deliver the next stage of our digital transformation.
The transformation programme will ensure we
continue to meet the evolving needs of our customers,
through enabling them to access our services as they
want, and providing us with more flexibility to develop
new products and services.
Efficient and reliable
We strengthened our ability to withstand
and recover from unexpected events
through continued investment in our IT
infrastructure and testing of our operational
resilience. Our customers count on us, and
no matter what challenges come our way,
we’re committed to delivering a reliable
service and building a stronger business for
the long term. We’re pleased that our services
have remained uninterrupted – protecting our
customers and their data is our top priority.
We’ll keep
our business secure
and sustainable for
the future
We remain financially strong and committed to
social and environmental sustainability.
A year of resilience and growth
This year, we’ve continued to do what we do best
– help people save, buy homes and build secure
futures. We’ve remained strong, financially resilient
and committed to our customers and communities.
Financial pressures for our customers continue to
be challenging with the cost of living still high, and
ongoing global uncertainty.
A strong performance
We’re pleased to report a strong profit before tax of
£36.5m (2023/24: £32.1m), a 14% increase on the same
period last year. This financial strength allows us to
invest in our digital transformation, continue to grow,
and offer existing and future customers products and
services. On an underlying basis, after excluding the
one-off cost of Tier 2 debt buyback in the prior year,
underlying profit was broadly flat at £36.5m (2023/24:
£37.2m).
This year we welcomed 24,897 new customers,
bringing the total to over 408,000.
Our key performance indicators
We monitor our performance and goals using key
performance indicators (KPIs). These help us to keep
on track with our strategic ambitions.
Profit before tax
2023/24
2024/25
£36.5m
£32.1m
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Measure
CET 1 capital is the highest quality form of capital for a financial
institution, comprising retained earnings, other reserves and
qualifying CET 1 capital instruments.
Measure
Profit before tax adjusted for one-off items contributes to
capital which provides financial resilience and facilitates
future growth and investment.
Measure
Net interest margin is net interest income expressed as a
percentage of mean total assets.
The drivers of this measure are the level of return received from
mortgages and the interest paid to savers.
17.1%
Performance
The CET 1 ratio at 17.1% remains comfortably above our regulatory
Total Capital Requirement and has done so throughout the year.
Our strong capital position has allowed us to grow our residential
mortgage book and invest in our digital transformation.
2025
2024
2023
2022
2021
8.7%
9.3%
9.4%
9.3%
9.3%
17.1%
17.8%
18.7%
17.0%
16.4%
Total Capital Requirement (TCR)
CET 1 ratio
Underlying profit has broadly been flat year on year.
Performance
2025
2024
2023
2022
2021
£36.5m
£37.2m
£28.8m
£26.2m
£4.7m
Whilst net interest margin has remained high it has reduced in the year.
This was primarily due to the amount we pay to savings customers
increasing relative to the amount we receive from mortgage customers.
Performance
2025
2024
2023
2022
2021
1.56%
1.77%
1.05%
1.42%
1.02%
£36.5m
1.56%
Common Equity
Tier 1 (CET 1) ratio
Underlying profit
before tax
Net interest
margin
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Measure
Exiting the commercial real estate sector has been a longstanding
strategy of the Board and is measured by the reduction in the gross
carrying value of non-core commercial gross exposures, which
totalled £1.7bn in 2008/09.
CRE exposures exclude securitised commercial balances as the
group has no remaining exposure to credit losses for these loans.
Measure
The internal measure, reported to the Board, is the number of
residential (excluding second charge) mortgage cases where the
borrower has missed more than three monthly payments, as a
proportion of the total number of loans.
Measure
The management expense ratio is a measure of cost efficiency,
reflecting costs (including depreciation and amortisation) as a
percentage of mean total assets.
11%
The management expense ratio increased marginally to 1.05%,
reflecting ongoing inflationary pressures and our strategic
transformation investment.
Manex ratio
Performance
2025
2024
2023
2022
2021
1.05%
1.02%
0.89%
0.78%
0.83%
0.93%
1.05%
CRE
Exposures
Core residential
arrears
Cost
efficiency
Whilst the arrears rates are above industry averages, with core
residential arrears of 0.93% (UK Finance: 0.89%)
3
, this increase is
driven by our legacy lending book (including buy to let), with arrears in
lending completed from 2012 onwards at just 0.34%.
Performance
2025
2024
2023
2022
2021
0.93%
0.31%
0.52%
0.43%
0.89%
Non-core commercial mortgage balances have continued to reduce
annually, down 11% in the year to £194m from a peak lending position
of £1.7bn in 2008/09, an overall reduction of 88%.
Non-core commercial lending (Net Exposure)
Non-core commercial lending (Gross Exposure)
Performance
2025
2024
2023
2022
2021
£127m
£155m
£249m
£306m
£219m
£194m
£106m
£228m
£339m
£379m
3
UK Finance is a trade association for the UK banking and financial services sector.
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Looking ahead
The world and the economic environment, and the
impact on our customers, remains uncertain, as
it has at many other times in our 176 year history.
And as we have done throughout many changing
environments we’ll continue to manage our
business to best serve our customers and remain
sustainable, which is at the heart of the Making
Tomorrow strategy.
As we move into the second year of delivering our
strategy, we’ll continue to develop new products
and improve our services to help more customers
into homeownership and improve their financial
resilience. Our mortgage development will focus
especially on helping those who struggle to save
for a deposit alongside our continued support for
new build, shared ownership and other ways into
homeownership.
In 2025/26 we’re improving our savings customer
experience by developing a mobile app, giving a
wider choice of how our customers interact with
us. However, we know how the vast majority of our
customers still access us, and therefore we’re also
continuing to develop our services for customers
through our branches and contact centre.
We want to make a bigger impact within our
communities and support young people in building
solid and secure futures. We’re working on some
new social initiatives which we plan to launch later
in the year. We also continue to progress plans
to reduce our impact on the environment, and in
2025/26 will be improving our measurement and
reporting of carbon emissions.
The people that work here at the West Brom are key
to our success, and we’re proud to have a team who
are committed to our customers and vision. As we
move forward, we’ll continue to improve our equity,
inclusion and diversity initiatives through the colleague
led Connect group and a reverse mentoring initiative.
We’re also building a new recognition programme to
celebrate success and motivate our teams.
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Financial
review of
the year
Income statement overview
Group
2025
£m
Group
2024
£m
Net interest income
96.2
103.6
Fees, commissions and other income
4.9
5.7
Fair value gain/(loss) on financial instruments*
4.4
(0.4)
Total income
105.5
108.9
Management expenses
(64.6)
(59.5)
Operating profit before revaluation gains,
impairment, provisions and cost on debt
buyback
40.9
49.4
Gains on investment properties
2.4
2.5
Impairment on loans and advances
(6.9)
(14.7)
Cost on debt buyback
-
(5.1)
Provisions for liabilities
0.1
-
Profit before tax
36.5
32.1
Taxation
(6.9)
(7.7)
Profit for the financial year
29.6
24.4
*Fair value gains are net of a loss on derivatives used to hedge
commercial loans of £1.0m (2023/24: £2.4m), included within the
amounts presented in note 5 to the accounts.
Summary income statement
We delivered a strong performance this year, with
profit before tax rising by 14% to £36.5m (2023/24:
£32.1m), largely as a result of one-off charges
last year that were not repeated this year. On an
underlying basis, after excluding the one-off cost
of Tier 2 debt buyback in the prior year, underlying
profit was broadly flat at £36.5m (2023/24: £37.2m).
This stability was the result of a lower charge for
impairment on loans and advances which offset a
slightly reduced total income and higher management
expenses which reflected our initial investment in our
digital transformation.
Our income statement overview gives a high-level
summary of our financial performance over the year.
Net interest income
Net interest income decreased in the year to £96.2m
(2023/24: £103.6m), with a net interest margin of
1.56% (2023/24: 1.77%).
After a period of rising interest rates, the Bank Rate
stabilised this year before beginning to slowly reduce.
As this happened, we held off reducing savings
interest rates, meaning that a greater proportion of
the interest earned on mortgages (interest income)
has been paid to our savings customers (interest
expense), pushing down our net interest margin.
The average amount paid to our savings members
was 0.86% above the market average
2
in line with the
previous year (2023/24: 0.88%) but, as our savings
balances grew by 9%, overall our savers received a
higher mutual benefit of £41.8m (2023/24: £38.6m).
Fair value gain/(loss) on financial
instruments
Financial instruments are used to protect our
Society’s net interest income against unexpected
changes in interest rates and, under accounting
rules, they are held at fair value in our accounts.
Fluctuations in the fair value are offset in the income
statement but only where we meet the conditions for
applying hedge accounting. The fair value gain this
year relates to gains where these conditions were not
met, mainly where we used this protection against
our mortgage offers awaiting drawdown.
Year to 31 March: Reconciliation of
statutory to underlying profit before tax
2025
£m
2024
£m
Statutory profit before tax
36.5
32.1
Cost on debt buyback
-
5.1
Underlying profit before tax
36.5
37.2
The table below shows a year-on-year comparison
of our underlying profit before tax.
2
Average market rates sourced from Bank of England Bankstats table A6.1 March 2025.
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Year to 31 March: Impairment on loans
and advances
2025
£m
2024
£m
Residential loans
(0.4)
0.5
Commercial loans
7.3
14.2
Total impairment
6.9
14.7
Fair value movement on derivatives held to
hedge impaired commercial loans
1.0
2.4
Total impairment and related charges
7.9
17.1
Management expenses
Management expenses are the costs related to the
running of our Society. This year these costs have
increased from £59.5m to £64.6m, because we’ve
been strengthening our teams to support our digital
strategy, coupled with the ongoing impact of higher
inflation. The average number of people who worked
for us during the year increased from 701 to 739.
Investing in our future ensures we can continue to
provide services to our customers how and when they
want - as outlined in the “Our strategy” section of the
strategic report (pages 12 to 23).
Gains on investment properties
We provide homes to rent through our subsidiary
company, West Bromwich Homes Limited, with
properties mainly in the West Midlands, the South
West and South Wales. Whilst the housing market has
seen some volatility, it has remained resilient, and we
saw a consistent gain of £2.4m (2023/24: £2.5m), in
comparison to the previous year.
Impairment on loans and advances
The table below shows our impairment charge/
(credit) on loans and advances.
Residential impairment
Impairment charges on the residential loan portfolio
are based on Expected Credit Loss (ECL) calculations
which consider the credit risk of the loans in the
context of assumptions of future economic scenarios
in line with IFRS 9 requirements. The residential
impairment (credit)/charge has remained relatively
neutral with a small credit of £0.4m this year
(2023/24: small charge of £0.5m). More detail on
the provision for impairment losses is given in the
Financial Position section.
Commercial lending impairment
Commercial loan impairment charges decreased in
the year to £7.3m from £14.2m. After adjusting for
the impact of hedging, net charges halved to £8.3m
(2023/24:£16.6m).
The commercial property sector remains sensitive to
changes in the wider economy and we’re continuing
to make the appropriate provisions against our
exposure. Our total commercial provision balances
now stand at £89.1m (2023/24: £92.1m), which
represents 44.8% of the current loan book (2023/24:
41.2%).
Taxation
For a detailed breakdown of the tax charge see note 9
in the financial statements.
Summary statement
of financial position
Group
2025
£m
Group
2024
£m
Assets
Residential loans and advances
5,288.4
4,653.4
Commercial loans and advances
109.7
131.7
Liquid assets
716.2
929.4
Derivative financial instruments
44.9
61.8
Fixed and other assets
202.6
213.4
Total assets
6,361.8
5,989.7
Liabilities
Retail funding
5,071.6
4,670.6
Wholesale funding
778.0
820.0
Derivative financial instruments
16.8
12.8
Other liabilities
34.2
41.6
Total liabilities
5,900.6
5,545.0
Equity
General reserves
326.5
305.7
Other equity instruments
130.9
134.8
Other reserves
3.8
4.2
Total equity
461.2
444.7
Total liabilities and equity
6,361.8
5,989.7
Financial position at 31 March
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5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
-
2021
2023
2022
2024
£3,706m
£4,460m
£3,157m
£3,277m
£3,168m
2025
Owner occupied
Buy to let
£995m
£856m
£1,141m
£1,301m
£1,373m
Analysis by lending type at 31 March
We saw a strong growth in our total residential loans
and advances this year, driven by higher gross new
lending of £1.3bn (2023/24: £1.1bn) and customers
staying with us when they reach the end of their
mortgage term.
The proportion of owner-occupied loans has
continued to increase in line with our strategy of
reducing the legacy buy to let portfolio, which has
reduced to 16% of residential lending balances, from
21% in the prior year, and a peak of 63% in 2013.
Residential loans and advances
Commercial loans and advances
At 31 March: Commercial loan portfolio
2025
£m
2024
£m
Non-core commercial balances excluding
securitisation
194.3
218.8
Securitised commercial balances
4.5
5.0
Impairment provisions
(89.1)
(92.1)
109.7
131.7
We’ve helped a further 6,267 first-time buyers into
their own homes, an increase of 34% from 2023/24.
Core residential arrears rates are marginally above
industry averages, with core residential arrears
of 0.93% (UK Finance: 0.89%)
3
at 31 March 2025
(2023/24: 0.89% and 0.91% respectively). This
increase is due to pressure put on borrowers maturing
from lower fixed rates and now entering new higher
rates; coupled with our legacy lending book (including
buy to let), with arrears in lending completed from
2012 onwards at just 0.34% (2023/24: 0.23 %).
We continue to support borrowers who are faced with
ongoing cost of living challenges, including the higher
Bank Rate environment. Encouraging borrowers to
engage early is a key focus for us so we can tailor
the approach to help reduce the impacts. The wider
economic outlook remains uncertain due to the rising
cost of living and this may impact arrears levels going
forward.
Our opening provision for impairment included an
allowance for increased defaults from borrowers
impacted by an affordability squeeze as interest rates
and the cost of living increased. Whilst the economic
outlook remains uncertain, we continue to hold an
overlay to cover the valuation difficulties with flats
including potential cladding and leasehold issues.
As part of our long-term strategy to exit the
commercial real estate sector, the commercial
loan book has reduced by 11% this year (2023/24:
4%). After accounting for increased provisions, the
portfolio has fallen by 17% to £110m, now making up
just 2% of our total lending.
3
UK Finance is a trade association for the UK banking and financial services sector.
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Since its peak of £1.7bn in 2008/09, commercial
exposures have been reduced by 88%, marking a
significant step in de-risking our balance sheet and
reinforcing our focus on core residential lending.
The majority of our commercial portfolio is made
up of loans to the retail sector. Provision coverage
against loans to the retail sector increased to 57.2%
from 52.3%. Note 32(c)(iii) in the financial statements
further analyses the commercial portfolio by industry
type.
Liquid assets
We continue to hold a substantial buffer above
regulatory and internal liquidity requirements. As of
31 March 2025, liquid assets were £0.72bn (2023/24:
£0.93bn), including £0.63bn of high-quality liquid assets
(HQLA) which are either held in cash or assets that can
be easily convertible to cash through treasury markets
or via Bank of England liquidity schemes. The asset
quality of the book is very high with all liquidity assets
rated at A or above, and the liquid asset impairment
provisions were negligible for both the current and
prior year. Our Liquidity Coverage Ratio (LCR), which
measures our ability to meet cash outflows in a stressed
scenario, stood at 168% as of 31 March 2025 (2023/24:
203%), remaining well above the 100% regulatory
minimum. A breakdown of the liquidity portfolio is
included in note 34 to the accounts.
Funding
3.34
3.42
3.50
3.15
2.98
0.96
1.25
1.57
1.03
1.25
0.74
2021
£bn
2023
2022
2024
2025
6.00
5.00
4.00
3.00
2.00
1.00
0
Other wholesale
TFSME
Branch retail savings
Securitisation (RMBS)
Online & direct retail savings
1.06
0.21
0.08
0.17
0.17
0.11
0.22
0.17
0.00
0.00
0.29
0.71
0.61
0.41
As at 31 March
Our primary source of funding is retail savings. Retail
savings balances increased by 9% to £5.1bn (2023/24:
£4.7bn). Within this total, branch-based accounts
increased by 2% to £3.5bn.
Retail savings balances make up 87% (2023/24: 85%)
of total funding with the remainder being wholesale
funding. In September, we raised £300m of wholesale
funding through a successful residential mortgage-
backed securitisation (RMBS). The deal was well
received by the financial markets and represents a
valuable diversification of funding to complement our
retail savings and support our lending ambitions.
Despite this, our wholesale funding balances reduced
to £0.78bn (2023/24: £0.82bn) with the repayment of
£200m of funds borrowed under the Bank of England’s
TFSME (Term Funding Scheme with additional
incentives for SMEs) facility, plus other shorter-
term funding secured on our marketable assets,
offsetting the residential mortgage-backed security
issuance. This reduced the ratio of wholesale funding
as a proportion of total shares and borrowing to 13%
(2023/24: 15%).
Funding balances
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Capital ratios
%
%
%
%
Common Equity Tier 1
(as a percentage of RWA)
17.1
17.1
17.8
17.8
Tier 1
(as a percentage of RWA)
17.1
17.1
17.8
17.8
Total capital
(as a percentage of RWA)
17.2
17.2
17.9
17.9
Leverage ratio
3
6.8
6.8
7.5
7.4
Capital
(unaudited)
1.
Other adjustments mainly comprise deductions for intangible assets, deferred tax assets and the retirement benefit asset.
2.
Tier 2 capital comprises subordinated liabilities excluding accrued interest.
3.
The leverage ratio is calculated following UK regulation which excludes central bank claims from the exposure measure.
4.
The 'Full implementation' basis includes the unwind of IFRS 9 transitional relief (£nil at 31 March 2025, £0.1m at 31 March 2024). The transitional
arrangements cease to apply from 1 April 2025.
At 31 March
Transitional
2025
Full
implementation
4
2025
Transitional
2024
Full
implementation
4
2024
£m
£m
£m
£m
Members
’
interest and equity
461.2
461.2
444.7
444.7
Permanent interest bearing shares (PIBS) deductions
(3.9)
(3.9)
(7.8)
(7.8)
Other adjustments
1
(36.9)
(36.9)
(34.6)
(34.7)
Common Equity Tier 1 (CET 1) capital
420.4
420.4
402.3
402.2
Additional Tier 1 capital
-
-
-
-
Total Tier 1 capital
420.4
420.4
402.3
402.2
Tier 2 capital
2
2.0
2.0
2.0
2.0
Total regulatory capital resources
422.4
422.4
404.3
404.2
Risk weighted assets (RWA)
2,455.5
2,455.5
2,258.8
2,258.7
Leverage ratio exposure
3
6,148.2
6,148.2
5,399.0
5,398.9
Regulatory capital
Our regulatory capital is in place to protect depositors
and creditors by providing a buffer against unexpected
losses. We continuously monitor our capital levels to
ensure we meet Prudential Regulation Authority (PRA)
requirements under the UK Capital Requirements
Regulation (CRR).
As of 31 March 2025, our Common Equity Tier 1 (CET
1) capital was made up of retained profits, Core Capital
Deferred Shares (CCDS), and other reserves after
regulatory adjustments.
• Our CET 1 ratio, which fell to 17.1% (2023/24:
17.8%) due to growth and investment in the year,
remains well above our Total Capital Requirement
(TCR) of 8.7% (2023/24: 9.3%) of risk-weighted
assets.
• Our leverage ratio remains strong at 6.8%
(2023/24: 7.5%).
During the year we paid £5.8m as distributions on
our CCDS. In May 2025 our Board declared a final
distribution for the period to 31 March 2025 of £2.25
per CCDS, in line with the current distribution policy,
published on 24 November 2021. The final distribution
has been deducted from capital available but is not
reflected in the primary statements detailed on pages
93 to 99 as, for accounting purposes, distributions to
the CCDS holders are recognised on the date they are
declared, which fell after the financial year end.
In March 2025, we approved an interest payment of
1.5414% on Permanent Interest Bearing Shares (PIBS)
which was paid on 5 April 2025.
Further details of our capital position are given in the
Pillar 3 disclosure document on our website.
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Principal risks and uncertainties
Managing our risks is essential to achieving our Purpose
and building trust with our customers, colleagues, and
regulators. You can find out more about how we manage
risk in our risk management report on pages 31 to 40.
Financial outlook
The outlook for the UK economy remains unclear; trade
tariff uncertainty from the US, unstable geopolitical
picture, big increase in payroll taxes and ongoing inflation
concerns have all contributed to higher uncertainty and
volatile Bank Rate expectations.
The UK housing market has remained resilient due to a
shortage of properties and the falling mortgage rates.
As a lender with a focus on our Purpose of advancing
homeownership, our mortgage lending, which is
concentrated on first-time borrowers, is expected to be
more impacted by this uncertainty.
Operating backdrop
Operational resilience continues to be a key area of focus
and is co-ordinated by a centralised area to deliver the
Operational Resilience Plan and embed the Business
Continuity and Disaster Recovery Risk Management
Framework, which are important components which
allow us to assess and monitor our operational resilience.
Additionally, we have recently introduced our Security
Operations Centre (SOC) that operates 24/7 on every
day of the year, ensuring we protect our customers from
the cyber threats we see and read about every day. The
SOC uses the latest tools and techniques to protect our
data and services from anyone intent on doing harm and
is a critical investment as we start to offer more services
using digital technologies.
Alex Pawley
Chief Financial Officer
28 May 2025
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Our risk management framework
Our activities are governed in line with our Purpose and
values. Our Board has agreed a set of Risk Appetite
Statements covering the principal risk categories which we
are exposed to: business, credit, capital, liquidity, margin
compression, market, operational, cyber and conduct (the
Society’s Risk Appetite Statements). A definition of each of
these risks can be found in the table on pages 33 to 36. Our
Board also reviews the key strategic risks that may impact
the delivery of its business plan.
These Risk Appetite Statements drive our corporate
planning activity, including capital and liquidity planning, as
well as providing the basis for our principal risk measures.
These measures are categorised as:
Level 1
– set by the Risk
Committee with full
Board visibility.
Level 2
– set by the Executive
sub-committees and reported to
the Risk Committee and Board.
Level 3
– set by sub-committees and
reported to the Risk Committee and
Board by exception.
Overview
Effective management of risks and opportunities
is essential to achieving our objectives. Our Board
aims to manage effectively all the risks arising
from our activities and believes that its approach
reflects an understanding of actual and potential
risks, the quantification of the impact of such
risks, and the development and implementation of
controls that manage exposures within our Board’s
risk appetite.
We operate entirely within the UK financial
services market and only take on risks we have the
capability to understand and manage effectively.
Risk
management
report
This report tells you about:
·
How we manage risk.
·
Risk management framework.
Level 1
Level 2
Level 3
The final element of the framework is the formal structure for
managing risk across the Group. This is based on the ‘Three
Lines of Defence’ model which is illustrated overleaf.
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• Defines culture and values.
• Establishes risk appetite and strategy.
• Approves frameworks, methodologies, policies,
and roles and responsibilities.
Board
• Operational areas are accountable for management of
risk and execution of risk controls in their area including:
• Identifying.
• Assessing.
• Reporting risk exposures, taking into account the
Society’s risk appetite, policies and procedures.
Day-to-day risk
management
• Independent oversight and risk governance through
monitoring and reporting responsibilities to Operational
Oversight Committees and the Risk Committee.
• Provide guidance, support and education on risk
management matters, working collaboratively with
business management to ensure effective risk
management practices are being delivered.
Risk
oversight
• Internal Audit provide the Board (via the Audit
Committee) with independent assurance over
the adequacy and effectiveness of control
mechanisms in place to mitigate the Society’s
exposure to all risk within its risk categories.
Independent
assurance
Chief Risk Officer
Chief Internal Auditor and Board Audit Committee
Board Risk Committee
Executive
Chief Executive Officer
FIRST
LINE
SECOND
LINE
THIRD
LINE
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Principal risk category
Day-to-day management
Business risk
The risk of the Society
failing to meet its business
objectives through the
inappropriate selection or
implementation of strategic
plans; inadequate assessment
and mitigation of climate
change related risks; and/or
failure to implement a diverse
and inclusive culture.
Our Board reviews the strategy periodically and
sets out a Medium Term Plan (MTP) annually that
spans typically a five year period and is presented
at least quarterly to our Board to monitor business
performance against internal forecasts, including
Key Performance Indicators, and assess the
economic environment, completing scenario analysis
and sensitivity analysis to ensure the risk appetite
remains appropriate to mitigate any emerging risks/
trends on the horizon.
Business risk is regularly stress tested via upside and
downside scenarios to the MTP, the Internal Capital
Adequacy Assessment Process (ICAAP), and Reverse
Stress Testing (RST). Following these activities, actions
are assessed to mitigate if identified risks crystallise
and, to manage effectively more extreme events,
a Recovery Plan is maintained. To identify the
emergence of a more extreme stress, a range of Early
Warning Indicators are regularly monitored, and a list
of strategic/tactical management actions identified
that could be taken, if necessary, to protect us.
Climate change related physical and transition risk
is recognised to arise across several of the principal
risk categories and further detail on how the Society
manages this can be found in the ‘Climate-related
Financial Disclosures’ section.
We recognise the importance of having a diverse
workforce with an inclusive culture that is well
embedded and regularly monitored and reported to
our Board.
Credit risk
The risk that losses may
arise because of our
borrowers, debtors or market
counterparties failing to meet
their obligations to repay.
Our Board establishes the credit risk appetite and
supporting responsible lending policy. All new
lending is monitored against risk appetite limits, with
any breaches reported through our risk committees so
that the need for corrective action may be considered.
Our exposure to residential and commercial credit
risk is managed by a specialist Credit Risk team,
which is responsible for the Credit Risk Management
Framework and associated policies and limits and
providing regular reports to the RC.
Economic uncertainty and market movements
including higher interest rates, have manifested
into cost of living challenges for many in the UK.
In response, we continuously review our credit
risk policies and procedures that reflect these
affordability challenges. This approach supports
both responsible lending decisions and the support
provided to individual customers in or at risk of
falling into financial difficulty including in vulnerable
financial situations.
Our approach to collections and recoveries has
continued to evolve, reflecting experiences of
working with borrowers through recent financial
uncertainty and substantial increases in the cost
of living. Focus has been drawn to providing pre-
emptive support for borrowers. Our approach is
reflective of any ongoing government and
regulatory guidance and has specifically been fully
cognisant of the Financial Conduct Authority’s
(FCA) Strengthening Protections for Borrowers in
Financial Difficulty statement and supported the
Government’s Mortgage Charter.
Our internal credit risk reporting has evolved to
ensure that the risk committees have the required
information in relation to borrowers’ potential
affordability issues or those already in financial
difficulty due to cost of living challenges.
Additionally, credit risk can arise within treasury
transactions (used to meet liquidity requirements
and those hedging instruments used for interest rate
risk purposes). This type of credit risk is managed
by the Treasury Middle Office team. Daily, this team
monitors exposures to counterparties and countries,
and ensures operations remain within Board approved
limits. The Assets & Liabilities Committee (ALCo)
and our Board review the Treasury and Financial Risk
Management Policy (TFRMP) and limits, with reports
presented to ALCo monthly confirming compliance
with such policy limits.
Principal risk categories and
day-to-day management
Our Board has identified nine principal risk categories,
which together define our overall risk universe.
These Principal Risk categories and the day-to-day
management are shown in the table.
For each category our Board has agreed a risk
appetite statement and associated key metrics
which, together, define the level of risk our Board
is prepared to accept or tolerate. In addition, key
threats and the corresponding Society responses
or mitigants, as well as opportunities, have been
identified. The Risk Committee (RC) meets at
least quarterly to review our exposure to the risk
categories and during this financial year, this
committee met on seven occasions.
Primary responsibility for risk management, including
the design and operation of effective controls, rests
with the management of each business function -
the ‘First Line of Defence’. Support and challenge
of the ‘First Line of Defence’ responsibility is
provided through specialist risk functions - Credit
Risk, Operational Risk, Compliance and Financial
Crime, and ALM (Asset and Liability Management)
Oversight and Model Risk Oversight – the ‘Second
Line of Defence’. These functions develop and review
policies, monitor and support compliance with those
policies, and support the business functions in their
management of risk. Our Internal Audit team are the
‘Third Line of Defence’. Their role is to make sure that
our approach to risk is free from bias and meets the
required standards. Our Internal Audit team provide
independent assurance and report directly to the
Chair of the Audit Committee.
Governance and oversight is provided through a
number of management and executive committees
as detailed on page 37.
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Principal risk categories and
day-to-day management
(continued)
Principal risk category
Day-to-day management
Capital risk
The risk that the Society has
insufficient capital to cover
stressed losses or to meet
regulatory requirements.
We conduct an Internal Capital Adequacy
Assessment Process (ICAAP) covering all risks. This
is used to assess our capital adequacy and determine
the levels of capital required going forward to
support the current and future risks in the business.
This analysis is collated through the ICAAP that
incorporates expected future capital requirements
from changes in business volumes, mix of assets
and activities within the context of current and
anticipated future risks, and stressed scenarios.
The ICAAP is reviewed by the Prudential Regulation
Authority (PRA) periodically to set our Total Capital
Requirement.
Our capital requirements are reviewed monthly,
and the results of this monitoring are reported to
the Capital Review Group (CRG), ALCo, RC and our
Board. RC reviews and recommends for approval to
our Board the ICAAP at least annually.
The detailed breakdown of our capital position can
be found on page 28.
Liquidity risk
The risk that the Society
either does not have sufficient
financial resources to enable
it to meet its obligations as
they fall due or can secure
such resources only at
excessive cost.
We fund mortgages on residential property
substantially from shorter term deposits provided
by our saving members. The contractual maturity of
the mortgages is up to 40 years although loans are
typically repaid early due to borrowers moving home
or remortgaging.
Savers’ deposits, whilst accessible predominantly
on demand, at short notice or for fixed periods, tend
to remain with us for longer periods. A substantial
proportion of savers have long-established
relationships with us, predominantly through our
branch network.
This difference in the nature of borrowers’ and
savers’ relationships cause a structural mismatch
between the speed at which the Group can generate
cash from its business assets and the demand for
funds to meet its liabilities. To mitigate this risk, the
Group holds sufficient cash to meet the normal day-
to-day operations of the business and in addition,
maintains a buffer of high-quality liquid assets, which
can be converted quickly into cash to cover outflows
in stressed conditions. Processes are in place to
ensure that the quantity, quality and availability of
these liquid resources is adequate at all times.
Our Board undertakes a detailed review of its
liquidity adequacy under the Internal Liquidity
Adequacy Assessment Process (ILAAP) and submits
this to the PRA for supervisory review upon their
request. The ILAAP specifies the daily processes that
we use to determine the amount of liquidity required
to cover its potential cash flow needs under a range
of stresses including three PRA standard scenarios:
‘name-specific’, ‘market-wide’ and ‘combined’.
The supervisory review also informs the PRA’s view of
the amount of ‘buffer’ or highest quality liquid assets
that we should hold to meet the three standard
regulatory stress scenarios and the maximum
allowable gap between maturing wholesale assets
and wholesale liabilities (wholesale refinancing gap).
The Treasury team maintains liquid resources at
the greater of the Liquidity Coverage Ratio (LCR)
requirement or the internal assessment of liquidity
adequacy.
The TFRMP lays down a rigorous framework of limits
to control our liquidity risk. The governance process
surrounding liquidity risk management activities is
as follows:
• The RC has delegated authority for the governance
of liquidity risk management to the ALCo which
meets at least monthly.
• Operational management of liquidity risk is further
delegated to the Liquidity Management Group
(LMG) which meets at least twice a month. LMG
looks at liquidity stresses over a horizon of up to
three months and plans cash flows over a rolling 12
month planning period.
• The Treasury team is responsible for day-to-day
management and maintenance of adequate liquid
resources under delegated authority from ALCo.
• The RC monitors independently the overall liquidity
adequacy process, including the activities of ALCo,
LMG and the Treasury team. It also reviews and
recommends for approval to our Board the ILAAP at
least annually.
We’re responsible for the liquidity and cash flow
requirements of wholly owned subsidiaries.
Throughout the last financial year, a conservative
approach to liquidity management has been
maintained, holding most of the liquidity in the Bank
of England Reserve Account and other high quality,
LCR eligible assets. Treasury operates an effective
control framework, and exposures are monitored on
an intra-daily basis.
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Principal risk category
Day-to-day management
Margin compression risk
The risk of a margin squeeze
caused by having limited
ability to increase margins
on the mortgage book if the
Society were to experience
a relative increase in funding
costs affecting variable rate
retail funding and in particular
the administered rate retail
balances.
We control Margin Compression Risk (MCR) exposure
by managing basis risk matching, as well as seeking
opportunities to increase the volume of administered
rate assets and managing asset repricing profiles.
The key drivers of this risk are mortgage assets
having a longer duration before reaching a repricing
point where we can manage margin, funding being
of a shorter term and therefore being more quickly
exposed to changes in market rates. We focus on
MCR in relation to the longer-term asset exposure
relating to mortgages, acknowledging that this can
be offset by lengthening the behavioural term of
funding or shortening the behavioural term of assets.
MCR exposure is modelled and managed based on a
funding cost stress, applicable on the behavioural
repricing difference between the two sides of the
balance sheet.
Acknowledging the exposure to MCR by an inability
to increase margins on the fixed rate mortgage
book if we were to experience a relative increase
in funding costs, a set of tenor limits for mortgage
business are in place to assist in mitigating this risk
and providing increased balance sheet flexibility
from more frequent re-pricing opportunities. A
minimum volume of administered rate savings is also
targeted to provide margin management potential
over shorter term horizons, and in line with the
guidance limit within PRA SS20/15.
Market risk
The risk of changes in the
value of, or income arising
from, our assets and liabilities
as a result of unexpected
changes in financial prices,
primarily interest rates,
property prices, bond yields
and inflation.
Market risk exposures are managed through the
Treasury department which is responsible for
managing exposure to all aspects of market risk
within parameters set by our Board.
ALCo reviews the TFRMP, recommending changes
to our Board as appropriate and ensures that regular
reports on all aspects of market risk are assessed and
reported to the RC and our Board. The key market
risk is interest rate risk, which arises because of
differences in the timing of interest rate re-pricing
of assets and liabilities. To mitigate this, the Treasury
team uses natural balance sheet hedging (e.g.
matching 2 year fixed rate mortgages with 2 year
fixed rate saving bonds) and derivative instruments.
The Building Societies Act 1986 restricts the use of
derivatives strictly to hedge against the impact of
fluctuating external factors, such as interest rates.
In line with regulatory requirements and best
practice, the impact on Net Interest Income (NII) of
a parallel shift in interest rates in both directions is
considered. In addition, the impacts of alternative
non-parallel scenarios upon NII and market value are
also considered. Both are reported monthly to ALCo.
Interest rate sensitivity also arises from the potential
for different interest rates to move in different ways,
e.g. Bank Rate linked mortgages are partially funded
by administered rate liabilities. The impact of these
mismatches (basis risk) is monitored by the Treasury
team and reported to ALCo. There is no direct
exposure to foreign exchange rates.
We’ve invested in property through our subsidiary
West Bromwich Homes Limited (WBHL) and offer
residential property for rent. This exposes us to
movements in house prices.
Operational risk
The risk of loss and/or
negative impact to the
Society resulting from
inadequate or failed internal
processes, systems or people,
or from external events.
Each business function has a clearly articulated
responsibility for identifying, monitoring and
controlling its operational risks. The business function
receives support and guidance from the Operational
Risk, Resilience & Continuity team (ORRCT), which has
regular dialogue with function managers and collates
management information for review by executive
management, the Operational Risk & Resilience Group
(ORRG) and the RC.
The ORRCT also provides independent input and
challenge to the business functions, both through
the regular review of operational risks and day-
to-day business initiatives. They also oversee the
operational risk scenario analysis that feeds into
the ICAAP.
During the year there has been continued focus on
our operational resilience and there has been
co-ordinated efforts successfully across the
business in the delivery of our operational resilience
plan and Business Continuity and Disaster Recovery
Risk Management Framework, all important
components against which to manage operational
resilience.
We’ve established our Important Business Services,
associated Impact Tolerances and completed
resource mapping. We have continued to focus
testing against severe but plausible disruption
scenarios to identify any vulnerabilities to
us remaining operationally resilient. Supplier
Management has remained a key focus area for us.
Following the introduction of a dedicated team to
support business areas, controls within this area have
been strengthened and matured. These steps
Principal risk categories and
day-to-day management
(continued)
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Principal risk category
Day-to-day management
Operational risk (continued)
continued to support us in our delivery against the
regulatory requirements and will be ongoing post
the transition period to March 2025, defined by
the FCA and PRA “as the ability of firms to prevent,
adapt, respond, recover and learn from operational
disruptions”.
As a subset of Operational risk, Information risk is
supported and has Second Line oversight from
the Compliance Team to ensure appropriate
protection and management of member and Society
information assets and to ensure compliance with
regulatory requirements set out by the Information
Commissioner’s Office. This is to ensure appropriate
controls are in place to protect the data from
breaches caused by people or systems.
Cyber risk
The potential for financial
loss, operational disruption,
reputational damage or legal
consequences arising from
the compromise, failure or
misuse of our information
systems, technology
infrastructure or digital
assets.
Identifying and understanding cybersecurity risk is
paramount in today’s digital landscape, where the
interconnectedness of systems and the proliferation
of sophisticated threats pose significant challenges.
Recognising the potential impact of cyber-attacks on
our operations, finances and reputation, we prioritise
proactive measures through the implementation
and maturing of robust security frameworks, regular
risk assessments and fostering a culture of security
awareness among our colleagues.
The RC approved Cyber Security Strategy outlines
the approach to and the implementation of cyber
security by delivering best security practice that is
aligned to industry standards to protect the services
and products that we provide, and the supporting
information assets, systems and data stored within
them from unauthorised access, harm, or misuse.
Additionally, the RC approved Cyber Security Risk
and Control Assessment Policy implemented within
the Society forms the basis of our Cyber Security
Risk Management Framework. It establishes the
requirements for identifying and assessing cyber
security risks across our key value chain, including
our supporting services, infrastructure, extended
enterprise, IT systems, products, processes, people
and activities.
The IT Security team is responsible for developing
and implementing the people, processes and
technology required to effectively manage cyber
risk. This is in alignment with our defined cyber risk
appetite, which is set to “zero”, such that “all cyber
security risk events need to be identified, escalated,
and recorded within the parameters set out in the
Cyber Security Risk and Control Assessment Policy”.
Decisions to accept residual cyber security risk
impacts being signed off by the Chief Information
Security Officer and/or member of the Executive.
We continuously monitor compliance with the Cyber
Security Risk and Control Assessment Policy through
bi-annual reports to the Executive Risk Committee
(ERC) on the status of risks and controls including
risk profile and key trends, monthly reporting on
risk events to the Information Security Forum and
monthly production of key risk indicators that
confirm compliance to policy requirements and
reported to RC.
Conduct risk
The risk that Society action
or behaviour results in poor
customer outcomes.
We put our customers’ needs at the heart of everything
we do and focus on delivering good outcomes. We
manage this in several ways including making sure we
meet the FCA’s conduct risk requirements and more
recently the Consumer Duty (the ‘Duty’).
The Duty hasn’t replaced any existing rules but
instead, it’s enhanced them by setting higher and
clearer standards.
In advance of the FCA’s deadline of the end of July
2024, our Board attested to our compliance with the
Duty, and we’ve continued to embed this in a number
of ways including:
• Regular testing of our communications with our
Customer Panel to assess whether they are easy to
understand;
• Learning from customer outcome testing where we
assess customer outcomes across a number of key
customer journeys;
• Regularly reviewing our products to ensure they are
fair value and deliver good customer outcomes;
• Monitoring and reporting our performance against
conduct risk requirements in a way that also
focusses on customer outcomes; and
• Enhancing our approach to monitoring how well we
treat customers with additional requirements.
We manage conduct risk and our compliance with
the Duty at Conduct Risk & Customer Review Group
(CRCRG), with secondary responsibility at ORRG and
reporting to RC.
Principal risk categories and
day-to-day management
(continued)
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Risk governance structure
During the year, risk governance was provided
through eleven risk management committees/
groups which are shown in the table.
Committee /
group / forum
Responsibilities
Chair
Risk
Committee
(RC)
Oversight, management and review of our principal and key strategic risks
identified by our Board.
Details of this Committee and its key activities can be found on our website
www.westbrom.co.uk/about-us/corporate-governance/board-committees
Chaired by a Non-Executive
Director
Audit
Committee
(AC)
To give assurance to our Board regarding the integrity of the financial
statements, the adequacy of the provisions and the adequacy and effectiveness
of our risk management frameworks.
Details of this Committee and its key activities can be found on our website
www.westbrom.co.uk/about-us/corporate-governance/board-committees
Chaired by a Non-Executive
Director*
Executive Risk
Committee (ERC)
To give our Executives an enterprise wide view of our risk profile, covering both
current and potential risks.
Responsible for driving the implementation of our risk management framework.
Chief Risk Officer
Assets & Liabilities
Committee (ALCo)
Oversight of assets and liabilities risk including the assessment of exposure to
Treasury counterparty credit, market, liquidity, margin compression, basis and
interest rate risk.
Chief Financial Officer
Residential Credit
Group (RCG)
Oversight of the exposure to credit risks as a result of our residential lending
activity.
Chief Risk Officer
Commercial Loans
Risk Group (CLRG)
Managing and overseeing the exposure to credit risks and exit strategies of our
closed commercial loan book.
Chief Risk Officer
Conduct Risk &
Customer Review
Group (CRCRG)
Oversight of the management of conduct risk and monitoring of customer
outcomes from our savings and mortgage activities.
Chief Customer Officer
Operational Risk &
Resilience Group
(ORRG)
Oversight and management of all operational information and operational
resilience risks.
Secondary responsibility for conduct risk oversight, focussing particularly on the
reporting of our risk events and policy and process oversight.
Chief Operating Officer
Information Security
Forum (ISF)
As part of our overall cyber security risk governance, this forum brings together
IT leaders, security professionals and business leadership to have First Line of
Defence (1LOD) operational level discussions about cyber risk.
Chief Information Security Officer
Capital Review
Group (CRG)
Overseeing our capital position.
Chief Financial Officer
Model Risk
Group (MRG)
Overseeing our exposure to model risk across the business.
Chief Financial Officer
*The list of Non-Executive Directors who Chair and attend this committee is on page 65.
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Principal risks and uncertainties
The following tables show our Board’s Principal
Risk external threats which have been identified
by the RC, along with the responses and mitigants
we have in place. The effectiveness of these
mitigants is monitored regularly through the risk
management committees/groups/forums.
Principal risk category
Principal external threats
Society response and mitigants
Business risk
Adverse changes to the operating environment
arising from the general uncertainty in the UK
economy, due to the ongoing disruption caused by
heightened geopolitical risks and ongoing cost of
living crisis leading to:
• Higher inflation resulting in Bank Rate increasing
above 5%.
• Declining consumer confidence resulting in
reduced activity in the housing market and adverse
impact from both lower lending and a potential fall
in house prices.
• Elevated competition in the mortgage market and
rising cost of retail funding.
• Flat or declining economic growth and associated
rising unemployment causing possible recession.
• Increasing regulatory costs.
Business plans continue to model the impact of
a range of scenarios and stress tests, which have
been expanded to include potential macroeconomic
impact of rising central Bank Rates to respond to
higher inflation due to global trade and supply chain
issues and rising energy costs. This is reflected
within the IFRS 9 provision, ICAAP and ILAAP
assessments. These outcomes have Board visibility
and are reviewed by a number of risk management
committees.
These scenario and stress tests are complemented
by RST to identify the circumstances that put us into
an unviable position, i.e. capital and/or liquidity falls
below minimum regulatory requirements.
We’re based in the UK and have no EU operations.
Credit risk
Higher unemployment because of self-employed/
wider business insolvencies and/or an increase in
Bank Rate (leading to increased arrears and losses).
Our IFRS 9 provisioning and stress testing models
assume a range of unemployment levels and varying
interest rate scenarios, including a stressed outcome.
Should an increase in arrears accounts occur, we
would expand our credit services resource and
regularly review its capacity planning in this regard.
Reduction in property prices (leading to a higher
incidence of voluntary possessions and elevated
shortfalls when properties are sold).
We’re committed to work with our borrowers across
a range of forbearance options to avoid possession
wherever possible. In the event that possessions
were to increase, our regular reviews of our IFRS
9 provisions would reflect this increase. Mortgage
Indemnity Guarantee insurance is obtained on
lending originated at above 80% Loan to Value to
mitigate potential losses.
Low or flat economic growth combined with higher
inflation (leading to further commercial property/BTL
tenant failures).
We have a well-resourced and highly experienced
team dealing with commercial property and BTL
mortgages and, as has been the case throughout the
year, work with borrowers and agents to lessen the
impact.
Capital risk
Rules for calculating capital (amount required and/or
amount held) are changed.
Maintain regular dialogue with the regulator and
ensure full understanding of, and compliance with,
the relevant (existing and future Basel 3.1 and Small
Domestic Deposit Taker regimes) rules.
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Principal risks and uncertainties
(continued)
Principal risk category
Principal external threats
Society response and mitigants
Liquidity risk
Intensification of competition for retail and
wholesale funding.
Following the failure of US mid-size banks in 2023,
rules for calculating liquidity (amount required and/or
amount held) are changed.
We continue to demonstrate the ability to attract
new retail deposits this year. We also have access to
a diverse range of other funding sources, including
wholesale options and funding provided through the
Bank of England’s Sterling Monetary Framework.
Scenario and stress testing is undertaken to
assess the requirements over several different
time horizons. This is also complemented by RST
to identify the circumstances that put us into an
unviable position, i.e. liquidity falls below minimum
regulatory requirements.
Margin compression risk
Reduction in returns from residential tracker
mortgage assets whose rate is linked to Bank Rate
with no floor.
We don’t originate any new residential tracker
mortgages and we’re managing down our Bank Rate
Tracker book, replacing this with administered rate,
or SONIA-linked assets.
A relative increase in funding costs affecting variable
rate retail funding, and particularly the administered
rate retail balances.
We’ve embedded into the Risk Management
Framework, a Margin Compression Stress (MCS)
model. The MCS model quantifies what could
happen to NIM following an increase in funding
costs exclusively outside of other benchmark rates
(Bank Rate and SONIA) and returns earned on
existing mortgage assets (which are mostly linked to
benchmark rates through swaps).
Market risk
The risk of a reduction in our net interest margin or
economic value because of unexpected movements
in interest rates.
We operate within Board approved limits and monitor
the exposure to unexpected movements in rates or
the yield curve through ALCo.
Falling HPI, leading to a reduction in the book value
of WBHL properties.
No new homes have been added, containing the
exposure, and properties continue to be sold where
appropriate.
Operational risk
Single points of failure are identified, potentially
impacting on critical and important business
services.
We maintain an operational resilience framework to
prevent, adapt, respond to, recover, and learn from
operational disruptions. Scenario analysis is also
undertaken to identify vulnerabilities.
A significant business continuity event.
Detailed business continuity plans are in place, which
are regularly tested and supported by scenario
testing.
Investment in core technology introduces execution
risk with the benefits being delayed or not delivered.
We have a robust change management framework in
place with regular updates provided to our Board.
Insurance arrangements do not sufficiently cover an
event (requiring us to pick up the cost).
The annual review of insurance arrangements
is based on advice from brokers and an annual
benchmarking exercise.
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Principal risks and uncertainties
(continued)
Principal risk category
Principal external threats
Society response and mitigants
Cyber risk
One or more of our IT systems are attacked for the
purposes of financial gain, theft of data or to cause
disruption or negative exposure and threaten the
security of members’ information, and the availability
of the services offered to them. Cyber-attacks,
including those done through phishing, malware,
ransomware or supply chain attack, remain a
significant risk for financial institutions.
We recognise the need to maintain and develop our
defences and responses in this area to protect us and
maintain the trust of members and the confidence of
regulators. We have a robust Cyber Security Strategy
and RC is kept updated as to the maturity of our
cyber defences and controls and a Chief Information
Security Officer has been recruited to develop these
further.
Conduct risk
Actions of third party and outsourced suppliers
leading to adverse customer outcomes.
A robust supplier framework is in place to oversee
the activities of key suppliers. The conduct risk
appetite metrics monitoring is reported to RC.
Business conditions and the
economic environment
The UK’s economy is showing steady growth, though
the unpredictable global trade and geopolitical
situation adds some uncertainty about what’s next. We
face some challenges, like inflation still running a bit
higher than desired and external shocks impacting the
economy. Concerns over government borrowing remind
us of the need to carefully manage public finances to
keep things stable and sustainable in the long run.
The inflationary environment has changed over the year,
which has allowed the Bank of England to lower interest
rates from 5.25% to 4.5% as at 31 March 2025. However,
price and wage pressures are still a bit high, so inflation
remains above the 2% target. Mortgage rates have
dropped, but affordability and the cost of living are still
tough for many. Some people may face higher interest
rates when renewing their mortgages. While mortgage
arrears remain low, we’ve improved our support for
borrowers, offering more personalised and proactive
help.
Our focus is entirely on the UK, and the state of the UK
economy plays a key role in our success. We regularly
assess the risks of the broader economic environment
– whether things are stable, stressed, or improving – to
understand and manage their impact.
External factors that affect us include:
• Interest rates (like the Bank of England rate and
other market rates).
• Inflation.
• Unemployment.
• The residential housing and commercial property
markets.
For information on climate risk our Climate-related
Financial Disclosures are shown on pages 41 to 49.
David Thomas
Chair of Risk Committee
28 May 2025
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Climate-related
Financial Disclosures
Climate change continues to
be one of the most significant
long-term risks facing the
financial system.
We recognise the importance of managing the
financial risks linked to climate change, and we’re
committed to playing our part in the transition to a
more sustainable future.
We’ve been working since 2019 to strengthen how
we identify, assess and respond to climate-related
risks and opportunities. This includes both physical
risks, such as the potential impact of flooding and
extreme weather on mortgaged properties, and
transition risks, which arise as the UK economy
moves towards Net Zero.
Our disclosures follow the Task Force on Climate-
related Financial Disclosures (TCFD) framework,
covering governance, strategy, risk management,
and metrics and targets. We’re also aligned with
regulatory requirements set out in the Companies
(strategic report) (Climate-related Financial
Disclosure) Regulations 2022 and continue to
meet the expectations of the Prudential Regulation
Authority’s (PRA’s) Supervisory Statement SS3/19.
We know there’s more to do, but we’re committed
to continuing this work in a transparent
and responsible way - supporting people,
understanding the risks to our business, and
contributing to a fair and orderly transition.
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Governance
Our approach to climate governance ensures clear
oversight and accountability for the management
of climate-related financial risks. The governance
framework supports informed decision-making, clear
lines of responsibility, and continuous improvement
in line with evolving regulatory expectations.
Board and committee oversight
Our Board has overall accountability for our
climate-related risks and opportunities. Oversight of
these matters is delegated to the Risk Committee,
which sets the risk appetite for climate change
and receives regular updates on climate-related
risk exposure, emerging issues, and regulatory
developments. The Audit Committee is responsible
for reviewing external climate disclosures, ensuring
they meet regulatory expectations and reflect a true
and fair view.
Executive responsibility
The Chief Risk Officer (CRO) holds the designated
Senior Management Function for climate financial
risk. The CRO chairs the Executive Risk Committee
(ERC), which provides executive-level oversight
of climate-related matters, including review of
the Climate Change Risk Management Framework
(CCRMF), key risk indicators, and stress testing
outputs. The ERC also reviews proposals relating to
climate risk appetite and escalates these to the Risk
Committee for approval.
Day-to-day responsibility
The Credit Risk team is responsible for managing
climate-related financial risks on a day-to-day basis.
They consider the implications of the risk in our
mortgage portfolios and integrate these risks into
underwriting practices and wider credit assessments.
Training and awareness
We recognise the importance of building internal
capability across the Society. Climate-related training
is embedded in our wider colleague engagement,
including the development of our Climate Champions
Network - a group of volunteers from across the
business who share insights, support awareness, and
encourage environmental responsibility in their teams.
We remain committed to strengthening climate
knowledge at every level of the Society, supporting
better decision-making, more effective risk management,
and progress towards our Net Zero ambitions.
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Strategy
Our climate strategy aligns with our Purpose as
a member-focused mutual. During the year, we
continued to take meaningful steps to address both
the risks and opportunities climate change presents
to our business model, while also supporting the UK’s
wider goal of reaching Net Zero.
Climate-related risks
The following table shows our initial assessment of
the climate-related risks we face. This is informed by
internal expertise and external data and will evolve over
time as our understanding and capabilities develop.
Climate risk assessments are integrated into the
broader risk management framework and reviewed
regularly to ensure they reflect changes in climate
science, regulatory expectations, and market behaviour.
Risk category
Risk summary
Significance
/Impact
1
Ability to
control
2
Horizon
term risk
3
Business risk
‘Green’ competition in the mortgage lending
and retail deposit space.
Low
High
Short
Increasing frequency of environmental perils
could affect the delivery of 3rd party goods
& services.
Low
Medium
Long
Increasing supply chain costs due to climate
related inflationary pressures.
Low
Medium
Medium
Credit risk
Flood/subsidence risk materialising which
impacts property values and subsequent
losses to the Society.
Low
Medium
Long
Higher energy efficiency standards for BTL
properties may affect our BTL/Ltd Co. BTL
books, Commercial Real Estate (CRE) and
West Bromwich Homes (WBH) book.
Medium
High
Medium
Operational risk
Business continuity events as a result of
increasing frequency and severity of weather
events (Head Office, branches, suppliers).
Medium
Medium
Long
Increased cost base (insurance, energy etc).
Low
High
Medium
Supplier/third-party operational risk due to
climate events, or sourcing of supplies from
entities with poor climate change disclosures
or strategy.
Medium
Medium
Medium
Market, liquidity,
funding risk
Market/liquidity shocks in response to a
specific weather event or repricing for
new information causing disruption and
volatility in specific asset categories, sectors,
individual names or regions.
Medium
Medium
Medium
Retail and wholesale participants only
funding/dealing with firms with strong
environmental credentials.
High
Medium
Short
Higher haircuts on Bank of England pledged
collateral with low energy efficiency ratings.
Medium
Medium
Medium
Savings balances eroded to fund, for example
property retrofits or replace income due to a
climate related macroeconomic impact.
Medium
Medium
Medium
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Risk category
Risk summary
Significance
/Impact
1
Ability to
control
2
Horizon
term risk
3
Conduct risk
Potential for borrowers with significant
uninsurable flood or subsidence risk, or
poorer EPC rated properties to become
mortgage prisoners/face a ’Brown’ discount.
Low
Medium
Long
Inappropriate incentives for green products.
Medium
High
Short
Potential liability and conduct risks from
green propositions and assumed advice.
Low
High
Long
Regulatory & legal
Inadequate or inaccurate climate risk
disclosures on past or anticipated events.
Medium
High
Long
(Possible) capital add-ons for lack of
governance and control of risks.
Medium
High
Medium
Reputational risk
Foreseeable, material risks left undisclosed.
High
High
Medium
Society seen as not proactively addressing
risks, but rather responding reactively to
regulation and guidance or “greenwashing”.
Medium
Medium
Medium
Managing climate risk in lending
Climate considerations are integrated into our lending
policies. We apply additional scrutiny where properties
are in areas with high flood risk or have low Energy
Performance Certificate (EPC) ratings, as part of the
property valuation and risk assessment process.
Climate-related opportunities
The transition to a low-carbon economy presents
opportunities for us to support people in improving
the energy efficiency of their homes. We continue to
explore new ways to engage and educate members
on energy efficiency measures, and are collaborating
with suppliers, industry bodies, government, and
regulators to share knowledge and support wider
sector progress.
Scenario analysis
Scenario analysis plays a central role in assessing the
resilience of our strategy to climate-related risks.
We adopt a proportionate approach that reflects the
nature of our business and the long-term time horizons
over which climate risks may materialise.
Our current focus is on physical climate risks, including
flooding and subsidence, across the mortgage
portfolio. These assessments draw on modelling
developed in partnership with 4most Analytics
Consulting, using UK-specific pathways based on the
Met Office Representative Concentration Pathways
(RCPs). We explore a range of future outcomes,
including low – less than 2
o
C warming (RCP 2.6), high
– warming of 5
o
C (RCP 8.5), and interpolated medium
emissions scenarios, consistent with the UK Climate
Change Risk Assessment 2017 (CCRA2017).
1
Significance/Impact is based on the risk drivers crystallising.
2
Ability to control reflects the extent of mitigation that can be applied by the Society
3
Horizon Term risk is defined by Short (1-2 years), Medium (3-4 years), and Long (5 years or more).
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Across all modelled scenarios to 2080, exposure to
physical climate risk remains modest. For instance,
under the high-emissions scenario, flood risk
increases slightly by 2050, but the projected impact
on expected losses is limited. The flood risk profile,
based on the mortgage portfolio as of 31 March
2025, is shown below.
Net zero
Our climate change target aligns with
the UK’s net zero goals:
• To achieve net zero emissions by 2050,
with aspiration to become carbon negative
(removing more carbon dioxide from the
atmosphere than is emitted).
To reduce our operational emissions, we use
renewable energy across all branches and Head
Office. Our company vehicle fleet is fully electric,
and further measures are under consideration,
including the potential installation of solar panels and
improvements to our lighting systems. We continue
to collect and refine operational emissions data to
support credible reporting.
In 2025, we’re carrying out a full carbon foot printing
exercise to better understand our baseline emissions
across all areas of the Society. This work will lay the
foundations for setting clear, measurable interim
targets and developing a credible plan to reduce
emissions over time.
We recognise that our journey towards a greener
future is still in its early stages. As standards and
best practice continue to evolve, we will refine our
targets, develop transition plans, and evolve our
disclosures to reflect emerging expectations.
Subsidence exposure is also low, with modelling
indicating limited financial impact even under
adverse climate outcomes.
These insights inform long-term strategic planning
and financial planning. We are now exploring ways to
expand this analysis to incorporate transition risks,
such as policy and market changes.
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
None
Medium
Low
High
0.4%
1.9%
4.7%
93.0%
Surface
River
3.2%
4.4%
14.6%
77.9%
Number of properties
Risk Level
Distribution of Risk – England
& Wales
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Risk management
Climate change introduces uncertain and potentially
irreversible risks. These risks can be physical (such as
flooding and subsidence) or transition-related (for
example, linked to changes in policy or regulation) and
may develop over short, medium, or long timeframes.
While the precise impacts are hard to predict, we
recognise the financial implications are likely to
increase over time.
We manage climate-related risks in line with
expectations from the PRA, the FCA, and the TCFD.
Our approach is proportionate to the Society’s
business model and the nature of the risks we
face. We aim to balance managing financial risks
in and emerging and uncertain area while avoiding
unintended consequences. This approach will continue
to evolve as the regulatory landscape and industry
best practice develop.
Climate change isn’t currently considered a Principal
Risk for the Society. This is based on our modelling,
which shows modest financial impacts from future
physical risks such as flooding and subsidence.
However, we treat it seriously as a sub-risk under
Business Risk, with ongoing oversight from our Board.
To support this, we have a Climate Change Risk
Management Framework (CCRMF) which helps us
identify, assess and manage climate-related financial
risks and ensures we stay aligned to our strategy and
risk appetite.
Use of scenario analysis
Scenario analysis is a core tool in understanding
how climate-related risks may affect our mortgage
portfolio over time. We assess both physical risks,
such as flooding, subsidence, and coastal erosion,
and transition risks, including those related to Energy
Performance Certificate (EPC) ratings.
Physical risk modelling uses the Met Office
Representative Concentration Pathways (RCPs),
aligned with Intergovernmental Panel on Climate
Change (IPCC) scenarios. We apply low (RCP 2.6), and
high (RCP 8.5) emissions scenarios, with a medium
emissions pathway interpolated between the two. Risk
trajectories are benchmarked against the UK 2017
Climate Change Risk Assessment (CCRA2017), with
projected impacts modelled to 2080 using a static
balance sheet.
These exercises are integrated into our wider risk
and capital planning and are reviewed by senior
management and our Board. Our approach is aligned
with Bank of England expectations, and we continue
to refine this work as new data sets and guidance
become available.
Risk appetite
We’ve defined a clear risk appetite for climate-related
financial risk:
“We will ensure that the impact of physical and
transition risks on our exposures do not give rise to
potential losses that threaten our business model, or
compromise our current or future viability.”
This statement is reviewed annually and has
not changed.
How we identify and assess climate-related risks
We assess risk across three main areas:
Market-wide risks
These include new regulation or energy
efficiency rules that affect the wider
financial sector or mortgage market.
These could lead to increased credit
losses in the future.
Idiosyncratic risks
These are specific to our own exposures.
For example, buy to let properties may
be affected by tighter EPC standards,
reducing property value or rental
income.
Emerging risks
We keep a close watch on the external
environment to identify new risks
early, including shifts in climate policy,
regulation or customer behaviour.
How we manage climate-related risks
We apply the following principles to managing these risks:
Regulatory
compliance
We align with the PRA’s Supervisory
Statement (SS3/19), FCA disclosure rules,
and other relevant requirements.
Proportionality
Our response is tailored to our size and
complexity, and reflects the specific
nature of our climate-related exposures.
Governance and
policy alignment
Any changes to how we manage risk (for
example, lending criteria) must follow
our approved governance and policy
processes.
Best practice
We actively consider insights and
recommendations from the Climate
Financial Risk Forum (CFRF), BSA and
other sector groups to improve our
approach.
Resilience in stress
We test whether our risk management
would be effective in a range of stress
events – whether sudden (e.g. flash
flooding) or longer-term.
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Metrics and targets
Operational emissions
We measure our greenhouse gas emissions in line
with the Streamlined Energy and Carbon Reporting
(SECR) framework, as implemented by the Companies
(Directors’ report) and Limited Liability Partnerships
(Energy and Carbon Report) Regulations 2018.
•
Scope 1
emissions cover direct emissions
from sources we own or control, including the
combustion of natural gas and fuels used in our
electric vehicle fleet.
•
Scope 2
emissions are indirect and relate to the
electricity we use in our day-to-day operations.
Location-based emissions
Scope 1 (natural gas) emissions saw a decrease in
2024/25 compared to 2023/24, owing to a conscious
effort to reduce emissions through adjusted plant
running times. Scope 2 (electricity) emissions saw a
slight increase, reflecting higher activity across our
estate as we continue to move away from
pandemic-related operational patterns.
*To ensure accuracy of our emissions reporting we use actual
consumption data where available. Due to issues outside our control,
4.67% of our Scope 2 energy data (kWh) for 2024/25 is based on
extrapolated values, calculated in line with industry best practice.
Monitoring and oversight
We track climate-related risks using a set of metrics
and management information, which is reported twice
a year to the Risk Committee. This includes metrics
on flood and subsidence exposure and the energy
efficiency of properties across our mortgage portfolio.
Based on current data and modelling, our exposure
to financial losses from physical and transition risks
remains modest. However, we remain vigilant as the
climate risk landscape evolves and we’ll continue to
strengthen our understanding and response over time.
Market-based emissions
All the electricity we purchased between April 2024
and March 2025 was 100% renewable, sourced
through REGO-backed contracts. We’ve applied an
emissions factor of 0.00 tCO₂/kWh to reflect this.
Location-based emissions (tCO
2
e)
2024/25
2023/24
Scope 1
Gaseous and other fuels
129.3
187.9
Transport (owned)
0.0
0.0
Scope 2
Buildings electricity
449.4*
443.8
Total Scope 1 and 2
578.7
631.7
Market-based emissions (tCO
2
e)
2024/25
2023/24
Scope 2
Buildings electricity
0
0
Total Scope 2
0
0
Net Zero targets
Operational targets
• To achieve net zero emissions by 2050,
with aspiration to become carbon negative
(removing more carbon dioxide from the
atmosphere than is emitted).
We’re committed to achieving Net Zero emissions
from our operations by 2050 and have an aspiration
to go further by becoming carbon negative. As well
as Scope 1 and 2, this includes Scope 3 emissions
which encompass indirect emissions generated
from upstream and downstream activities. For the
Society, the most significant element will be the
emissions from properties we have financed.
Since 2020, we’ve taken meaningful steps towards
this goal and in 2025, we’re completing a full carbon
foot printing exercise. We recognise that tackling
Scope 3 emissions, particularly those linked to
financed emissions, is where we can make the
biggest impact. While we may need to use offsetting
in the future, our priority remains on real emissions
reduction wherever possible.
Physical risk metrics
We assess flood and subsidence risks across our
mortgage portfolio using a climate scenario model
that estimates the additional ECLs we could face
due to climate impacts over different time horizons.
These models cover river, coastal, and surface
flooding and consider high, medium, and low
emissions scenarios. The model adjusts property
values to reflect potential costs related to flood and
subsidence risks and assesses how these risks may
affect the likelihood of borrowers falling into arrears.
These factors are then used to calculate the increase
in credit losses attributable to climate risk.
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Flood risk
Our modelling has produced the following outputs for
future flood-related ECLs across England and Wales.
Subsidence risk
Subsidence risk remains low under both the 2030 and
2070 scenarios.
Overall, we believe our exposure to physical climate
risk remains limited. Even under high-emissions
scenarios, the projected increase in credit losses
is modest. There’s currently no material impact on
our financial statements because of physical risk.
However, we’ll continue to monitor climate outputs
and consider mitigation actions if risks become
material in the future.
Transition risk metrics
We use Energy Performance Certificate (EPC) data
to assess our exposure to transition risk, particularly
those risks linked to energy efficiency standards and
government policy.
As of 31 March 2025, the average EPC rating across
our residential mortgage portfolio is D. We’ve
successfully matched EPC ratings for most of the
portfolio using government data and estimation
models, giving us visibility over 98% of the book.
2025
Additional flood risk
related expected loss £m
Low
Medium
High
0.33
0.42
0.51
2030
Additional flood risk
related expected loss £m
Low
Medium
High
0.35
0.46
0.57
2050
Additional flood risk
related expected loss £m
Low
Medium
High
0.43
0.60
0.79
2080
Additional flood risk
related expected loss £m
Low
Medium
High
0.51
0.76
1.02
Subsidence cost
assumptions (£m)
2030
2070
“High cost” scenario –
average cost £40,000
0.07
0.16
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We’re aiming to improve the average EPC rating of
our mortgage portfolio to a C by 2028. While we
recognise that achieving this goal relies on continued
Government support and wider policy shifts, we’re
committed to taking action within our control. For the
portfolio of rental properties we own, the EPC rating is
C or better for 98.5% of the properties.
We’ll continue to explore how we can best support
borrowers to improve the energy efficiency of their
homes and are closely monitoring developments in
the policy landscape. Although we’re focused on the
positive steps, we can take to support a just transition,
we acknowledge that the scale of the challenge
facing the UK’s housing stock is significant. Reaching
our 2050 Net Zero ambition will require coordinated
action across the sector, underpinned by meaningful
policy change, and targeted government intervention.
David Thomas
Chair of Risk Committee
28 May 2025
Current EPC rating
Potential EPC rating
EPC Rating
Total
%
Owner Occupied
%
Buy to let
%
Total
%
Owner Occupied
%
Buy to let
%
A
0.9
1.1
0.0
14.8
17.8
2.5
B
17.9
20.8
6.0
43.9
44.5
41.2
C
22.0
19.8
31.1
25.1
22.6
35.4
D
43.7
42.8
47.6
14.0
13.0
18.2
E
13.0
12.8
13.6
2.0
1.9
2.4
F
2.1
2.2
1.4
0.2
0.2
0.2
G
0.4
0.5
0.3
0.0
0.0
0.1
Average
D
D
D
B
B
C
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Corporate
Governance
report
This report outlines how the Society’s managed
in the interest of our members and highlights the
role, constitution and governance framework of
the Board and Committees. The report gives a
detailed explanation of the following:
• Governance structure.
• Board.
• Executive Committee.
The UK Corporate Governance Code seeks to
establish the best governance practices across
companies whose shares are listed. As a mutual
organisation, the Society isn’t required to comply
with the UK Corporate Governance Code (the
Code). However, the Board pays due regard to it
when establishing and reviewing our corporate
and governance arrangements.
The Building Societies Association states that
the role of a building society Board is typically
seen as one of stewardship, running a society
not just for the benefit of current members,
but also for future generations of members.
The notion of stewardship demands a
long-term perspective on financial stability,
member propositions and investment.
Therefore, the focus in the Code on Boards’
promoting long-term sustainable success
supports our mutual ethos.
Governance framework
Our Governance framework supports best
governance practices within the Society to
help the Board do its job it is supported by
several Committees.
Tier 1 Committees are run by a Non-
Executive Director or Chair. Further
information on each Committee can be
found in the Committee reports.
Tier 2 Committees and Groups are run
by an Executive Director or one of the
Executive Committee.
ExCo
Executive Committee
TIER 2
TIER 1
ERC
Executive Risk
Committee
Board
Remuneration
Committee
Audit
Committee
Nominations
Committee
Risk
Committee
CRCRG
Conduct
Risk &
Customer
Review
Group
ORRG
Operational
Risk &
Resilience
Group
CLRG
Commercial
Loans Risk
Group
PCG
Product
Consideration
Group
RCG
Residential
Credit
Group
SIG
Strategic
Investment
Group
ALCo
Assets &
Liabilities
Committee
CRG
Capital
Review
Group
ISF
Information
Security
Forum
MRG
Model
Risk Group
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John’s an experienced board member having served
on boards across financial services, public and private
sectors, not-for-profit, and private-equity backed
businesses. He also has experience chairing purpose-
led organisations – having been Chair of Good
Energy for over six years. John’s currently Chair of
Allica Bank, Non-Executive Director of Nordea Bank
and Chair of Max Nicholas Renewables.
John was previously on the Board of Trustees for the
National Citizen’s Service Trust and in recognition of
this role was awarded an MBE in 2022.
Lynne has over 30 years’ experience within HR.
Working within the energy and financial services
industries, this has included HR Director roles
across Retail, Business and Corporate Banking and
across global regions.
In January 2022 she joined the Board of Trustees
for Action for Children, helping children grow up
safe and happy.
She was awarded an MBE in 2017 for services
to HR in banking, for the work of herself and her
team in driving apprenticeships and other inclusive
working programmes.
The Board
John Maltby
– appointed January 2021
Chair of the Board
Committees
– Chair of the Nominations
Committee and member of Remuneration
Committee
Lynne Atkin
– appointed May 2025
Non-Executive Director
Committees
– Member of Risk,
Remuneration and Nominations Committees
The Board has a wide range of skills, its main
role is to shape the strategy and ensure
adequate resources are in place to achieve
our Purpose. Our Board’s responsible for:
• Setting clear goals and defining how
much risk the Society is willing to take.
• Building and maintaining strong
systems that help identify and manage
risks.
• Making sure appropriate financial
and people resources are in place to
achieve our objectives.
• Regularly reviewing how well the
management team is performing.
• Making sure our members receive a
good service and, when members give
their feedback it's addressed and any
trends are monitored.
• Making sure that we comply with the
relevant laws and regulations.
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Sara has over 15 years of experience in retail
financial services, having worked in senior roles at
Nationwide and Barclays. Before that, she worked in
advertising agencies in the UK and Asia for well-
known brands. She also serves as a Non-Executive
Director on other Boards within the regulated
sector and beyond.
Manjit joined us in 2006. Before this, he was at
the Britannia Building Society for five years. In
total he has over 30 years of financial services
experience, having started his career at
NatWest Mortgage Services, and in risk related
roles since 1993.
Sara Bennison
– appointed August 2023
Non-Executive Director
Committees
– Member of Remuneration and
Risk Committees
Martin Boyle
–
appointed April 2023
Chief Operating Officer
Committees
– Member of Executive and
Executive Risk Committees
Manjit Hayre
–
appointed September 2021
Chief Risk Officer
Committees
– Chair of Executive Risk
Committee, member of Executive and Assets
& Liabilities Committees
Martin’s an experienced change and operations
leader with extensive retail banking expertise, most
recently as Chief Transformation Officer at Metro
Bank Plc, where he sat on the Group Executive
Committee. He’s also held senior roles at Nationwide
and Portman building societies, Visa Europe and
Accenture.
Martin has a wealth of experience leading
transformation and managing large-scale operations.
He’s responsible for modernising and digitising our
infrastructure and operations to better serve our
current and future customers.
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Lynne previously held the position of Chief Financial
Officer at Virgin Care and before that Global
Finance Director of Christie’s, the international
auction house. She’s held a variety of senior finance
and management roles at Centrica plc, British
Gas, Goldfish Bank plc and Alliance & Leicester
plc. Lynne is a Director and Chair of the Audit
Committee of Antin Infrastructure Partners and a
Director and Governor of the Southbank Centre.
She’s also a fellow of the Institute of Chartered
Accountants in England and Wales.
Lynne Shamwana
–
appointed February 2019
Non-Executive Director
Committees
– Chair of Audit Committee and
member of Nominations (until 31 January 2025)
and Risk Committees
Alex joined our Board having been promoted to
Chief Financial Officer after spending the preceding
six years in different roles in the Society’s Treasury
and Finance team. Prior to joining the West Brom,
he spent over a decade working for Deloitte,
where he qualified as a Chartered Accountant, and
specialised in the financial services sector.
Alex Pawley
– appointed January 2023
Chief Financial Officer
Committees
– Chair of Assets & Liabilities
Committee, member of Executive and
Executive Risk Committees
Nimisha is a highly experienced executive leader
with over 23 years of experience in technology,
digital transformation, and cyber security. She’s
made a significant impact across both private
and public sectors, including financial services,
healthcare, energy, and automotive manufacturing.
She’s currently the Group CIO at Mishcon de
Raya. Nimisha was Chief Digital and Information
Officer for Bupa and HM Cabinet Office. She was
also on the Board of Bank North, where she was a
member of the Bank’s Audit, Risk and Remuneration
Committees.
Nimisha Patel
– appointed June 2024
Non-Executive Director
Committees
– Member of Audit,
Nominations and Risk Committees
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David has a wealth of experience in general and risk
management, internal audit and regulatory activities.
His previous roles include Chief Risk Officer at
SMBC, EMEA Region, Chief Risk Officer at RBS Plc,
Corporate Banking Division and Managing Director
responsible for Ulster Bank’s Corporate and SME
business in Ireland.
Jonathan has spent over 40 years in financial
services, mainly in the building society sector.
He served as Finance Director at two building
societies before joining the West Brom Board,
initially as Finance Director and Deputy Chief
Executive. He was appointed as Chief Executive
Officer in May 2011. Jonathan is also a past Chair
of the Building Societies Association and currently
serves as a Non-Executive Director of Livv
Housing Group.
David Thomas
–
appointed August 2020
Non-Executive Director
Committees
– Chair of the Risk Committee and
member of Remuneration, Nominations (from 1
November 2024) and Audit Committees
Jonathan Westhoff
–
appointed May 2009
Chief Executive
Committees
- Chair of Executive Committee,
Chair of the Employee Council, Member
of Assets & Liabilities and Executive Risk
Committees
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Jonathan Westhoff
Chief Executive
Martin Boyle
Chief Operating Officer
Sarah Teague
Chief Internal Auditor
Alex Pawley
Chief Financial Officer
Alex Windle
Chief Customer Officer
Manjit Hayre
Chief Risk Officer
Sophie Pazzaglia
Chief People Officer &
Group Secretary
The
Executive
Committee
The Executive Committee,
led by Jonathan our CEO,
is responsible for the
delivery of the Society’s
strategy and the day to
day operations.
Meet the
Executive
Committee
An overview of our
Executive Committee
is available on our
website.
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We’re committed to a high level of Corporate
Governance and follow the 2018 UK Corporate
Governance Code (the Code). On 22 January 2024,
a revised 2024 Code was published which applies to
listed entities with accounting periods commencing
on or after 1 January 2025. The principal changes are
those around internal controls, in particular, Principle
O and a new Provision 29, effective from 1 January
2026, which asks boards to make a declaration in
relation to the effectiveness of their material internal
controls. We’re currently working to evaluate how this
is incorporated in future reporting.
This section explains to our members how we’ve
complied with the principles and the Code so far as
its provisions are relevant to building societies. Any
non-adherence to the Code has been listed at the end
of this report.
Board leadership
The responsibilities of our Board include setting the
purpose, values and strategy, ensuring they are aligned
to our objectives, providing the leadership to put them
into effect, monitoring performance and reporting to
members on their stewardship.
The Board meets regularly to fulfil its responsibilities.
They met 10 times last year, details on who attended
Board and Committee meetings are in a table at the
end of this report.
At every Board and Committee meeting, minutes are
taken capturing all important discussions and any
challenges that have been raised. These minutes are
shared with all Directors. At the next Board meeting,
the Chair of each committee updates everyone on the
key points discussed.
We’re owned by our members, therefore, regular
feedback from our members is sought in several ways
which can be found in the strategic report on pages 6
to 29 and the Corporate Governance report on pages
51 to 63.
Colleagues can raise any concerns they may have. We
operate an ‘Open door’ (‘Whistleblowing’) policy, which
is in line with the Public Interest Disclosure Act 1998.
Colleagues can get in touch with the Chief Executive
(CEO), Chief People Officer and Group Secretary and
the Chief Compliance Officer by email, phone, or face
to face. They can also leave an anonymous message
on a dedicated phone line, or get in touch with Lynne
Shamwana (Chair of Audit Committee),
our whistleblowing champion.
The Audit Committee reviewed a report on
whistleblowing incidents over the past 12 months.
There was no evidence of any issues with financial
reporting or anything else covered by the Public
Interest Disclosure Act 1998.
Division of responsibilities
The Chair is responsible for leading our Board, making
sure there are plans in place for the future and
development. They set clear rules to guide decision-
making and manage its activities, making sure the right
committees are formed. They also chair the AGM and
represent the Society with the regulators.
The Board delegates responsibility for framing
and, after approval, implementing strategy and
the management of the day-to-day operation of
the Society to the CEO. The Executive Committee
supports the CEO in carrying out their role. The CEO
reports to the Board at each meeting. The Chair also
has access to the Group Secretariat for advice and
support. The Chief People Officer and Group Secretary
advises the Chair and Board on governance matters,
policies and procedures.
Executive Committee
The CEO leads the Executive Committee which is
responsible for management and oversight of all
matters related to the Society on a daily basis.
Board Committees
Risk Committee
The Risk Committee is responsible for evaluating
and assessing risk appetite and tolerance, reviewing
the management of principal risks within the Risk
Management Framework (RMF), reviewing our risk
profile, considering the key risk issues we face
and ensuring the independence of the Risk and
Compliance functions.
Audit Committee
The Audit Committee is responsible for monitoring
the integrity of financial reporting, the effectiveness
of internal controls, and the independence and
effectiveness of internal and external audit.
Nominations Committee
The Nominations Committee regularly reviews our
Board and Committee structures. They do this to
make sure they’re the right size and they have the
right skills and experience to oversee our business
activities and objectives.
Our Non-Executive Directors commit at least 30
days each year, while the Chair and Chairs of Board
committees commit additional time.
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Remuneration Committee
The Remuneration Committee is responsible for
overseeing the remuneration arrangements for the
Society’s Executive Directors and senior leadership,
setting overarching principles and policy for
remuneration and reward within the Society, and
the design and operation of performance related
incentive plans.
Our Directors have access to independent
professional advice should they need it.
Composition, succession and
evaluation
The Nominations Committee is responsible for the
recruitment of our Board members and Executive
Committee.
More details are included in the Nominations
Committee report on page 64.
Audit, risk and internal control
The Board is responsible for developing strategies
relating to risk management and internal control.
The day-to-day responsibility sits with the Executive
Directors and senior managers. Risk management
systems and internal controls are designed to help
achieve our objectives and stay in line with the Risk
Appetite Statements while systems and controls are
implemented to mitigate and manage risk.
More information can be found in the Audit
Committee report on pages 65 to 67 and the risk
management report on pages 31 to 40.
Remuneration
More information can be found in the Remuneration
Committee report on pages 68 to 76.
Operational resilience
The Board has considered the Operational Resilience
of the Society through Business Continuity planning.
The Board has been kept up to date of changes
made to processes within the Society to improve
resilience and ensure we’re compliant with regulatory
requirements and has received regular updates on
the ongoing enhancement of our IT infrastructure,
Information Security and process automation. The
Board reviews the annual Operational Resilience
Self-Assessment which provides a robust view of the
resilience of our important business services to severe
but plausible disruption, and the necessary steps to
ensure those services can be recovered before causing
intolerable harm to members.
Liquidity and capital management
The Board has evaluated extensively our assessment
of capital and liquidity requirements to ensure ongoing
financial security. The Board continues to monitor the
availability of funding markets (retail and wholesale) to
enable us to achieve our strategic objectives.
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Evaluation of the Board and its
effectiveness
The previous external Board effectiveness review
was conducted by New Street Consulting Limited in
the year ended 31 March 2024 and concluded that
the Board and its sub-Committees were operating
effectively. The Chief People Officer and Group
Secretary undertakes an annual Board Effectiveness
Review as part of compliance with the Code.
Engagement with our members and
other stakeholders
As a member-led organisation, we’ve always placed
emphasis on the relationship with our members and
other stakeholders over the years and continue to do
so. The Member Council and Employee Council are
a testament to the commitment to our members
and colleagues.
Our commitment to member engagement is clear
throughout this report. The table shows how member
views are considered in Board decisions.
Stakeholders
How the Board considers views when
making decisions
Other ways we make sure views are
considered
Society members
The Member Council, set up in 2019, helps the
Board make sure our long-term strategic decision
making considers the views of our members.
Through the year, the Council held three
meetings, chaired by the CCO, with the CEO
and one of the Non-Executive Directors in
attendance.
In November the Member Council refreshed
its membership, welcoming 12 new members
representing a broad cross-section of our
member base.
• Over the last 12 months the Member Council
has supported the Board with insights into
our strategic direction, Executive Director
remuneration, refreshed brand and approach
to green mortgages.
• Every month information is given to the
Board covering our key customer metrics
including:
– Customer feedback
– Net Promoter Score.
– Complaints.
• Our customer panel has over 1,500
members. We regularly ask for feedback
to help us shape what we do. This includes
testing literature for new products to
make sure it’s clear, balanced and easy to
understand.
Colleagues
Just like the Member Council, our Employee
Council helps make sure the Board’s long-term
strategic decision making considers the views of
all colleagues.
Over the last 12 months, we held three meetings,
chaired by our CEO or one of our Non-Executive
Directors. To help strengthen the link between the
Council and the Board, one of our Non-Executive
Directors also attends the Council. It discussed
broadly the same topics as our Member Council.
• Regular colleague surveys give colleagues the
chance to have their say on our key operational
matters.
• Our colleague-led Connect group promotes
equity, inclusion and diversity. Further details
can be found on page 18 of this report.
• WeBe, our intranet platform, is a place where
our colleagues, including our executive team,
can have open and honest conversations. All
colleagues can stay connected and share ideas,
creating a more inclusive workplace.
Communities
As a regional building society, our strong
community relationships play a key role in making
us a sustainable business that truly cares about
the communities we serve.
In June, Birmingham-based charity Jericho was
selected as our charity partner for the year. Its
mission is to support people into long term jobs
and a brighter more secure future – a mission that
is wholly aligned to our own Purpose.
Over the last 12 months our Charitable
Foundation has continued to work alongside
Barnardo’s to deliver the Birmingham Gap Homes
project. This will support young care leavers into
sustainable housing, enabling them to have a
more secure future.
The Board gets regular updates on our community
activities.
• We provide much-needed funding to local
charities and community through grants made
by the Mercian Community Trust. This funding is
enabled by members saving into our Community
Account affinity product. In the last year we
have supported 43 local causes through this
grant scheme.
• We support various community needs through
fundraising and volunteering and deliver
financial education sessions to local schools and
colleges, helping students feel more confident
about managing money.
More information on how we’re supporting our
communities can be found on page 17 of our
strategic report.
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Stakeholders
How the Board considers views when
making decisions
Other ways we make sure views are
considered
Wider stakeholder groups
The Board gets regular updates on the
relationships we have with our wider stakeholder
groups including:
• Mortgage brokers and third-party suppliers.
• Relationships with wholesale investors,
which are overseen by the Assets & Liabilities
Committee.
• Regular attendance at supplier user groups
encourages a positive feedback loop between
clients and providers.
• Engaging with investors helps build strong
collaborative working relationships.
Environment
• Climate considerations are being integrated
into strategic decisions, aligning with regulatory
expectations and stakeholder priorities.
• Climate risk is embedded within our Climate
Change Risk Management Framework, with
regular Board oversight through the Risk
Committee.
• The Board receives bi-annual updates on climate
risk, assesses physical and transition risks, and
oversees the development of our Climate and
Environment Strategy.
• Sustainability principles are incorporated into
lending policies, procurement, and operational
decisions, ensuring a long-term commitment to
environmental responsibility.
• We are working to enhance our climate
disclosures, improving Scope 1, 2, and 3
emissions reporting.
• We engage colleagues at all levels through
training and awareness initiatives, including
our Climate Champions Network, which drives
sustainability action across the business.
• Through member communication, partnerships,
and industry collaboration, we ensure that
stakeholder views shape our approach to
climate and environmental responsibility.
More information can be found in our Climate-
related Financial Disclosures report on pages 41
to 49.
Regulators
The Board has an open and transparent
relationship with both the FCA and the PRA.
This includes:
• Managing actions raised from regulatory
reviews at Board level, with key updates
provided on a regular basis.
• Making sure Board members attend important
regulatory update meetings. This means
our position is considered for any emerging
developments.
• Monthly updates on key regulatory changes are
provided to the Board.
• Regular conversations with our regulatory
supervisors to cover principal risks and other
matters.
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Board
Nominations
Audit
Risk
Remuneration
Sara Bennison
10 (10)
7 (7)
4 (4)
Martin Boyle *
10 (10)
Dave Dyer
4 (4)
1 (1)
2 (2)
Anne Gunther
4 (4)
2 (2)
1 (1)
Russell Galley
8 (9)
6 (6)
4 (4)
Manjit Hayre *
10 (10)
Julie Hopes
9 (10)
5 (6)
2 (4)
4 (4)
John Maltby (Chair)
10 (10)
6 (6)
4 (4)
Nimisha Patel
6 (8)
4 (4)
3 (3)
4 (5)
Alex Pawley *
10 (10)
Lynne Shamwana
9 (10)
5 (5)
3 (4)
6 (7)
David Thomas
10 (10)
2 (2)
4 (4)
7 (7)
4 (4)
Jonathan Westhoff *
10 (10)
Attendance records – Board and Board Committee meetings
Our Board met 10 times in the last year. The table below shows each member’s attendance.
The number of meetings each was eligible to attend is shown in brackets.
* Executive Directors
Non-adherence to the Principles and
Provisions of the Code
The Code’s expectation is one of ‘Comply or Explain’.
The philosophy of the Board is to comply with the
Code and the guidance on it issued by the Financial
Reporting Council and the Building Societies
Association. As the Code was not designed for
mutual organisations, it inevitably contains sections
with which we cannot comply. The areas of non-
compliance during the year were:
• Provision 3, which requires the Chair to discuss
governance matters with major shareholders
and relay their views to the Board as a whole (as
a mutual organisation, owned by its members,
with each voting member having one vote, there
are no shareholders and therefore this specific
requirement is not relevant to us).
• Provision 36, which requires remuneration
schemes to promote long-term shareholdings by
Executive Directors (not possible for the Society
due to its mutual status).
During 2024/25, other than the points listed above,
the Board is of the opinion that we have complied with
all other aspects of the Code.
On behalf of the Board
John Maltby
Chair
28 May 2025
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<1
7
4
11
2
9
6
13
1
8
5
12
3
10
14
Board Members
Years
Board diversity
and engagement
Tenure of Board members
The Board analysis detailed
represents the Board as at
28 May 2025.
Gender split
40%
Female = 4
60%
Male = 6
Ethnic diversity
Ethnically
diverse = 2
Non-ethnically
diverse = 8
20%
80%
2
1
1
2
1
1
2
15
16
The experience and diversity of our Board is essential to achieving our Purpose.
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Advanced or higher level skills/ experience
Indirect skills/experience
7
3
The output of the ‘Boards skills and experience’ is self-assessed by each individual Director.
Board skills and experience as at 28 May 2025
1
9
Banking & Financial Services
Risk Management
Customer Insight
Technology & Data
Major change, transformation & projects
Digital Customer Experience
Accounting & Financial Reporting Oversight
CEO Experience
Corporate Governance
Strategy
Marketing & Brand
Sustainability & Environment
Community Engagement
People Strategy
4
6
6
4
4
6
3
7
3
7
5
5
2
8
2
8
4
6
3
7
3
7
2
8
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Nominations
Committee
report
• The Nominations
Committee’s
responsibilities and
activities over the year.
This report tells you about:
Purpose of the Committee
The purpose of the Nominations Committee is to
define what skills and capabilities are needed, and to
recruit and ensure the ongoing development of Board
members and the Executive Committee.
Committee membership and
responsibilities
The Committee’s made up of:
• John Maltby (Chair)
• Lynne Atkin (joined the Committee 01/05/25)
• Julie Hopes (stepped down from the Committee
28/05/25)
• Nimisha Patel (joined the Committee 01/06/24)
experience needed for the Board to continue to give
us the support we need. We’ve used specialist advisers
to support this process. Details of the appointments
that have been made can be found on our website.
Board development
There is a comprehensive induction programme for
NEDs, tailored to their individual experiences. For
example, after joining the Board, they’re invited to
visit us, have meetings with our senior management
team, and review reports on our Group’s strategy and
operations. A separate induction programme is in place
for Executive Directors. Throughout their term with us,
Board Directors continue to undertake activities which
maintain the level of skill and knowledge they need in
their roles; development logs track the activities each
Director takes part in, and each year a skill assessment
matrix is completed to identify any gaps.
NEDs usually serve on the Board for a maximum of
nine years.
All NEDs need to meet the independence criteria when
they’re appointed and throughout their time on the
Board. Each Director currently serving at the Society
is confirmed as independent in both character and
judgement, with no conflicts of interest that could
influence their decision making.
John Maltby
Chair of Nominations Committee
28 May 2025
• Lynne Shamwana (stepped down from the
Committee 31/01/25)
• David Thomas (joined the Committee 01/11/24)
All members are Non-Executive Directors. Our Chief
Executive and Chief People Officer & Group Secretary
attend meetings when they’re invited.
The Committee’s responsible for:
• Overseeing appointments and succession
planning for the Board and Executive Committee.
• Ensuring the Board is the right size and has the
skills and experience to govern the Society.
If you’d like a copy of the Committee’s terms of
reference, please email us at communications@
westbrom.co.uk
Key areas of focus
In the last 12 months the Committee met six times, and
its key areas of focus were:
• Attracting, selecting and appointing new NEDs.
• Developing and enhancing the Board’s
performance. A Board effectiveness review
was completed to make sure it is delivering
strong, effective and dynamic governance of the
Society.
• Overseeing our people strategy and how it
supports the delivery of our goals.
Non-Executive Director appointments
The Committee regularly reviews our plans for Board
succession which includes both Executive Directors
and Non-Executive Directors. With several Non-
Executive Directors due to complete their set terms on
the Board, the Committee has carefully selected new
candidates who can help drive our strategy at Board
level. To do this, the Committee looks at the skills and
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Audit
Committee
report
• The Audit Committee’s
roles and responsibilities.
• Their key focus over
the year.
This report tells you about:
Purpose of the Committee
The Audit Committee plays a crucial role in our
corporate governance, making sure our financial
statements, and compliance and risk management is
honest and fair.
Committee membership and
responsibilities
The Committee’s made up of:
• Lynne Shamwana (Chair)
• Julie Hopes (stepped down from the Committee
28/05/25)
• Nimisha Patel (joined the Committee 01/06/24)
• David Thomas
All members are Non-Executive Directors. Our Chair
and other Non-Executive Directors, members of ExCo
and the external auditors also attend meetings when
they’re invited.
The Committee also gets advice from independent
consultants when it’s needed.
The Committee’s responsible for:
• Reviewing the statements made in the annual
and half-year reports before publication.
• Making sure we’re compliant with accounting
standards and regulatory requirements.
• Monitoring and reviewing how our Internal
Audit team provide assurance regarding the
management of risk.
• Assessing the effectiveness of our internal
controls and risk management systems (including
conduct risk).
• Approving the appointment and removal of our
Chief Internal Auditor.
• Recommending the appointment or
reappointment of the external auditors at
the AGM.
• Monitoring the effectiveness of the external
auditors.
• Making sure we align to legal, regulatory and
ethical standards.
• Monitoring our whistleblower policies and fraud
investigations.
These roles and responsibilities follow the guidelines
set by the Financial Reporting Council (FRC) Guidance
for Audit Committees. If you’d like a copy of the terms
of reference for the Audit Committee, please email us
at communications@westbrom.co.uk
Key areas of focus
The Audit Committee met four times this year and
their key areas of focus were:
• Financial reporting oversight.
• Risk and internal control.
• External auditors.
• Compliance and ethical standards.
Financial reporting oversight
The committee reviewed our financial statements
and interim report. The key areas that needed more
attention are in the table on the next page.
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Area of focus
Actions taken
Loan impairment
provisions
• We reviewed the expected credit loss provisions for each mortgage portfolio under IFRS 9.
• We’ve considered the use and completeness of Post Model Adjustments.
• For commercial loans, we’ve examined exposure levels, and provision coverage for ‘at risk’ sectors.
• We’ve challenged the impairment model assumptions in different forecasts and scenario analyses.
• We confirmed credit risk disclosures were accurate and properly reported.
• We reviewed the development of updates to IFRS 9 models to make sure they continue to meet our needs.
Investment property
valuations
• We’ve made sure that our West Bromwich Homes residential properties are fair valued as per IAS 40.
• We reviewed the valuation process and the effect of any adjustments and concluded the year-end portfolio
value is well supported by market data and independent valuations of properties.
Financial instruments
(Fair value and hedge
accounting)
• We’ve made sure that the IAS 39 rules for hedge accounting are correctly applied.
• We reviewed our hedging requirements and made sure that our processes based on previous external audit
findings have been updated where necessary.
Defined benefit pension
liability
• We reviewed the key assumptions for the funded defined benefit pension scheme (see note 30).
• We’ve monitored the ‘Buy In’ that the defined benefit retirement scheme went through.
• We’ve reviewed our assumptions to calculate the retirement benefit obligations are appropriate as of
31 March 2025.
Accounting standard
updates
• We reviewed that our disclosures relating to new or amended accounting standards are fair and accurate.
Going concern and
viability statement
• We reviewed our evidence supporting the going concern and long-term viability during economic
uncertainty.
• We’ve assessed the Group’s strategy, business model, and capital/liquidity under current and stressed
conditions.
• We approved the Annual Report on a going concern basis and affirmed the viability statement in the
Directors’ report.
Fair, balanced and
understandable reporting
• We’ve made sure that the financial statements and interim reports fairly represent the Group’s position,
performance, and strategy.
External audit
• We’ve considered the external auditors’ feedback and concluded that no significant changes to our financial
statements were needed.
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Risk and internal control
We know that strong risk management and effective
internal controls are key to reaching our goals and
protecting our assets. They help operations run
smoothly, make sure we report accurately, and help
keep us in line with laws and regulations.
You can find out more about how we manage risk in
our risk management report on pages 31 to 40.
Through the Committee, the Internal Audit team
gives our Board an independent view on how risks are
managed and, when needed, they’re supported by
external specialists. The Committee’s responsible for
making sure the Internal Audit team have the skills and
resources to deliver the right level of assurance and
remain independent. For the 2024/25 financial year,
we maintained an effective internal control framework
in line with the principles of the UK Corporate
Governance Code.
The Committee approves the Internal Audit plan
for the year. The plan’s developed with a risk-based
approach and with input from a range of sources,
including management and the Committee. The
Committee reviews reports, and other management
information provided by the Internal Audit team,
including tracking any actions through to completion.
We approved the Internal Audit plan for 2024/25. This
year, the main areas we reviewed were:
• Information security, cyber security and
operational resilience.
• Areas of prudential and financial risk.
• Material ‘change’ projects.
• Aspects of our credit risk management
framework.
• A range of operational and conduct risk related
reviews.
The Committee monitors and assesses the role and
effectiveness of Internal Audit, including an annual
external quality review of a sample of audit files, and
an External Quality Assessment (EQA) every five years.
The last EQA took place in 2021/22 concluded that
Internal Audit ‘generally conforms’ to the standards,
the highest rating.
We’re satisfied Internal Audit is operating effectively.
External auditors
PwC are in their fifth year as the Society’s external
auditors.
On a yearly basis the Committee monitors our
relationship with the external auditors to make sure
they are independent and objective. This assessment
is facilitated by the Chief People Officer and Group
Secretary and is initially discussed without auditors
present. The Committee is confident that the
relationship with the auditors is working well and is
satisfied with their effectiveness and independence.
Details of the fees paid to the external auditors for
both audit and non-audit services can be found in note
6 of the financial statements.
Open door reporting
Every year the Committee oversees the use of our
confidential reporting channel, and our ‘Open Door’
policy. The policy is in place to give colleagues, who
may have serious concerns, a way of coming forward
to voice those concerns. We make sure all colleagues
know about the policy through their induction as well
as regular education.
In the last year, no reports were made.
Audit Committee effectiveness
Every 3 years an external firm assesses the
Committee’s effectiveness, looking at time
management, processes, support, work and future
priorities. This was last completed in 2023/24 with the
conclusion that the Committee is effective. Internal
reviews are completed in the years in between external
reviews.
Committee members must complete relevant training
regularly, and the Committee also receives periodic
training on current topics.
Lynne Shamwana
Chair of Audit Committee
28 May 2025
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Remuneration
Committee
report
• The Remuneration
Committee’s
responsibilities and
activities over the year.
• The pay and benefits of
our Executive Directors
and fees paid to Non-
Executive Directors.
This report tells you about:
* Under the Remuneration Code, we must identify
colleagues who we think have an impact on our
risk profile, we call these Code Staff. This includes
all Executive and Non-Executive Directors and all
members of our Executive Committee.
If you’d like a copy of the Committee’s terms of
reference, please email us at communications@
westbrom.co.uk
Remuneration Policy
Our Remuneration Policy exists to ensure fair and
transparent decisions are made about pay and benefits
for all colleagues.
Background
The Policy provides the framework for the Committee
to make remuneration decisions and recommendations
to our Board in relation to Executive Directors and
other Code Staff.
The Policy is designed to promote appropriate
behaviours and practices consistent with risk appetite.
The approach of the Remuneration Committee is
to ensure that Executive Directors’ remuneration is
designed to promote the long-term success of the
Society, with full consideration of other stakeholders
such as customers, colleagues and regulators.
Remuneration decisions are made based on total
compensation comprising salary, performance-
related pay and benefits, ensuring an appropriate
balance between the fixed and variable components
of remuneration. The variable element of the
remuneration package creates flexibility to allow for
changes in current and future performance.
Purpose of the Committee
The key purpose of the Remuneration Committee is
to review colleagues’ pay and benefits and to make
sure policies align with the Society’s values, risk
appetites and legal and regulatory requirements.
Committee membership and
responsibilities
The committee’s made up of:
• Julie Hopes (Chair) (stepped down from the
Committee 28/05/25)
• Lynne Atkin (joined the Committee 01/05/25)
• John Maltby
• Sara Bennison
• Russell Galley (joined the Committee 01/05/24,
stepped down from the Committee 30/04/25)
• David Thomas
All members are Non-Executive Directors. Our Chief
Executive Officer and Chief People Officer & Group
Secretary attend meetings when they are invited.
Under the Committee’s terms of reference, at least
one member must also be a member of either the
Risk Committee or Audit Committee. We meet this
requirement.
The Committee receives advice from independent
consultants, when required.
The Committee is responsible for:
• Setting the Remuneration Policy (the Policy).
• Overseeing the implementation of the Policy.
• Determining remuneration arrangements for our
Executive Directors and other Code Staff*.
• Consideration of whether anyone’s actions or
behaviour could affect their eligibility to take
part in performance-related pay schemes.
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The Society’s remuneration principles are:
• The Policy is in line with our strategy, objectives
and values, thereby aligning it with both short and
long-term interests.
• The policies, procedures, remuneration practices
and performance-related payment schemes
are consistent with the promotion of good and
effective risk management and are structured in
such a way as to discourage risk taking which is
outside our risk appetite.
• Focus is on the underlying business position
where management can influence performance.
Performance-related pay schemes may therefore
exclude the impact of specific one-off items
which would be agreed at the outset by the
Committee.
• All remuneration packages are designed such that
we can attract and retain high calibre individuals.
• Performance measures for individuals are
challenging and robust and measured on a
consistent basis.
• Performance-related pay is based on the Board’s
objectives for the period, 40% of any award is
deferred over a four year period, to allow the
Remuneration Committee to review whether
the payment remains appropriate, and providing
the ability to reduce or cancel the payment.
The Committee also has discretion to recover
payments previously made (clawback), should
information come to light after the payment
being made, that would have resulted in the
Committee withholding the payment, had this
information been known.
The Policy follows, as a minimum, the Remuneration
Code and good corporate governance practices.
Remuneration policy and practice
Components of remuneration
The tables below show the Policy for Code Staff.
Component 1
Basic salary
Fixed remuneration set to attract and retain individuals of sufficient
calibre through the payment of competitive rates.
Operation and performance metrics
Reviewed annually (or more frequently if required).
Influencing factors include role and experience, personal
performance, salary increases awarded across the Society, and
benchmarking comparisons against organisations of a similar size/
complexity, and roles of similar responsibilities.
Opportunity
Set at a level considered appropriate, considering the relevant
factors tabled. The Committee considers very carefully any pay
awards which do not reflect the wider increases across the Society
and will only make them where there is a clear commercial rationale
for doing so.
Component 2
Performance-related pay
Linked to the delivery of Key Performance Indicators and personal
objectives. Used to reward within the context of achieving the
Society’s goals and objectives.
Operation and performance metrics
40% of the performance-related pay earned is deferred over a
four-year period. Deferred payments are made in equal instalments
over the following four years and are subject to annual review by
the Committee. The Committee has discretion to make a reduction
in the level of award (down to zero) or recover awards if necessary
including withholding vested awards (malus arrangements) and
recovering payments (clawback arrangements) in line with relevant
regulation, which is for a period of seven years for Executive
Directors, and five years for deferred payments/one year for non-
deferred payments for other Code Staff. The annual review prior to
payment of a deferred element will consider several factors, making
sure management has operated within our risk appetite, not exposed
the Society to regulatory or control failings, or taken other such
actions that would represent a poor outcome for customers.
All awards are non-pensionable.
Based on several measures, including customer, financial, change,
risk and people.
Reviewed by the Committee annually to ensure that the measures
are appropriate.
Opportunity
The Committee has the discretion to allow maximum annual
opportunity of 75% of basic salary (as approved by voting members
at the 2018 AGM). However, the maximum opportunity for 2024/25
remained at 50% of basic salary.
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Component 3
Pension or pension allowance
A part of fixed remuneration intended to attract and retain
individuals of sufficient calibre.
Operation and performance metrics
A choice is offered; either to join the Society’s stakeholder pension plan or,
as an alternative, be provided with a cash allowance (for example, where
they have exceeded the annual or lifetime allowance).
Opportunity
A pension contribution or cash allowance equal to the maximum
pension contribution available to all other colleagues (for 2024/25:
10.6%).
Component 4
Benefits
A part of fixed remuneration intended to attract and retain
individuals of sufficient calibre.
Operation and performance metrics
Benefits are in line with market practice; private medical care for
themselves and their family, and life assurance (4X basic salary). Other
benefits may be provided in individual circumstances.
Opportunity
Set at a level considered appropriate, as part of a review of total
compensation arrangements.
Component
Operation
Application
Fees
To attract and retain
Non-Executive
Directors of the
right calibre for the
Society.
Fees are reviewed
annually for Non-
Executive Directors
by the Chair and
Executive Directors.
Fees for the Chair
are recommended
by the Remuneration
Committee and
approved by our
Board. The Chair
is not present
when these fees
are discussed or
approved.
Fees are set at a level
to attract individuals
with the appropriate
knowledge and
experience and
to reflect the
responsibilities and
time commitment
for Board and
Board Committees,
considering market
practice.
Reimbursement
is also made for
reasonable travel
expenses for
attending meetings/
Society business.
Component
Application
Basic salary
An amount commensurate with their
experience and responsibilities.
Benefits
Comparable benefits to existing Directors,
although if required to attract the right
candidate these may be widened to include
additional benefits, such as a relocation
allowance.
Performance-
related pay
The maximum performance-related pay
would be in line with the current Policy,
unless the market rate required to recruit the
individual supported a higher amount. In any
event, this would be no more than what is
considered commercially justifiable.
Pension or pension
allowance
The option to join the stakeholder pension
scheme or to receive a cash allowance up to
the maximum pension contribution available
to all colleagues, which is 10.6% of salary
(with the cash allowance option subject to
deduction of tax and national insurance).
Recruitment
compensation
Compensation arrangements are only
considered if the new Executive Director
was required to forego an arrangement from
their previous employer. In such instances
the award would be no more in terms of
amount than the award due to be foregone.
The timing and vesting requirements of
any payment would be replicated as far as
possible.
The table below shows the Policy for
Non-Executive Directors.
Recruitment policy for
Executive Directors
The appointment of an Executive Director could
be either an internal or external appointment. In
principle, we would look to provide no additional
benefits than those provided to an existing
Executive Director.
The approach is to offer a package that is
sufficient to recruit an individual of sufficient
calibre, but to pay no more than is necessary to
attract the appropriate candidate.
The Remuneration Committee has the right to exercise
discretion within the Policy and recommend to our
Board an override of any formulaic approach laid
out in the PRP Scheme Rules should it be deemed
appropriate in line with good corporate governance.
In agreeing remuneration arrangements for new
hires, the Committee will consider the value of the
total package on offer compared to similar positions
in the market, the structure of the remuneration
and the experience of the candidate, to ensure that
arrangements are in the best interests of both the
Society and its customers, without paying in excess of
what is deemed necessary to recruit an individual of
the required calibre.
Whilst Non-Executive Directors do not participate in
any performance-related pay scheme, their overall
performance is reviewed annually by the Chair.
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Component
Application
Salary and benefits
A termination payment would be based on
the relevant notice period. There would be
no payment in the event of misconduct or
poor performance.
Performance-
related pay
Any performance-related pay awards would
be made solely at the discretion of the
Committee. Any deferred awards would
remain payable in future years subject to
the normal rules of the Scheme, including
possible reduction or cancellation.
Component
Application
Fees
A new Non-Executive Director would receive
fees. The level of fees would be set at a level
commensurate with the Director’s experience
and responsibilities and with due regard to
the fees of other Non-Executive Directors.
Service contracts
The terms and conditions of employment for Executive
Directors are detailed in their service contracts. The
contract is terminable with 12 months’ notice if given
by us, or six months’ notice if given by the Director.
Non-Executive Directors do not have service contracts
and instead have letters of engagement which set out
their time commitments and responsibilities.
Policy on payment for loss of office
The Policy, as reflected in Executive Director
contracts, is for loss of office payments to be reduced
by an amount equivalent to basic salary from new
employment entered into during the period covered by
loss of office payments.
Employment conditions elsewhere
in the Society
The pay and benefits of colleagues is considered
annually by the Committee, which also determines
the amount of general performance-related pay.
Subject to eligibility, we offer a comprehensive range
of benefits to colleagues, including pension, life
assurance, health care, car scheme and performance-
related pay. Our annual salary review scheme looks
at the salary for each colleague based on robust
external benchmarking, considering the market
rate and level of responsibility for each role. From
April 2025, eligible colleagues will get base salary
increases of up to 14%.
Remuneration scenarios
The chart shows the breakdown of the component
parts of the remuneration package for Executive
Directors 2024/25 on the following basis:
• Fixed remuneration – comprising basic salary,
pension and benefits.
• Target remuneration – the anticipated annual
remuneration incorporating a performance-
related award.
• Maximum remuneration – the maximum
remuneration that could be awarded.
When developing the remuneration scenarios, the
following assumptions were made:
• Fixed remuneration includes basic salary, pension
and benefits only.
• Target remuneration is based on a performance-
related award of 37.5% of basic salary.
• Maximum award is based on a performance-
related pay award of the maximum achievable
which is 50% of basic salary (as stated on page
69, the Remuneration Committee has the right
to allow an increase in performance-related
award to 75% if deemed appropriate, with
effect from financial year 2019/20).
Recruitment policy for Non-Executive
Directors
As with Executive Directors, the approach is to offer
a package that is sufficient to recruit an individual of
sufficient calibre, but to pay no more than is necessary
to attract the appropriate candidate.
Total Maximum Remuneration
Target Remuneration
Fixed Remuneration
Chief Executive Officer
Chief Financial Officer
Chief Operating Officer
Chief Risk Officer
785,000
725,000
544,000
375,000
502,000
483,000
333,000
446,000
460,000
317,000
424,000
542,000
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The following Executive Director pay increases
were agreed:
• Chief Executive Officer 2%.
• Chief Financial Officer 5%.
• Chief Risk Officer 2%.
• Chief Operating Officer 2%.
Our Executive Directors' remuneration, including
performance-related pay can be found on page 73.
FIT Consultants reviewed Non-Executive Director fees for
next year. To stay competitive and keep a strong Board,
the Committee agreed to increase non-executive fees
by 1.85%, and give the same increase to our Chair. The
additional fees for Chairs of Board Committees will
remain constant.
Gender and Ethnicity Pay Gap
reporting
We’re committed to maintaining a diverse and inclusive
workplace where all colleagues are paid fairly. As part of
our commitment, we regularly track and share our pay
gap statistics.
You can read our 2024 gender and ethnicity pay gap report
on our website.
A more diverse team helps us to provide a better service
for our customers. In March 2024, we introduced a new
diversity and inclusion questionnaire, giving our colleagues
the chance to share and update demographic information.
Fair pay for our colleagues
The Committee reviews the pay and benefits of colleagues
every year. We offer a comprehensive range of benefits to
colleagues, including pension, life assurance, health care,
car scheme and performance-related pay. We’re committed
to paying all colleagues the Real Living Wage as an absolute
minimum.
Every year, we review salaries by using market comparisons
and role responsibilities. From April 2025, eligible
colleagues will get base salary increases of up to 14%.
Annual remuneration report
In this report, the tables marked ‘audited’ meet the
requirements of the Building Societies Act 1986. We follow
the Prudential Regulation Authority’s (PRAs) code on
Remuneration Practices and disclosure requirements and
align our policy with the PRAs best practice guidelines and
the UK Corporate Governance Code where appropriate.
Loans to Directors are in line with s68 disclosure of interest
of associated personnel (Director) to the Society.
At 31 March 2025, one Director (2023/24: one Director)
or persons connected with Directors had mortgage loans
granted in the ordinary course of business totalling £0.2m
(2023/24: £0.2m). A register containing details of loans and
transactions between the Society and its Directors may be
inspected at our Head Office, during normal office hours, in
the period of fifteen days expiring on the date of the AGM,
or at that meeting.
Key areas of focus
The Committee met four times this year and their key areas
of focus were:
• Pay and benefits of Executive Directors,
Non-Executive Directors and Code Staff.
• Oversight of salary review for all colleagues.
• Budget for salary and performance-related pay for
our colleagues, including overseeing our approach to
pay, reward and recognition.
• Level of performance-related pay for this financial
year and deferred awards.
• Continued oversight of alignment of remuneration
practices across the whole colleague base to ensure
continued equity in our pay practices.
• Review of the benefits package offered to all
colleagues (including enhancement to pensions and
recognition schemes).
• Society and individual performance-related pay
objectives for our Executive Directors and Code
Staff for the 2025/26 financial year.
• Approach for Gender Pay Gap and Ethnicity
Pay Gap reporting.
Attracting and retaining a
talented team
Every year, every colleague’s salary is benchmarked
against the financial services market, to make sure
everyone is paid fairly and competitively for their role
and level of responsibility.
The Committee recently benchmarked our Executive
Directors’ remuneration using the remuneration adviser,
FIT Consultants.
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Non-Executive Directors' fees (audited)
Executive Director remuneration – 2024/25 (audited)
Executive
Director
Basic
salary
£000
Performance
- related pay
(1)
£000
Pension
£000
Other
benefits
£000
Total
£000
Jonathan Westhoff
(Chief Executive Officer)
487
232
52
3
774
Manjit Hayre
(Chief Risk Officer)
286
127
30
1
444
Alex Pawley
(Chief Financial Officer)
300
138
32
1
471
Martin Boyle
(Chief Operating Officer)
338
161
36
1
536
Total
1,411
658
150
6
2,225
Notes:
1. The Society’s Chair (John Maltby) and other Non-Executive Directors received a 4% increase in their base
fee from April 2024.
2. In addition to the payment of fees, Non-Executive Directors receive expenses for travel and
accommodation in relation to their attendance at meetings.
1.
Includes an element that is subject to deferral. The subsequent table headed ‘Deferred performance-
related pay’ details the amount due for payment, subject to review by the Committee at the
appropriate time.
Note: Jonathan Westhoff also received £4,500 during the year from Livv Housing Group, for his role as a
Non-Executive Director on their Board. Livv Housing Group is an entirely separate and unrelated business
to the Society and this fee was not related to services performed for the Society.
Non-Executive
Director
Date
appointed
2024/25
Fees
(1)
£000
2024/25
Benefits
(2)
£000
2023/24
Fees
£000
2023/24
Benefits
(2)
£000
John Maltby
(Society Chair since
01/03/21)
04/01/21
135
3
130
1
Julie Hopes
(Remuneration
Committee Chair.
Deputy Chair since
01/08/19)
01/04/16
79
2
77
2
Lynne Shamwana
(Audit Committee
Chair since
23/07/20)
01/02/19
69
2
67
1
David Thomas
(Risk Committee
Chair since 04/05/21)
01/08/20
69
2
67
1
Sara Bennison
01/08/23
54
2
35
1
Russell Galley
(from 01/05/24)
01/05/24
50
2
-
-
Nimisha Patel
(from 01/06/24)
01/06/24
45
2
-
-
David Dyer
(until 24/07/24)
01/09/21
18
1
52
1
Anne Gunther
(until 24/07/24)
01/11/21
18
1
52
1
Victoria Mitchell
(until 31/03/24)
01/04/18
-
-
52
1
Total
537
17
532
9
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Executive Director Remuneration – 2023/24 (audited)
Objectives
% of overall
award
potential
% of
award
achieved
Customer:
Gross residential lending, retention of lending,
customer satisfaction, ease of doing business
20%
18.75%
Financial:
Profitability, net interest margin, cost efficiency
15%
15%
Change:
System enhancement and implementation for savings
and mortgages
15%
13.75%
Risk:
Operational resiliency, support capability for lending
15%
14%
People
: Strengthening leadership and management capability,
enhancing diversity and inclusivity
15%
13.75%
Overall assessment by the Board of Executive performance
20%
20%
Overall Society objectives
100%
95.25%
Our objectives for the year include:
Executive
Director
Basic
salary
£000
Performance
- related pay
(1)
£000
Pension
£000
Other
benefits
£000
Total
£000
Jonathan Westhoff
(Chief Executive Officer)
468
222
50
3
743
Manjit Hayre
(Chief Risk Officer)
275
121
29
1
426
Alex Pawley
(Chief Financial Officer)
260
119
28
1
408
Martin Boyle
(
Chief Operating Officer)
325
152
35
2
514
Total
1,328
614
142
7
2,091
Executive
Director
% awarded
for Society
objectives
% awarded
for personal
objectives
Total %
awarded
Jonathan Westhoff
(Chief Executive Officer)
28.575%
19%
47.575%
Alex Pawley
(Chief Financial Officer)
28.575%
17.5%
46.075%
Martin Boyle
(Chief Operating Officer)
28.575%
19%
47.575%
Manjit Hayre
(Chief Risk Officer)
9.525%
35%
44.525%
1. Includes an element that is subject to deferral. The subsequent table headed ‘Deferred performance-
related pay’ details the amount due for payment, subject to review by the Committee at the
appropriate time.
Note: Benefits of £49,481 in lieu of pay and benefits for the period from April 2023 to November 2023 were
paid to Ashraf Piranie under the terms of his contract when he stepped down from his role.
Performance-related pay is made up of both Society and personal objectives
set at the start of each year (the maximum award is 50% of basic salary). This is
made up of:
• Society objectives:
– 30% for the Chief Executive Officer, Chief Financial Officer and Chief
Operating Officer.
– 10% for the Chief Risk Officer.
• Personal objectives:
– 20% for the Chief Executive Officer, Chief Financial Officer and Chief
Operating Officer.
– 40% for the Chief Risk Officer.
The Remuneration policy gives us the option to increase Executive Directors’
maximum performance-related pay award up to 75% of basic salary. It has been
agreed this will remain at 50% of salary for 2025/26.
This year (2024/25), the total performance-related pay for our Executive Directors is:
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Deferred performance-
related pay
Part of the Executive Directors’
performance-related pay has been
deferred, this means set aside to
be paid in future years, as shown
in the table. Before any payments
are made, they are reviewed by the
Committee. They may be reduced
or cancelled, if any negative
actions or behaviours come to
light that have resulted in undue
harm to the Society.
Deferred performance-related
payments for relevant prior years
have been approved for payment
at the end of the 2024/25 financial
year. These payments are for our:
• Chief Executive Officer.
• Chief Financial Officer.
• Chief Risk Officer.
• Chief Operating Officer.
• Former Group Finance &
Operations Director.
Payable in future years
Payable after year ending
Executive Director
Deferred from
2024/25
£000
2025/26
£000
2026/27
£000
2027/28
£000
2028/29
£000
Jonathan Westhoff
2021/22
17
17
-
-
-
2022/23
19
19
19
-
-
2023/24
22
22
22
22
-
2024/25
-
23
23
23
23
Total
58
81
64
45
23
Ashraf Piranie
(until 31/12/2022)
2021/22
12
12
-
-
-
2022/23
10
10
10
-
-
Total
22
22
10
-
-
Manjit Hayre
2021/22
1
7
7
-
-
-
2022/23
10
10
10
-
-
2023/24
12
12
12
12
-
2024/25
-
13
13
13
13
Total
29
42
35
25
13
Alex Pawley
2022/23
2
6
6
6
-
-
2023/24
12
12
12
12
-
2024/25
-
14
14
14
14
Total
18
32
32
26
14
Martin Boyle
2023/24
15
15
15
15
-
2024/25
-
16
16
16
16
Total
15
31
31
31
16
1.
The 2021/22 breakdown shown for Manjit Hayre includes elements subject to deferral from his total performance-related pay awarded for the year, including
the period for which he was not an Executive Director.
2.
The 2022/23 breakdown shown for Alex Pawley includes elements subject to deferral from his total performance-related pay awarded for the year, including
the period for which he was not an Executive Director.
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Chief Executive Officer (CEO) pay ratio
Statement on member voting at the 2024 AGM
The Companies (Miscellaneous Reporting) Regulations 2018 came into force for
accounting periods starting 1 January 2019 and requires the publication of the ratio
of the CEO’s total remuneration to that of all colleagues.
We use the government’s preferred method to work out the total pay and benefits
of all UK colleagues. We then compare the median, 25th, and 75th percentiles
against the CEO’s pay. The ratios below are based on our colleague data from
31 March 2025.
At last year’s AGM members voted on the Directors’ Remuneration Report, and the
results are shown below.
Approval of the Directors’ Remuneration Report (advisory vote, i.e. not conditional
on resolution being passed):
Focus for 2025/26
Next year, the Committee will focus on supporting the leadership team during an
exciting transformation to keep the Society strong and resilient for our customers.
The Committee will follow industry best practices and regulations while considering
what is best for the Society, its customers, colleagues and community.
Julie Hopes
Chair of Remuneration Committee
28 May 2025
Year
Method
25th
Percentile
Median
75th
Percentile
2024-25
Option A
30:1
23:1
16:1
2023-24
Option A
30:1
23:1
16:1
2022-23
Option A
29:1
22:1
16:1
2021-22
Option A
30:1
23:1
15:1
2020-21
Option A
31:1
23:1
16:1
Remuneration Element
25th
Percentile £
Median £
75th
Percentile £
Total pay and benefits
26,004
34,063
49,727
Salary
22,932
31,273
45,393
Vote
Votes
for
% Votes
Votes against
Withheld*
To approve
the Directors’
Remuneration Report
10,036
92.34%
832
249
* The withheld figures are not included in the calculation of % ‘Votes for’.
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The Directors are pleased to present the Annual
Report and Accounts of the Society and its subsidiary
undertakings for the financial year ended 31 March
2025. The Directors confirm that, to the best of
their knowledge, the Annual Report and Accounts,
taken in its entirety, is fair, balanced, provides an
understandable assessment of the Society’s position
and prospects and provides the information necessary
to members to assess our performance, business
model and strategy.
Directors’ report
Board of Directors
The names of the Directors, along with their
biographies, who were serving at the time of signing
this report are set out on pages 52 to 55 in the
Corporate Governance report.
In addition, the following Directors served for part of
the financial year:
David Dyer (resigned 24/07/24)
Russell Galley (appointed 01/05/24, resigned
30/04/25)
Anne Gunther (resigned 24/07/24)
Julie Hopes (resigned 28/05/25)
In accordance with the Corporate Governance Code,
all Executive and Non-Executive Directors can offer
themselves for election or re-election by the members
at the 2025 AGM. None of the Directors have any
beneficial interest in equity shares in, or debentures of,
any connected undertaking of the Society.
Businesses objectives
The main purpose of the Society and its subsidiaries
(the Group) is to work together to meet the primary
financial needs of our members. This includes the
provision of a range of personal financial products,
offering competitive pricing and excellent service.
Business review
The Group’s business and future plans are referred to
in the Chair’s review on page 7, the CEO’s review on
page 8 to 9 and under ‘Our strategy’ on pages 12 to 23.
Details of our KPIs can be found under ‘Our strategy’
on pages 12 to 23.
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Profit and capital
The Society reported a consolidated profit before
tax for the year of £36.5m (2023/24: £32.1m).
Our capital position can be found in the financial
review of the year on pages 24 to 29 and the annual
business statement on page 160.
Our Pillar 3 capital disclosures for the current year
are available on our website.
Country-by-country reporting
Information in respect of the Capital Requirements
(country-by-country reporting) Regulations 2013
can be found on page 156.
Risk management
We operate in a competitive environment. The
management of risk and the development of a
suitable strategy are critical activities in achieving
our business objectives.
The Board and its Committees ensure that risk
management and strategic direction are regularly
reviewed with suitable actions implemented as
necessary. Any considerations are outlined in our
Internal Capital Adequacy Assessment Process
(ICAAP) document.
The principal risks inherent to the Society, along
with how these risks are managed are outlined
in the risk management report on pages 31 to
40. In addition to these principal risks there are,
because of economic environment for banks and
building societies, ongoing actions under the
PRA’s supervisory review process which include
extensive stress testing exercises. The Directors
are aware, in arriving at their judgements, that we
will be subject, in the same way as others within
the sector, to these ongoing tests of capital and
recognise the uncertainty inherent in the process
as factors within each test change.
Financial risk management
objectives and policies
The Board’s objective is to reduce the impact of
financial risk upon our performance. The financial
risks consist of interest rate, credit and liquidity
risks. The Board manages these risks through its
risk management framework, Board policies and the
Treasury and Credit Risk functions. The Risk and
Assets & Liabilities Committees provide necessary
governance and oversight. Details of our financial
instruments, hedging activity and risk mitigation
can be found in notes 12 and notes 32 to 34 of
the financial statements. Any other emerging
risks concerning the Society can be found on
pages 12 to 29 of the strategic report and the risk
management section on pages 30 to 49.
Mortgage arrears
At 31 March 2025 there were 123 residential and
7 commercial mortgage accounts (2023/24: 88
residential and 5 commercial mortgage accounts)
where payments were 12 months or more in arrears.
The total amount outstanding on these accounts
was £105.4m (2023/24: £74.8m), of which
£91.1m (2023/24: £66.9m) related to commercial
mortgage accounts. The total amount outstanding
represented 1.92% (2023/24: 1.52%) of mortgage
balances. The amount of arrears was £18.7m
(2023/24: £14.3m), relating mainly to commercial
mortgage accounts. We made appropriate
provisions for potential losses on mortgages,
following the provisioning policy shown in note 1 to
the financial statements.
Supplier payment policy
Our policy is to agree on payment terms before
trading with a supplier and to pay according to
the contractual and other legal obligations. At 31
March 2025, the creditors’ days figure was 27 days
(2023/24: 29 days) which is in line with the aim of
paying creditors promptly.
Charitable donations
We’ve raised significant sums of money for charities
through several community programmes, affinity
accounts, and voluntary initiatives. Our charitable
activities over the past 12 months are outlined in the
strategic report on page 17. We donated £1,592 to
the charity of the year, Jericho (2023/24: £1,311 to
Barnardo’s), from the number of votes received at the
2024 Annual General Meeting (AGM).
No donations were made for political purposes.
Whilst we encourage our colleagues to take part in
community affairs, we do not support any of our
colleagues in the pursuit of political activity.
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Colleagues
We are an equal opportunities employer and
consider all job applications based on skills
and abilities regardless of race, gender, sexual
orientation, age or disability. If current colleagues
become disabled, every effort is made to help them
retain their position or provide relevant retraining.
We consult with the Employee and Member
Councils and evaluate the results of colleague
surveys to ensure that colleagues’ conditions and
workload are maintained at an acceptable level.
Details of meetings, team briefings, circulars and
information updates are placed on our intranet
to ensure that colleagues are both aware of
the Society’s objectives and performance, and
conscious of the wider financial and commercial
environment within which we operate.
Managing health and safety
We maintain high health and safety standards for all
colleagues, members and anyone affected by any
of our operations. All our colleagues receive health
and safety training when starting their employment
with additional training available when needed.
We recognise the need to consult with our
colleagues on health and safety issues through
accredited safety representatives and a Health and
Safety Committee every six months. Health and
safety issues are communicated through business
channels and colleagues are encouraged to raise
issues through their managers.
No enforcement notices or legal proceedings were
issued against us for health and safety breaches
during the reporting year.
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Directors’ responsibilities in respect
of the preparation of the Annual
Report, Annual business statement,
Directors’ Report and Annual
Accounts
The Building Societies Act 1986 (the Act) requires
the Directors to prepare financial statements for
each financial year. Under the Act the Directors
are required to prepare the Group accounts
in accordance with UK adopted International
Accounting Standards (IAS) and applicable law and
have elected to prepare the Society accounts on the
same basis.
Under the Act the Directors must not approve the
financial statements unless they are satisfied that
they give a true and fair view of the state of affairs
of the Society and of the profit or loss for that
period. In preparing these financial statements, the
Directors are required to:
• Select suitable accounting policies and then
apply them consistently.
• Make judgements and accounting estimates
that are reasonable and prudent.
• State whether the financial statements have
been prepared in accordance with IAS.
• Prepare the financial statements on the going
concern basis unless it is inappropriate to
presume that we will continue in business.
In addition to the Annual Accounts the Act requires
the Directors to prepare, for each financial year, an
Annual Business Statement and a Directors’ Report,
each containing prescribed information relating to
the business of the Group and Society.
A copy of the Annual Report and Accounts is
available on our website.
Directors’ statement pursuant to
the Disclosure and Transparency
Rules
The Directors who held office, at the date of
approval of this report confirm, to the best of their
knowledge that:
• The financial statements prepared under
International Financial Reporting Standards
(IFRS) as shown in note 1 of the accounts,
provide a true and fair view of the Society’s
assets, liabilities, financial position and results.
• The management reports, found on pages 6
to 49, offer a clear review of our performance,
position, and the main risks and uncertainties
faced by the Society.
Directors’ responsibilities for
accounting records and internal
control
The Directors are responsible for ensuring that
the Society:
• Keeps accurate accounting records that
reflect the Group and Society’s financial
position, complying with the Act.
• Takes reasonable care to establish, maintain
and review appropriate systems and controls
which comply with the rules set by the
Financial Conduct Authority and Prudential
Regulation Authority under the Financial
Services and Markets Act 2000.
The Directors have a general responsibility for
safeguarding the assets of the Society and for
taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for maintaining the
integrity of corporate and financial information
which is available on our website. Legislation in the
United Kingdom governing the preparation and
dissemination of annual accounts may differ from
legislation in other jurisdictions.
Going concern
In preparing the financial statements, we must
confirm that adopting the going concern basis
is reasonable. We meet our daily liquidity needs
through managing both retail and wholesale
funding and maintain a buffer over regulatory
capital requirements to stay authorised.
Details of our business activities and performance,
including factors that may affect it in the future,
are set out in the CEO’s review on pages 8 to 9 and
the strategic report on pages 10 to 29. Our financial
position, including our capital structure, risk
management and control processes for managing
exposure to credit, market, liquidity and operational
risk are described in the strategic report on pages
24 to 29 and the risk management report on pages
31 to 40.
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Our capital exceeds the PRA’s minimum
requirement in all considered scenarios, including
high inflation, potential recession, and geopolitical
instability. After reviewing the situation, we’re
confident we have the resources to continue for
the next 12 months, confirming the going concern
basis for the Annual Accounts.
Our viability statement
We’ve chosen, in line with the UK Corporate
Governance Code, to publish a viability statement.
We’ve assessed our viability over a three-year
period. The assessment’s based on a thorough
review of our main risks, Medium Term Plan (MTP)
and risk management framework, including risk
appetite and culture. It’s backed by the Internal
Capital Adequacy Assessment Process (ICAAP),
Internal Liquidity Adequacy Assessment Process
(ILAAP), Reverse Stress Testing and Recovery Plan.
The three-year period is within the period covered
by our MTP, ICAAP, ILAAP and stress tests. We
chose this period because, as time goes on,
uncertainty increases, especially with the changing
economic, market, and regulatory environments.
The MTP shows our financial performance, capital,
and funding will remain strong.
Through the ICAAP, we model scenarios at least
as severe as in the Bank of England’s Bank Capital
Stress Test scenario, which shows the Society
remains viable with a surplus above total capital
requirements. Even in more severe conditions,
such as high inflation and geopolitical instability,
the Society remains in a strong position. Despite
uncertainties, we’re confident that, based on this
thorough assessment, we can continue to operate
and meet our obligations through to March 2028.
External auditors
PricewaterhouseCoopers LLP are eligible for re-
appointment and have offered themselves for
re-election. A resolution to reappoint PwC will be
proposed at this year’s AGM, as required by the
Building Societies Act 1986.
Each of the persons who is a Director at the date of
approval of this report confirms that, so far as they
are aware, there is no relevant audit information
of which our Auditor is unaware and that they
have taken all the steps that should be taken by a
Director in order to be aware of any relevant audit
information, and to establish that our Auditor is
aware of that information.
Section 172 (1) statement
The Directors have acted in good faith, to promote
the success of the Society for the benefit of our
members and wider stakeholders. This section
forms the Society’s Section 172 disclosure,
describing how, in doing so, the Directors
considered the matters set out in Section 172(1)
(a) to (f) of the Companies Act 2006. Although
we as a building society are not required to follow
the Act, we seek to apply its requirements where
appropriate.
The statement holds our Directors accountable to
act in ways that benefit the Society’s members and
wider stakeholders. It covers key areas such as:
• Long-term impacts of decisions.
• The interests of colleagues.
• Building strong relationships with suppliers
and other key stakeholders.
• Considering the community and
environmental impacts.
• Upholding its reputation for high standards.
• Balancing the interests of the
members fairly.
Our commitment to stakeholder engagement is
clear throughout this report. How stakeholder
views are considered in Board decisions is
available under our Corporate Governance report
on pages 51 to 63.
On behalf of the Board
John Maltby
Chair
28 May 2025
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Financial
Statements
• Independent Auditors' report
• Income Statements
• Statements of Comprehensive Income
• Statements of Financial Position
• Statements of Changes in Members’
Interests and Equity
• Statements of Cash Flows
• Notes to the Accounts
• Country-by-Country Reporting
• Annual Business Statement
Independent Auditors’ report to the members of
West Bromwich Building Society
83
Report on the audit of the annual accounts
In our opinion, the Group annual accounts have been properly prepared in
accordance with international financial reporting standards adopted pursuant to
Opinion
Regulation (EC) No 1606/2002 as it applies in the European Union.
In our opinion, West Bromwich Building Society’s Group annual accounts and
Basis for opinions
Society annual accounts (the “annual accounts”):
We conducted our audit in accordance with International Standards on Auditing
•
give a true and fair view of the state of the Group’s and of the Society’s affairs as
(UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are
at 31 March 2025 and of the Group’s and the Society’s income and expenditure
further described in the Auditors’ responsibilities for the audit of the annual
and the Group’s and the Society’s cash flows for the year then ended;
accounts section of our report. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
•
have been properly prepared in accordance with UK-adopted international
accounting standards; and
Independence
•
have been prepared in accordance with the requirements of the Building
We remained independent of the Group in accordance with the ethical
Societies Act 1986.
requirements that are relevant to our audit of the annual accounts in the UK,
which includes the FRC’s Ethical Standard applicable to public interest entities
We have audited the annual accounts, included within the Annual Report and
and we have fulfilled our other ethical responsibilities in accordance with these
Accounts (the “Annual Report”), which comprise: the Group and Society statement
requirements. Other than those disclosed in the note 6 to the annual accounts, we
of financial position as at 31 March 2025; the Group and Society income statement
have provided no non-audit services to the Group in the period from 1 April 2024
and statement of comprehensive income, the Group and Society statement of cash
to 31 March 2025.
flows, and the Group and Society statement of changes in members’ interests and
equity for the year then ended; and the notes to the annual accounts, comprising
Our audit approach
material accounting policy information and other explanatory information.
Overview
Our opinion is consistent with our reporting to the Audit Committee.
Materiality
Separate opinion in relation to international financial reporting standards adopted
•
£4.5m (2024: £4.3m) - Group annual accounts
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union
•
Based on 1% of Group net assets
As explained in note 1 to the annual accounts, the Group, in addition to applying
UK-adopted international accounting standards, has applied international financial
•
£3.8m (2024: £3.7m) - Society annual accounts
reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union.
•
Based on 1% of net assets
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Scoping
• We conducted all of our audit work over the Group and its components using
one audit team, using information obtained from the Groups’ staff and records
based in West Bromwich.
• Audit procedures were performed over all material account balances and
financial information in the Society due to its significance to the Group’s financial
performance and position.
• The Group consists of the Society and six other entities. Our audit procedures
provide coverage over 99.7% of the interest income of the Group and 99.9% of
the total assets of the Group.
Key audit matters
• Risk of inappropriate judgements and estimates relating to the significant
management judgements involved in determining the appropriateness of
account specific scenarios and associated weightings given the historic facts and
circumstances in each account within the commercial loan portfolio (Group).
• Risk of inappropriate judgements and estimates relating to future economic
assumptions, the appropriateness of changes made to the methodology
regarding the calculation of the probability of default and the suitability of the
staging thresholds selected by management on loans and advances to customers
in the residential portfolios (Group and Society).
• Risk of inappropriate manual adjustments made in the hedging process (Group
and Society).
• Risk of material misstatement in the valuation of investment property through
inappropriate assumptions applied in the year end valuation (Group).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks
of material misstatement in the annual accounts. In particular, we looked at where
the directors made subjective judgements, for example in respect of significant
accounting estimates that involved making assumptions and considering future
events that are inherently uncertain. As in all of our audits we also addressed the
risk of management override of internal controls, including evaluating whether
there was evidence of bias by the directors that represented a risk of material
misstatement due to fraud.
Capability of the audit in detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined in the
Auditors’ responsibilities for the audit of the annual accounts section, to detect
material misstatements in respect of irregularities, including fraud. The extent to
which our procedures are capable of detecting irregularities, including fraud, is
detailed below.
Based on our understanding of the Group/industry, we identified that the principal
risks of non-compliance with laws and regulations related to breaches of banking
regulations including, but not limited to, the Financial Conduct Authority’s
regulations, the Prudential Regulation Authority’s regulations and UK tax legislation,
and we considered the extent to which non-compliance might have a material
effect on the annual accounts. We also considered those laws and regulations that
have a direct impact on the annual accounts such as the Building Societies Act
1986. We evaluated management’s incentives and opportunities for fraudulent
manipulation of the annual accounts (including the risk of override of controls) and
determined that the principal risks were related to posting inappropriate journal
entries to increase income and inappropriate management bias in accounting
estimates. Audit procedures performed included:
• Agreement of the financial statement disclosures to underlying supporting
documentation;
• Review of correspondence with the Society’s regulators, the FCA and the PRA, in
relation to compliance with Financial Services Regulations;
• Reviewing internal audit reports, and relevant meeting minutes including those of
the Audit Committee and the Board;
• Testing significant accounting estimates (see key audit matters below);
• Obtaining completeness over journal entries and testing those entries that
contained unusual account combinations back to corroborating evidence;
• Incorporating unpredictability into the nature, timing and/or extent of our testing;
• Discussions with management and those charged with governance in relation to
known or suspected instances of non-compliance with laws and regulation and
fraud; and
• Specific audit procedures over non-interest revenue streams significant to the
Group accounts.
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There are inherent limitations in the audit procedures described above. We are less
likely to become aware of instances of non-compliance with laws and regulations
that are not closely related to events and transactions reflected in the annual
accounts. Also, the risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or intentional misrepresentations
or through collusion.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement,
were of most significance in the audit of the annual accounts of the current period
and include the most significant assessed risks of material misstatement (whether
or not due to fraud) identified by the auditors, including those which had the
greatest effect on: the overall audit strategy; the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters, and any
comments we make on the results of our procedures thereon, were addressed
in the context of our audit of the annual accounts as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters. This is
not a complete list of all risks identified by our audit.
The primary change in key audit matters (KAM) from the previous year is the
removal of the pension liability valuation key audit matter. During the reporting
period, the scheme has entered into a buy-in arrangement whereby an insurance
policy was acquired to match c.96.9% of the scheme’s liabilities. This transaction
materially reduces the scheme's exposure to future investment and longevity risks,
which are associated with the liabilities. All other key audit matters listed below
remain consistent with those from last year.
86
Key audit matter
Risk of inappropriate judgements and estimates relating to the significant
management judgement involved in determining the appropriateness of
commercial account specific scenarios and associated weightings.
The modelling of commercial loans, which is a closed book, is performed
separately to the residential portfolio, with management performing individual
assessments given the unique circumstances and large exposures. The focus of
our audit work was on the methodology used to determine the staging of loans
and the level of individual assessment required.
Management performs individual impairment assessments for stage 3 loan
exposures where unique circumstances mean that management judgement is
required to determine the different possible future scenarios and the level of
provision required for each one. Our focus was on the principal assumptions
applied by management in estimating impairment provisions such as the
valuation of collateral, forecast and timing of future cash flows and the
completeness and severity of future scenarios.
These assumptions are based on existing contracts between the Group and
borrowers or tenants and management’s best estimates of future work out
strategies, including alternative scenarios which are used as part of the weighted
final provision calculation.
This significant risk is confined to the Society's Shopping Centre portfolio and
exposures where there has been a material change in provision relative to the
prior period. The remaining exposures have been evaluated with the normal risk
assessment for material misstatement.
See notes 14 and 32 to the financial statements for the IFRS 9 impairment
disclosures.
How our audit addressed the key audit matter
We performed the following procedures to address the areas of judgement and
estimates used in the calculation of commercial ECL:
•
We performed a walkthrough of management’s process of determining the
commercial loans expected credit loss. We tested the design, modelling
methodology and reviewed the appropriateness of the management’s
assumptions used in determining the expected credit loss.
•
We assessed the methodology used to stage the commercial loans for
compliance with the standard, including the application of this within the
model itself.
•
We selected a sample of loans and tested them for consistency with the
individual scenarios modelled by management and challenged the
appropriateness of current year assumptions regarding collateral values,
rental yields and other cash flows on individual accounts by agreeing key data
points back to supporting documents (eg. contracts, lease agreements and
valuation reports).
•
We performed a retrospective analysis of these cases by comparing the
prior year assumptions against actual developments in the year and against
alternative scenarios.
•
We challenged management’s assumptions where case reviews indicated that
alternative outcomes could occur and considered the impact on the ECL of
these.
•
We tested completeness of the provision by selecting an additional sample
of loans with nil provision and testing the ECL calculation to confirm this was
reasonable.
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Key audit matter
Risk of inappropriate judgements and estimates relating to future economic
assumptions, the appropriateness of changes made to the methodology
regarding the calculation of the probability of default and the suitability of
the staging thresholds selected by management on loans and advances to
customers in the residential portfolios
Under the IFRS 9 impairment models, losses are recognised on an ‘expected
credit loss’ (ECL) basis. The calculation of expected credit losses requires the
use of forward looking information, reflecting management’s view of potential
future economic scenarios. The standard also requires management to make
judgements regarding when a loan has experienced a ‘significant increase in
credit risk’ and to make assumptions regarding expected customer default rates
and repayment behaviour.
We focused our audit work on the areas of the methodology and assumptions
that we identified as most judgemental. This was informed by our understanding
of the model and areas of increased management judgement.
For the residential book ECL, the key assumptions and focus areas were:
•
The key economic variables and scenarios used in the model, particularly the
severity and likelihood of the base and downturn economic scenarios that form
part of the forward looking modelling of default rates and house price values
and their impact on ECL;
•
The appropriateness of changes made to the methodology regarding the
calculation of the probability of default (PD) for both Owner Occupied and
Buy-to-Let portfolios; and
•
The appropriateness of the ‘staging’ thresholds selected by management to
determine whether a significant increase in credit risk had arisen, and hence
whether a 12 month or lifetime loss provision is recorded.
How our audit addressed the key audit matter
We performed the following procedures to address the areas of judgement and
estimates used in the calculation of residential ECL:
•
We performed a walkthrough of management’s process of determining the
residential expected credit loss. We reviewed changes made to the model
in the current year and assessed the appropriateness and implementation of
these changes.
•
We challenged management on the implementation issues identified and
evaluated the mathematical accuracy of the calculation of PD by performing
a full independent replication of the year end modelled ECL calculation of
management’s modelled ECL.
•
We compared the forward-looking economic assumptions to independent
forecasters. The severity and magnitude of the scenarios were compared
to external forecasts and data from historical economic downturns, and the
sensitivities of the scenarios were considered against consensus.
•
We tested whether the economic scenarios used were appropriately
severe so as to capture nonlinear effects in credit losses which may arise in
economic downturns and weighted appropriately given the current economic
uncertainty.
•
We assessed the reasonableness of management’s selection of staging criteria
and their definition of a ‘significant increase in credit risk’. We engaged our risk
modelling specialists to re-perform the application of these staging thresholds.
We found that the criteria and thresholds adopted were reasonable and that
their application was appropriate.
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Key audit matter
Risk of inappropriate manual adjustments made in the hedging process
The Group & Society has designated hedge accounting relationships linked
to the migration of interest rate risk. They are exposed to interest rate risk as
a result of the mismatch between fixed and floating rate cash flows due to
entering into fixed interest income mortgage contracts with customers.
The risk of future movements in market rates of interest affecting the
profitability of the Group & Society is mitigated using derivative financial
instruments in the form of interest rate swap contracts. These are designated
in hedge accounting relationships so that the underlying hedged items
are recorded at fair value, as long as they can demonstrate that the hedge
accounting arrangements are effective in accordance with accounting standards.
We focused our work on the manual adjustments that are required to be posted
to system outputs to achieve compliance with accounting standards.
We focused our work on this area as the hedge accounting rules are complex
and given the nature of manual adjustments required can give rise to an
increased risk of error application.
The Group & Society disclosures are given in Note 12.
How our audit addressed the key audit matter
We performed the following procedures to address the risks in relation to hedge
accounting:
•
We re-performed the valuation of a sample of derivatives and underlying
hedged items using valuation specialists where appropriate.
•
We assessed the completeness and accuracy of the mortgage, deposit and
swap data flowing into hedging calculations.
•
We tested the completeness and accuracy of income statement
ineffectiveness recorded in the income statement in the year and challenged
management on the completeness of manual adjustments made to achieve
compliance with accounting standards.
•
We reconciled the output of hedging calculations to the general ledger to
ensure that the amounts recorded in the annual accounts are accurate.
•
We tested the disclosures in respect of hedge accounting and confirmed that
they were compliant with accounting standards.
89
Key audit matter
How our audit addressed the key audit matter
Risk of material misstatement in the valuation of investment property through
inappropriate assumptions applied in the year end valuation
The Group holds a portfolio of investment properties within the West Bromwich
Homes Limited subsidiary. In line with the requirements of the accounting
standard these properties are held at fair value with changes in the fair value
recognised within the income statement.
Management calculates the year end valuation with the assistance of external
valuation experts who assess the current valuation through comparison to
expected market values at the balance sheet date.
In certain situations, management makes adjustments to the valuations provided
by their experts to capture specific risks identified.
Given the overall valuation of the investment property portfolio at the year end
and the potential reasonable range of reasonable valuations we determined that
this represents a significant risk within our audit plan. Further disclosure is given
within note 17 of the financial statements.
How our audit addressed the key audit matter
Our procedures over the year end valuation included:
•
We performed a walkthrough of management’s process of determining the fair
value of the property portfolio.
•
We evaluated the competence, objectivity and independence of experts
engaged by the directors to assist with the property valuations and review of
historical performance of the valuations against actual sales.
•
We engaged our internal Real Estate valuation experts to evaluate the work
performed by management’s experts and assessed the reasonableness of any
differences in the valuations used with regard to externally available sources
(such as land registry data).
•
We tested adjustments to the expert valuation made by management,
including assumed costs in relation to cladding, back to supporting
documentation or evidence.
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How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to
be able to give an opinion on the annual accounts as a whole, taking into account
the structure of the Group and the Society, the accounting processes and controls,
and the industry in which they operate.
Substantially all of the Group’s activities are in the United Kingdom
its operating results along three business lines, being retail, commercial real estate
and property businesses (see note 37 of the financial statements). We performed
an audit of all material account balances and other financial information for the
Society and five subsidiaries, together with the assessment of management’s going
concern assumption.
All audit work over the Group and its components was performed by a single audit
team.
Taken together, our audit procedures on the Society and its subsidiary
undertakings provided us with sufficient audit evidence as a basis for our opinion
on the Group financial statements as a whole.
Materiality
The scope of our audit was influenced by our application of materiality. We set
certain quantitative thresholds for materiality. These, together with qualitative
considerations, helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual financial statement
line items and disclosures and in evaluating the effect of misstatements, both
individually and in aggregate on the annual accounts as a whole.
Based on our professional judgement, we determined materiality for the annual
accounts as a whole as follows:
Group annual accounts
Society annual accounts
Overall materiality
£4.5m (2024: £4.4m).
£3.8m (2024: £3.7m).
How we determined it
1% of net assets.
1% of net assets.
Rationale for
We believe that the subscribed capital and reserves
benchmark applied
(“net assets”) is the most appropriate benchmark
to use for the Society and Group, whose strategy is
not one of profit maximisation. Regulatory capital
is a key benchmark for management and regulators
and hence we continue to use net assets, a proxy
to regulatory capital, as our benchmark.
For each component in the scope of our Group audit, we allocated a materiality
that is less than our overall Group materiality. The range of materiality allocated
across components was £0.1m to £4.3m.
We use performance materiality to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements
exceeds overall materiality. Specifically, we use performance materiality in
determining the scope of our audit and the nature and extent of our testing
of account balances, classes of transactions and disclosures, for example in
determining sample sizes. Our performance materiality was 75% of overall
materiality, amounting to £3.4m for the Group financial statements and £2.8m for
the Society materiality.
In determining the performance materiality, we considered a number of factors
- the history of misstatements, risk assessment and aggregation risk and the
effectiveness of controls - and concluded that an amount at the upper end of our
normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements
identified during our audit above £0.2m (2024: £0.2m) as well as misstatements
below that amount that, in our view, warranted reporting for qualitative reasons.
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Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group’s and the Society’s ability
to continue to adopt the going concern basis of accounting included:
• Evaluation and challenge of key assumptions used by the directors in their
determination of the going concern of the Group and Society;
• Consideration as to whether our audit work had identified events or conditions
which may give rise to uncertainty as to the Group’s and Society’s future ability
to trade; and
• Review of legal and regulatory correspondence to ensure that any compliance
issues which may impact the going concern of the Group and Society had not
been identified.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or collectively, may
cast significant doubt on the Group’s and the Society’s ability to continue as a
going concern for a period of at least twelve months from the date on which the
annual accounts are authorised for issue.
In auditing the annual accounts, we have concluded that the directors’ use of the
going concern basis of accounting in the preparation of the annual accounts is
appropriate.
However, because not all future events or conditions can be predicted, this
conclusion is not a guarantee as to the Group’s and Society’s ability to continue as
a going concern.
Our responsibilities and the responsibilities of the directors with respect to going
concern are described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other
than the annual accounts and our auditors’ report thereon. The directors are
responsible for the other information. Our opinion on the annual accounts does not
cover the other information and, accordingly, we do not express an audit opinion
or, except to the extent otherwise explicitly stated in this report, any form of
assurance thereon.
In connection with our audit of the annual accounts, our responsibility is to read
the other information and, in doing so, consider whether the other information is
materially inconsistent with the annual accounts or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If we identify an apparent
material inconsistency or material misstatement, we are required to perform
procedures to conclude whether there is a material misstatement of the annual
accounts or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report
based on these responsibilities.
With respect to the Annual Business Statement and Directors’ Report we also
considered whether the disclosures required by the Building Societies Act 1986
have been included.
Based on our work undertaken in the course of the audit, the Building Societies Act
1986 requires us also to report certain opinions and matters as described below.
Annual Business Statement and Directors’ Report
In our opinion, based on our work undertaken in the course of the audit:
• the Annual Business Statement and the Directors’ Report have been prepared in
accordance with the requirements of the Building Societies Act 1986;
• the information given in the Directors’ Report for the year ended 31 March 2025
is consistent with the accounting records and the annual accounts; and
• the information given in the Annual Business Statement (other than the
information upon which we are not required to report) gives a true representation
of the matters in respect of which it is given.
In light of the knowledge and understanding of the Group and Society and their
environment obtained in the course of the audit, we did not identify any material
misstatements in the Directors’ Report.
Responsibilities for the annual accounts and the audit
Responsibilities of the directors for the annual accounts
As explained more fully in the Directors’ responsibilities in respect of the Annual
Report, the Annual Business Statement, the Directors’ Report and the Annual
Accounts, the directors are responsible for the preparation of the annual accounts
in accordance with the applicable framework and for being satisfied that they give
a true and fair view. The directors are also responsible for such internal control as
they determine is necessary to enable the preparation of annual accounts that are
free from material misstatement, whether due to fraud or error.
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In preparing the annual accounts, the directors are responsible for assessing
the Group’s and Society’s ability to continue as a going concern, disclosing as
applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group and Society or
to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the annual accounts
Our objectives are to obtain reasonable assurance about whether the annual
accounts as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these
annual accounts.
Our audit testing might include testing complete populations of certain
transactions and balances, possibly using data auditing techniques. However,
it typically involves selecting a limited number of items for testing, rather than
testing complete populations. We will often seek to target particular items for
testing based on their size or risk characteristics. In other cases, we will use audit
sampling to enable us to draw a conclusion about the population from which the
sample is selected.
A further description of our responsibilities for the audit of the annual accounts
is located on the Financial Reporting Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Society’s
members as a body in accordance with Section 78 of the Building Societies Act
1986 and for no other purpose. We do not, in giving these opinions, accept or
assume responsibility for any other purpose or to any other person to whom this
report is shown or into whose hands it may come save where expressly agreed by
our prior consent in writing.
Other required reporting
Building Societies Act 1986 exception reporting
Under the Building Societies Act 1986 we are required to report to you if,
in our opinion:
• adequate accounting records have not been kept by the Society; or
• the Society annual accounts are not in agreement with the accounting records;
or
• we have not received all the information and explanations and access to
documents we require for our audit.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the audit committee, we were appointed by the
members on 20 September 2020 to audit the annual accounts for the year ended
31 March 2021 and subsequent financial periods. The period of total uninterrupted
engagement is 5 years, covering the years ended 31 March 2021 to 31 March 2025.
Other matter
In due course, as required by the Financial Conduct Authority Disclosure Guidance
and Transparency Rule 4.1.14R, these financial statements will form part of the
ESEF-prepared annual financial report filed on the National Storage Mechanism of
the Financial Conduct Authority in accordance with the ESEF Regulatory Technical
Standard (‘ESEF RTS’). This auditors’ report provides no assurance over whether
the annual financial report will be prepared using the single electronic format
specified in the ESEF RTS.
Daniel Brydon
(Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
28 May 2025
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Income Statements
for the year ended 31 March 2025
Note(s)
Group
2025
£m
Group
2024
£m
Society
2025
£m
Society
2024
£m
Interest receivable and similar income
Calculated using the effective interest method
On instruments measured at fair value through profit or loss
Total interest receivable and similar income
2
Interest expense and similar charges
3
(220.2 )
(183.4 )
(222.6 )
(183.3 )
Net interest receivable
Fees and commissions receivable
Other operating income
4
Fair value gain/(loss) on financial instruments
5
(0.4 )
(3.3 )
(0.4 )
Total income
Administrative expenses
6
(57.6 )
(54.0 )
(54.9 )
(51.4 )
Depreciation and amortisation
16,18
(7.0 )
(5.5 )
(7.0 )
(5.5 )
Operating profit before revaluation gains, impairment, provisions and cost on debt buyback
Gains on investment properties
17
Impairment on loans and advances
14
(6.9 )
(14.7 )
(0.3 )
(1.4 )
Cost on debt buyback
27
(5.1 )
(5.1 )
Provisions for liabilities
24
Provisions against investments in subsidiary undertakings
15
(8.0 )
(13.5 )
Profit before tax
Taxation
9
(6.9 )
(7.7 )
(6.9 )
(6.8 )
Profit for the financial year
The profit for the year derives wholly from continuing operations.
The notes on pages 100 to 155 form part of these financial statements.
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Statements of Comprehensive Income
for the year ended 31 March 2025
Note
Group
2025
£m
Group
2024
£m
Profit for the financial year
Other comprehensive (expense)/income
Items that may subsequently be reclassified to profit or loss
Fair value through other comprehensive income investments
Valuation (losses)/gains taken to equity
(0.6 )
Taxation
29
(0.3 )
Items that will not subsequently be reclassified to profit or loss
Actuarial losses on defined benefit assets
30
(4.5 )
(7.2 )
Taxation
29
Other comprehensive expense for the financial year, net of tax
(3.8 )
(4.5 )
Total comprehensive income for the financial year
Note
Society
2025
£m
Society
2024
£m
Profit for the financial year
Other comprehensive (expense)/income
Items that may subsequently be reclassified to profit or loss
Fair value through other comprehensive income investments
Valuation (losses)/gains taken to equity
(0.6 )
Taxation
29
(0.3 )
Items that will not subsequently be reclassified to profit or loss
Actuarial losses on defined benefit assets
30
(4.5 )
(7.2 )
Taxation
29
Other comprehensive expense for the financial year, net of tax
(3.8 )
(4.5 )
Total comprehensive income for the financial year
The notes on pages 100 to 155 form part of these financial statements.
95
Statements of Financial Position
at 31 March 2025
Note
Group
2025
£m
Group
2024
£m
Society
2025
£m
Society
2024
£m
Assets
Cash and balances with the Bank of England
Loans and advances to credit institutions
10
Investment securities
11
Derivative financial instruments
12
Loans and advances to customers
13
Deferred tax assets
19
Trade and other receivables
20
Investments
15
Intangible assets
Investment properties
16
17
Property, plant and equipment
Retirement benefit asset
18
30
Total assets
Liabilities
Shares
Amounts due to credit institutions
Amounts due to other customers
21
Derivative financial instruments
12
Debt securities in issue
22
Current tax liabilities
Deferred tax liabilities
19
Trade and other payables
23
Provisions for liabilities
24
Subordinated liabilities
27
Total liabilities
Members' interests and equity
Core capital deferred shares
Subscribed capital
26
25
General reserves
Revaluation reserve
Fair value reserve
Total members' interests and equity
Total members' interests, equity and liabilities
The accounting policies and notes on pages 100 to 155 form part of these financial statements.
Approved by the Board of Directors on 28 May 2025 and signed on its behalf by:
John Maltby
Jonathan Westhoff
Alex Pawley
Chair
Chief Executive Officer
Chief Financial Officer
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Statements of Changes in Members’ Interests and Equity
for the year ended 31 March 2025
Group
Core capital
deferred
shares
£m
Subscribed
capital
£m
General
reserves
£m
Revaluation
reserve
£m
Fair value
reserve
£m
Total
£m
At 1 April 2024
Profit for the financial year
Other comprehensive expense
for the year (net of tax)
Retirement benefit assets
(3.4 )
(3.4 )
Fair value through other
comprehensive income
investments
(0.4 )
(0.4 )
Total other comprehensive
expense
(3.4 )
(0.4 )
(3.8 )
Total comprehensive income
for the year
(0.4 )
Distribution to the holders of
core capital deferred shares
(5.8 )
(5.8 )
Buyback and cancellation of
subscribed capital
(3.9 )
(3.5 )
At 31 March 2025
for the year ended 31 March 2024
Group
Core capital
deferred
shares
£m
Subscribed
capital
£m
General
reserves
£m
Revaluation
reserve
£m
Fair value
reserve
£m
Total
£m
At 1 April 2023
Profit for the financial year
Other comprehensive (expense)/
income for the year (net of tax)
Retirement benefit assets
(5.5 )
(5.5 )
Realisation of previous
revaluation gains
(0.1 )
Fair value through other
comprehensive income
investments
Total other comprehensive
expense
(5.4 )
(0.1 )
(4.5 )
Total comprehensive income
for the year
(0.1 )
Distribution to the holders of
core capital deferred shares
(5.7 )
(5.7 )
At 31 March 2024
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Statements of Changes in Members’ Interests and Equity
for the year ended 31 March 2025
Society
Core capital
deferred
shares
£m
Subscribed
capital
£m
General
reserves
£m
Revaluation
reserve
£m
Fair value
reserve
£m
Total
£m
At 1 April 2024
Profit for the financial year
Other comprehensive expense
for the year (net of tax)
Retirement benefit assets
(3.4 )
(3.4 )
Fair value through other
comprehensive income
investments
(0.4 )
(0.4 )
Total other comprehensive
expense
(3.4 )
(0.4 )
(3.8 )
Total comprehensive income
for the year
(0.4 )
Distribution to the holders of
core capital deferred shares
(5.8 )
(5.8 )
Buyback and cancellation of
subscribed capital
(3.9 )
(3.5 )
At 31 March 2025
for the year ended 31 March 2024
Society
Core capital
deferred
shares
£m
Subscribed
capital
£m
General
reserves
£m
Revaluation
reserve
£m
Fair value
reserve
£m
Total
£m
At 1 April 2023
Profit for the financial year
Other comprehensive (expense)/
income for the year (net of tax)
Retirement benefit assets
(5.5 )
(5.5 )
Realisation of previous
revaluation gains
(0.1 )
Fair value through other
comprehensive income
investments
Total other comprehensive
expense
(5.4 )
(0.1 )
(4.5 )
Total comprehensive income
for the year
(0.1 )
Distribution to the holders of
core capital deferred shares
(5.7 )
(5.7 )
At 31 March 2024
The notes on pages 100 to 155 form part of these financial statements.
98
Statements of Cash Flows
for the year ended 31 March 2025
Group
2025
£m
Group
2024
£m
Society
2025
£m
Society
2024
£m
Net cash outflow from operating activities (below)
(491.7 )
(13.8 )
(184.4 )
(159.2 )
Cash flows from investing activities
Purchase of investment securities
(333.6 )
(333.0 )
(524.7 )
(333.1 )
Proceeds from disposal of investment securities
Proceeds from disposal of investment properties
Purchase of property, plant and equipment,
intangible assets and investment properties
New funding to subsidiaries
(6.3 )
(9.7 )
(5.6 )
(48.1 )
(8.7 )
(228.4 )
Repayment of funding from subsidiaries
Net cash (outflow)/inflow from investing activities
(74.6 )
(76.9 )
(123.8 )
Cash flows from financing activities
Repurchase of subordinated liabilities
(20.4 )
(20.4 )
Net Issuance of debt securities
Interest paid on subordinated liabilities
(0.2 )
(1.8 )
(0.2 )
(1.8 )
Payment of lease liabilities
Distribution to the holders of core capital deferred
shares
(0.5 )
(5.8 )
(0.4 )
(5.8 )
(0.5 )
(5.8 )
(0.4 )
(5.8 )
Repurchase of subscribed capital
(3.4 )
(3.4 )
Net cash inflow/(outflow) from financing activities
(28.4 )
(9.9 )
(28.4 )
Net decrease in cash
(289.3 )
(119.1 )
(318.1 )
(88.4 )
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
For the purposes of the statements of cash flows, cash and cash equivalents comprise the following balances
with less than 90 days original maturity:
Group
2025
£m
Group
2024
£m
Society
2025
£m
Society
2024
£m
Cash in hand (including Bank of
England Reserve account)
Loans and advances to credit institutions
The Group’s loans and advances to credit institutions include £28.3 m (2023/24: £nil ) of balances belonging to
the Society’s structured entities which are not available for general use by the Society.
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The notes on pages 100 to 155 form part of these financial statements.
Statements of Cash Flows
(continued)
for the year ended 31 March 2025
Group
2025
£m
Group
2024
£m
Society
2025
£m
Society
2024
£m
Cash flows from operating activities
Profit before tax
Adjustments for non-cash items included in profit before tax
Impairment on loans and advances
Depreciation and amortisation
Disposal of property, plant and equipment and investment properties
Revaluations of investment properties
(2.4 )
(2.5 )
Provisions against investments in subsidiary undertakings
Interest on subordinated liabilities
Fair value losses/(gains) on equity release portfolio
(0.2 )
(0.2 )
Interest paid on lease liabilities
Changes in fair value on hedged items in fair value hedge relationships
(20.0 )
(36.7 )
(18.5 )
(31.6 )
Changes in operating assets and liabilities
Loans and advances to customers
(599.9 )
(391.9 )
(734.1 )
(530.6 )
Loans and advances to credit institutions
Derivative financial instruments
Shares
Deposits and other borrowings
(334.1 )
(64.1 )
(63.0 )
Trade and other receivables
(0.4 )
(0.3 )
Trade and other payables
(5.5 )
(5.7 )
Retirement benefit obligations
(2.4 )
(2.4 )
Tax paid
(2.9 )
(2.9 )
Net cash outflow from operating activities
(491.7 )
(13.8 )
(184.4 )
(159.2 )
The principal accounting policies applied consistently in the preparation of these consolidated Annual
Accounts are set out below.
The Annual Accounts of the Group and the Society have been prepared in accordance with UK adopted
International Accounting Standards and conform with the requirements of the Building Societies Act 1986.
In addition to complying with International Accounting Standards in conformity with the requirements of
the Building Societies Regulations, the consolidated financial statements also comply with International
Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union.
The Annual Accounts have been prepared under the historical cost convention as modified by the
application of fair value revaluation of other comprehensive income assets, derivatives, investment
properties, certain categories of property, plant and equipment and other financial assets measured at fair
value through profit or loss.
The Annual Accounts are presented in pounds Sterling and, except where otherwise indicated, have been
The Directors have prepared forecasts for the Group, including its capital position, for a period in excess of
12 months from the date of approval of these financial statements. The Directors have also considered the
effect upon the Group’s business, financial position, liquidity and capital of more pessimistic, but plausible,
trends in its business using stress testing and scenario analysis techniques.
The Society’s Medium Term Plan has been updated to reflect the continuing uncertainty in the UK and global
economies.
The Directors consider that the Society and Group have adequate resources to continue in operational
existence for the next 12 months. Accordingly they continue to adopt the going concern basis in preparing
No changes to accounting standards have been implemented in the period that have a material impact on
The Group financial statements consolidate the financial statements of the Society and its subsidiary
undertakings.
Subsidiaries are all entities controlled by the Society. Under IFRS 10 ‘Consolidated Financial Statements’
control is achieved where the Group has the power to govern the financial and operating policies of an
entity, has the exposure or rights to the variable returns from the involvement with the entity, and is able to
use its power to affect the amount of returns for the Group. In assessing control, potential voting rights that
presently are exercisable or convertible are taken into account. The financial statements of the subsidiaries
are included in the results from the date that control commences until the date that control ceases.
The purchase method of accounting has been adopted, under which the results of subsidiary undertakings
acquired or disposed of in a year are included in the Income Statement from the date of acquisition or up
to the date of disposal. The excess of the cost of acquisition over the fair value of the Group’s share of the
identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of
the net assets of the subsidiary acquired, the difference is recognised directly in the Income Statement.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of
the asset transferred. Accounting policies of subsidiaries are consistent with the policies adopted by the
Group.
Securitisation transactions
The Group and Society have entered into securitisation transactions in which they sold mortgages to
structured entities. Cash flows received from the mortgage repayments are transferred to the structured
entity. As the Group and Society retained substantially all the risks and rewards including, but not limited
to, holding the legal title of the mortgages, In accordance with IFRS 9 ‘Financial Instruments’ the Group
continues to recognise securitised assets as loans and advances to customers.
The equity of the structured entities created for these securitisations is not owned by the Group. However,
to comply with IFRS 10, the structured entities are included as subsidiaries in the consolidated financial
statements, where certain criteria are met. The analysis of whether the criteria are met is subject to regular
reassessment. Where IFRS 10 consolidation criteria are no longer met, securitised mortgage assets continue
to be recognised with an offsetting deemed loan liability recorded in the Group financial statements.
Where the IFRS 10 consolidation criteria are met and the Society is the originator of the transferred
mortgage interests, the Society continues to recognise the securitised assets as loans and advances to
customers and consequently also shows a deemed loan liability to the structured entities.
Deemed loans are included within amounts due to other customers.
Interest in unconsolidated structured entities - Group
As outlined further below, management has judged that the securitisations Sandwell Commercial Finance
No. 1 Plc and Sandwell Commercial Finance No. 2 Plc do not meet the consolidation criteria set out in
IFRS 10.
The principal activity of the entities is that of holding non-core commercial mortgage portfolios – these
being the assets that were transferred when the securitisations were established. Whilst these structured
entities are not consolidated, the securitised commercial mortgages continue to be recognised in the
Group financial statements via subsidiary West Bromwich Commercial Limited (WBCL), the originator of
the securitised commercial loans. The deemed loan liability in WBCL, in relation to Sandwell Commercial
Finance No. 1 plc and Sandwell Commercial Finance No. 2 plc, is recorded in the Group balance sheet. The
deemed loan liability is continually revalued to reflect the impairment provisions held against the underlying
commercial mortgages, given the impairments are ultimately borne by the loan note holders and the Group
is no longer exposed to the structure. In these entities, the Group has limited exposure to credit losses,
with risk transferred, in part, to third party investors who have purchased loan note securities issued by the
entities.
Notes to the Accounts for the year
ended 31 March 2025
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1. Accounting policies
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The table below indicates the interests in unconsolidated structured entities. Following redemption of the
final loans in the structure, a special resolution to wind up Sandwell Commercial Finance No. 1 Plc was filed
during the year ended 31 March 2025.
| 31 March 2025 | 31 March 2024 | |||||||
Maximum | Maximum | |||||||
Notes | exposure | Notes | exposure | |||||
held in | to loss in | held in | to loss in | |||||
Deemed | structured | unconsolidated | Deemed | structured | unconsolidated | |||
loan | Mortgages | entities at | structured | loan | Mortgages | entities at | structured | |
balances | transferred | fair value | entities | balances | transferred | fair value | entities | |
£m | £m | £m | £m | £m | £m | £m | £m | |
Group | 4.8 | 4.5 | 0.3 | - | 5.2 | 5.0 | 0.4 | - |
IFRS 8 ‘Operating Segments’, requires operating segments to be identified on the basis of internal reports
and components of the Group regularly reviewed by the chief operating decision maker to allocate
resources to segments and to assess their performance. In terms of the Group, the chief operating decision
maker is the Chief Executive Officer.
Each segment is determined according to the distinguishable operating component of the Group that
is regularly reviewed by the Group’s chief operating decision maker and for which discrete financial
information is available.
Interest receivable and expense are recognised in the Income Statement for all instruments measured at
amortised cost or fair value through other comprehensive income using the effective interest rate method.
Interest income on defaulted loans categorised as ‘stage 3’ under IFRS 9 is recognised by applying the
effective interest rate to the balances net of the provisions for expected credit losses.
Effective interest rate (EIR)
The EIR method is the method used to calculate the amortised cost of financial instruments and to
recognise interest receivable or payable over the relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash flows or receipts through the expected life of the instrument, or
where appropriate, a shorter period, to its carrying amount. From inception, mortgage products are treated
as having distinct periods (initial and follow-on) and income in the follow-on period is recognised as it is
received. In addition, where mortgage advances have upfront fees, such as application and arrangement
fees, and costs, these are spread over the initial period. When a mortgage redeems early, any deferred fees
Fees and commissions are generally recognised on an accruals basis when the service has been provided.
Mortgage arrangement fees and other direct costs are deferred and incorporated in the mortgage portfolio
as part of the effective interest rate method. Commissions and fees arising from negotiating or participating
in the negotiation of a transaction with a third party are recognised on completion of the underlying
Investment properties are properties held for long-term rental yields and capital appreciation. Investment
properties are carried in the Statement of Financial Position at fair value, representing open market value
determined annually and subject to review by independent specialist valuers. Changes in fair values are
recorded in the Income Statement in accordance with IAS 40 ‘Investment Properties’. Leasehold properties
Under IFRS 9, financial assets are classified as amortised cost or fair value (through other comprehensive
income or through profit or loss), based on the business model under which they are held and the
characteristics of their contractual cash flows.
Amortised cost
Financial assets are measured at amortised cost if they are held for the purpose of collecting contractual
cash flows (“held to collect” business model) and have contractual terms which give rise on specified dates
to cash flows which are solely payments of principal and interest (SPPI) on the outstanding amount.
This category includes cash and balances with the Bank of England, loans and advances to credit institutions
and the majority of the Group’s loans and advances to customers. All of the Group’s mortgage portfolios
were originated or purchased for the purposes of collecting contractual cash flows comprising of both
capital and interest on the outstanding balance, apart from the closed equity release portfolio.
For the Society, loans to subsidiary undertakings and holdings of certain investment securities issued by
Group entities are also measured at amortised cost based on the business model and SPPI assessments.
In the case of mortgage-backed securities, the SPPI criteria are only met where the underlying asset pools
contain mortgages which are SPPI and the exposure to credit risk inherent in the tranches held by the
Society is equal to or lower than the exposure to credit risk of the underlying mortgage pools.
Assets measured at amortised cost are initially recognised at fair value, being the cash consideration to
originate or purchase the asset including any directly attributable transaction costs, and subsequently
measured using the effective interest rate method.
Fair value through other comprehensive income (FVOCI)
Financial assets are classified as FVOCI where the associated business model objective is achieved by both
collecting contractual cash flows and selling the assets (“held to collect and sell” business model). The
contractual terms of FVOCI assets give rise on specified dates to cash flows which are solely payments of
principal and interest on the outstanding balance.
This category comprises the Group’s portfolio of investment securities held in order to meet current and
future liquidity requirements and which have been assessed by the Group to be in a “held to collect and sell”
business model. Consistent with the criteria for FVOCI, the Group collects contractual cash flows which,
without exception, meet the IFRS 9 SPPI definition and periodically sells a proportion of the portfolio to
evidence the liquidity of the investment assets. In the case of mortgage-backed securities, the SPPI criteria
are only met where the underlying asset pools contain mortgages which are SPPI and the exposure to credit
risk inherent in the tranches held by the Society is equal to or lower than the exposure to credit risk of the
underlying mortgage pools.
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1. Accounting policies
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FVOCI assets are recognised at fair value on trade date, which is the cash consideration including any
directly attributable transaction costs, and measured subsequently at fair value. Gains and losses from
changes in fair value are recorded in other comprehensive income via the fair value reserve, except for
impairment losses which are recognised in the Income Statement. Gains or losses arising on sale, including
any cumulative gains and losses previously recognised in other comprehensive income, are recognised in
the Income Statement. Interest is calculated using the effective interest rate method.
The fair values of FVOCI assets are based on quoted prices or, if these are not available, valuation
techniques developed by the Group. These include, but are not limited to, the use of discounted cash flow
models, option pricing models and recent arm’s length transactions.
Financial assets which do not meet the classification criteria to be held at amortised cost or FVOCI are
measured at FVTPL.
This category includes derivative assets and the closed equity release portfolio (presented within loans and
advances to customers). An assessment of the contractual terms of the equity release loans concluded that
the SPPI criteria, which must be satisfied to carry an asset at amortised cost or FVOCI, were not met. In the
Society’s Statement of Financial Position, certain investment securities issued by unconsolidated structured
entities are measured at FVTPL.
The fair values of derivatives are based on level 2 valuation techniques, as described in section (f) below.
Changes in the fair value of derivative assets are presented within fair value gain/(loss) on financial
instruments in the Income Statement offset, where the derivatives are hedging instruments in a qualifying
IAS 39 ‘Financial Instruments: Recognition and Measurement’ fair value hedge relationship, by the fair
value movements on the corresponding hedged items. Interest arising on derivative financial instruments is
recognised within net interest on an accruals basis.
Due to the bespoke nature of equity release books, relevant market pricing data is not available. The
fair value of the equity release portfolio is therefore determined using an internal discounted cash flow
model which estimates the amount and timing of future cash flows arising on redemption and discounts
these at assumed market rates to calculate the fair value of the mortgages. Model inputs are informed
by the Society’s historic experience (e.g. redemption rates). Under IFRS 13 ‘Fair Value Measurement’ and
Amendments to IFRS 7 ‘Financial Instruments: Disclosures’, the fair value measurement of equity release
mortgages is categorised as level 3.
An entity may, at initial recognition or on adoption of IFRS 9, make an irrevocable designation to measure
a financial asset at FVTPL, if doing so eliminates or significantly reduces a measurement or recognition
inconsistency that would arise if the asset were to be held at amortised cost or FVOCI. The Group and
In accordance with IFRS 9, all of the Group and Society’s financial liabilities are classified and subsequently
measured at amortised cost except for financial liabilities at fair value through profit or loss.
Amortised cost
This category includes shares, amounts due to credit institutions, amounts due to other customers, debt
securities in issue and subordinated liabilities.
Liabilities subsequently measured at amortised cost are recognised initially at fair value, being the
issue proceeds, net of premia, discounts and directly attributable transaction costs incurred. They are
subsequently measured at amortised cost using the effective interest rate method.
This category includes derivative liabilities for which changes in fair value are presented within fair value
gain/(loss) on financial instruments in the Income Statement offset, where the derivatives are hedging
instruments in a qualifying IAS 39 fair value hedge relationship, by the fair value movements on the
corresponding hedged items. Interest arising on derivative financial instruments is recognised within net
interest on an accruals basis.
The fair values of derivative liabilities are determined in accordance with the three tier valuation hierarchy as
defined within IFRS 13 and in section (f) below.
An entity may, at initial recognition or on adoption of IFRS 9, make an irrevocable designation to measure
a financial liability (that would otherwise be held at amortised cost) at FVTPL if doing so eliminates or
significantly reduces a measurement or recognition inconsistency. The Group and Society have not
Expected credit losses (ECLs) are recognised for all financial assets carried at amortised cost or FVOCI
under IFRS 9, and also for undrawn loan commitments where a mortgage offer has been made but the loan
is yet to be advanced and recognised in the Statement of Financial Position.
The year end modelled ECL has been updated where necessary, for example:
•
Account level assumptions for commercial provisions have been refined to reflect the latest
developments on an individual account level. Factors such as strategy, rental cover and exit value
valuation assumptions have been considered when informing these decisions.
•
The macroeconomic scenarios have been updated to reflect the latest economic position in the UK at
the reporting date, including assumptions of the cost of living challenges, interest rates and house price
movements.
During the year, the ECL model has been enhanced, enabling several residential Post Model Adjustments
(PMAs) applied in previous years to be retired. Total PMAs in 2024/25 of £3.3m (2023/24 £3.7m) cover the
factors detailed below:
•
The flat price index diverges from the all-house price index, driven by uncertainty over impacts of
cladding and high leasehold charges. The overlay compensates for this divergence.
•
The commercial portfolio is concentrated in the retail sector for which the impact of global events,
including recent US tariff announcements, is uncertain.
Staging
At each reporting date, financial assets subject to the impairment requirements of IFRS 9 are categorised
into one of three stages:
Stage 1 (Initial recognition)
On initial recognition, financial assets which are not credit impaired and have not experienced a significant
increase in credit risk (SICR) since initial recognition are categorised as stage 1 and provision is made for
12 month ECLs, being the losses from default events expected to occur within the next 12 months. Assets
remain in stage 1 until such time as they meet the criteria for another stage or are derecognised.
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Stage 2 (significant increase in credit risk)
Financial assets which are not in default, but have experienced a SICR since initial recognition, are
categorised as stage 2. The loss allowance recognised is equivalent to lifetime ECL, being the loss arising
from default events expected to occur over the lifetime of the financial asset.
Determining whether a SICR has occurred is a critical aspect of the IFRS 9 methodology and one which
involves judgement, based on a combination of quantitative and qualitative measures. As described in the
ECL calculation sections which follow, the criteria applied vary across portfolios depending on the nature
of the portfolio and availability of relevant credit risk information, but all include the IFRS 9 ‘backstop’ of 30
days past due as a stage 2 trigger.
Stage 3 (default)
Defaulted or credit-impaired financial assets are categorised as stage 3, requiring recognition of lifetime
ECLs.
Transfers to lower stages (curing)
Financial assets in stages 2 or 3 can transfer back to stages 1 or 2, once the criteria for SICR or default cease
to be met for a period of time, ranging from 6 months to 24 months, based on certain qualitative attributes
defined within the ECL methodology for that portfolio, sometimes known as the ‘cure’ period. In practice,
this means that a stage 2 or 3 loan which ceases to breach the threshold(s)/criteria for that stage will remain
in the higher stage for a pre-determined number of months. The use of cure periods gives assurance that
accounts have rehabilitated before re-entering lower stages and reduces the level of volatility that might
otherwise arise from accounts regularly migrating between stages.
Forward-looking ECL approach
ECL is measured as the present value of the difference between the cash flows contractually due on a
financial asset or undrawn commitment and the cash flows expected to be received. In the Statement of
Financial Position, the loss allowance is presented as a reduction in the carrying value of the financial asset.
In the case of an undrawn loan commitment, the impairment provision is instead presented within provisions
for liabilities.
For each of the Group and Society’s financial asset portfolios in the scope of IFRS 9 impairment, the
estimate of ECL is unbiased and weighted to take into account a range of possible outcomes.
In accordance with IFRS 9, forecasts of future economic conditions are integral to the ECL calculations
for each portfolio. The Group currently models four forward-looking macroeconomic scenarios: a central
forecast (assigned the highest weighting), together with upside, downside and stress scenarios. The
scenarios have been updated to take into account the economic and geopolitical backdrop.
ECL calculation – core residential mortgages
For the core residential mortgage books, the impairment model employs industry-accepted statistical
techniques to address the complex requirements of IFRS 9, with model assumptions and parameters initially
determined by regression analysis of historical default data. The assumptions are validated using ‘out of
time’ samples, across a range of economic scenarios, enabling the predictive capabilities of the models to
be confirmed.
The model incorporates quantitative factors for identifying a SICR by comparing reporting date lifetime PD
with residual origination lifetime PD. For the purposes of this quantitative staging assessment, mortgages
are segmented by lending type (owner occupied or buy to let). Residual origination PD curves and (relative
and absolute) threshold levels are established via an iterative process involving statistical analysis of the
Group’s default data. In addition, a range of internally monitored potential impairment indicators has been
selected as qualitative criteria for classifying an individual loan as stage 2. Examples of qualitative indicators
include cancelled direct debit instructions, certain forbearance measures and evidence of impaired credit
history obtained from external agencies.
The default criteria for core residential loans are entirely aligned with those used for capital and credit risk
management purposes. Loans are considered to be in default or credit-impaired if they are in arrears by
three or more months, in litigation, possession or Law of Property Act ( LPA) receivership, or meet one of a
range of internal ‘unlikely to pay’ indicators.
Within the core residential model, ECL is calculated by multiplying the forward-looking PD, exposure at
default (EAD) and loss given default (LGD). The model outputs monthly ECLs, which are aggregated over the
first 12 months to obtain 12 month ECL and over the life of the loan to calculate lifetime ECL.
The model combines a number of account-specific variables and forecasts of future economic conditions
within the calculation of PD. Macroeconomic variable inputs to the model are reviewed quarterly and include
house price index (HPI), interest rates, unemployment and GDP. The variables were selected based on
statistical tests and other analysis which evidenced their correlation with credit risk.
ECL calculation – undrawn commitments
The loss allowance for undrawn commitments is inferred from the core residential mortgage impairment
model outputs for existing loans with similar risk characteristics.
All undrawn commitments are currently allocated to stage 1 such that a 12-month ECL calculation is
appropriate.
The Group's IFRS 9 provision requirements for undrawn commitments were negligible at 31 March 2025 and
31 March 2024.
ECL calculation – second charge residential mortgages
For the closed second charge loan book, a SICR is assessed using external credit agency PD indicators.
Absolute thresholds have been set based on analysis of monthly PD scores from origination (or earliest
available date) to point of default.
Second charge mortgages are considered to be in default if they are in arrears by three or more months or in
bankruptcy, litigation or possession.
Impairment provisions for the closed second charge mortgage book are determined using a simple
discounted cash flow model which segregates accounts by payment status. Estimated future cash flows,
which consider the forced sale property valuation and level of first charge debt remaining, are discounted
to their present value using the effective interest rate of the loan and compared with the account balance at
the reporting date. This estimated loss on possession is multiplied by the probability of possession occurring
to calculate the ECL requirement.
The key macroeconomic variable affecting the level of second charge impairment losses is HPI, as forecast
within the Group’s central, upside, downside and stress scenarios.
ECL calculation – commercial mortgages
The key indicator of a SICR for a commercial loan is a downward migration in internal credit rating,
determined via an established internal credit risk assessment process. The internal grade is determined at an
individual account level, combining expert judgement with prescriptive measures including, but not limited
to, loan to value and income/debt service coverage ratios.
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Commercial loans are categorised as default if a LPA Receiver (or equivalent) has been appointed, if they are
in arrears by greater than or equal to three months, and/or are past scheduled maturity (unless past maturity
by no more than 3 months and active negotiations to extend are in progress with the customer). Loans not
meeting these criteria may be classified as stage 3 based on expert management judgment of the perceived
risk of non-payment.
The ECL requirements for commercial mortgages are assessed on an individual loan basis, with the right
to offsetting ECL requirements where cross-collateralisation exists between connected commercial
mortgages, using cash flow scenario modelling. This involves estimating the timing and amount of future
cash flows, in the event of default, for one or more probability weighted account-specific scenarios based
on the Group’s central forecast of economic conditions. Applying the Group’s macroeconomic scenarios
effectively creates a range of alternative outcomes in addition to the central forecast.
Estimated future cash flows, comprising rental receipts and final sales proceeds (each net of costs), are
discounted at the effective interest rate of the loan and compared with its carrying value to determine
the ECL under each combination of account-specific and macroeconomic scenarios. The relevant
macroeconomic weightings are then applied to calculate the overall provision requirement at the reporting
date.
ECL calculation – liquid assets
For liquid assets, comprising cash and balances with the Bank of England, loans and advances to credit
institutions and investment securities, a SICR is determined by counterparty type and adverse movements
in counterparty credit rating beyond specified thresholds. None of the Group’s liquid assets are categorised
as stage 2 at the reporting date.
Liquid assets are in default if categorised as such by external credit rating agencies. The Group has never
experienced an impairment loss or default on its Treasury investment portfolio.
The ECL calculation for liquid assets multiplies the carrying value of the asset by a PD applicable to its
credit rating at the reporting date. The PD is obtained from publicly available external credit rating agency
data tables. The macroeconomic weighted scenarios are translated to shifts in counterparty credit ratings
thereby changing the PDs applied in the calculation.
The Group’s liquid asset provision requirements at 31 March 2025 and 31 March 2024 were negligible.
ECL calculation – investments in subsidiary undertakings
Investments in subsidiary undertakings comprise (minimal) share capital and intercompany loans.
Intercompany loans are financial assets of the Society which are measured at amortised cost and therefore
subject to the impairment requirements of IFRS 9.
For lending subsidiaries, a SICR is deemed to occur when the net assets of the subsidiary are lower than the
amount owed to the Society, calling into question the recoverability of the amount owed to the Society.
Where there is a significant increase in credit risk, the intercompany loan is categorised as stage 2; all
other intercompany loans are recorded as stage 1. The ultimate recovery of these amounts is linked to the
recoverability of the underlying loans and advances, for which the ECL methodology, including related
judgments and estimation techniques, has been provided above. The impairment provision requirement is
reviewed periodically.
Write off of financial assets
Where a loan is not recoverable, it is written off against the related provision for loan impairment once
all the necessary procedures have been completed and the amount of the loss has been determined.
Subsequent recoveries of amounts previously written off decrease the amount of impairment losses
The Group’s policy is to derecognise financial assets when the contractual right to the cash flows from
the financial asset expires. The Group also derecognises financial assets that it transfers to another party
provided the transfer of the asset also transfers the right to receive the cash flows of the financial asset and
substantially all the risks and rewards of ownership.
The Group derecognises financial liabilities only when the obligation specified in the contract is discharged,
The Group may, in certain circumstances, renegotiate or otherwise modify the contractual cash flows
of loans and advances to customers. If qualitative assessments conclude that the new cash flows are
substantially different to the original cash flows, the original loan is derecognised and a new financial asset
recognised in the Statement of Financial Position. If the modified cash flows are not substantially different,
a modification gain or loss is recognised in profit or loss, calculated by adjusting the loan’s gross carrying
amount to the present value of the modified contractual cash flows discounted at the asset’s original
effective interest rate.
Where contractual terms are modified due to financial difficulties of the borrower (forbearance), the
modification gain or loss is included within impairment on loans and advances; otherwise it is presented
within interest receivable.
For residential mortgages, a change of product at the end of a fixed rate deal period is not considered to be
a modification to the contract but instead a repricing to market interest rates which was envisaged at the
The Group determines fair values by the three tier valuation hierarchy as defined within IFRS 13 and
Amendments to IFRS 7.
Level 1: For financial instruments traded in active markets, the determination of fair values of financial assets
and financial liabilities is based on quoted market prices or dealer price quotations. This includes listed
equity securities and quoted debt instruments on major exchanges (for example, FTSE) and broker quotes
(for example, Bloomberg).
A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly
available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those
prices represent actual and regularly occurring market transactions in an orderly transaction between
market participants. If the above criteria are not met, the market is regarded as being inactive. Indications
that a market is inactive are when there is a wide bid-offer spread or there are few recent transactions.
Level 2: For all other financial instruments, fair value is determined using valuation techniques. In these
techniques, fair values are estimated from observable data in respect of similar financial instruments, using
models to estimate the present value of expected future cash flows or other valuation techniques, using
inputs (for example, SONIA yield curve, volatilities and counterparty spreads) existing at the reporting dates.
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The Group uses widely recognised valuation models for determining fair values of non-standardised
financial instruments of lower complexity, such as interest rate swaps. For these financial instruments,
inputs into models are generally market observable.
Level 3: Fair value is determined using valuation techniques where significant inputs are not based on
observable market data.
The objective of valuation techniques is to arrive at a fair value determination that reflects the price of the
financial instrument at the reporting date that would have been determined by market participants acting at
g) Sale and repurchase agreements
Investment and other securities may be lent or sold subject to a commitment to repurchase them. Where
substantially all of the risks and rewards of ownership remain with the Group, the securities are retained on
the Statement of Financial Position. The counterparty liability is recognised separately in the Statement of
Financial Position as appropriate. The difference between the sale and repurchase price is accrued over the
life of the agreements.
The Group uses derivative financial instruments to hedge its exposure to interest rate risk arising from
operational, financing and investment activities.
In accordance with its Treasury and Financial Risk Management Policy and the Building Societies Act 1986,
the Group does not hold or issue derivative financial instruments for trading purposes.
Derivative financial instruments (both assets and liabilities) are initially recognised and subsequently held
at fair value in the Statement of Financial Position with changes in their fair value going through the Income
Statement. However, by applying the hedge accounting rules set out in IAS 39, the changes in fair value of
derivatives used to hedge particular risks can be offset in the Income Statement.
i) Fair value hedges – The Group undertakes hedges of the fair value of recognised assets or liabilities
(fair value hedges) provided that certain criteria are met. Changes in the fair value of derivatives that are
designated and qualify as fair value hedges are recorded in the Income Statement, together with any
changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The Group
undertakes hedge accounting on both an individual and a portfolio basis. If the hedge no longer meets
the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item, for which the
effective interest rate method is used, is amortised to profit or loss over the remaining expected life of the
previously hedged item.
The Group documents, at the inception of any hedging transaction, the relationship between the hedging
instrument and the hedged items, as well as its risk management objective and strategy for undertaking
various hedge transactions. The Group also documents its assessment, both at hedge inception and on
an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in
offsetting changes in fair values or cash flows of hedged items.
ii) Derivatives that do not qualify for hedge accounting – Certain derivative instruments do not qualify for
hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge
Financial assets and financial liabilities are offset and the net amount presented within the Statement of
Financial Position when, and only when, the Group has a legally enforceable right to offset the amounts and
it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
Currently there are no financial assets or liabilities which are offset within the Statement of Financial
Position and all financial assets and liabilities are presented on a gross basis. Income and expenses are
presented on a net basis only when permitted under IFRS.
i) Equity instruments
Equity instruments, comprising core capital deferred shares (CCDS), subscribed capital and, in previous
years, profit participating deferred shares (PPDS), are financial instruments issued which do not give rise to
a contractual obligation to deliver cash or another financial asset to the holder. Where such an obligation
exists, the instrument is classified as a financial liability.
The proceeds of issuing equity instruments are recognised within equity, net of directly attributable costs
and tax.
Distributions to holders of equity instruments are recognised directly in equity as a deduction from general
Computer software
Computer software which is not an integral part of the related hardware is recorded as an intangible asset.
The identifiable and directly associated external and internal costs of acquiring and developing software are
capitalised where the software is controlled by the Group, and where it is probable that future economic
benefits, that exceed its cost, will flow from its use over more than one year. Intangible assets are held at
amortised cost; amortisation is charged to the Income Statement on a straight line basis over the estimated
useful life of 3 to 10 years. Intangible assets are subject to regular impairment reviews. Costs associated
valuation less depreciation. All gains on the revaluation of property are recognised in the revaluation reserve
when they arise. Freehold branches are revalued every 3 to 5 years by an independent firm of valuers. The
Head Office building and plant and equipment are stated at historical cost less depreciation. Historical cost
includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or are recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to the
Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to
the Income Statement during the financial period in which they are incurred.
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1. Accounting policies
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Land is not depreciated. Depreciation on other assets is calculated using the straight line method (unless
otherwise stated) to allocate their cost less their residual values over their estimated useful lives, as follows:
Freehold branches | Up to 50 years |
Head office | 25 years |
Leasehold improvements | Annual instalments over the period of the lease |
Equipment, fixtures and fittings and motor vehicles | |
• Office equipment | 3 to 7 years |
• Computer equipment | 3 to 7 years |
• Motor vehicles | 25% per annum reducing balance |
• Refurbishments | 5 to 10 years |
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each year end
date. Assets that are subject to amortisation are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. An asset’s carrying amount
is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its
estimated recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are
When the Group enters into a contract which conveys the right to control the use of an identified asset for a
period of time in excess of 12 months in exchange for consideration, it recognises a right-of-use (ROU) asset
and a corresponding lease liability in the Statement of Financial Position. The majority of the Group's leases
relate to its branch property network.
The lease liability is measured at the present value of the remaining lease payments at the commencement
date, discounted using the Group's incremental borrowing rate. The lease term incorporates lease extension
or termination options where they are reasonably certain to be exercised. The incremental borrowing rate is
determined with reference to the market pricing of securities with similar risk characteristics and terms to
the leased assets at the commencement date. The carrying value of the lease liability is adjusted for interest
charged and repayments. The lease liability is remeasured for changes in future lease payments, the lease
term or the Group's assessment of whether it will exercise a lease extension or termination option. Any
remeasurement results in a corresponding adjustment to the ROU asset. Interest is charged on the lease
liability at the Group's incremental borrowing rate and recorded in interest expense and similar charges
within the Income Statement.
The ROU asset is measured at cost, less any accumulated depreciation and impairment losses, and adjusted
for remeasurement of the corresponding lease liability. The initial measurement of the ROU asset includes
the lease liability, initial direct costs, lease payments made prior to the commencement date and lease
incentives received. It is subsequently depreciated using the straight line method over the shorter of the
asset's estimated useful life and the period to the end of the lease term. ROU assets are subject to an annual
impairment assessment.
As permitted by IFRS 16 ‘Leases’, the Group does not recognise a ROU asset or lease liability for leases of
low value or with lease terms of less than 12 months. For these leases, payments are recognised on a straight
line basis over the lease term and disclosed within administrative expenses in the Income Statement.
The Group has elected to separate its lease components and non-lease components for its property leases
(e.g. service charges).
In the Statement of Cash Flows, payments of lease liabilities are categorised as cash flows from financing
activities.
Where the Group acts as a lessor, these leases are treated as operating leases. The Group recognises lease
payments received in line with receipt of payments in the Income Statement.
Determining the incremental borrowing rate used to discount the future lease payments involves a degree
of estimation uncertainty. However, these judgements and estimates are not deemed critical, as they do not
For the purposes of the Statement of Cash Flows, cash comprises cash in hand and loans and advances
to credit institutions repayable on demand. Cash equivalents comprise highly liquid investments that are
convertible into cash with an insignificant risk of changes in value, with maturities of 90 days or less from
Tax on the profit/loss for the year comprises current tax and deferred tax. Income tax is recognised in the
Income Statement except to the extent that it relates to items recognised directly in equity, in which case it
is recognised in other comprehensive income within the Statement of Comprehensive Income or directly in
equity.
Current tax is the expected tax payable/receivable on the taxable income/expense for the year, using the tax
rate which applies to the accounting period ending at the date of the Statement of Financial Position, and
any adjustment to tax payable in respect of previous years.
between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes.
Deferred tax is determined using tax rates (and laws) that have been substantively enacted by the year
end date and are expected to apply when the related deferred income tax asset is realised or the deferred
income tax liability is settled.
Deferred tax assets are recognised only where it is probable that future taxable profits will be available
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1. Accounting policies
(continued)
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past
events, it is more likely than not that an outflow of resources will be required to settle the obligation and the
amount can be reliably estimated.
A possible obligation that arises from past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events, not wholly within the control of the
Group, is a contingent liability. A contingent liability is disclosed but not recognised in the Statement of
The Group provides both a defined benefit scheme (closed to new employees from 2002/3 and accruals
from 2009/10) and a defined contribution scheme on behalf of staff and Directors. The defined benefit
scheme is funded by contributions from the Society at rates assessed by independent actuaries. These
contributions are invested separately from the Group’s assets. The Scheme assets are measured at market
value at each year end date and the liabilities are measured using the projected unit valuation method, by
qualified actuaries, discounted using a corporate bond rate. The resulting pension scheme surplus or deficit
is recognised in the Statement of Financial Position.
Actuarial gains and losses are recognised in full in the period in which they occur. As permitted by the
revised standard (IAS 19 ‘Employee Benefits’), actuarial gains and losses are recognised outside profit or loss
in other comprehensive income, as an increase or decrease in general reserves.
Net interest, comprising interest income on plan assets less interest costs on scheme liabilities, and other
expenses relating to the defined benefit pension scheme are recognised in the Income Statement. Actuarial
gains or losses, that are gains or losses arising from differences between previous actuarial assumptions and
actual experience, are recognised in the Statement of Comprehensive Income.
For defined contribution plans, the contributions are recognised as employee benefit expenses in the
Income Statement when they are due, in accordance with the rules of the scheme. Prepaid contributions are
recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
Pensions
The Group operates a defined benefit pension scheme. The year end valuation of the scheme assets and
liabilities relies on estimates of future interest, inflation and mortality rates informed by external advice from
the scheme actuaries. The main assumptions used in the valuation, together with sensitivity analysis of the
In the process of applying accounting policies, the Group makes various judgements, estimates and
assumptions which affect the amounts recognised in the financial statements. Estimates and judgements
are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
Significant judgements in applying accounting policies
Impairment
For IFRS 9 impairment, judgement is required to define the staging criteria, i.e. what constitutes a significant
increase in credit risk (stage 2) and what circumstances give rise to a default (stage 3). Where assets meet
the stage 2 or 3 criteria, lifetime ECL must be recognised.
The staging methodologies for each portfolio are detailed within the “Impairment of financial assets”
accounting policy in this note. Model monitoring and model validation procedures are used to continually
evaluate the appropriateness of the staging criteria and macroeconomic variable inputs.
Securitisation transactions
In order to determine whether the Group controls a structured entity or not, the Group has to make
judgements about the degree of control and assess the ability to make operational decisions for the
structured entity in question. In many instances, elements are present that, when considered in isolation,
indicate control or lack of control over a structured entity, but when considered together make it difficult
to reach a clear conclusion. When assessing whether the Group has to consolidate a structured entity it
evaluates a range of factors following the rules and guidance of IFRS 10.
Where the Group has concluded that it does, in substance, control the entity to which financial assets have
been transferred, the structured entity is included in these financial statements and the transferred assets
are recognised in the Group’s Statement of Financial Position. Where the securitised assets were originated
by the Society they continue to be recognised in the Society’s Statement of Financial Position. In the case
of Sandwell Commercial Finance No. 1 Plc, Sandwell Commercial Finance No. 2 Plc, management judge that
these entities no longer meet the consolidation criteria set out in IFRS 10. In particular, the Group’s limited
exposure to credit losses in these entities (through deferred consideration and subordinated debt) has been
fully written down, with little prospect of recovery, meaning that there is no longer any future exposure to
variability of returns from these entities. As a result, these entities are no longer consolidated within the
Group. Consequently, the Group accounts do not include the results of these entities after deconsolidation.
Sources of estimation uncertainty
Impairment on loans and advances – forward-looking ECL approach
The estimation of ECLs is inherently uncertain and the IFRS 9 impairment models incorporate a number of
assumptions and estimates, changes in which could materially affect the carrying amounts of assets and
liabilities within the next financial year. The IFRS 9 requirements to incorporate forward-looking information
within the ECL calculation, including forecasts of future macroeconomic conditions, necessitate judgement
thereby increasing the potential for volatility in future periods.
The Group’s impairment models incorporate four macroeconomic forecasts (central, upside, downside and
stress), each comprising a number of economic variables considered to be credit risk drivers. As already
explained, economic scenarios and weightings have been updated to reflect the changing economic
conditions to which the Group is exposed.
Impairment on loans and advances - residential mortgages (core and second charge)
The following table indicates the main economic variables included within the IFRS 9 macroeconomic
scenarios at 31 March 2025 and the associated weightings, along with the sensitivity to the total residential
and commercial ECL provision arising from the application of 100% weightings to each scenario. The
macroeconomic scenarios and associated weightings at 31 March 2024 are also provided for comparative
purposes.
The forward looking macroeconomic scenarios are updated with reference to third party published
economic data and forecasts. Management judgement is applied to the relative weighting of the scenarios
in line with the prevailing conditions and uncertainty in the UK economy.
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1. Accounting policies
(continued)
Macroeconomic scenarios as at 31 March 2025:
(Decrease)/ | ||||||||||
(Decrease)/ | Increase in | |||||||||
Increase in | provision with | |||||||||
Current scenario (%) | provision with | 10% increase | ||||||||
100% scenario | in scenario | |||||||||
Scenario | weighting | weighting* | ||||||||
weighting | Metric | 2025/26 | 2026/27 | 2027/28 | 2028/29 | 2029/30 | 5 year average | £m | £m | |
Bank Rate | 4.0 | 3.8 | 3.8 | 3.8 | 3.5 | 3.8 | ||||
Central | HPI | 2.1 | 1.7 | 2.3 | 3.1 | 3.8 | 2.6 | |||
scenario | 50% | Unemployment | 4.6 | 4.7 | 4.8 | 4.7 | 4.6 | 4.7 | (9.1) | - |
GDP | 0.9 | 1.5 | 1.5 | 1.6 | 1.7 | 1.4 | ||||
Bank Rate | 3.8 | 3.5 | 3.5 | 3.5 | 3.3 | 3.5 | ||||
Upside | HPI | 3.9 | 4.5 | 5.0 | 4.5 | 5.1 | 4.6 | (11.5) | (0.3) | |
scenario | 5% | Unemployment | 4.1 | 3.8 | 3.9 | 4.1 | 4.1 | 4.0 | ||
GDP | 1.8 | 1.8 | 2.0 | 1.8 | 1.9 | 1.9 | ||||
Bank Rate | 6.0 | 5.3 | 4.0 | 3.0 | 2.3 | 4.1 | ||||
Downside | HPI | (5.3) | (5.0) | (2.0) | 1.8 | 2.8 | (1.5) | 6.1 | 1.5 | |
scenario | 30% | Unemployment | 5.3 | 6.2 | 6.0 | 5.8 | 6.1 | 5.9 | ||
GDP | (0.3) | (0.1) | 0.9 | 1.1 | 1.6 | 0.6 | ||||
Bank Rate | 2.3 | 0.5 | 1.0 | 1.5 | 2.0 | 1.5 | ||||
Stress | HPI | (7.6) | (14.7) | (8.0) | 6.9 | 6.3 | (3.4) | 21.9 | 3.1 | |
scenario | 15% | Unemployment | 5.7 | 8.4 | 8.2 | 7.5 | 6.8 | 7.3 | ||
GDP | (4.9) | 0.9 | 1.2 | 1.3 | 1.4 | - | ||||
*10% increase in weighting with a corresponding reduction to the central scenario weighting.
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1. Accounting policies
(continued)
Macroeconomic scenarios as at 31 March 2024:
(Decrease)/ | ||||||||||
(Decrease)/ | Increase in | |||||||||
Increase in | provision with | |||||||||
| Year ended 31 March 2024 scenario (%) | provision with | 10% increase | ||||||||
100% scenario | in scenario | |||||||||
Scenario | weighting | weighting* | ||||||||
weighting | Metric | 2024/25 | 2025/26 | 2026/27 | 2027/28 | 2028/29 | 5 year average | £m | £m | |
Bank Rate | 4.5 | 3.8 | 3.5 | 3.5 | 3.3 | 3.7 | ||||
Central | HPI | (2.9) | (1.0) | 1.2 | 3.0 | 3.8 | 0.8 | |||
scenario | 50% | Unemployment | 4.5 | 4.7 | 4.8 | 4.7 | 4.9 | 4.7 | (8.9) | - |
GDP | 0.5 | 1.3 | 1.6 | 1.8 | 1.7 | 1.4 | ||||
Bank Rate | 4.3 | 3.5 | 3.0 | 3.0 | 3.0 | 3.4 | ||||
Upside | HPI | 2.8 | 2.8 | 4.1 | 4.7 | 5.6 | 4.0 | |||
scenario | 5% | Unemployment | 4.0 | 3.8 | 3.7 | 3.7 | 3.7 | 3.8 | (12.2) | (0.4) |
GDP | 1.1 | 2.0 | 2.5 | 2.3 | 2.3 | 2.0 | ||||
Bank Rate | 6.5 | 5.8 | 5.3 | 4.8 | 4.0 | 5.3 | ||||
Downside | HPI | (9.2) | (6.7) | (3.5) | 1.6 | 2.4 | (3.2) | |||
scenario | 30% | Unemployment | 5.0 | 5.8 | 6.9 | 7.1 | 7.6 | 6.5 | 5.8 | 1.4 |
GDP | (0.5) | (0.2) | 0.5 | 0.9 | 1.0 | 0.3 | ||||
Bank Rate | 2.3 | 0.3 | 0.3 | 0.3 | 0.3 | 0.7 | ||||
Stress | HPI | (10.4) | (15.2) | (8.3) | 7.2 | 6.6 | (4.5) | 22.2 | 3.2 | |
scenario | 15% | Unemployment | 7.6 | 8.3 | 7.7 | 7.1 | 6.5 | 7.4 | ||
GDP | (4.1) | 0.1 | 1.2 | 1.3 | 1.4 | - | ||||
*10% increase in weighting with a corresponding reduction to the central scenario weighting
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1. Accounting policies
(continued)
Key assumptions for the residential portfolios are the weightings of the macroeconomic forecasts, which
each incorporate a different outlook for the economic variables shown in the table above, the forecast of
future house price inflation and the relative threshold used to identify a significant increase in credit risk.
The sensitivity of the residential provision calculations to the key assumptions in the current and prior year
is as follows:
(Decrease)/increase in | (Decrease)/increase in | ||
impairment provision | impairment provision | ||
Change to current | 2025 | 2024 | |
Assumption | assumption | £m | £m |
HPI growth | Increase of 5.0% | (0.4) | (0.3) |
HPI growth | Decrease of 5.0% | 0.6 | 0.4 |
Quantitative threshold for | |||
identifying a significant | Relative increase of 10% | (0.4) | (0.1) |
increase in credit risk |
Impairment on loans and advances - commercial mortgages
Consistent with residential mortgages, the IFRS 9 ECL calculation for the commercial portfolio incorporates
central, upside, downside and stress economic scenarios with weightings of 50%, 5%, 30% and 15%
respectively.
In addition to the scenario weightings and account-specific factors that impact cash flows, the key model
assumption for commercial provisioning is considered to be the exit yield requirement, which is used to
estimate the cash flows arising from realisation of the property values on sale. While interest rates also have
a significant impact on the ECL, via the discount factor applied in the model, compensating economic hedge
arrangements would substantially offset the provision movement in profit or loss terms with an opposing
fair value movement. Compared with the central economic forecast, the exit yield requirement for each loan
increases by 0.85% and 1.93% in the downside and stress scenario respectively and reduces by 0.18% in the
upside scenario. This compares to an average exit yield of 8.15%.
The table below illustrates the sensitivity of the commercial ECL calculation to the scenario weightings and exit
yield requirement.
(Decrease)/Increase in | (Decrease)/Increase in | ||
impairment provision | impairment provision | ||
2025 | 2024 | ||
Assumption | Change to current assumption | £m | £m |
Upside scenario | Increase weighting by 10% (with | ||
| weighting | a corresponding reduction to the | (0.1) | (0.2) |
central scenario) | |||
Downside | Increase weighting by 10% (with | ||
scenario | a corresponding reduction to the | 1.0 | 1.0 |
weighting | central scenario) | ||
| Stress scenario | Increase weighting by 10% (with | ||
| weighting | a corresponding reduction to the | 1.5 | 2.5 |
central scenario) | |||
Exit yield | |||
| requirement | Increase of 0.5% across all scenarios | 0.9 | 1.7 |
Investment properties
Independent specialist valuers have undertaken a valuation review of the portfolio of residential investment
properties on an open market value for existing use basis, calculated on the net income allowing for
reversionary potential. In making the judgment, consideration has been given to assumptions that are mainly
based on market conditions existing at the Statement of Financial Position date. These estimates are regularly
compared to actual market data and actual transactions entered into by the Group. The calculation of the
fair value of investment properties incorporates house price assumptions which are regularly reviewed by
management.
If house prices were to increase by 5%, the carrying value of the investment properties would change by £7.2m
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
On financial assets not at fair value through | ||||
profit or loss: | ||||
Loans fully secured on | ||||
residential property | 233.8 | 180.9 | 185.3 | 126.4 |
Other loans | ||||
Connected undertakings | - | - | 44.7 | 44.1 |
Loans fully secured on land | 4.0 | 4.2 | - | - |
Investment securities | 20.2 | 19.5 | 25.3 | 22.4 |
Other liquid assets | 21.9 | 24.8 | 21.4 | 24.5 |
On financial assets at fair value through | ||||
profit or loss: | ||||
Loans fully secured on | ||||
residential property | 0.8 | 0.9 | 0.8 | 0.9 |
Net Income on derivative financial | ||||
instruments | 35.7 | 56.7 | 32.8 | 56.6 |
Total interest receivable and similar income | 316.4 | 287.0 | 310.3 | 274.9 |
Interest receivable includes: | ||||
Income from fixed income securities | 2.9 | 3.7 | 2.9 | 3.7 |
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During the year ended 31 March 2025, the total interest receivable and similar income calculated using the
effective interest method was: Group £259.7m (2023/24: £209.8m) and Society £251.4m (2023/24: £195.0m)
for financial assets held at amortised cost, and Group £20.2m (2023/24: £19.5m) and Society £25.3m (2023/24:
£22.4m) for financial assets held at fair value through other comprehensive income. Accrued interest on
qualifying derivative financial instruments is recognised in interest receivable/payable depending on whether
they hedge assets/liabilities respectively.
Included within interest receivable and similar income is interest accrued on impaired residential mortgage
assets: Group £1.6m (2023/24: £1.4m) and Society £2.4m (2023/24: £1.8m) and interest accrued on impaired
commercial mortgage assets: Group £4.3m (2023/24: £5.4m) and Society £nil (2023/24: £nil). For the purposes
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
On financial liabilities not at fair value | ||||
through profit or loss: | ||||
Shares held by individuals | 180.6 | 142.5 | 180.6 | 142.4 |
Deposits from banks and other deposits | 31.8 | 39.8 | 31.8 | 39.5 |
Debt securities in issue | 7.6 | - | - | - |
Subordinated liabilities | 0.2 | 0.8 | 0.2 | 0.8 |
Deemed loans | - | (0.3) | 10.0 | - |
On financial liabilities at fair value through | ||||
profit or loss: | ||||
Net expense on derivative financial | ||||
instruments | - | 0.6 | - | 0.6 |
Total interest expense and similar charges | 220.2 | 183.4 | 222.6 | 183.3 |
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Other operating income includes: | ||||
Rent receivable on investment property | 7.1 | 7.5 | - | - |
Operating expenses on investment | ||||
| property | (3.2) | (3.4) | - | - |
Pension fund net interest (note 30) | 0.3 | 0.5 | 0.3 | 0.6 |
Total other operating income | 4.2 | 4.6 | 0.3 | 0.6 |
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Fair value hedges | ||||
Derivatives designated as fair value | ||||
hedges | (18.0) | (41.2) | (18.0) | (41.2) |
Adjustments to hedged items in fair value | ||||
hedge relationships | 20.1 | 37.2 | 20.1 | 37.2 |
Fair value gain/(loss) on hedge accounting | 2.1 | (4.0) | 2.1 | (4.0) |
Other derivatives | 2.4 | 3.4 | (5.3) | 3.4 |
Financial instruments mandatorily at fair | ||||
value through profit or loss | (0.1) | 0.2 | (0.1) | 0.2 |
Total fair value gain/(loss) on financial | ||||
instruments | 4.4 | (0.4) | (3.3) | (0.4) |
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Staff costs | ||||
Wages and salaries | 29.0 | 27.2 | 28.3 | 26.6 |
Social security costs | 2.9 | 2.8 | 2.9 | 2.7 |
Other pension costs | 2.5 | 2.1 | 2.4 | 2.1 |
Other administrative expenses | 23.2 | 21.9 | 21.3 | 20.0 |
57.6 | 54.0 | 54.9 | 51.4 | |
Other administrative expenses include: | ||||
Remuneration of auditors | ||||
(excluding VAT element) | ||||
Audit of these financial statements | 0.5 | 0.4 | 0.5 | 0.4 |
Audit of the subsidiary financial | ||||
statements | 0.3 | 0.2 | - | - |
Wages and salaries include £0.2m (2023/24: £0.3m) redundancy costs paid as part of the restructuring and
rationalisation undertaken during the year.
Other assurance services provided by the external auditors comprise £11,000 (2023/24: £6,000) in respect of
audit-related assurance services and £nil (2023/24: £nil) in respect of other assurance services, in each case
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Group and | Group and | |
Society | Society | |
2025 | 2024 | |
The average number of employees employed throughout the year was: | ||
Full time | 542 | 505 |
Part time | 197 | 196 |
739 | 701 | |
Building Society | ||
Central administration (Society and subsidiaries) | 567 | 523 |
Branches | 172 | 178 |
739 | 701 |
Total Directors’ emoluments including expenses amounted to £2.8m (2023/24: £2.7m). Full details are given in
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
UK corporation tax at 25% (2023/24: 25%) | 1.4 | 2.6 | 1.4 | 2.5 |
Corporation tax - adjustment in respect of | ||||
prior years | (0.5) | (0.5) | 0.2 | 0.1 |
Total current tax | 0.9 | 2.1 | 1.6 | 2.6 |
Deferred tax | ||||
Current year | 5.3 | 5.3 | 4.7 | 4.7 |
Adjustment in respect of prior periods | 0.7 | 0.3 | 0.6 | (0.5) |
Tax on profit on ordinary activities | 6.9 | 7.7 | 6.9 | 6.8 |
UK corporation tax has been calculated at the applicable prevailing rate.
The tax charge is reconciled to the profit before tax in the Income Statement as follows:
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Profit before tax | 36.5 | 32.1 | 15.5 | 15.7 |
Profit before tax multiplied by the UK | ||||
| standard rate of tax of 25% (2023/24: 25%) | 9.1 | 8.0 | 3.9 | 3.9 |
Effects of: | ||||
Income not taxable and expenses not | ||||
| deductible for tax purposes | 0.3 | 0.2 | 2.2 | 3.5 |
Securitisation profits | (1.9) | - | - | - |
Adjustment in respect of prior years | 0.2 | (0.2) | 0.8 | (0.4) |
Transfer pricing adjustments | - | - | (0.6) | (0.2) |
Chargeable gains | 0.6 | - | 0.6 | - |
Movement in deferred tax not recognised | (1.0) | - | - | - |
Revaluation | (0.4) | (0.3) | - | - |
Tax charge | 6.9 | 7.7 | 6.9 | 6.8 |
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Cash in hand | 1.3 | 1.2 | 1.3 | 1.2 |
Other deposits with the Bank of England | 158.5 | 490.4 | 158.5 | 490.4 |
159.8 | 491.6 | 159.8 | 491.6 |
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Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Listed transferable investment securities: | ||||
Fair value through other comprehensive | ||||
| income | 467.3 | 391.1 | 467.3 | 391.1 |
Amortised cost | - | - | 191.0 | - |
Fair value through profit or loss | 0.3 | 0.4 | 0.3 | 0.4 |
Total investment securities | 467.6 | 391.5 | 658.6 | 391.5 |
The movement in investment securities is summarised as follows:
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
At beginning of year | 391.5 | 315.6 | 391.5 | 686.2 |
Investment securities with maturities > | ||||
3 months at date of acquisition: | ||||
Additions | 333.6 | 333.0 | 524.7 | 333.0 |
Disposals (sale and redemption) | (256.8) | (258.4) | (256.9) | (629.0) |
(Losses)/Gains from changes in fair value | (0.7) | 1.3 | (0.7) | 1.3 |
At end of year | 467.6 | 391.5 | 658.6 | 391.5 |
The Directors consider that the primary purpose for holding investment securities is as liquid assets with the
(a) Use of derivative financial instruments for interest rate risk management purposes
The Group is exposed to the risk that movements in interest rates change the value of, or income arising from,
its assets and liabilities. This type of market risk is known as interest rate risk.
The Group has an integrated approach to interest rate risk management, taking advantage of natural hedges
which exist within the Group Statement of Financial Position and using derivatives where no such natural
hedges exist. Derivatives are financial instruments whose value is derived from one or more underlying price,
rate or index (such as interest rates, exchange rates or stock market indices) but have a smaller or no initial net
investment relative to financial assets/liabilities offering the same risk/return, as cash flows are generally settled
at a future date.
The derivatives currently held by the Group comprise interest rate swaps with highly rated counterparties.
Counterparty credit risk is mitigated by the posting of collateral and the use of central clearing counterparties.
In accordance with the Building Societies Act 1986, derivatives are solely used for risk mitigation and never
for trading purposes. From an accounting perspective, where the IAS 39 criteria are met, the derivatives
are designated as hedging instruments in fair value hedge relationships and hedge accounting is adopted.
Otherwise, the derivatives are held as economic hedges and valued at fair value through profit or loss. The
accounting policies for derivatives and hedge accounting are described in note 1 to the accounts.
The following table describes the significant activities undertaken by the Group, the associated risks, the type
of derivatives typically used in managing such risks and related hedge relationships.
Derivative | Hedge | Hedge | ||
Activity | Risk | type | relationship | accounting |
Fixed rate | Sensitivity to | Pay fixed receive | Fair value | |
| mortgage lending | changes in | floating interest | hedge | Yes |
| interest rates | rate swaps | |||
| Fixed rate | Sensitivity to | Pay fixed receive | Fair value | Not at |
investment | changes in | floating interest | hedge | present |
| securities | interest rates | rate swaps | ||
Fixed rate | Sensitivity to | Receive fixed pay | Fair value | Not at |
| savings products | changes in | floating interest | hedge | present |
| interest rates | rate swaps | |||
| Commercial | Sensitivity to | Pay fixed receive | Economic | |
mortgage loss | changes in | floating interest | hedge | No |
| provisions | interest rates | rate swaps |
These arrangements have been established solely for the mitigation of interest rate risk. Other risks, such as
credit risk, are separately managed but not hedged. The interest rate risk component of the hedge relationship
is ascertained with reference to the benchmark rate of interest being hedged.
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12. Derivative financial instruments and hedge accounting
(continued)
(b) Derivative financial instruments in the Statement of Financial Position
The following tables show the notional and carrying amounts of derivative financial instruments at the year-end
date.
Carrying value in the | |||
Statement of Financial Position | |||
Notional amount | Assets | Liabilities | |
2025 | 2025 | 2025 | |
Group | £m | £m | £m |
Interest rate swaps | |||
Designated as fair value hedges | 2,743.8 | 33.6 | (7.8) |
Economic hedges | 1,061.8 | 11.3 | (9.0) |
Total derivatives held for hedging purposes | 3,805.6 | 44.9 | (16.8) |
Carrying value in the | |||
Statement of Financial Position | |||
Notional amount | Assets | Liabilities | |
2024 | 2024 | 2024 | |
Group | £m | £m | £m |
Interest rate swaps | |||
Designated as fair value hedges | 2,237.8 | 58.0 | (12.3) |
Economic hedges | 159.8 | 3.8 | (0.5) |
Total derivatives held for hedging purposes | 2,397.6 | 61.8 | (12.8) |
Carrying value in the | |||
Statement of Financial Position | |||
Notional amount | Assets | Liabilities | |
2025 | 2025 | 2025 | |
Society | £m | £m | £m |
Interest rate swaps | |||
Designated as fair value hedges | 2,743.8 | 33.6 | (7.8) |
Economic hedges | 636.4 | 2.6 | (9.0) |
Total derivatives held for hedging purposes | 3,380.2 | 36.2 | (16.8) |
Carrying value in the | |||
Statement of Financial Position | |||
Notional amount | Assets | Liabilities | |
2024 | 2024 | 2024 | |
Society | £m | £m | £m |
Interest rate swaps | |||
Designated as fair value hedges | 2,237.8 | 58.0 | (12.3) |
Economic hedges | 159.8 | 3.7 | (0.5) |
Total derivatives held for hedging purposes | 2,397.6 | 61.7 | (12.8) |
(c) Hedge accounting
(i) Fair value hedges
Hedges of the fair value of recognised assets or liabilities are termed ‘fair value hedges’. Under hedge
accounting rules, changes in the fair value of derivatives (hedging instruments) are offset against changes in
the fair value of hedged assets or liabilities (hedged items) in the Income Statement. The hedging ratio is the
ratio of the notional value of the derivatives to the principal of the assets or liabilities being hedged.
(ii) Hedge effectiveness
For a fair value hedge of interest rate risk, hedge effectiveness is determined by comparing changes in the fair
value of the derivative with changes in the fair value of the hedged asset or liability attributable to changes in
interest rates.
The primary sources of ineffectiveness for the Society’s fair value hedge relationships are:
•
Differences in the timing of cash flows between the interest rate swaps and the hedged mortgages
or savings products.
•
Differences between actual and expected prepayment profiles of the hedged items.
•
Differences between the contractual start dates and maturity dates of the derivatives and the hedged items.
(iii) Portfolio hedges
The Society designates fair value hedge relationships in which derivative financial instruments hedge a portfolio
of fixed rate mortgages or savings products, reducing the Income Statement volatility that would otherwise
arise from the derivatives being measured at fair value through profit or loss and the related hedged items at
amortised cost.
The Society’s hedging approach is dynamic, as the mortgage portfolios are constantly changing due to new
advances, contractual repayments and early redemptions. To manage the interest rate risk inherent within
fixed rate mortgage lending, the Society frequently enters into and closes interest rate swap arrangements. It
assesses hedging ratios and hedge effectiveness on a monthly basis.
(iv) Derivatives not in a designated hedge relationship
In cases where the Group holds derivatives for hedging purposes, but the prescriptive IAS 39 criteria for
application of hedge accounting are not met, the derivatives are held at fair value through profit or loss.
Changes in the fair value of these derivatives are included within ‘Fair value gains/(losses) on financial
instruments’ on the Income Statement.
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12. Derivative financial instruments and hedge accounting
(continued)
The following tables analyse the notional value and average fixed rate of interest rate swaps in designated hedge relationships by contractual maturity date.
At 31 March 2025
Less than 3 | 3 to 12 | 1 to 5 | Over 5 | |
Group | months | months | years | years |
Fair value hedge of fixed rate | ||||
residential loans | ||||
Interest rate swap notional (£m) | 18.0 | 434.9 | 2,193.9 | 67.4 |
Average fixed rate | 3.73% | 2.62% | 3.27% | 2.62% |
Fair value hedge of fixed rate | ||||
commercial loans | ||||
Interest rate swap notional (£m) | 4.6 | 1.0 | 24.0 | - |
Average fixed rate | 4.44% | 4.44% | 5.08% | - |
Society | ||||
Fair value hedge of fixed rate | ||||
residential loans | ||||
Interest rate swap notional (£m) | 18.0 | 413.6 | 2,082.5 | 66.6 |
Average fixed rate | 3.73% | 2.60% | 3.28% | 2.62% |
Fair value hedge of | ||||
intercompany loans* | ||||
Interest rate swap notional (£m) | 4.6 | 22.3 | 135.4 | 0.8 |
Average fixed rate | 4.44% | 3.67% | 4.12% | 2.87% |
At 31 March 2024
Less than 3 | 3 to 12 | 1 to 5 | Over 5 | |
Group | months | months | years | years |
Fair value hedge of fixed rate | ||||
residential loans | ||||
Interest rate swap notional (£m) | 60.6 | 79.1 | 1,974.1 | 89.6 |
Average fixed rate | 2.84% | 0.61% | 2.83% | 2.74% |
Fair value hedge of fixed rate | ||||
commercial loans | ||||
Interest rate swap notional (£m) | - | - | 34.4 | - |
Average fixed rate | - | - | 4.91% | - |
Society | ||||
Fair value hedge of fixed rate | ||||
residential loans | ||||
Interest rate swap notional (£m) | 56.7 | 76.0 | 1,824.7 | 87.6 |
Average fixed rate | 2.91% | 0.62% | 2.83% | 2.73% |
Fair value hedge of | ||||
intercompany loans* | ||||
Interest rate swap notional (£m) | 3.9 | 3.1 | 183.8 | 2.0 |
Average fixed rate | 1.85% | 0.60% | 3.81% | 3.09% |
*The Society holds interest rate swaps to mitigate interest rate risk on commercial and residential mortgages originated by its subsidiaries West Bromwich Commercial Limited (WBCL) and West Bromwich Mortgage Company
Limited (WBMC). At Group level the derivatives and mortgages are in designated IAS 39 hedge relationships. In the Society’s individual financial statements, the interest rate swaps are held in a hedge relationship against
intercompany loans with equivalent terms to the third party commercial and residential mortgages.
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12. Derivative financial instruments and hedge accounting
(continued)
The impact of hedge accounting on the Group and Society Income Statement and Statement of Financial Position (SOFP) is indicated in the tables which follow.
Hedging instruments at 31 March 2025
Carrying value in the SOFP | Change in fair value | Ineffectivess (credit)/ | |||||
used for recognising | charge in the Income | ||||||
| Interest rate swaps | Notional amount | Assets | Liabilities | SOFP line | ineffectiveness | Statement | Income Statement line |
Group | £m | £m | £m | £m | £m | ||
Fair value hedge of fixed | |||||||
rate residential loans | 2,714.2 | 33.6 | (7.3) | Derivative financial instruments | (18.2) | (2.7) | Fair value gain/(loss) on financial instruments |
Fair value hedge of fixed | |||||||
| rate commercial loans | 29.6 | - | (0.5) | Derivative financial instruments | 0.2 | 0.6 | Fair value gain/(loss) on financial instruments |
Society | |||||||
Fair value hedge of fixed | |||||||
| rate residential loans | 2,580.7 | 32.0 | (7.0) | Derivative financial instruments | (15.9) | (2.7) | Fair value gain/(loss) on financial instruments |
Fair value hedge of | |||||||
| intercompany loans* | 163.1 | 1.6 | (0.8) | Derivative financial instruments | (2.1) | 0.6 | Fair value gain/(loss) on financial instruments |
Hedging instruments at 31 March 2024
Carrying value in the SOFP | Change in fair value | Ineffectivess charge/ | |||||
used for recognising | (credit) in the Income | ||||||
| Interest rate swaps | Notional amount | Assets | Liabilities | SOFP line | ineffectiveness | Statement | Income Statement line |
| Group | £m | £m | £m | £m | £m | ||
Fair value hedge of fixed | |||||||
rate residential loans | 2,203.4 | 58.0 | (11.5) | Derivative financial instruments | (41.7) | 3.5 | Fair value gain/(loss) on financial instruments |
Fair value hedge of fixed | |||||||
| rate commercial loans | 34.4 | - | (0.8) | Derivative financial instruments | 0.5 | 0.5 | Fair value gain/(loss) on financial instruments |
Society | |||||||
Fair value hedge of fixed | |||||||
rate residential loans | 2,045.0 | 53.6 | (10.8) | Derivative financial instruments | (36.4) | 4.1 | Fair value gain/(loss) on financial instruments |
Fair value hedge of | |||||||
| intercompany loans* | 192.8 | 4.4 | (1.5) | Derivative financial instruments | (4.8) | (0.1) | Fair value gain/(loss) on financial instruments |
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12. Derivative financial instruments and hedge accounting
(continued)
Hedged items at 31 March 2025
Change in fair | ||||
Hedged assets | Accumulated | value used for | ||
and liabilities | Carrying value | fair value | recognising | |
in the SOFP | adjustments | SOFP line | ineffectiveness | |
£m | £m | £m | ||
Group | ||||
Fixed rate | Loans and advances | |||
residential loans | 2,639.0 | (22.4) | to customers | 20.9 |
Fixed rate | Loans and advances | |||
commercial loans | 29.8 | 1.7 | to customers | (0.8) |
Society | ||||
Fixed rate | Loans and advances | |||
residential loans | 2,508.0 | (21.1) | to customers | 18.6 |
| Intercompany loans* | 160.8 | 0.4 | Loans and advances | |
to customers | 1.5 |
Hedged items at 31 March 2024
Change in fair | ||||
Hedged assets | Accumulated | value used for | ||
and liabilities | Carrying value | fair value | recognising | |
in the SOFP | adjustments | SOFP line | ineffectiveness | |
£m | £m | £m | ||
Group | ||||
Fixed rate | Loans and advances | |||
| residential loans | 2,036.2 | (43.3) | to customers | 38.2 |
Fixed rate | Loans and advances | |||
| commercial loans | 35.6 | 2.4 | to customers | (1.0) |
Society | ||||
Fixed rate | Loans and advances | |||
| residential loans | 1,888.3 | (39.7) | to customers | 32.3 |
| Intercompany loans* | 183.5 | (1.2) | Loans and advances | |
to customers | 4.9 |
*The Society holds interest rate swaps to mitigate interest rate risk on commercial and residential mortgages originated by its subsidiaries WBCL and WBMC. At Group level the derivatives and mortgages are in designated IAS 39
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Amortised cost | ||||
Loans fully secured on residential property | 5,316.2 | 4,701.4 | 4,558.1 | 3,822.3 |
Loans fully secured on land | 196.5 | 220.6 | - | - |
5,512.7 | 4,922.0 | 4,558.1 | 3,822.3 | |
At fair value through profit or loss | ||||
Loans fully secured on residential property | 5.6 | 7.0 | 5.6 | 7.0 |
5,518.3 | 4,929.0 | 4,563.7 | 3,829.3 | |
Fair value adjustment for hedged risk | (20.8) | (40.9) | (21.1) | (39.7) |
Less: impairment provisions | (99.4) | (103.0) | (4.3) | (3.6) |
5,398.1 | 4,785.1 | 4,538.3 | 3,786.0 |
Included within loans and advances to customers are
£198.8m (2023/24: £223.6m) of commercial lending
balances of which £4.5m (2023/24: £5.0m) have been
sold by the Group to bankruptcy remote structured
entities. A balance of £464.5m (2023/24: £nil) of
residential mortgage balances, included within loans
and advances, have also been sold by the Group to
structured entities. The structured entities have been
funded by issuing mortgage backed securities (MBSs),
a proportion of which are held by the Society, at a
carrying value of £191.4m (2023/24: £0.5m). Note
15 includes a list of the structured entities that are
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| Group | Society | |||
Loans fully secured on | Loans fully | Loans fully secured on | ||
residential property | secured on land | Total | residential property | |
£m | £m | £m | £m | |
At 1 April 2024 | 10.9 | 92.1 | 103.0 | 3.6 |
Amounts written off | (0.2) | (10.0) | (10.2) | 0.4 |
Charge for the year comprising: | ||||
Provision for loan impairment | 0.6 | 7.0 | 7.6 | 1.0 |
Provision for securitisation assets | - | 0.3 | 0.3 | - |
Adjustments to provisions resulting from recoveries | (1.0) | - | (1.0) | (0.7) |
(Credit)/Charge for the year | (0.4) | 7.3 | 6.9 | 0.3 |
Deemed loans | - | (0.3) | (0.3) | - |
At 31 March 2025 | 10.3 | 89.1 | 99.4 | 4.3 |
| Group | Society | |||
Loans fully secured on | Loans fully | Loans fully secured on | ||
residential property | secured on land | Total | residential property | |
£m | £m | £m | £m | |
At 1 April 2023 | 10.2 | 79.1 | 89.3 | 2.3 |
Amounts written off | 0.2 | (0.7) | (0.5) | (0.1) |
Charge for the year comprising: | ||||
Provision for loan impairment | 1.5 | 13.7 | 15.2 | 1.8 |
Provision for securitisation assets | - | 0.5 | 0.5 | - |
Adjustments to provisions resulting from recoveries | (1.0) | - | (1.0) | (0.4) |
Charge for the year | 0.5 | 14.2 | 14.7 | 1.4 |
Deemed loans | - | (0.5) | (0.5) | - |
At 31 March 2024 | 10.9 | 92.1 | 103.0 | 3.6 |
During the year there were impairment charges of £0.3m (2023/24: £0.5m) against the subordinated loan interest due from structured entity, Sandwell Commercial Finance No. 2 Plc. The carrying value of the deemed loan has
been adjusted by an equivalent amount. Impairment provisions at the end of the year include £nil (2023/24: £nil) against mortgage loans in Sandwell Commercial Finance No. 2 Plc. Impairments against mortgage loans in Sandwell
Commercial Finance No. 2 Plc are borne by the loan note holders. The loan notes issued by the securitised entites represent obligations solely of the issuer. Non-payment of these notes does not create any obligation for the
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Shares in subsidiary | Loans to subsidiary | |||||
undertakings | undertakings | Total | ||||
2025 | 2024 | 2025 | 2024 | 2025 | 2024 | |
Society | £m | £m | £m | £m | £m | £m |
Cost | ||||||
At beginning of year | 0.6 | 0.6 | 1,297.1 | 1,109.6 | 1,297.7 | 1,110.2 |
(Decrease)/Increase for the year | - | - | (150.3) | 187.5 | (150.3) | 187.5 |
At end of year | 0.6 | 0.6 | 1,146.8 | 1,297.1 | 1,147.4 | 1,297.7 |
Provisions | ||||||
At beginning of year | 0.5 | 0.5 | 226.9 | 213.4 | 227.4 | 213.9 |
Charge for the year | - | - | 8.0 | 13.5 | 8.0 | 13.5 |
At end of year | 0.5 | 0.5 | 234.9 | 226.9 | 235.4 | 227.4 |
Net book value at end of year | 0.1 | 0.1 | 911.9 | 1,070.2 | 912.0 | 1,070.3 |
The Society’s approach to the assessment of impairment against investments in subsidiary undertakings is
discussed within accounting policies note 1 under ECL calculation – investments in subsidiary undertakings. The
value of the Society’s investment in West Bromwich Commercial Limited has been assessed by comparison of
the amount owed to the Society against the net assets of the subsidiary. Following continued contraction of the
commercial mortgage book and the additional losses recognised within West Bromwich Commercial Limited, it
has been necessary to write down the value of the investment by £8.8m (2023/24: £14.3m). An assessment has
also been performed in respect of the value of the Society’s investment in West Bromwich Mortgage Company
Limited for which a credit of £0.8m has been recognised against the investment (2023/24: £0.8m credit).
The Society holds directly (unless otherwise stated) the following interests in key subsidiary undertakings, all of
which are registered in England:
Class of | Interest | ||
Name | Major activities | shares held | of Society |
West Bromwich Mortgage | |||
| Company Limited | Residential mortgage lending | Ordinary £1 shares | 100% |
West Bromwich Commercial | |||
| Limited | Commercial mortgage lending | Ordinary £1 shares | 100% |
West Bromwich Homes Limited | Investment in property for rental | Ordinary £1 shares | 100% |
Insignia Finance Limited | Holding company | Ordinary £500 shares | 100% |
White Label Lending Limited (1) | Second charge lending | Ordinary £1 shares | 100% |
(1)
The entire share capital of White Label Lending Limited is held by Insignia Finance Limited.
The registered office of the subsidiary undertakings listed above is the Group’s registered office as detailed in note 36.
Securitisation entities
The results of the following securitisation entities are consolidated into the results of the Group under the rules
and guidance of IFRS 10:
Name | Country of incorporation | Principal activity |
Hawthorn Asset Co Limited (1) | United Kingdom | Securitisation entity - non trading |
Kenrick No.4 Holdings Limited | United Kingdom | Holding company |
Kenrick No.4 Plc | United Kingdom | Securitisation entity |
(1)
The assets and liabilities held by Hawthorn Asset Co Limited were transferred into West Bromwich Mortgage
Company Limited on 1 June 2023. The entity ceased its principal activity on that date and is in liquidation.
The registered office of Hawthorn Asset Co Limited is 7th Floor, 21 Lombard Street, London, EC3V 9AH.
The registered office of Kenrick 2018-1 Holdings Limited and Kenrick 2018-1 Plc, being dormant companies with
no trading, is 280 Bishopsgate, London, United Kingdom, EC2M 4RB. Both entities changed their names, from
Kenrick No.4 Holdings Ltd and Kenrick No.4 Plc respectively, on 21 May 2024 and were subsequently dissolved
on 11 March 2025 and 10 December 2024 respectively.
Structured entities, Kenrick No.4 Holdings Limited and Kenrick No.4 Plc, were incorporated on 30 May 2024
and 5 June 2024 respectively. The registered office of both entities is 280 Bishopsgate, London, United
Kingdom, EC2M 4RB.
The Society has no shareholdings in any of the companies listed above. Unless stated otherwise above, all are
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Goodwill | Purchased software | Development costs | Total | Goodwill | Purchased software | Development costs | Total | |
2025 | 2025 | 2025 | 2025 | 2024 | 2024 | 2024 | 2024 | |
Group | £m | £m | £m | £m | £m | £m | £m | £m |
Cost | ||||||||
At beginning of year | 0.5 | 19.5 | 35.8 | 55.8 | 0.5 | 19.3 | 28.6 | 48.4 |
Additions | - | 0.6 | 11.2 | 11.8 | - | 0.2 | 7.4 | 7.6 |
Transfers | - | (1.9) | 1.9 | - | - | - | - | - |
Disposals | - | (3.9) | (9.5) | (13.4) | - | - | - | - |
Write off of previously capitalised costs | - | - | - | - | - | - | (0.2) | (0.2) |
At end of year | 0.5 | 14.3 | 39.4 | 54.2 | 0.5 | 19.5 | 35.8 | 55.8 |
Aggregate amortisation | ||||||||
At beginning of year | 0.5 | 16.4 | 25.0 | 41.9 | 0.5 | 16.0 | 22.0 | 38.5 |
Charge for the year | - | 0.8 | 4.2 | 5.0 | - | 0.4 | 3.2 | 3.6 |
Disposals | - | (3.9) | (9.5) | (13.4) | - | - | (0.2) | (0.2) |
At end of year | 0.5 | 13.3 | 19.7 | 33.5 | 0.5 | 16.4 | 25.0 | 41.9 |
Net book value at end of year | - | 1.0 | 19.7 | 20.7 | - | 3.1 | 10.8 | 13.9 |
Net book value at beginning of year | - | 3.1 | 10.8 | 13.9 | - | 3.3 | 6.6 | 9.9 |
Purchased software | Development costs | Total | Purchased software | Development costs | Total | |
2025 | 2025 | 2025 | 2024 | 2024 | 2024 | |
Society | £m | £m | £m | £m | £m | £m |
Cost | ||||||
At beginning of year | 19.5 | 35.8 | 55.3 | 19.3 | 28.6 | 47.9 |
Additions | 0.6 | 11.2 | 11.8 | 0.2 | 7.4 | 7.6 |
Transfers | (1.9) | 1.9 | - | - | - | - |
Disposals | (3.9) | (9.5) | (13.4) | - | - | - |
Write off of previously capitalised costs | - | - | - | - | (0.2) | (0.2) |
At end of year | 14.3 | 39.4 | 53.7 | 19.5 | 35.8 | 55.3 |
Aggregate amortisation | ||||||
At beginning of year | 16.4 | 25.0 | 41.4 | 16.0 | 22.0 | 38.0 |
Charge for the year | 0.8 | 4.2 | 5.0 | 0.4 | 3.2 | 3.6 |
Disposals | (3.9) | (9.5) | (13.4) | - | (0.2) | (0.2) |
At end of year | 13.3 | 19.7 | 33.0 | 16.4 | 25.0 | 41.4 |
Net book value at end of year | 1.0 | 19.7 | 20.7 | 3.1 | 10.8 | 13.9 |
Net book value at beginning of year | 3.1 | 10.8 | 13.9 | 3.3 | 6.6 | 9.9 |
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Group | Group | |
2025 | 2024 | |
£m | £m | |
Valuation | ||
At beginning of year | 148.7 | 152.7 |
Additions | 0.7 | 1.0 |
Disposals | (8.6) | (7.5) |
Revaluation gains | 2.4 | 2.5 |
At end of year | 143.2 | 148.7 |
The Group applies the fair value model to its investment property portfolio.
Management have engaged independent specialist valuers to undertake a valuation review of the residential
investment properties held by West Bromwich Homes Limited. Management have made adjustments to this
valuation which, whilst not material to the carrying value of the investment properties, are deemed appropriate
to reflect their current condition.
This fair value measurement is categorised as a Level 3 fair value measurement, based on an assessment of the
inputs to the valuation methodology, as described in Note 1f (2024: Level 3).
If the investment properties were carried at cost, the carrying amount would be £71.3m (2023/24: £76.7m).
The Group leases investment properties to non-commercial individuals for a contract period of up to 36 months.
The future minimum lease receipts under non-cancellable operating leases that end within 12 months are £1.3m
(2023/24: £1.8m), and an additional £0.3m up to 36 months (2023/24: £1.0m). The Group has not recognised
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| Land and buildings | ||||||
Equipment, | ||||||
fixtures, | ||||||
Freehold | Head | Leasehold | fittings and | Right-of-use | ||
branches | Office | improvements | vehicles | assets | Total | |
Group | £m | £m | £m | £m | £m | £m |
Cost or valuation | ||||||
At 1 April 2024 | 5.0 | 21.2 | 0.6 | 22.0 | 3.1 | 51.9 |
Additions | - | - | - | 0.7 | - | 0.7 |
Disposals | - | (1.2) | (0.1) | (11.5) | - | (12.8) |
At 31 March 2025 | 5.0 | 20.0 | 0.5 | 11.2 | 3.1 | 39.8 |
Accumulated | ||||||
depreciation | ||||||
At 1 April 2024 | 0.1 | 7.4 | 0.4 | 20.4 | 1.8 | 30.1 |
Charge for the year | 0.1 | 0.9 | - | 0.7 | 0.3 | 2.0 |
Disposals | - | (1.0) | (0.1) | (11.5) | - | (12.6) |
At 31 March 2025 | 0.2 | 7.3 | 0.3 | 9.6 | 2.1 | 19.5 |
Net book value | ||||||
At 31 March 2025 | 4.8 | 12.7 | 0.2 | 1.6 | 1.0 | 20.3 |
Land and buildings | ||||||
Equipment, | ||||||
fixtures, | ||||||
Freehold | Head | Leasehold | fittings and | Right-of-use | ||
branches | Office | improvements | vehicles | assets | Total | |
Group | £m | £m | £m | £m | £m | £m |
Cost or valuation | ||||||
At 1 April 2023 | 5.0 | 21.2 | 0.6 | 20.9 | 3.2 | 50.9 |
Additions | - | - | - | 1.1 | - | 1.1 |
Lease modifications | ||||||
and remeasurements | - | - | - | - | (0.1) | (0.1) |
At 31 March 2024 | 5.0 | 21.2 | 0.6 | 22.0 | 3.1 | 51.9 |
Accumulated | ||||||
depreciation | ||||||
At 1 April 2023 | - | 6.5 | 0.4 | 19.8 | 1.5 | 28.2 |
Charge for the year | 0.1 | 0.9 | - | 0.6 | 0.3 | 1.9 |
At 31 March 2024 | 0.1 | 7.4 | 0.4 | 20.4 | 1.8 | 30.1 |
Net book value | ||||||
At 31 March 2024 | 4.9 | 13.8 | 0.2 | 1.6 | 1.3 | 21.8 |
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18. Property, plant and equipment
(continued)
| Land and buildings | ||||||
Equipment, | ||||||
fixtures, | ||||||
Freehold | Leasehold | fittings and | Right-of- | |||
branches | Head Office | improvements | vehicles | use assets | Total | |
Society | £m | £m | £m | £m | £m | £m |
Cost or valuation | ||||||
At 1 April 2024 | 5.0 | 21.2 | 0.6 | 21.7 | 3.1 | 51.6 |
Additions | - | - | - | 0.7 | - | 0.7 |
Disposals | - | (1.2) | (0.1) | (11.5) | - | (12.8) |
At 31 March 2025 | 5.0 | 20.0 | 0.5 | 10.9 | 3.1 | 39.5 |
Accumulated | ||||||
depreciation | ||||||
At 1 April 2024 | 0.1 | 7.4 | 0.4 | 20.1 | 1.8 | 29.8 |
Charge for the year | 0.1 | 0.9 | - | 0.7 | 0.3 | 2.0 |
Disposals | - | (1.0) | (0.1) | (11.5) | - | (12.6) |
At 31 March 2025 | 0.2 | 7.3 | 0.3 | 9.3 | 2.1 | 19.2 |
Net book value | ||||||
At 31 March 2025 | 4.8 | 12.7 | 0.2 | 1.6 | 1.0 | 20.3 |
Land and buildings | ||||||
Equipment, | ||||||
fixtures, | ||||||
Freehold | Leasehold | fittings and | Right-of- | |||
branches | Head Office | improvements | vehicles | use assets | Total | |
Society | £m | £m | £m | £m | £m | £m |
Cost or valuation | ||||||
At 1 April 2023 | 5.0 | 21.2 | 0.6 | 20.6 | 3.2 | 50.6 |
Additions | - | - | - | 1.1 | - | 1.1 |
Lease modifications | ||||||
and remeasurements | - | - | - | - | (0.1) | (0.1) |
At 31 March 2024 | 5.0 | 21.2 | 0.6 | 21.7 | 3.1 | 51.6 |
Accumulated | ||||||
depreciation | ||||||
At 1 April 2023 | - | 6.5 | 0.4 | 19.5 | 1.5 | 27.9 |
Charge for the year | 0.1 | 0.9 | - | 0.6 | 0.3 | 1.9 |
At 31 March 2024 | 0.1 | 7.4 | 0.4 | 20.1 | 1.8 | 29.8 |
Net book value | ||||||
At 31 March 2024 | 4.9 | 13.8 | 0.2 | 1.6 | 1.3 | 21.8 |
The average remaining term of right-of-use assets at 31 March 2025 was 3.2 years (2023/24: 4.0 years).
The net book value of land and buildings occupied for the Society’s own activities at 31 March is £17.6m
(2023/24: £18.8m).
The Group’s freehold branches were last revalued at 31 March 2023 by Colliers International, a firm of
independent chartered surveyors. The valuations were undertaken in accordance with the Valuation
Standards issued by the Royal Institution of Chartered Surveyors in the United Kingdom. These valuations
were incorporated into the financial statements and the resulting revaluation adjustments taken to the
revaluation reserve. This fair value measurement is categorised as a Level 3 fair value measurement in the
current year as described in Note 1f (2024: Level 3).
If land and buildings were carried at historical cost less depreciation, the carrying amount would be £13.5m
(2023/24: £14.7m).
As part of the ongoing funding agreement for the West Bromwich Building Society Staff Retirement
Scheme (the SRS), the Trustees of the SRS have been granted a charge over the Society’s Head Office.
The charge may be exercised only in the event of the Society defaulting on its pension obligations and in
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Deferred tax is calculated on all temporary differences under the liability method using an effective
tax rate of 25% (2023/24: 25%). The movement on the deferred tax account is as follows:
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
At beginning of year | 4.8 | 9.6 | 8.9 | 12.4 |
Current year Income | ||||
| Statement charge | (5.3) | (5.3) | (4.7) | (4.7) |
Amount recognised directly in | ||||
| other comprehensive income | 1.2 | 0.7 | 1.2 | 0.7 |
Adjustments in respect of | ||||
| prior years | (0.7) | (0.2) | (0.6) | 0.5 |
At end of year | - | 4.8 | 4.8 | 8.9 |
Deferred tax assets and liabilities are attributable to the following items:
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Deferred tax assets | ||||
Accelerated tax depreciation | 1.1 | 5.8 | 1.1 | 5.7 |
Carried forward tax losses | 8.8 | 9.1 | 5.2 | 6.1 |
Other temporary differences | 3.0 | 4.1 | 0.6 | 0.8 |
12.9 | 19.0 | 6.9 | 12.6 | |
Deferred tax liabilities | ||||
Property valuations | (11.8) | (11.6) | (1.0) | (1.1) |
Other temporary differences | (0.7) | (1.0) | (0.7) | (1.0) |
Pensions and other post | ||||
| retirement benefits | (0.4) | (1.6) | (0.4) | (1.6) |
(12.9) | (14.2) | (2.1) | (3.7) |
The deferred tax charge in the Income Statement comprises the following temporary differences:
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Accelerated tax depreciation | (4.7) | (2.4) | (4.5) | (2.3) |
Other provisions | (0.9) | (0.8) | - | - |
Carried forward tax losses | (0.2) | (2.6) | (0.8) | (1.9) |
Property valuations | (0.2) | 0.2 | - | - |
(6.0) | (5.6) | (5.3) | (4.2) |
Deferred tax assets are recognised only to the extent that realisation of the related tax benefit against future
taxable profits is probable over the foreseeable future. The deferred tax asset balances attributable to carried
forward losses are expected to be substantially recovered against future taxable profits (as projected in the
latest Medium Term Plan) within five years. The assumptions surrounding future expected credit losses and
changes in the Bank Rate of interest represent the most subjective areas of judgement in management’s
projections of future taxable profits. The deferred tax assets have not been discounted. Unused tax losses,
which have not been recognised within deferred tax assets at 31 March 2025, amounted to Group: £19.0m
(2023/24: £23.0m) and Society: £nil (2023/24: £nil). These losses, which are trading losses, will be available to
offset against future taxable profits, subject to certain loss restriction rules set by HMRC.
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125
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Prepayments and accrued income | 4.3 | 3.8 | 4.1 | 3.8 |
Other | - | 0.1 | - | - |
4.3 | 3.9 | 4.1 | 3.8 |
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Deemed loans | 4.8 | 5.2 | 450.2 | - |
Other customers | 24.3 | 31.8 | 24.2 | 31.7 |
29.1 | 37.0 | 474.4 | 31.7 |
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Non-recourse finance on | ||||
securitised advances | 289.8 | - | - | - |
289.8 | - | - | - |
The non-recourse finance comprises mortgage backed floating rate notes (the Notes) secured over
portfolios of mortgage loans secured by first charges over residential properties in the United Kingdom (see
note 13).
For the purposes of the Statements of Cash Flows, debt securities in issue are classified as liabilities arising
from financing activities. The following table analyses movements in debt securities in issue.
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
At beginning of year | - | - | - | - |
Financing cash flows | ||||
Proceeds from issue of debt | ||||
| securities | 300.0 | - | - | - |
Costs on issue of debt securities | (1.0) | - | - | - |
Repayments of debt securities | ||||
| in issue | (12.1) | - | - | - |
Non-cash flows: | ||||
Accrued interest | 2.8 | - | - | - |
Amortisation | 0.1 | - | - | - |
At end of year | 289.8 | - | - | - |
During the year debt securities were issued relating to the Kenrick 4 securitisation. See note 15 for details of
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126
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Accruals | 12.5 | 11.0 | 11.9 | 10.6 |
Lease liabilities | 1.1 | 1.5 | 1.1 | 1.5 |
Other creditors | 5.2 | 5.1 | 4.9 | 4.8 |
18.8 | 17.6 | 17.9 | 16.9 |
The maturity analysis of lease liabilities is included in note 35.
The movement in lease liabilities in the year is analysed in the table below:
2025 | 2024 | |
Group and Society | £m | £m |
At beginning of year | 1.5 | 1.9 |
Modifications/remeasurements of existing lease liabilities | - | (0.1) |
Interest charged | 0.1 | 0.1 |
Lease payments | (0.5) | (0.4) |
At end of year | 1.1 | 1.5 |
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
At beginning of year | 0.5 | 0.5 | 0.4 | 0.4 |
(Release) for the year | (0.1) | - | (0.1) | - |
At end of year | 0.4 | 0.5 | 0.3 | 0.4 |
Provisions for liabilities
Provisions for liabilities represent the Group’s best estimate regarding various provisions, of which none are
individually significant. The calculation is based on a series of assumptions, including the number of affected
Number of shares | Carrying value | |||
2025 | 2024 | 2025 | 2024 | |
Group and Society | £m | £m | ||
Permanent interest bearing shares | ||||
At beginning of year | 7,847 | 7,847 | 7.8 | 7.8 |
Purchase and cancellation of PIBS | (3,909) | - | (3.9) | - |
At end of year | 3,938 | 7,847 | 3.9 | 7.8 |
The Society’s permanent interest bearing shares (PIBS) comprise 3,938 PIBS of £1,000 each issued at a
price of 99.828% of their principal amount, with the issue premium amortised. In August 2024 the Society
purchased and cancelled 3,909 of its remaining PIBS.
The PIBS became repayable at the option of the Society on the 5 April 2021 or at any scheduled interest
payment date thereafter, subject to PRA approval.
In a winding up or dissolution of the Society the claims of the holders of PIBS would rank behind all other
creditors of the Society, with the exception of the claims of holders of core capital deferred shares (CCDS).
The holders of PIBS are not entitled to any share in any final surplus upon winding up or dissolution of the
Society.
Whilst noting that any interest payments on the PIBS are at the sole discretion of the Society, the Society
announced during its capital restructuring in 2018 that any future payments on PIBS will be made only if and
to the extent that they would have been permitted had the Liability Management Exercise (LME) not taken
place, and in the context of determining the equivalent annual yield that would have been paid to holders of
the Society’s Profit Participating Deferred Shares (PPDS) had they remained in issue on their original terms.
Under the terms and conditions of the PPDS, the Society’s ability to pay PPDS distributions was constrained
by reference to a percentage of profits generated in the relevant financial year, and to the extent of any
positive balance on a special PPDS reserve account (to which a percentage of profits or losses of the Society
was allocated each year).
Interest payments on the PIBS will therefore be limited to the lower of (i) the equivalent annual yield that
would have been paid to holders of PPDS (had they remained in issue on their original terms); and (ii) the
annual rate set out in the Special Conditions of Issue of the PIBS (the “Specified Rate”), being 6.15% prior to 5
April 2021 and thereafter, a rate of interest reset periodically and equal to the applicable 5-year gilt rate plus
a margin of 2.8% (currently 3.0827%).
For the year ended 31 March 2025, the Group generated a reported profit after tax of £29.6m including the
impact of £0.2m Tier 2 interest payable. The net profit, disregarding the Tier 2 interest payable (after tax),
would have been £29.9m, meaning £7.5m at 31 March 2025 that could have been distributed to PPDS holders.
The equivalent annual yield that would have been paid to PPDS holders would therefore have been 4.09%,
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Number of | CCDS nominal | Share | ||
shares | amount | premium | Total | |
Group and Society | £m | £m | £m | |
At 31 March 2024 | 1,288,813 | 1.3 | 125.7 | 127.0 |
At 31 March 2025 | 1,288,813 | 1.3 | 125.7 | 127.0 |
CCDS are perpetual instruments and a form of Common Equity Tier 1 (CET 1) capital.
CCDS are the most junior-ranking capital instrument of the Society, ranking behind the claims of all depositors,
payables and investing members.
Each holder of CCDS has one vote, regardless of the number of CCDS held.
The CCDS holders are entitled to receive a distribution at the discretion of the Society. The total distribution
paid on each CCDS in respect of any given financial year of the Society is subject to a cap provided for in the
Rules of the Society and adjusted annually for inflation. The Directors declared an interim distribution of £2.25
per CCDS in respect of the period to 30 September 2024 which was paid in February 2025.
This distribution
has been recognised in the Statement of Changes in Members’ Interests and Equity. In May 2025 the Directors
declared a final distribution for the period to 31 March 2025 of £2.25 per CCDS, in line with current distribution
policy published on 24 November 2021. The final distribution is not reflected in these financial statements as
distributions to the CCDS holders are recognised with reference to the date they are declared.
In the event of a winding up or dissolution of the Society, the share of surplus assets (if any) a CCDS holder
would be eligible to receive is determined by the calculation of a core capital contribution proportion, limited to
| 2025 | 2024 | |
Group and Society | £m | £m |
Subordinated notes due 2038 – 11.0% | 2.1 | 2.1 |
The Society’s subordinated notes rank behind all other creditors of the Society, with the exception of holders of
CCDS and PIBS.
In the prior year the Society repurchased £20.4m of the 11% Subordinated Tier 2 Notes; £17.3m in June 2023 (at
122.5p) and £3.1m in July 2023 (at 118.5p). A cost of £5.1m has been recorded for the buyback, being the premium
paid of £4.5m and write-off of unamortised fees of £0.6m. The repurchased notes were subsequently cancelled
leaving £2.1m aggregate notional outstanding and £0.1m of unamortised fees on balance sheet at 31 March 2024.
For the purposes of the Statements of Cash Flows, subordinated liabilities are classified as liabilities arising from
financing activities. The following table analyses movements in subordinated liabilities.
2025 | 2024 | |
Group and Society | £m | £m |
At beginning of year | 2.1 | 22.9 |
Financing cash flows | ||
Interest paid on subordinated liabilities | (0.2) | (1.8) |
Repurchase of subordinated liabilities | - | (20.4) |
Non-cash flows: | ||
Accrued interest (settled during the year) | 0.1 | 0.7 |
Accrued interest (carried forward) | 0.1 | 0.1 |
Movement in unamortised issue costs | - | 0.6 |
At end of year | 2.1 | 2.1 |
through profit or loss (FVTPL)
Financial assets mandatorily measured at FVTPL
The Society’s closed portfolio of equity release mortgages is held at FVTPL under IFRS 9.
The movements on the portfolio during the year are analysed in the table below.
2025 | 2024 | |
Group and Society | £m | £m |
At beginning of year | 7.0 | 8.6 |
Interest added | 0.8 | 0.9 |
Redemptions | (2.1) | (2.7) |
Changes in fair value | (0.1) | 0.2 |
At end of year | 5.6 | 7.0 |
Fair value of equity release mortgages
Under IFRS 9, the mature and closed book of equity release mortgages is held at FVTPL with fair values
determined using a discounted cash flow model which incorporates a number of judgemental assumptions to
determine the amount and timing of future cash flows arising on mortgage redemption. Certain model inputs,
such as redemption rates, are informed by historic experience, with observed closure curves extrapolated
to give an expected maturity profile for the remaining book. Other model assumptions, such as house price
indices, are based on the Group’s view of future economic conditions. The discount factor used to calculate the
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other comprehensive income
Before tax amount | Taxation | Net of tax amount | |
2025 | 2025 | 2025 | |
Group and Society | £m | £m | £m |
Fair value through other comprehensive | |||
| income investments | (0.6) | 0.2 | (0.4) |
Retirement benefit obligations | (4.5) | 1.1 | (3.4) |
Other comprehensive income | (5.1) | 1.3 | (3.8) |
Before tax amount | Taxation | Net of tax amount | |
2024 | 2024 | 2024 | |
Group and Society | £m | £m | £m |
Fair value through other comprehensive | |||
| income investments | 1.3 | (0.3) | 1.0 |
Retirement benefit obligations | (7.2) | 1.7 | (5.5) |
Other comprehensive income | (5.9) | 1.4 | (4.5) |
2025 | 2024 | 2023 | 2022 | 2021 | |
Group and Society | £m | £m | £m | £m | £m |
Net defined benefit pension | |||||
| scheme asset | (1.2) | (6.1) | (10.9) | (14.9) | (1.1) |
Defined benefit plans
The Society operates the West Bromwich Building Society Staff Retirement Scheme (SRS), a funded pension
scheme providing benefits for some of its employees based on final pensionable emoluments. The assets of
the Scheme are held in a separate Trustee administered fund. In addition, the Society has an unregistered
arrangement in place in respect of one former Director. The financial effect of this arrangement is included in
this note.
The Society closed the SRS to the future accrual of benefits with effect from 1 August 2009, at which date all
previously active members became entitled to deferred pensions in the SRS. The SRS is subject to the
funding legislation outlined in the Pensions Act 2004 and the Pensions Act 2021, which received royal assent
in February 2021. This, together with associated regulations and documents issued by the Pensions
Regulator, sets out the framework for funding defined benefit occupational pension schemes in the UK.
The results of a formal actuarial valuation at 31 March 2022 carried out by the appointed actuary to the
Scheme have been rolled forward to the accounting date by an independent qualified actuary and updated in
accordance with IAS 19, ‘Employee Benefits’. The 31 March 2022 valuation was formally agreed in June 2023.
No contributions were paid into the SRS during 2024/25 (2023/24: £2.3m).
In June 2024, the Trustee of the SRS changed the SRS’s investment strategy and invested in a buy-in
insurance policy. This insurance policy, together with a previous policy purchased in 2013, pays an income to
the SRS which matches the pensions to be paid to members.
Now that there are insurance policies covering almost all benefits under the plan, most of the usual risks
applying to pension liabilities, including investment risks and longevity risks, no longer apply. The Society
remains legally responsible for supporting the SRS and the Trustee continues to operate the SRS – some
legal and operational risks therefore still exist.
As at 31 March 2024, an additional liability of £3.8m was recorded to cover the potential cost of payments to
early retirees (under certain conditions) owing to potential discrepancies in Trust documentation – it was
noted that all or part of this liability may be recovered through an ongoing resolution exercise. Following a
court hearing in July 2024, the Court agreed that historical administrative practice should not be amended in
respect of most of these potential additional liabilities. As a result, this reserve has been reduced to £0.2m as
at 31 March 2025 – with the remaining reserve reflecting small additional benefits due to members due to a
discrepancy in Trust documentation. The gain has been treated as a gain in other comprehensive income,
reversing a loss previously recognised. We are pursuing the advisers at the time for the costs associated with
obtaining this agreement.
In a case involving Virgin Media in 2023, the High Court restated the understood position that an actuarial
confirmation is a necessary condition when changes are made to a pension scheme affecting certain pension
rights accrued between 1996 and 2016. In July 2024 the Court of Appeal dismissed an appeal against the
ruling. The Court confirmed that if there were no actuarial confirmation of a relevant amendment, the
amendment was void, leading to additional liabilities beyond those promised under the rules as previously
understood. This highlights the risk that past amendments could be challenged.
The Trustee, their advisors and the Society are considering if the judgment has a potential impact on the SRS.
In the meantime the figures presented here assume no changes to the benefits as currently administered.
IAS 19 allows an employer to recognise a surplus as an asset to the extent that it is able to recover a surplus
either through reduced contributions in the future or through refunds from the Scheme, even if the refunds
may only be available at some distant time in the future, such as after the last benefit has been paid. The
Society believes that under the Scheme Rules a surplus would be recoverable on the basis that once
members’ benefits have been secured and any wind-up expenses have been paid, any balance of the fund
then remaining shall be paid to the participating employers in such proportions as the Trustee shall
determine.
As part of the ongoing funding agreement for the SRS, the Trustee of the SRS has been granted a charge
over the Society’s Head Office, which may be exercised only in the event of the Society defaulting on its
pension obligations and in such circumstances assigns the rights of ownership of the building to the SRS.
The weighted average duration of the expected benefit payments from the Scheme is around 12 years.
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30. Retirement benefit asset
(continued)
The key assumptions used by the actuary in the updated calculation were:
Group and Society | 2025 | 2024 | 2023 | 2022 | 2021 |
Pension increases in payment | |||||
(RPI capped at 5%) | 3.0% | 3.1% | 3.1% | 3.4% | 3.1% |
Pension increases in payment | |||||
(CPI capped at 2.5%) | 1.8% | 1.8% | 1.9% | 2.1% | 1.9% |
Discount rate | 5.8% | 4.8% | 4.8% | 2.8% | 2.1% |
Life expectancy of male | |||||
aged 65 at year end date | 21.3 | 21.2 | 21.5 | 21.6 | 21.8 |
Life expectancy of female | |||||
aged 65 at year end date | 23.6 | 23.5 | 23.7 | 23.8 | 23.9 |
Life expectancy of male | |||||
aged 65 at year end date | 22.6 | 22.5 | 22.8 | 22.9 | 23.1 |
plus 20 years | |||||
Life expectancy of female | |||||
aged 65 at year end date plus | 25.0 | 24.9 | 25.2 | 25.2 | 25.3 |
20 years |
The sensitivity of the defined benefit obligation to changes in the significant actuarial assumptions is shown in
the table below. These are on a gross basis; benefits are now almost all insured, the changes in the obligations
are now matched by changes in the assets:
2025 | 2024 | |
(Decrease)/Increase | (Decrease)/Increase | |
Group and Society | £m | £m |
Discount rate | ||
Effect on defined benefit obligation of a 1% increase | (7.5) | (9.6) |
Inflation | ||
Effect on defined benefit obligation of a 1% increase | 5.4 | 7.1 |
Life expectancy | ||
Effect on defined benefit obligation of a 1 year increase | 2.4 | 3.2 |
The amounts recognised in the Statement of Financial Position are as follows:
2025 | 2024 | 2023 | 2022 | 2021 | |
Group and Society | £m | £m | £m | £m | £m |
Present value of funded obligations | 69.6 | 82.3 | 83.9 | 109.7 | 119.9 |
Present value of unfunded obligations | 0.5 | 0.5 | 0.5 | 0.7 | 0.8 |
70.1 | 82.8 | 84.4 | 110.4 | 120.7 | |
Fair value of scheme assets | (71.3) | (88.9) | (95.3) | (125.3) | (121.8) |
Net asset in the Statement of Financial | |||||
| Position | (1.2) | (6.1) | (10.9) | (14.9) | (1.1) |
The amounts recognised in the Income Statement are as follows:
2025 | 2024 | 2023 | |
Group and Society | £m | £m | £m |
Interest cost | 3.9 | 3.9 | 3.0 |
Interest receivable on plan assets | (4.2) | (4.5) | (3.5) |
Running costs | 0.7 | 0.5 | 0.5 |
Total pension fund cost | 0.4 | (0.1) | - |
Running costs, other than those associated with management of scheme assets, are shown in administrative
expenses whilst interest cost and interest receivable on plan assets are disclosed as other operating income.
The amounts recognised in the Statement of Comprehensive Income are as follows:
2025 | 2024 | |
Group and Society | £m | £m |
Actuarial (gains)/losses arising from: | ||
Financial assumptions | (8.8) | (1.2) |
Demographic assumptions | (0.2) | (0.7) |
Experience adjustments | (3.5) | 0.4 |
Loss on plan assets (excluding interest) | 17.0 | 8.7 |
Total amount recognised in Other Comprehensive Income | 4.5 | 7.2 |
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130
30. Retirement benefit asset
(continued)
Change in benefit obligations
Group and Society
£m
£m
£m
Benefit obligations at beginning of year
82.8
84.4
110.4
Interest cost
3.9
3.9
3.0
Actuarial gains
(12.5)
(1.5)
(25.2)
Benefits paid
(4.1)
(4.0)
(3.8)
Benefit obligations at end of year
70.1
82.8
84.4
Change in scheme assets
2025 | 2024 | 2023 | |
Group and Society | £m | £m | £m |
Fair value of scheme assets at beginning of year | 88.9 | 95.3 | 125.3 |
Interest receivable on plan assets | 4.2 | 4.5 | 3.5 |
Actuarial losses | (17.0) | (8.7) | (36.0) |
Contribution by employer | - | 2.3 | 6.8 |
Running costs | (0.7) | (0.5) | (0.5) |
Benefits paid | (4.1) | (4.0) | (3.8) |
Fair value of scheme assets at end of year | 71.3 | 88.9 | 95.3 |
2025
2024
2023
The amount recognised outside profit and loss in the Statement of Comprehensive Income for 2024/25 is an
actuarial loss of £4.5m (2023/24: loss of £7.2m). The cumulative amount recognised outside profit and loss at
31 March 2025 is an actuarial loss of £71.6m.
History of experience gains and losses
Group and Society | 2025 | 2024 | 2023 | 2022 | 2021 |
Experience (losses)/gains on scheme assets: | |||||
Amount (£m) | (17.0) | (8.7) | (36.0) | 0.7 | 13.2 |
Percentage of scheme assets | (19%) | 9% | 29% | 1% | 12% |
Experience (gains)/losses on scheme liabilities: | |||||
Amount (£m) | (12.5) | (1.5) | 7.6 | 2.0 | (0.6) |
Percentage of scheme liabilities | (15%) | (2%) | 7% | 2% | (1%) |
Scheme assets
The value of the invested assets at 31 March 2025 was £71.3m, analysed as follows:
2025 | 2024 | 2023 | |
Group and Society | £m | £m | £m |
Diversified growth fund (Quoted) | - | - | 1.8 |
Corporate bonds (Quoted) | - | 11.8 | 14.2 |
Fixed interest government bonds (Quoted) | - | 7.6 | - |
Index-linked government bonds (Quoted) | - | 21.1 | - |
Liability driven investment (Quoted) | - | 12.6 | 25.0 |
Short duration credit (Quoted) | - | 2.5 | 14.4 |
Insurance asset (Unquoted) | 69.1 | 12.4 | 12.9 |
Cash and other assets (Quoted) | 2.2 | 20.9 | 27.0 |
71.3 | 88.9 | 95.3 |
Stakeholder scheme
The total cost for the year of the stakeholder plan to the Group and Society was £1.7m (2023/24: £1.5m).
For the period through to July 2009, staff could contribute between 2% and 9% with the Society contributing
on a sliding scale between 2% and 7%. From August 2009 to March 2018, staff were able to contribute
between 2% and 10% with the Society providing matched funding. From April 2018 to March 2019, staff
within the stakeholder scheme were required to contribute between 3% and 10%, with the Society providing
matched funding plus 0.6%. From April 2019 to February 2025, staff within the stakeholder scheme were
required to contribute between 4% and 10%, with the Society providing matched funding plus 0.6%. From
March 2025, the Society adopted the Living Pension standard introduced by the Living Wage Foundation,
hence the ‘staff - Society’ contribution rates of the scheme were updated as ‘4%-4.6%’, ‘5%-7%’, ‘7%-7.6%’,
A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability or
equity of another entity.
The Group is a retailer of financial instruments, mainly in the form of mortgages and savings. The Group uses
wholesale financial instruments to invest liquid asset balances and raise wholesale funding, and to manage the
risks arising from its operations. As a result of these activities, the Group is exposed to a variety of risks, the
most significant of which are credit risk, liquidity risk and market risk (principally interest rate risk). These risks
are described in notes 32 to 34.
The use of derivative financial instruments for risk management purposes is described in note 12.
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131
31. Financial instruments
(continued)
Classification of financial assets and financial liabilities
The following tables show the classification of the Group’s and Society’s financial assets and liabilities:
At 31 March 2025
Fair value | ||||
through other | Fair value | |||
comprehensive | through profit | |||
Amortised cost | income | or loss | Total | |
Group | £m | £m | £m | £m |
Assets | ||||
Cash and balances with | ||||
| the Bank of England | 159.8 | - | - | 159.8 |
Loans and advances to credit | ||||
| institutions | 88.8 | - | - | 88.8 |
Investment securities | - | 467.3 | 0.3 | 467.6 |
Derivative financial instruments | - | - | 44.9 | 44.9 |
Loans and advances to customers | 5,392.5 | - | 5.6 | 5,398.1 |
Total financial assets | 5,641.1 | 467.3 | 50.8 | 6,159.2 |
Non-financial assets | 202.6 | |||
Total assets | 6,361.8 | |||
Fair value | ||||
through profit | ||||
Amortised cost | or loss | Total | ||
£m | £m | £m | ||
Liabilities | ||||
Shares | 5,071.6 | - | 5,071.6 | |
Amounts due to credit institutions | 459.1 | - | 459.1 | |
Amounts due to other customers | 29.1 | - | 29.1 | |
Derivative financial instruments | - | 16.8 | 16.8 | |
Debt securities in issue | 289.8 | - | 289.8 | |
Subordinated liabilities | 2.1 | - | 2.1 | |
Total financial liabilities | 5,851.7 | 16.8 | 5,868.5 | |
Non-financial liabilities | 32.1 | |||
Total liabilities | 5,900.6 |
At 31 March 2024
Fair value | ||||
through other | Fair value | |||
comprehensive | through profit | |||
Amortised cost | income | or loss | Total | |
Group | ||||
£m | £m | £m | £m | |
Assets | ||||
Cash and balances with | ||||
the Bank of England | 491.6 | - | - | 491.6 |
Loans and advances to | ||||
credit institutions | 46.3 | - | - | 46.3 |
Investment securities | - | 391.1 | 0.4 | 391.5 |
Derivative financial instruments | - | - | 61.8 | 61.8 |
Loans and advances to customers | 4,778.1 | - | 7.0 | 4,785.1 |
Total financial assets | 5,316.0 | 391.1 | 69.2 | 5,776.3 |
Non-financial assets | 213.4 | |||
Total assets | 5,989.7 | |||
Fair value | ||||
through profit | ||||
Amortised cost | or loss | Total | ||
£m | £m | £m | ||
Liabilities | ||||
Shares | 4,670.6 | - | 4,670.6 | |
Amounts due to credit institutions | 788.2 | - | 788.2 | |
Amounts due to other customers | 37.0 | - | 37.0 | |
Derivative financial instruments | - | 12.8 | 12.8 | |
Subordinated liabilities | 2.1 | - | 2.1 | |
Total financial liabilities | 5,497.9 | 12.8 | 5,510.7 | |
Non-financial liabilities | 34.3 | |||
Total liabilities | 5,545.0 |
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132
At 31 March 2025
Fair value | ||||
through other | Fair value | |||
comprehensive | through profit | |||
Amortised cost | income | or loss | Total | |
Society | £m | £m | £m | £m |
Assets | ||||
Cash and balances with the | ||||
Bank of England | 159.8 | - | - | 159.8 |
Loans and advances to credit | ||||
institutions | 58.4 | - | - | 58.4 |
Investment securities | 191.0 | 467.3 | 0.3 | 658.6 |
Derivative financial instruments | - | - | 36.2 | 36.2 |
Loans and advances to | ||||
customers | 4,532.7 | - | 5.6 | 4,538.3 |
Investments | 912.0 | - | - | 912.0 |
Total financial assets | 5,853.9 | 467.3 | 42.1 | 6,363.3 |
Non-financial assets | 53.2 | |||
Total assets | 6,416.5 | |||
Fair value | ||||
through profit | ||||
Amortised cost | or loss | Total | ||
£m | £m | £m | ||
Liabilities | ||||
Shares | 5,071.6 | - | 5,071.6 | |
Amounts due to credit | ||||
institutions | 460.2 | - | 460.2 | |
Amounts due to other | ||||
customers | 474.4 | - | 474.4 | |
Derivative financial instruments | - | 16.8 | 16.8 | |
Subordinated liabilities | 2.1 | - | 2.1 | |
Total financial liabilities | 6,008.3 | 16.8 | 6,025.1 | |
Non-financial liabilities | 20.3 | |||
Total liabilities | 6,045.4 |
31. Financial instruments
(continued)
At 31 March 2024
Fair value | ||||
through other | Fair value | |||
comprehensive | through profit | |||
Amortised cost | income | or loss | Total | |
Society | £m | £m | £m | £m |
Assets | ||||
Cash and balances with the | ||||
Bank of England | 491.6 | - | - | 491.6 |
Loans and advances to credit | ||||
institutions | 44.7 | - | - | 44.7 |
Investment securities | - | 391.1 | 0.4 | 391.5 |
Derivative financial instruments | - | - | 61.7 | 61.7 |
Loans and advances to | ||||
customers | 3,779.0 | - | 7.0 | 3,786.0 |
Investments | 1,070.3 | - | - | 1,070.3 |
Total financial assets | 5,385.6 | 391.1 | 69.1 | 5,845.8 |
Non-financial assets | 58.2 | |||
Total assets | 5,904.0 | |||
Fair value | ||||
through profit | ||||
Amortised cost | or loss | Total | ||
£m | £m | £m | ||
Liabilities | ||||
Shares | 4,670.6 | - | 4,670.6 | |
Amounts due to credit | ||||
institutions | 788.2 | - | 788.2 | |
Amounts due to other | ||||
customers | 31.7 | - | 31.7 | |
Derivative financial instruments | - | 12.8 | 12.8 | |
Subordinated liabilities | 2.1 | - | 2.1 | |
Total financial liabilities | 5,492.6 | 12.8 | 5,505.4 | |
Non-financial liabilities | 23.0 | |||
Total liabilities | 5,528.4 |
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133
31. Financial instruments
(continued)
Fair values of financial assets and financial liabilities
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Group determines fair values by the following three tier
valuation hierarchy:
Level 1:
Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:
Valuation techniques where all inputs are taken from observable market data, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3:
Valuation techniques where significant inputs are not based on observable market data.
Valuation techniques include net present value and discounted cash flow models, comparison to similar instruments for which market observable prices exist and other valuation models. Assumptions and market observable inputs
used in valuation techniques include risk-free and benchmark interest rates, equity index prices and expected price volatilities. The objective of valuation techniques is to arrive at a fair value determination that reflects the price
of the financial instrument at the reporting date that would have been determined by market participants acting at arm’s length.
Observable prices are those that have been seen either from counterparties or from market pricing
sources including Bloomberg. The use of these depends upon the liquidity of the relevant market.
The carrying value of cash and balances with the Bank of England is assumed to approximate their fair value.
Financial assets and financial liabilities held at amortised cost
The tables below show the fair values of the Group’s and Society’s financial assets and liabilities held at amortised cost in the Statements of Financial Position, analysed according to the fair value hierarchy described above.
At 31 March 2025
Carrying | Fair value | Fair value | Fair value | Fair value | |
value | Level 1 | Level 2 | Level 3 | Total | |
Group | £m | £m | £m | £m | £m |
Financial assets | |||||
Cash and balances with the | |||||
Bank of England | 159.8 | 159.8 | - | - | 159.8 |
Loans and advances to credit | |||||
institutions | 88.8 | - | 88.8 | - | 88.8 |
Loans and advances to customers | 5,392.5 | - | - | 5,503.1 | 5,503.1 |
5,641.1 | 159.8 | 88.8 | 5,503.1 | 5,751.7 | |
Financial liabilities | |||||
Shares | 5,071.6 | - | - | 5,052.4 | 5,052.4 |
Amounts due to credit institutions | 459.1 | - | 459.1 | - | 459.1 |
Amounts due to other customers | 29.1 | - | 24.3 | 4.7 | 29.0 |
Debt securities in issue | 289.8 | 290.2 | - | - | 290.2 |
Subordinated liabilities | 2.1 | - | 2.1 | - | 2.1 |
5,851.7 | 290.2 | 485.5 | 5,057.1 | 5,832.8 |
At 31 March 2024
Carrying | Fair value | Fair value | Fair value | Fair value | |
value | Level 1 | Level 2 | Level 3 | Total | |
Group | £m | £m | £m | £m | £m |
Financial assets | |||||
Loans and advances to | |||||
credit institutions | 46.3 | - | 46.3 | - | 46.3 |
Loans and advances to customers | 4,778.1 | - | - | 4,866.9 | 4,866.9 |
4,824.4 | - | 46.3 | 4,866.9 | 4,913.2 | |
Financial liabilities | |||||
Shares | 4,670.6 | - | - | 4,650.6 | 4,650.6 |
Amounts due to credit institutions | 788.2 | - | 788.2 | - | 788.2 |
Amounts due to other customers | 37.0 | - | 31.8 | 5.0 | 36.8 |
Subordinated liabilities | 2.1 | - | 2.1 | - | 2.1 |
5,497.9 | - | 822.1 | 4,655.6 | 5,477.7 |
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134
31. Financial instruments
At 31 March 2025
(continued)
Carrying | Fair value | Fair value | Fair value | Fair value | |
value | Level 1 | Level 2 | Level 3 | Total | |
Society | £m | £m | £m | £m | £m |
Financial assets | |||||
Cash and balances with the | |||||
Bank of England | 159.8 | 159.8 | - | - | 159.8 |
Loans and advances to credit | |||||
institutions | 58.4 | - | 58.4 | - | 58.4 |
Investment securities | 191.0 | - | 191.4 | - | 191.4 |
Loans and advances to customers | 4,532.7 | - | - | 4,977.1 | 4,977.1 |
Investments | 912.0 | - | - | 912.0 | 912.0 |
5,853.9 | 159.8 | 249.8 | 5,889.1 | 6,298.7 | |
Financial liabilities | |||||
Shares | 5,071.6 | - | - | 5,052.4 | 5,052.4 |
Amounts due to credit institutions | 460.2 | - | 460.2 | - | 460.2 |
Amounts due to other customers | 474.4 | - | 24.2 | 465.7 | 489.9 |
Subordinated liabilities | 2.1 | - | 2.1 | - | 2.1 |
6,008.3 | - | 486.5 | 5,518.1 | 6,004.6 |
At 31 March 2024
Carrying | Fair value | Fair value | Fair value | Fair value | |
value | Level 1 | Level 2 | Level 3 | Total | |
Society | £m | £m | £m | £m | £m |
Financial assets | |||||
Loans and advances to credit | |||||
institutions | 44.7 | - | 44.7 | - | 44.7 |
Loans and advances to customers | 3,779.0 | - | - | 3,966.2 | 3,966.2 |
Investments | 1,070.3 | - | - | 1,070.3 | 1,070.3 |
4,894.0 | - | 44.7 | 5,036.5 | 5,081.2 | |
Financial liabilities | |||||
Shares | 4,670.6 | - | - | 4,650.6 | 4,650.6 |
Amounts due to credit institutions | 788.2 | - | 788.2 | - | 788.2 |
Amounts due to other customers | 31.7 | - | 31.7 | - | 31.7 |
Subordinated liabilities | 2.1 | - | 2.1 | - | 2.1 |
5,492.6 | - | 822.0 | 4,650.6 | 5,472.6 |
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135
31. Financial instruments
(continued)
a) Loans and advances to customers
The fair value of loans and advances to customers has been determined taking into account factors such as impairment and interest rates. The fair values have been calculated on a product basis and as such do not necessarily
represent the value that could have been obtained for a portfolio if it were sold at 31 March 2025.
b) Shares and borrowings
The estimated fair value of deposits with no stated maturity, which includes non-interest bearing deposits, is the amount repayable on demand. The estimated fair value of fixed interest-bearing deposits and other borrowings
without quoted market price is based on discounted cash flows using interest rates for new deposits with similar remaining maturity. The fair values have been calculated on a product basis and as such do not necessarily
represent the value that could have been obtained for a portfolio if it were sold at 31 March 2025.
c) Debt securities in issue
The aggregate fair values are calculated based on quoted market prices. For those notes where quoted market prices are not available, a discounted cash flow model is used based on a current yield curve appropriate for the
remaining term to maturity.
Financial assets and financial liabilities held at fair value
The tables below show the fair values of the Group’s and Society’s financial assets and liabilities held at fair value in the Statements of Financial Position, analysed according to the fair value hierarchy described previously.
Level 1 | Level 2 | Level 3 | Total | |
2025 | 2025 | 2025 | 2025 | |
Group | £m | £m | £m | £m |
Financial assets | ||||
Investment securities | ||||
At fair value through other | ||||
| comprehensive income | 467.3 | - | - | 467.3 |
At fair value through profit or loss | 0.3 | - | - | 0.3 |
Derivative financial instruments | - | 44.9 | - | 44.9 |
Loans and advances to customers | - | - | 5.6 | 5.6 |
467.6 | 44.9 | 5.6 | 518.1 | |
Financial liabilities | ||||
Derivative financial instruments | - | 16.8 | - | 16.8 |
- | 16.8 | - | 16.8 |
Level 1 | Level 2 | Level 3 | Total | |
2024 | 2024 | 2024 | 2024 | |
Group | £m | £m | £m | £m |
Financial assets | ||||
Investment securities | ||||
At fair value through other | ||||
| comprehensive income | 391.1 | - | - | 391.1 |
At fair value through profit or loss | 0.4 | - | - | 0.4 |
Derivative financial instruments | - | 61.8 | - | 61.8 |
Loans and advances to customers | - | - | 7.0 | 7.0 |
391.5 | 61.8 | 7.0 | 460.3 | |
Financial liabilities | ||||
Derivative financial instruments | - | 12.8 | - | 12.8 |
- | 12.8 | - | 12.8 |
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31. Financial instruments
(continued)
Level 1 | Level 2 | Level 3 | Total | |
2025 | 2025 | 2025 | 2025 | |
Society | £m | £m | £m | £m |
Financial assets | ||||
Investment securities | ||||
At fair value through other | ||||
| comprehensive income | 467.3 | - | - | 467.3 |
At fair value through profit or loss | 0.3 | - | - | 0.3 |
Derivative financial instruments | - | 36.2 | - | 36.2 |
Loans and advances to customers | - | - | 5.6 | 5.6 |
467.6 | 36.2 | 5.6 | 509.4 | |
Financial liabilities | ||||
Derivative financial instruments | - | 16.8 | - | 16.8 |
- | 16.8 | - | 16.8 |
Level 1 | Level 2 | Level 3 | Total | |
2024 | 2024 | 2024 | 2024 | |
Society | £m | £m | £m | £m |
Financial assets | ||||
Investment securities | ||||
At fair value through other | ||||
| comprehensive income | 391.1 | - | - | 391.1 |
At fair value through profit or loss | 0.4 | - | - | 0.4 |
Derivative financial instruments | - | 61.7 | - | 61.7 |
Loans and advances to customers | - | - | 7.0 | 7.0 |
391.5 | 61.7 | 7.0 | 460.2 | |
Financial liabilities | ||||
Derivative financial instruments | - | 12.8 | - | 12.8 |
- | 12.8 | - | 12.8 |
The Society’s equity release mortgage portfolio is measured at fair value using a discounted cash flow model
for which key inputs are not based on observable market data. The calculation therefore meets the definition
of a level 3 valuation technique. Details of the key model assumptions and the fair value impact of changes in
those assumptions are given in the accounting policies.
The table below analyses movements in the level 3 portfolio during the period.
2025 | 2024 | |
Group and Society | £m | £m |
Equity release portfolio | ||
At beginning of year | 7.0 | 8.6 |
Items recognised in the Income Statement | ||
Interest receivable and similar income | 0.8 | 0.9 |
Fair value (losses)/gains on financial instruments | (0.1) | 0.2 |
Redemptions | (2.1) | (2.7) |
At end of year | 5.6 | 7.0 |
There have been no transfers of financial assets or liabilities between levels of the valuation hierarchy in the
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137
(a) Credit risk definition and management
Credit risk can be described as the risk of customers or counterparties being unable to meet their financial
obligations to the Group as they become due.
The Group is exposed to this risk through its lending to:
•
individuals (consumers - residential mortgages, including buy to let);
•
businesses (non-consumers - previous commercial lending and elements of buy to let exposure); and
•
wholesale counterparties (including other financial institutions). Specifically within the treasury portfolio,
where credit risk arises from the investments held by the Group in order to meet liquidity requirements
and for general business purposes.
Changes in the credit quality and the recoverability of loans and amounts due from counterparties influence
the Group’s exposure to credit risk. Adverse changes in the credit quality of counterparties, collateral values
or deterioration in the wider economy, including rising unemployment, worsening household finances and
tightening in the UK property market, resulting in declining property values, could affect the recoverability
and value of the Group’s assets and influence its financial performance. An economic downturn and
future falls in property values (either residential or commercial) could affect the level of impairment losses
recognised.
The controlled management of credit risk is critical to the Group’s overall strategy. The Group has therefore
embedded a comprehensive and robust credit risk management framework with clear lines of accountability
and oversight as part of its overall governance framework. The Group has effective policies and procedures
to identify, measure, monitor, manage and report credit risk within the Group’s risk appetite.
The Risk Committee is responsible for the oversight of credit risk appetite that has been established by
the Board and for approving lending policy and setting limits on credit exposures, which are monitored and
reviewed on a monthly basis. The minutes of this committee are presented to the Board. This committee is
supported by five Executive sub-committees/Groups: the Executive Risk Committee, the Residential Credit
Group, the Commercial Loans Risk Group, the Assets and Liabilities Committee and the Model Risk Group.
The role of each within the credit risk framework is outlined below:
•
The Executive Risk Committee (ERC) is responsible for providing the Risk Committee with an enterprise
wide view of the risk profile of the Society including current and potential risks. The ERC is also
accountable for driving the detailed implementation of the Society’s Risk Management Framework. In
the context of credit risk, the ERC proposes to Risk Committee any recommendations for Board approval
regarding the Residential Lending Statement and Credit Risk Appetite Statement. The ERC approves
material changes to the Lending and Security Policies, and reviews these policies annually. A summary of
the minutes of this committee is presented to the Risk Committee.
•
The Residential Credit Group is responsible for the monitoring of the Group’s residential credit exposures
and approving changes to the credit scoring systems that are utilised. In addition, the Group reviews the
type and quality of approved residential mortgage business and appraises actual arrears and repossession
levels against trends and industry averages. A summary of the minutes of this committee is presented to
the ERC.
•
The Commercial Loans Risk Group reviews individual commercial loans at levels mandated by the Board.
This may involve reviewing individual cases on a quarterly, half yearly or annual basis.
•
The Assets and Liabilities Committee (ALCo) is responsible for oversight of assets and liabilities risk
including the assessment of exposure to Treasury counterparty credit risk.
•
The Model Risk Group supports the Society’s development and maintenance of models, including those
related to the management of credit risk. The Group oversees the initiation, development, approval,
implementation, performance, monitoring and validation of the Society’s models in the context of
compliance with both Regulation and the Society’s own governance requirements. A summary of the
minutes of this group is presented to the ERC.
The Group adopts a responsible approach to lending ensuring that loans are, and are expected to remain,
affordable and the Responsible Lending Policy is approved annually by the Board.
The maximum credit risk exposure is the carrying value as shown in the tables on pages 133 to 136.
The Group’s most significant exposures to credit risk are loans secured on UK residential properties and loans
secured on UK land.
(b) Residential assets held at amortised cost
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
Concentration by loan type | £m | £m | £m | £m |
Prime owner occupied | 4,433.8 | 3,676.0 | 4,383.3 | 3,615.9 |
Buy to let | 855.8 | 995.2 | 174.4 | 206.0 |
Other | 26.0 | 29.9 | 0.4 | 0.4 |
Gross balances | 5,315.6 | 4,701.1 | 4,558.1 | 3,822.3 |
Expected credit loss provisions | (10.3) | (10.9) | (4.3) | (3.6) |
Fair value hedge adjustments | (22.4) | (43.3) | (21.1) | (39.7) |
5,282.9 | 4,646.9 | 4,532.7 | 3,779.0 |
(i) Credit quality
The Group assesses credit risk on owner occupied and buy to let residential mortgages using behavioural
scorecard and other analysis to determine probabilities of default. The IFRS 9 impairment models make use
of this data, incorporating forecasts of future economic conditions and account-specific factors to produce
forward-looking probabilities of default by account and allocating loans to one of three stages (as explained
in note 1).
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138
32. Credit risk
(continued)
The table below analyses gross exposures to residential assets by 12-month probability of default and IFRS
9 stage at the reporting date, with the exception of the closed second charge lending portfolio for which
probability of possession is used as a credit risk measure, rather than probability of default. The probability
of default analysis at 31 March 2025 reflects significant enhancements to the expected credit loss modelling
which has enabled several residential Post Model Adjustments (PMAs) applied in previous years to be retired.
At 31 March 2025
Group | Society | |||||||
Probability of | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total |
default range (%) | £m | £m | £m | £m | £m | £m | £m | £m |
0.00 to < 0.25 | 1,466.2 | 79.5 | - | 1,545.7 | 1,205.8 | 51.1 | - | 1,256.9 |
0.25 to < 0.50 | 2,377.4 | 223.6 | - | 2,601.0 | 2,314.1 | 208.3 | - | 2,522.4 |
0.50 to < 0.75 | 272.6 | 133.4 | - | 406.0 | 241.4 | 123.1 | - | 364.5 |
0.75 to < 1.00 | 47.2 | 89.0 | - | 136.2 | 23.9 | 79.2 | - | 103.1 |
1.00 to < 5.00 | 181.2 | 190.4 | - | 371.6 | 3.8 | 172.4 | - | 176.2 |
5.00 to < 10.00 | 24.9 | 57.0 | - | 81.9 | 4.4 | 32.9 | - | 37.3 |
10.00 to < 100.00 | 25.8 | 54.3 | - | 80.1 | 13.4 | 40.5 | - | 53.9 |
100.00 (default) | - | - | 88.9 | 88.9 | - | - | 43.7 | 43.7 |
Second charge | - | 3.1 | 1.1 | 4.2 | - | 0.1 | - | 0.1 |
4,395.3 | 830.3 | 90.0 | 5,315.6 | 3,806.8 | 707.6 | 43.7 | 4,558.1 | |
At 31 March 2024
| Group | Society | |||||||
Probability of | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total |
default range (%) | £m | £m | £m | £m | £m | £m | £m | £m |
0.00 to < 0.25 | 3,099.4 | 164.7 | 70.1 | 3,334.2 | 2,792.4 | 148.7 | 30.0 | 2,971.1 |
0.25 to < 0.50 | 208.4 | 34.4 | - | 242.8 | 92.2 | 18.7 | - | 110.9 |
0.50 to < 0.75 | 329.4 | 32.9 | - | 362.3 | 327.0 | 32.0 | - | 359.0 |
0.75 to < 1.00 | 42.3 | 25.5 | - | 67.8 | 10.1 | 13.2 | - | 23.3 |
1.00 to < 5.00 | 309.9 | 314.1 | - | 624.0 | 61.7 | 258.6 | - | 320.3 |
5.00 to < 10.00 | 6.3 | 2.3 | - | 8.6 | 3.9 | 1.9 | - | 5.8 |
10.00 to < 100.00 | 10.1 | 32.4 | (0.1) | 42.4 | 4.8 | 22.4 | - | 27.2 |
100.00 (default) | - | - | 14.0 | 14.0 | - | - | 4.6 | 4.6 |
Second charge | 2.9 | 1.3 | 0.8 | 5.0 | - | 0.1 | - | 0.1 |
4,008.7 | 607.6 | 84.8 | 4,701.1 | 3,292.1 | 495.6 | 34.6 | 3,822.3 | |
The table below provides further information on the Group’s residential loans and advances to customers by
payment due status at 31 March.
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Not past due | 5,236.9 | 4,630.8 | 4,515.3 | 3,788.7 |
Past due 1 to 3 months | 25.5 | 26.0 | 16.4 | 14.6 |
Past due 3 to 6 months | 18.6 | 15.8 | 11.2 | 7.1 |
Past due 6 to 12 months | 14.0 | 17.5 | 7.9 | 7.0 |
Past due over 12 months | 14.0 | 7.8 | 5.6 | 4.1 |
Possessions | 6.6 | 3.2 | 1.7 | 0.8 |
5,315.6 | 4,701.1 | 4,558.1 | 3,822.3 |
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139
32. Credit risk
(continued)
(ii) Expected credit losses
The table below illustrates the IFRS 9 staging distribution of residential loans and advances to customers held at amortised cost, loan commitments and related expected credit loss provisions at the year end. Stage 2 loans
have been further analysed to show those which are more than 30 days past due, the IFRS 9 backstop for identifying a significant increase in credit risk (SICR), and those which meet other SICR criteria as detailed in note 1 to
the accounts.
At 31 March 2025
Group | Society | |||||
Expected | Expected | |||||
Gross | credit loss | Provision | Gross | credit loss | Provision | |
exposure | provision | coverage | exposure | provision | coverage | |
£m | £m | % | £m | £m | % | |
Residential loans at | ||||||
amortised cost | ||||||
Stage 1 | 4,395.3 | 1.4 | 0.03% | 3,806.8 | 0.9 | 0.02% |
Stage 2 | ||||||
> 30 days past due | 16.9 | 0.2 | 1.18% | 11.8 | 0.2 | 1.69% |
Other SICR indicators | 813.4 | 3.5 | 0.43% | 695.8 | 2.2 | 0.32% |
Provision overlays | - | 1.8 | - | - | 0.1 | - |
Stage 3 | 90.0 | 3.4 | 3.78% | 43.7 | 0.9 | 2.06% |
5,315.6 | 10.3 | 0.19% | 4,558.1 | 4.3 | 0.09% | |
Loan commitments | ||||||
Stage 1 | 250.2 | - | 0.0% | 250.0 | - | 0.0% |
At 31 March 2024
Group | Society | |||||
Expected | Expected | |||||
Gross | credit loss | Provision | Gross | credit loss | Provision | |
exposure | provision | coverage | exposure | provision | coverage | |
£m | £m | % | £m | £m | % | |
Residential loans at | ||||||
amortised cost | ||||||
Stage 1 | 4,008.7 | 1.1 | 0.03% | 3,292.0 | 0.4 | 0.01% |
Stage 2 | ||||||
> 30 days past due | 16.7 | 0.2 | 1.20% | 9.8 | 0.2 | 2.04% |
Other SICR indicators | 590.9 | 2.0 | 0.34% | 485.8 | 1.0 | 0.21% |
Provision overlays | - | 3.9 | - | - | 1.0 | - |
Stage 3 | 84.8 | 3.7 | 4.36% | 34.7 | 1.0 | 2.88% |
4,701.1 | 10.9 | 0.23% | 3,822.3 | 3.6 | 0.09% | |
Loan commitments | ||||||
Stage 1 | 347.0 | - | 0.0% | 346.5 | - | 0.0% |
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140
The tables below analyse the movement in gross residential exposures and the related expected credit loss allowances for the years ended 31 March 2025 and 31 March 2024:
| Group | Society | |||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |
£m | £m | £m | £m | £m | £m | £m | £m | |
Gross exposure | ||||||||
At 1 April 2024 | 4,008.7 | 607.6 | 84.8 | 4,701.1 | 3,292.1 | 495.6 | 34.6 | 3,822.3 |
Transfers due to | ||||||||
increased credit risk: | ||||||||
From stage 1 to | ||||||||
| stage 2 | (451.0) | 450.9 | - | (0.1) | (398.8) | 398.8 | - | - |
From stage 1 to | ||||||||
| stage 3 | (12.6) | - | 12.6 | - | (7.5) | - | 7.5 | - |
From stage 2 to | ||||||||
| stage 3 | - | (18.0) | 17.9 | (0.1) | - | (11.6) | 11.6 | - |
Transfers due to | ||||||||
decreased credit risk: | ||||||||
From stage 2 to | ||||||||
| stage 1 | 143.6 | (143.6) | - | - | 119.1 | (119.1) | - | - |
From stage 3 to | ||||||||
| stage 1 | 1.1 | - | (1.1) | - | 0.5 | - | (0.5) | - |
From stage 3 to | ||||||||
| stage 2 | - | 5.6 | (5.6) | - | - | 2.8 | (2.8) | - |
Mortgage advances | 1,258.5 | - | - | 1,258.5 | 1,258.5 | - | - | 1,258.5 |
Net redemptions and | ||||||||
| repayments | (551.5) | (72.2) | (17.3) | (641.0) | (456.9) | (58.9) | (6.5) | (522.3) |
Amounts written off | - | - | (1.2) | (1.2) | - | - | (0.2) | (0.2) |
Other movements | (1.5) | - | (0.1) | (1.6) | (0.2) | - | - | (0.2) |
At 31 March 2025 | 4,395.3 | 830.3 | 90.0 | 5,315.6 | 3,806.8 | 707.6 | 43.7 | 4,558.1 |
Group | Society | |||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |
£m | £m | £m | £m | £m | £m | £m | £m | |
Gross exposure | ||||||||
At 1 April 2023 | 3,870.8 | 362.9 | 64.8 | 4,298.5 | 2,990.4 | 273.7 | 25.9 | 3,290.0 |
Transfers due to | ||||||||
increased credit risk: | ||||||||
From stage 1 to | ||||||||
| stage 2 | (376.7) | 376.7 | - | - | (317.6) | 317.6 | - | - |
From stage 1 to | ||||||||
| stage 3 | (16.9) | - | 16.9 | - | (5.9) | - | 5.9 | - |
From stage 2 to | ||||||||
stage 3 | - | (25.2) | 25.2 | - | - | (11.1) | 11.1 | - |
Transfers due to | ||||||||
decreased credit risk: | ||||||||
From stage 2 to | ||||||||
| stage 1 | 67.4 | (67.4) | - | - | 53.6 | (53.6) | - | - |
From stage 3 to | ||||||||
| stage 1 | 0.9 | - | (0.9) | - | 0.3 | - | (0.3) | - |
From stage 3 to | ||||||||
stage 2 | - | 4.1 | (4.1) | - | - | 2.4 | (2.4) | - |
Mortgage advances | 1,064.1 | - | - | 1,064.1 | 1,057.6 | - | - | 1,057.6 |
Net redemptions and | ||||||||
| repayments | (602.8) | (43.5) | (16.7) | (663.0) | (488.3) | (33.4) | (5.6) | (527.3) |
Amounts written off | - | - | (0.3) | (0.3) | - | - | - | - |
Other movements | 1.9 | - | (0.1) | 1.8 | 2.0 | - | - | 2.0 |
At 31 March 2024 | 4,008.7 | 607.6 | 84.8 | 4,701.1 | 3,292.1 | 495.6 | 34.6 | 3,822.3 |
32. Credit risk
(continued)
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Glossary
141
| Group | Society | |||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |
£m | £m | £m | £m | £m | £m | £m | £m | |
Expected credit loss | ||||||||
provision | ||||||||
At 1 April 2024 | 1.1 | 6.1 | 3.7 | 10.9 | 0.4 | 2.2 | 1.0 | 3.6 |
Transfers due to | ||||||||
increased credit risk: | ||||||||
From stage 1 to | ||||||||
| stage 2 | (0.1) | 2.3 | - | 2.2 | - | 1.5 | - | 1.5 |
From stage 1 to | ||||||||
| stage 3 | (0.1) | - | 0.3 | 0.2 | - | - | 0.1 | 0.1 |
From stage 2 to | ||||||||
| stage 3 | - | (0.2) | 0.4 | 0.2 | - | (0.1) | 0.2 | 0.1 |
Transfers due to | ||||||||
decreased credit risk: | ||||||||
From stage 2 to | ||||||||
| stage 1 | 0.1 | (0.3) | - | (0.2) | 0.1 | (0.1) | - | - |
From stage 3 to | ||||||||
| stage 1 | - | - | - | - | - | (0.1) | - | (0.1) |
From stage 3 to | ||||||||
| stage 2 | - | - | (0.1) | (0.1) | - | - | - | - |
Remeasurement of | ||||||||
expected credit losses | 0.7 | - | 1.0 | 1.7 | 0.5 | 0.1 | 0.1 | 0.7 |
with no stage transfer | ||||||||
Redemptions | (0.2) | (0.1) | - | (0.3) | (0.1) | (0.1) | (0.2) | (0.4) |
Amounts written off | - | - | (1.2) | (1.2) | - | - | (0.2) | (0.2) |
| Movement in provision | ||||||||
| overlays | - | (2.0) | - | (2.0) | - | (0.8) | - | (0.8) |
Other movements | (0.1) | (0.3) | (0.7) | (1.1) | - | (0.1) | (0.1) | (0.2) |
At 31 March 2025 | 1.4 | 5.5 | 3.4 | 10.3 | 0.9 | 2.5 | 0.9 | 4.3 |
Group | Society | |||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |
£m | £m | £m | £m | £m | £m | £m | £m | |
Expected credit loss | ||||||||
provision | ||||||||
At 1 April 2023 | 1.1 | 6.7 | 2.4 | 10.2 | 0.2 | 1.6 | 0.5 | 2.3 |
Transfers due to | ||||||||
increased credit risk: | ||||||||
From stage 1 to | ||||||||
stage 2 | (0.1) | 1.6 | - | 1.5 | - | 0.9 | - | 0.9 |
From stage 1 to | ||||||||
stage 3 | (0.1) | - | 0.6 | 0.5 | - | - | 0.2 | 0.2 |
From stage 2 to | ||||||||
stage 3 | - | (0.2) | 0.7 | 0.5 | - | (0.1) | 0.2 | 0.1 |
Transfers due to | ||||||||
decreased credit risk: | ||||||||
From stage 2 to | ||||||||
stage 1 | - | (0.2) | - | (0.2) | - | (0.1) | - | (0.1) |
From stage 3 to | ||||||||
stage 2 | - | 0.1 | (0.1) | - | - | - | - | - |
Remeasurement of | ||||||||
expected credit losses | 0.4 | (0.2) | 1.0 | 1.2 | 0.2 | (0.1) | 0.3 | 0.4 |
with no stage transfer | ||||||||
Redemptions | (0.2) | (0.1) | (0.5) | (0.8) | - | - | (0.1) | (0.1) |
Amounts written off | - | - | (0.3) | (0.3) | - | - | - | - |
Other movements | 0.2 | (0.1) | (0.1) | - | - | - | (0.1) | (0.1) |
Movement in provision | ||||||||
overlays | (0.2) | (1.5) | - | (1.7) | - | - | - | - |
At 31 March 2024 | 1.1 | 6.1 | 3.7 | 10.9 | 0.4 | 2.2 | 1.0 | 3.6 |
32. Credit risk
(continued)
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142
32. Credit risk
(continued)
(iii) Geographical analysis
The table below shows the geographic spread of the residential loan portfolio at the year end date:
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
East Anglia | 150.2 | 121.0 | 132.3 | 98.7 |
East Midlands | 586.5 | 491.0 | 522.3 | 414.8 |
Greater London | 465.1 | 461.9 | 295.8 | 272.7 |
Northern Ireland | 1.9 | 2.4 | - | - |
North | 257.9 | 225.6 | 229.7 | 192.9 |
North West | 779.1 | 678.4 | 687.6 | 573.5 |
Scotland | 38.4 | 46.6 | 8.9 | 11.3 |
South East | 1,008.7 | 874.1 | 858.1 | 700.9 |
South West | 424.6 | 362.7 | 378.1 | 306.8 |
Wales | 247.1 | 227.6 | 214.2 | 189.8 |
West Midlands | 739.0 | 675.1 | 672.2 | 594.4 |
Yorkshire | 617.1 | 534.7 | 558.9 | 466.5 |
5,315.6 | 4,701.1 | 4,558.1 | 3,822.3 |
The table below shows analysis of the indexed loan to value distribution of the residential loan portfolio at
the year end date:
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
>95% | 15.5 | 135.2 | 15.8 | 135.0 |
91% - 95% | 327.1 | 323.1 | 326.9 | 322.9 |
86% - 90% | 618.5 | 286.8 | 618.3 | 286.6 |
76% - 85% | 885.7 | 502.0 | 807.9 | 413.7 |
51% - 75% | 1,959.9 | 1,993.7 | 1,635.4 | 1,581.6 |
<51% | 1,508.9 | 1,460.3 | 1,153.8 | 1,082.5 |
5,315.6 | 4,701.1 | 4,558.1 | 3,822.3 |
The Group’s average indexed loan to value at the year end date is 56.3% (2023/24: 54.0%), calculated as a
simple average across all residential loans.
The following table indicates collateral held against residential loans and advances to customers by IFRS
9 stage:
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
Fair value of collateral held | £m | £m | £m | £m |
Stage 1 | 9,368.6 | 8,656.8 | 7,998.9 | 7,034.1 |
Stage 2 | 1,562.0 | 1,222.4 | 1,254.0 | 956.4 |
Stage 3 | 216.0 | 207.6 | 103.2 | 86.9 |
11,146.6 | 10,086.8 | 9,356.1 | 8,077.4 |
The collateral held consists of properties included within the above categories. The use of such collateral is in
(v) Forbearance
A range of forbearance strategies is employed in order to work with borrowers to control arrears and, wherever
possible, avoid repossession. These are set out in the relevant Group policies. The agreed strategy will reflect
the customer’s individual circumstances, appropriately taking any vulnerabilities into consideration, and will be
used in line with industry guidance. Forbearance arrangements include extended payment terms, a reduction in
interest or principal repayments, and approved external debt management plans.
The table below analyses residential mortgage balances with renegotiated terms at the year end date:
Term | |||||
Arrangements | Concessions | Capitalisation | extensions | Total | |
2025 | 2025 | 2025 | 2025 | 2025 | |
Group | £m | £m | £m | £m | £m |
Not past due | 4.2 | - | 1.5 | 0.1 | 5.8 |
Past due 1 to 3 months | 1.5 | - | - | - | 1.5 |
Past due 3 to 6 months | 0.9 | 0.4 | - | - | 1.3 |
Past due 6 to 12 months | 1.0 | - | 0.1 | - | 1.1 |
Past due over 12 months | 2.6 | - | - | - | 2.6 |
10.2 | 0.4 | 1.6 | 0.1 | 12.3 |
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143
32. Credit risk
(continued)
Term | |||||
Arrangements | Concessions | Capitalisation | extensions | Total | |
2024 | 2024 | 2024 | 2024 | 2024 | |
Group | £m | £m | £m | £m | £m |
Not past due | 7.9 | - | 1.0 | 0.5 | 9.4 |
Past due 1 to 3 months | 1.5 | - | 0.3 | - | 1.8 |
Past due 3 to 6 months | 0.7 | - | 0.1 | - | 0.8 |
Past due 6 to 12 months | 1.3 | - | - | - | 1.3 |
Past due over 12 months | 2.3 | - | - | - | 2.3 |
13.7 | - | 1.4 | 0.5 | 15.6 |
(c) Commercial assets
Commercial assets comprise a closed portfolio of non-core commercial loans which is analysed in the
table below.
Group | Group | |
2025 | 2024 | |
£m | £m | |
Concentration by loan type | ||
Loans secured on commercial property | 196.5 | 220.5 |
Loans secured on residential property | 0.6 | 0.7 |
Gross balances | 197.1 | 221.2 |
Fair value adjustments | 1.7 | 2.4 |
Gross exposures | 198.8 | 223.6 |
Impairment provisions | (89.1) | (92.1) |
109.7 | 131.5 |
Of the Group fair value adjustments, £1.7m (2023/24: £2.4m) relate to loans secured on commercial property
and £nil (2023/24: £nil) relate to loans secured on residential property. The Society has no exposure to
commercial loans.
(i) Credit quality
The internal credit risk grading approach for the closed commercial loan book does not use scorecards or
probability of default calculations.
Instead loans are individually assessed against a series of prescriptive
and judgmental criteria, by subject matter experts following a clearly defined methodology, to arrive at a risk
grade.
The distribution of the portfolio by grade and IFRS 9 stage at 31 March is set out in the table below.
At 31 March 2025
Group | ||||
Stage 1 | Stage 2 | Stage 3 | Total | |
£m | £m | £m | £m | |
Performing | 27.7 | - | - | 27.7 |
Default: | ||||
In Law of Property Act Receivership | - | - | 170.3 | 170.3 |
Other default | - | - | 0.8 | 0.8 |
27.7 | - | 171.1 | 198.8 | |
At 31 March 2024
| Group | ||||
Stage 1 | Stage 2 | Stage 3 | Total | |
£m | £m | £m | £m | |
Performing | 29.6 | - | - | 29.6 |
Watchlist | - | 7.2 | - | 7.2 |
Default: | ||||
In Law of Property Act Receivership | - | - | 184.9 | 184.9 |
Other default | - | - | 1.9 | 1.9 |
29.6 | 7.2 | 186.8 | 223.6 | |
The table below provides further information on the Group’s commercial assets by payment due status at
31 March:
Group | Group | |
2025 | 2024 | |
£m | £m | |
Not past due | 66.7 | 110.9 |
Past due up to 3 months | 12.4 | 1.3 |
Past due 3 to 6 months | - | 11.8 |
Past due 6 to 12 months | 28.5 | 32.8 |
Past due over 12 months | 91.2 | 66.8 |
198.8 | 223.6 |
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Glossary
144
32. Credit risk
(continued)
(ii) Expected credit losses
The table below illustrates the IFRS 9 staging distribution of commercial loans and advances to customers
and related expected credit loss provisions at the year end. Where applicable, stage 2 loans have been further
analysed to show those which are more than 30 days past due, the IFRS 9 backstop for identifying a significant
increase in credit risk (SICR), and those which meet other SICR criteria as detailed in note 1 to the accounts.
At 31 March 2025
| Group | |||
Expected credit loss | |||
Gross exposure | provision | Provision coverage | |
£m | £m | % | |
Commercial loans | |||
Stage 1 | 27.7 | 0.4 | 1.44% |
Stage 3 | |||
Provision overlays | - | 1.5 | - |
Other defaults | 171.1 | 87.2 | 50.99% |
198.8 | 89.1 | 44.84% | |
At 31 March 2024
Group | |||
Expected credit loss | |||
Gross exposure | provision | Provision coverage | |
£m | £m | % | |
Commercial loans | |||
Stage 1 | 29.6 | 0.1 | 0.34% |
Stage 2 | |||
Other SICR indicators | 7.2 | 1.1 | 15.48% |
Stage 3 | 186.8 | 90.9 | 48.66% |
223.6 | 92.1 | 41.20% | |
The tables below analyse the movement in gross commercial exposures and the related expected
credit loss allowances at 31 March:
Group | ||||
Stage 1 | Stage 2 | Stage 3 | Total | |
Gross exposure | £m | £m | £m | £m |
At 1 April 2024 | 29.6 | 7.2 | 186.8 | 223.6 |
Transfers due to decreased credit risk: | ||||
From stage 2 to stage 1 | 4.1 | (4.1) | - | - |
Net redemptions, repayments and fair | ||||
value adjustments for hedged risk | (6.0) | (2.6) | (6.3) | (14.9) |
Amounts written off | - | (0.5) | (9.5) | (10.0) |
At 31 March 2025 | 27.7 | - | 171.1 | 198.8 |
| Group | ||||
Stage 1 | Stage 2 | Stage 3 | Total | |
| Gross exposure | £m | £m | £m | £m |
At 1 April 2023 | 18.1 | 12.8 | 203.1 | 234.0 |
Transfers due to increased credit risk: | ||||
From stage 1 to stage 2 | (0.2) | 0.2 | - | - |
Transfers due to decreased credit risk: | ||||
From stage 2 to stage 1 | 11.5 | (11.5) | - | - |
From stage 3 to stage 1 | 2.1 | - | (2.1) | - |
From stage 3 to stage 2 | - | 7.0 | (7.0) | - |
Net redemptions, repayments and fair | ||||
| value adjustments for hedged risk | (1.9) | (1.3) | (6.4) | (9.6) |
Amounts written off | - | - | (0.8) | (0.8) |
At 31 March 2024 | 29.6 | 7.2 | 186.8 | 223.6 |
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Glossary
145
32. Credit risk
(continued)
Group | ||||
Stage 1 | Stage 2 | Stage 3 | Total | |
£m | £m | £m | £m | |
Expected credit loss allowance | ||||
At 1 April 2024 | 0.1 | 1.1 | 90.9 | 92.1 |
Transfers due to decreased credit risk: | ||||
From stage 2 to stage 1 | 0.4 | (0.4) | - | - |
Remeasurement of expected credit | ||||
losses with no stage transfer | (0.1) | - | 5.9 | 5.8 |
Redemptions | - | (0.2) | (0.1) | (0.3) |
Amounts written off | - | (0.5) | (9.5) | (10.0) |
Movement in provision overlays | - | - | 1.5 | 1.5 |
At 31 March 2025 | 0.4 | - | 88.7 | 89.1 |
| Group | ||||
Stage 1 | Stage 2 | Stage 3 | Total | |
£m | £m | £m | £m | |
Expected credit loss allowance | ||||
At 1 April 2023 | - | 0.2 | 79.0 | 79.2 |
Transfers due to decreased credit risk: | ||||
From stage 2 to stage 1 | 0.1 | (0.2) | - | (0.1) |
From stage 3 to stage 2 | - | 1.1 | (0.6) | 0.5 |
Remeasurement of expected credit | ||||
| losses with no stage transfer | - | - | 14.9 | 14.9 |
Amounts written off | - | - | (0.8) | (0.8) |
Movement in provision overlays | - | - | (1.6) | (1.6) |
At 31 March 2024 | 0.1 | 1.1 | 90.9 | 92.1 |
Group | Group | |
2025 | 2024 | |
£m | £m | |
Healthcare | 41.2 | 43.8 |
Leisure | 18.5 | 38.1 |
Industrial and warehouse | 3.3 | 3.8 |
Retail | 135.2 | 136.2 |
Residential | 0.6 | 0.7 |
Other | - | 1.0 |
198.8 | 223.6 |
(iii) Industry analysis of commercial loans
The analysis of commercial loans by industry type is as follows:
(iv) Geographical analysis
The table below shows the geographic spread of the commercial loan portfolio at the year end date:
Group | Group | |
2025 | 2024 | |
£m | £m | |
East Anglia | 8.5 | 11.5 |
East Midlands | 18.4 | 19.9 |
Greater London | 8.5 | 12.8 |
North | 18.4 | 19.7 |
North West | 102.1 | 102.4 |
Scotland | - | 0.3 |
South East | 24.2 | 25.2 |
South West | 5.8 | 6.2 |
West Midlands | 2.4 | 6.4 |
Yorkshire | 10.5 | 19.2 |
198.8 | 223.6 |
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Financial statements
Glossary
146
32. Credit risk
(continued)
(v) Collateral
The Group’s average unindexed loan to value at the year end date is 126.3% (2023/24: 101.5%), calculated as a
simple average across all commercial loans.
The following table indicates collateral held against commercial loans and advances to customers by IFRS 9
stage at 31 March:
Unindexed | Unindexed | |
Group | 2025 | 2024 |
Value of collateral held | £m | £m |
Stage 1 | 52.4 | 54.6 |
Stage 2 | 0.7 | 9.0 |
Stage 3 | 110.4 | 120.9 |
163.5 | 184.5 |
The collateral held consists of properties, land or other guarantees or cash included within the above categories.
The use of such collateral is in line with terms that are usual and customary to standard lending activities.
(vi) Forbearance
Certain forbearance activities are applied on a small number of commercial mortgages. Loans that have been
restructured (generally via a term extension) and would otherwise have been past due are classified as renegotiated.
The carrying amount of loans that have been classified as renegotiated retain this classification until maturity
or derecognition. Interest is recorded on renegotiated loans on the basis of new contractual terms following
renegotiation.
The analysis below sets out the commercial mortgage gross exposures with evidence of forbearance and
renegotiated terms at the year end date.
Arrangements | Capitalisation | Term extensions | Total | |
2025 | 2025 | 2025 | 2025 | |
Group | £m | £m | £m | £m |
Not past due | 9.8 | - | 2.2 | 12.0 |
Past due up to 3 months | - | 10.1 | - | 10.1 |
Past due over 12 months | 7.0 | - | - | 7.0 |
16.8 | 10.1 | 2.2 | 29.1 |
Arrangements | Capitalisation | Term extensions | Total | |
2024 | 2024 | 2024 | 2024 | |
Group | £m | £m | £m | £m |
Not past due | 10.5 | 10.1 | 2.7 | 23.3 |
Past due over 12 months | 7.3 | - | - | 7.3 |
17.8 | 10.1 | 2.7 | 30.6 |
(d) Loans and advances to credit institutions and investment securities
The Group holds treasury investments in order to meet liquidity requirements and for general business purposes.
The credit risk arising from these investments is monitored, managed and controlled closely by the Group.
At 31 March 2025, the Group and Society’s loans and advances to credit institutions and investment securities
held at amortised cost or FVOCI were all categorised as stage 1 and the associated ECLs were negligible.
At the reporting date, 100% (2023/24: 100%) of these treasury assets were invested in or deposited with
counterparties rated single A or better or classified as a Global Systemically Important Counterparty (GSIC).
The tables below show the relative concentrations of the Group’s treasury investment portfolio, all of which are
denominated in sterling:
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Concentration by credit grading | ||||
AAA | 373.2 | 296.3 | 564.3 | 296.3 |
AA+ to AA- | 253.9 | 565.7 | 253.9 | 565.7 |
A+ to A- | 88.8 | 67.0 | 58.3 | 65.4 |
Other | 0.3 | 0.5 | 0.3 | 0.5 |
716.2 | 929.5 | 876.8 | 927.9 | |
Concentration by sector | ||||
Financial institutions | 88.8 | 92.6 | 58.3 | 91.0 |
Asset backed securities | 266.3 | 252.1 | 457.4 | 252.1 |
Supranational institutions | 107.3 | 44.8 | 107.3 | 44.8 |
Sovereign | 253.8 | 540.0 | 253.8 | 540.0 |
716.2 | 929.5 | 876.8 | 927.9 | |
Concentration by region | ||||
UK | 580.7 | 838.4 | 769.5 | 836.8 |
Europe (excluding UK) | - | 20.7 | - | 20.7 |
North America | 28.2 | - | - | - |
Australasia | - | 25.6 | - | 25.6 |
Supranational | 107.3 | 44.8 | 107.3 | 44.8 |
716.2 | 929.5 | 876.8 | 927.9 |
(e) Intercompany loans
An ECL provision of £234.9m (2023/24: £226.9m) is held against intercompany loans of £1,048.5m (2023/24:
£1,188.7m) to West Bromwich Commercial Limited and West Bromwich Mortgage Company where there is
currently a shortfall in net assets; these loans are classified as Stage 3. The balance of £98.3m (2023/24: £108.4m)
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Glossary
147
Market risk is the potential adverse change in Group income, or the Group economic value, arising from
movements in interest rates, exchange rates, equity prices or other market prices.
The Board recognises that
the effective management of market risk is essential to the maintenance of stable earnings and the preservation
of member value.
The Group’s exposure to market risk is governed by the Board approved Treasury and Financial Risk
Management Policy, which sets out the nature of risks that may be taken and defines aggregate risk limits.
Within this Policy, the Board has delegated responsibility for the management and control of market risk to the
Assets & Liabilities Committee (ALCo). At each meeting, ALCo reviews reports which show the Group’s current
and forecast exposure to market risks together with the results of extensive stress testing.
The Society’s Assets and Liabilities Management function is responsible for operational management of the
Group’s exposure to market risk. It achieves this by taking advantage of natural hedges arising within the
Group’s businesses and, for the purpose of reducing risk, transacting appropriate hedging instruments where no
natural hedges exist.
The Group’s use of derivative financial instruments to manage interest rate risk is explained in
note 12 to the accounts.
Interest rate risk
The Group’s exposure to interest rate risk is reported against target operating ranges set by ALCo, which
themselves fall within Board Policy limits. The effect upon the Group’s current and forecast net market value
of assets and liabilities is determined for parallel yield curve shifts in the range +2.5% to -2.5%, and for a
variety of stressed non-parallel yield curve shifts. The impact upon net interest income is also assessed for rate
movements using parallel shifts in the range +2.5% to -2.5%.
Analysis is also presented to show the mismatches between assets and liabilities whose rates move in line
with different variable rate benchmarks such as Bank Rate, SONIA and rates administered by the Group. Such
mismatches generate additional interest rate risks (basis risk) to those assessed by parallel shift analysis. The
Board has a defined risk appetite for basis mismatch.
To ensure that the overall reported interest rate risk position does not mask excessive offsetting concentrations
in different periods, reprice gap concentration limits are in place to limit the maximum mismatch between
assets and liabilities repricing in future time periods. In conducting this analysis, general reserves, CCDS and
PIBS are allocated over a range of time buckets against treasury and other assets in accordance with targets set
by ALCo. The resulting ‘reverse cumulative gap report’ allows the income and market value sensitivity of a one
basis point movement in interest rates upon the whole balance sheet to be calculated.
The levels of Group pre-tax interest rate risk exposures to applicable parallel shifts through the reporting period
were as follows:
At | Average | High | Low | |
31 March 2025 | 2025 | 2025 | 2025 | |
£m | £m | £m | £m | |
Market value | (2.4) | (2.8) | (4.4) | (1.7) |
Net interest income | (3.8) | (4.1) | (5.0) | (2.6) |
At | Average | High | Low | |
31 March 2024 | 2024 | 2024 | 2024 | |
£m | £m | £m | £m | |
Market value | (3.6) | (4.6) | (8.2) | (1.8) |
Net interest income | (4.8) | (3.8) | (5.6) | (1.6) |
The Group’s gap and basis mismatch positions are reported quarterly to the Prudential Regulation Authority
(PRA). The Society also employs Economic Value of Equity measures in line with PRA requirements. The
Society’s internal limits framework ensures that Interest Rate Risk in the Banking Book is controlled at much
lower exposures than would trigger a notification to the PRA under the established reporting triggers.
Further detail on the Society’s management of interest rate risk is provided in the risk management report on
Strategic report
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Financial statements
Glossary
148
The contractual maturity of the mortgages is typically up to 30 years although loans are often repaid early due
to borrowers moving house or remortgaging. In contrast, the majority of members’ savings are available on
demand or at short notice. It is this inherent mismatch between the maturity profile of mortgage lending and
the easy accessibility of savings that creates liquidity risk.
The Group’s exposure to liquidity risk is governed by the Liquidity and Funding Policy sections of the Board
approved Treasury and Financial Risk Management Policy, taken together with its Internal Liquidity Adequacy
Assessment Process (ILAAP).
The Liquidity and Funding limits are designed to ensure that adequate liquid assets are held to cover statutory,
regulatory and operational cash requirements in both business-as-usual and stressed environments.
The Group’s liquidity risk is managed as follows:
•
The Board has delegated authority for the management of liquidity risk to the Assets & Liabilities Committee
(ALCo) within risk tolerances set out in the Treasury and Financial Risk Management Policy. ALCo meets
monthly;
•
Operational management of liquidity risk is further delegated to the Liquidity Management Group (LMG).
LMG meets regularly (typically 2-3 times monthly) to agree, based upon detailed customer behavioural
analysis, the amount of funding required to maintain the adequacy of Group liquidity over horizons of up to
three months. LMG plans cash requirements at a higher level over an extended rolling 12 month plan period;
•
LMG also considers a series of daily, weekly and monthly stress tests which are designed to ensure that
the Group maintains sufficient liquidity to meet its cash flow needs under a number of adverse scenarios.
These scenarios simulate both Group specific, general market and combined events including severe savings
outflows and the unavailability of wholesale funding; and
•
Under the Prudential Regulation Authority’s liquidity regime, the Group holds sufficient high quality liquid
assets, such as government securities, supranational bonds, covered bonds and cash deposited with the
Bank of England, to ensure that it can meet its liabilities over a 30 day period under stressed conditions. This
is known as its Liquidity Coverage Ratio (LCR). The Group holds high quality liquidity above that required by
the LCR in accordance with its own day-to-day assessment of liquidity adequacy. This includes stress testing
over a number of horizons, including survival days’ assessment out to 90 days.
The Overall Liquidity Adequacy Rule (OLAR) states that a regulated firm must at all times maintain liquidity
resources which are adequate, both as to amount and quality, to ensure that there is no significant risk that its
liabilities cannot be met as they fall due. There are three measures that the Group considers key to meeting the
OLAR:
•
Liquidity ratios - the amount of liquidity necessary to meet its LCR and to maintain overall liquidity adequacy
as determined by the Society’s ILAAP is assessed daily;
•
Liquidity stress tests - adequacy of Group liquidity under a number of different stress scenarios is modelled
and maintained within the Board’s liquidity risk tolerance; and
•
Refinancing gaps - the level of wholesale and combined retail/wholesale funding permitted to mature over
given time periods is subject to Board approved limits.
Further details of liquidity management are contained within the risk management report on pages 31 to 40.
The table below analyses the Group’s assets and liabilities across maturity periods that reflect the residual
maturity from the year end date to the contractual maturity date, this being the first call option date for
residential mortgage backed securities held within investment securities and for debt securities in issue.
The Group’s liquidity management processes consider the expected repayment profiles of financial assets
and liabilities which can be significantly different to those shown in the analysis.
At 31 March 2025
Repayable | No | ||||||
on | Less than | 3 to 12 | 1 to 5 | Over | specific | ||
demand | 3 months | months | years | 5 years | maturity | Total | |
Group | £m | £m | £m | £m | £m | £m | £m |
Financial assets | |||||||
Cash and balances with | |||||||
| the Bank of England | 159.8 | - | - | - | - | - | 159.8 |
Loans and advances to | |||||||
| credit institutions | 37.2 | 51.6 | - | - | - | - | 88.8 |
Investment securities | - | 54.1 | 97.6 | 186.6 | 129.3 | - | 467.6 |
Derivative financial | |||||||
| instruments | - | - | 3.0 | 38.7 | 3.2 | - | 44.9 |
Loans and advances to | |||||||
| customers | - | 164.4 | 35.4 | 359.1 | 4,959.4 | (120.2) | 5,398.1 |
Total financial assets | 197.0 | 270.1 | 136.0 | 584.4 | 5,091.9 | (120.2) | 6,159.2 |
Financial liabilities | |||||||
Shares | 2,798.6 | 702.8 | 747.0 | 822.6 | 0.6 | - | 5,071.6 |
Amounts due to credit | |||||||
| institutions | - | 84.4 | 374.7 | - | - | - | 459.1 |
Amounts due to other | |||||||
| customers | 4.6 | 18.2 | 5.0 | 1.3 | - | - | 29.1 |
Derivative financial | |||||||
| instruments | - | - | 1.4 | 15.4 | - | - | 16.8 |
Debt securities in issue | - | - | - | 289.8 | - | - | 289.8 |
Subordinated liabilities | - | - | - | - | 2.1 | - | 2.1 |
Total financial liabilities | 2,803.2 | 805.4 | 1,128.1 | 1,129.1 | 2.7 | - | 5,868.5 |
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149
At 31 March 2024
Repayable | No | ||||||
on | Less than | 3 to 12 | 1 to 5 | Over | specific | ||
demand | 3 months | months | years | 5 years | maturity | Total | |
Group | £m | £m | £m | £m | £m | £m | £m |
Financial assets | |||||||
Cash and balances with | |||||||
the Bank of England | 491.6 | - | - | - | - | - | 491.6 |
Loans and advances to | |||||||
credit institutions | 7.5 | 38.8 | - | - | - | - | 46.3 |
Investment securities | - | 102.5 | 76.0 | 121.3 | 91.7 | - | 391.5 |
Derivative financial | |||||||
instruments | - | 0.8 | 2.0 | 55.4 | 3.6 | - | 61.8 |
Loans and advances to | |||||||
customers | - | 170.4 | 22.1 | 426.3 | 4,309.8 | (143.5) | 4,785.1 |
Total financial assets | 499.1 | 312.5 | 100.1 | 603.0 | 4,405.1 | (143.5) | 5,776.3 |
Financial liabilities | |||||||
Shares | 2,709.1 | 465.8 | 762.1 | 733.6 | - | - | 4,670.6 |
Amounts due to credit | |||||||
institutions | - | 125.1 | 247.7 | 415.4 | - | - | 788.2 |
Amounts due to other | |||||||
customers | 5.2 | 26.8 | 3.6 | 1.4 | - | - | 37.0 |
Derivative financial | |||||||
instruments | - | - | - | 12.6 | 0.2 | - | 12.8 |
Subordinated liabilities | - | - | - | - | 2.1 | - | 2.1 |
Total financial liabilities | 2,714.3 | 617.7 | 1,013.4 | 1,163.0 | 2.3 | - | 5,510.7 |
At 31 March 2025
Repayable | No | ||||||
on | Less than | 3 to 12 | 1 to 5 | Over | specific | ||
demand | 3 months | months | years | 5 years | maturity | Total | |
Society | £m | £m | £m | £m | £m | £m | £m |
Financial assets | |||||||
Cash and balances with | |||||||
the Bank of England | 159.8 | - | - | - | - | - | 159.8 |
Loans and advances to | |||||||
credit institutions | 7.1 | 51.3 | - | - | - | - | 58.4 |
Investment securities | - | 54.1 | 97.6 | 186.7 | 320.2 | - | 658.6 |
Derivative financial | |||||||
instruments | - | - | 3.0 | 30.0 | 3.2 | - | 36.2 |
Loans and advances to | |||||||
customers | - | 7.3 | 13.7 | 104.9 | 4,434.5 | (22.1) | 4,538.3 |
Investments: loans to | |||||||
subsidiary undertakings | - | - | - | - | - | 912.0 | 912.0 |
Total financial assets | 166.9 | 112.7 | 114.3 | 321.6 | 4,757.9 | 889.9 | 6,363.3 |
Financial liabilities | |||||||
Shares | 2,798.6 | 702.8 | 747.0 | 822.6 | 0.6 | - | 5,071.6 |
Amounts due to credit | |||||||
institutions | - | 85.6 | 374.6 | - | - | - | 460.2 |
Amounts due to other | |||||||
customers | 4.6 | 18.3 | 1.5 | 1.0 | 449.0 | - | 474.4 |
Derivative financial | |||||||
instruments | - | - | 1.4 | 15.4 | - | - | 16.8 |
Subordinated liabilities | - | - | - | - | 2.1 | - | 2.1 |
Total financial liabilities | 2,803.2 | 806.7 | 1,124.5 | 839.0 | 451.7 | - | 6,025.1 |
34. Liquidity risk
(continued)
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Governance
Financial statements
Glossary
150
34. Liquidity risk
(continued)
At 31 March 2024
Repayable | No | ||||||
on | Less than | 3 to 12 | 1 to 5 | Over | specific | ||
demand | 3 months | months | years | 5 years | maturity | Total | |
Society | £m | £m | £m | £m | £m | £m | £m |
Financial assets | |||||||
Cash and balances with | |||||||
the Bank of England | 491.6 | - | - | - | - | - | 491.6 |
Loans and advances to | |||||||
credit institutions | 5.9 | 38.8 | - | - | - | - | 44.7 |
Investment securities | - | 102.5 | 76.0 | 121.3 | 91.7 | - | 391.5 |
Derivative financial | |||||||
instruments | - | 0.8 | 2.0 | 55.3 | 3.6 | - | 61.7 |
Loans and advances to | |||||||
customers | - | 7.7 | 8.3 | 112.9 | 3,697.2 | (40.1) | 3,786.0 |
Investments: loans to | |||||||
subsidiary undertakings | - | - | - | - | - | 1,070.3 | 1,070.3 |
Total financial assets | 497.5 | 149.8 | 86.3 | 289.5 | 3,792.5 | 1,030.2 | 5,845.8 |
Financial liabilities | |||||||
Shares | 2,709.1 | 465.8 | 762.1 | 733.6 | - | - | 4,670.6 |
Amounts due to credit | |||||||
institutions | - | 125.1 | 247.7 | 415.4 | - | - | 788.2 |
Amounts due to other | |||||||
customers | 5.2 | 26.6 | - | (0.1) | - | - | 31.7 |
Derivative financial | |||||||
instruments | - | - | - | 12.6 | 0.2 | - | 12.8 |
Subordinated liabilities | - | - | - | - | 2.1 | - | 2.1 |
Total financial liabilities | 2,714.3 | 617.5 | 1,009.8 | 1,161.5 | 2.3 | - | 5,505.4 |
As part of liquidity stress testing and forecasting, a wide range of scenarios is considered including mild and
severe stresses, credit downgrades and a total closure of the wholesale market. An analysis of the liquidity
portfolio is set out in the table below:
2025 | 2025 | 2024 | 2024 | |
Group | £m | % | £m | % |
Cash in hand and balances with | ||||
| the Bank of England | 159.8 | 22.3 | 491.6 | 52.9 |
Cash with banks and building | ||||
| societies | 88.8 | 12.4 | 46.3 | 5.0 |
Gilts | 37.9 | 5.3 | 4.8 | 0.5 |
Treasury bills | 56.2 | 7.8 | 43.7 | 4.7 |
Certificates of deposit | - | - | 46.3 | 5.0 |
Fixed rate bonds | 61.6 | 8.6 | 14.9 | 1.6 |
Floating rate notes | 45.7 | 6.4 | 29.9 | 3.2 |
Covered bonds | 154.5 | 21.6 | 165.0 | 17.8 |
Residential mortgage backed | ||||
| securities | 111.7 | 15.6 | 86.9 | 9.3 |
Total | 716.2 | 100.0 | 929.4 | 100.0 |
The prior year table has been restated to include Gilts of £4.8m. This has been done to provide more detailed analysis
The following table is an analysis of the gross contractual cash flows payable/(receivable) under financial liabilities:
At 31 March 2025
Less than 3 | 3 to 12 | 1 to | Over | ||
months | months | 5 years | 5 years | Total | |
Group | £m | £m | £m | £m | £m |
Liabilities | |||||
Shares | 3,505.8 | 873.6 | 778.6 | 0.6 | 5,158.6 |
Amounts due to credit | |||||
institutions and other customers | 111.8 | 379.2 | - | - | 491.0 |
Derivative financial instruments | 0.4 | 4.2 | 12.6 | 0.1 | 17.3 |
Debt securities in issue | 3.8 | 9.6 | 326.1 | - | 339.5 |
Subordinated liabilities | 0.1 | 0.1 | 0.9 | 3.9 | 5.0 |
3,621.9 | 1,266.7 | 1,118.2 | 4.6 | 6,011.4 | |
Loan commitments | 250.2 | - | - | - | 250.2 |
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Governance
Financial statements
Glossary
151
34. Liquidity risk
(continued)
At 31 March 2024
Less than 3 | 3 to 12 | 1 to | Over | ||
months | months | 5 years | 5 years | Total | |
Group | £m | £m | £m | £m | £m |
Liabilities | |||||
Shares | 3,152.3 | 839.3 | 766.4 | 0.3 | 4,758.3 |
Amounts due to credit | |||||
institutions and other customers | 165.3 | 269.9 | 424.0 | - | 859.2 |
Derivative financial instruments | (0.2) | 0.5 | 13.8 | 0.5 | 14.6 |
Subordinated liabilities | 0.1 | 0.1 | 0.9 | 4.2 | 5.3 |
3,317.5 | 1,109.8 | 1,205.1 | 5.0 | 5,637.4 | |
Loan commitments | 347.0 | - | - | - | 347.0 |
At 31 March 2025
Less than 3 | 3 to 12 | 1 to | Over | ||
months | months | 5 years | 5 years | Total | |
Society | £m | £m | £m | £m | £m |
Liabilities | |||||
Shares | 3,505.8 | 873.6 | 778.6 | 0.6 | 5,158.6 |
Amounts due to credit | |||||
| institutions and other customers | 111.8 | 379.2 | - | - | 491.0 |
Derivative financial instruments | 0.4 | 4.2 | 12.6 | 0.1 | 17.3 |
Subordinated liabilities | 0.1 | 0.1 | 0.9 | 3.9 | 5.0 |
3,618.1 | 1,257.1 | 792.1 | 4.6 | 5,671.9 | |
Loan commitments | 250.0 | - | - | - | 250.0 |
At 31 March 2024
Less than 3 | 3 to 12 | 1 to | Over | ||
months | months | 5 years | 5 years | Total | |
Society | £m | £m | £m | £m | £m |
Liabilities | |||||
Shares | 3,152.3 | 839.3 | 766.4 | 0.3 | 4,758.3 |
Amounts due to credit | |||||
institutions and other customers | 165.3 | 269.9 | 424.0 | - | 859.2 |
Derivative financial instruments | (0.2) | 0.5 | 13.8 | 0.5 | 14.6 |
Subordinated liabilities | 0.1 | 0.1 | 0.9 | 4.2 | 5.3 |
3,317.5 | 1,109.8 | 1,205.1 | 5.0 | 5,637.4 | |
Loan commitments | 346.5 | - | - | - | 346.5 |
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The maturity analysis of lease liabilities is analysed in the table shown below:
Group | Group | Society | Society | |
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
a) Leasing commitments | ||||
Less than three months | 0.1 | 0.1 | 0.1 | 0.1 |
Greater than three months | ||||
| and less than one year | 0.3 | 0.3 | 0.3 | 0.3 |
Between one and five years | 0.6 | 1.2 | 0.6 | 1.2 |
After five years | 0.1 | 0.2 | 0.1 | 0.2 |
1.1 | 1.8 | 1.1 | 1.8 |
The Society earns rental income on subletting parts of three (2023/24: three) of its freehold branches to
residential and commercial tenants.
The income received from this is negligible and is regarded as rental income.
b) Loan commitments | ||||
Undrawn loan facilities | 250.2 | 347.0 | 250.0 | 346.5 |
c) Capital commitments | ||||
Capital expenditure | ||||
contracted but not yet | 1.5 | - | 1.5 | - |
provided for in the accounts |
i) Subsidiary, parent and ultimate controlling party
The Group is controlled by West Bromwich Building Society
undertaking. The subsidiaries of the Society are detailed in note 15. The Group’s registered office and principal
place of business is 2 Providence Place, West Bromwich , B70 8AF.
The Board considers key management personnel to comprise Executive and Non-Executive Directors. Details
of Directors’ emoluments are disclosed in note 8 and the Remuneration Committee report on pages 68 to 76.
iii) Transactions with key management personnel and their close family members
The table below shows outstanding balances and transactions with key management personnel, which comprises
Group Directors as at 31 March, and their close family members:
Amount in | Amount in | |||
respect of key | respect of key | |||
management | management | |||
No. of key | personnel and | No. of key | personnel and | |
management | their close family | management | their close family | |
personnel | members | personnel | members | |
2025 | 2025 | 2024 | 2024 | |
Group and Society | £000 | £000 | ||
Savings balances at 31 | ||||
March | 13 | 162 | 12 | 149 |
Interest payable on savings | ||||
balances | 13 | 5 | 12 | 4 |
Mortgage loans and savings are available to key management personnel and members of their close family at
normal commercial terms. At 31 March 2025 , there were mortgage loans outstanding to Directors and their
connected persons of £0.2m (31 March 2024: £0.2m).
A register is maintained by the Society containing details of loans, transactions and arrangements made
between the Society or its subsidiary undertakings and Directors of the Society or persons connected with
Directors of the Society. The register will be available for inspection by members at the Annual General Meeting
and during normal office hours at the Society’s Principal Office (2 Providence Place, West Bromwich) during the
iv) Contributions to pension schemes
During the year the Group paid contributions of £nil (2023/24: £2.3m) to defined benefit pension schemes,
which are classified as related parties.
As part of the ongoing funding agreement for the West Bromwich Building Society Staff Retirement Scheme
(the SRS), the Trustees of the SRS have been granted a charge over the Society’s Head Office, which may
be exercised only in the event of the Society defaulting on its pension obligations and in such circumstances
assigns the rights of ownership of the building to the SRS.
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v) Transactions with subsidiary companies
Interest paid | Interest paid | |
to Society | to Society | |
2025 | 2024 | |
£m | £m | |
Insignia Finance Limited | 0.1 | 0.1 |
West Bromwich Commercial Limited | 15.0 | 13.3 |
West Bromwich Homes Limited | 2.4 | 2.7 |
West Bromwich Mortgage Company Limited | 27.2 | 28.0 |
44.7 | 44.1 |
At the year end the following balances were outstanding with subsidiary companies:
Loans owed (to)/ | Loans owed by | |
by subsidiaries | subsidiaries | |
2025 | 2024 | |
£m | £m | |
Insignia Finance Limited | (0.1) | 0.8 |
West Bromwich Commercial Limited | 292.9 | 325.0 |
West Bromwich Homes Limited | 98.4 | 107.6 |
West Bromwich Mortgage Company Limited | 520.7 | 636.8 |
911.9 | 1,070.2 |
Transactions and balances between Group companies are on normal commercial terms and conditions.
The loans owed by West Bromwich Commercial Limited are net of impairment provisions of £222.7m (2023/24:
£213.9m) and the loans owed by West Bromwich Mortgage Company Limited are net of impairment provisions
Operating segments are reported in accordance with the internal reporting provided to the Group Board, which
is responsible for allocating resources to the reportable segments and assessing their performance.
The Group has three main business segments:
•
Retail - incorporating residential lending, savings, investments and protection;
•
Commercial real estate - primarily representing loans for commercial property investment; and
•
Property - a portfolio of residential properties for rent.
Central Group operations have been included in Retail and comprise risk management, finance, treasury
services, human resources and computer services, none of which constitute a separately reportable segment.
Transactions between the business segments are carried out at arm’s length. The revenue from external
parties reported to the Group Board is measured in a manner consistent with that in the consolidated Income
Statement.
Funds are ordinarily allocated between segments, resulting in funding cost transfers disclosed in inter-segment
net interest income. Interest charged for these funds is based on the Group’s cost of capital. Central administrative
costs are also allocated between segments and are disclosed in inter-segment administrative expenses. There are
no other material items of income or expense between the business segments.
The Group does not consider its operations to be cyclical or seasonal in nature.
36. Related party transactions
(continued)
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37. Business segments
(continued)
Income Statements for the year ended 31 March 2025
Commercial | Consolidation | Total | |||
Retail | real estate | Property | adjustments | Group | |
£m | £m | £m | £m | £m | |
Interest receivable and similar income | |||||
Calculated using the effective | |||||
| interest method | 290.2 | 8.0 | - | (18.3) | 279.9 |
On instruments measured at fair | |||||
| value through profit or loss | 36.5 | - | - | - | 36.5 |
Total interest receivable and similar | |||||
| income | 326.7 | 8.0 | - | (18.3) | 316.4 |
Interest expense and similar charges | (228.0) | (8.1) | (2.4) | 18.3 | (220.2) |
Net interest receivable/(expense) | 98.7 | (0.1) | (2.4) | - | 96.2 |
Fees and commissions receivable | 0.7 | - | - | - | 0.7 |
Other operating income | 0.3 | - | 3.9 | - | 4.2 |
Fair value gain/(loss) on financial | |||||
| instruments | 5.9 | (1.5) | - | - | 4.4 |
Total income | 105.6 | (1.6) | 1.5 | - | 105.5 |
Administrative expenses | (56.4) | (0.7) | (0.5) | - | (57.6) |
Depreciation and amortisation | (7.0) | - | - | - | (7.0) |
Operating profit/(loss) before | |||||
revaluation gains, impairment and | 42.2 | (2.3) | 1.0 | - | 40.9 |
provisions | |||||
Gains on investment properties | - | - | 2.4 | - | 2.4 |
Impairment on loans and advances | 0.5 | (7.4) | - | - | (6.9) |
Provisions for liabilities | 0.1 | - | - | - | 0.1 |
Profit/(Loss) before tax | 42.8 | (9.7) | 3.4 | - | 36.5 |
Statements of Financial Position at 31 March 2025
Commercial | Consolidation | Total | |||
Retail | real estate | Property | adjustments | Group | |
£m | £m | £m | £m | £m | |
Total assets | 6,456.9 | 132.5 | 146.8 | (374.4) | 6,361.8 |
Total liabilities | 6,043.5 | 357.7 | 109.6 | (610.2) | 5,900.6 |
Capital expenditure | 12.5 | - | - | - | 12.5 |
Income Statements for the year ended 31 March 2024
Commercial | Consolidation | Total | |||
Retail | real estate | Property | adjustments | Group | |
£m | £m | £m | £m | £m | |
Interest receivable and similar income | |||||
Calculated using the effective | |||||
interest method | 238.1 | 8.3 | - | (17.0) | 229.4 |
On instruments measured at fair | |||||
value through profit or loss | 57.5 | 0.1 | - | - | 57.6 |
Total interest receivable and similar | |||||
income | 295.6 | 8.4 | - | (17.0) | 287.0 |
Interest expense and similar charges | (183.3) | (14.4) | (2.7) | 17.0 | (183.4) |
Net interest receivable/ (expense) | 112.3 | (6.0) | (2.7) | - | 103.6 |
Fees and commissions receivable | 1.1 | - | - | - | 1.1 |
Other operating income | 0.5 | - | 4.1 | - | 4.6 |
Fair value (loss)/gain on financial | |||||
instruments | (2.3) | 1.9 | - | - | (0.4) |
Total income | 111.6 | (4.1) | 1.4 | - | 108.9 |
Administrative expenses | (52.9) | (0.9) | (0.2) | - | (54.0) |
Depreciation and amortisation | (5.5) | - | - | - | (5.5) |
Operating profit/(loss) before | |||||
revaluation gains, impairment and | 53.2 | (5.0) | 1.2 | - | 49.4 |
provisions and cost of debt buyback | |||||
Gains on investment properties | - | - | 2.5 | - | 2.5 |
Impairment on loans and advances | (0.5) | (14.2) | - | - | (14.7) |
Cost on debt buyback | (5.1) | - | - | - | (5.1) |
Profit/(Loss) before tax | 47.6 | (19.2) | 3.7 | - | 32.1 |
Statements of Financial Position at 31 March 2024
Commercial | Consolidation | Total | |||
Retail | real estate | Property | adjustments | Group | |
£m | £m | £m | £m | £m | |
Total assets | 6,100.3 | 148.9 | 152.1 | (411.6) | 5,989.7 |
Total liabilities | 5,694.6 | 370.7 | 118.4 | (638.7) | 5,545.0 |
Capital expenditure | 8.7 | - | - | - | 8.7 |
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Certain financial assets have been utilised as collateral to support the wholesale funding initiatives of the Group. As
the Group has retained substantially all of the risks and rewards of ownership, the assets remain on the Statement
of Financial Position but are encumbered and cannot be utilised for other purposes.
As described in note 13, the Group has established securitisation structures funded by the issue of mortgage
backed securities (MBSs). Retained MBSs and designated mortgage loan pools may be pledged as collateral for
participation in Bank of England funding schemes.
For liquidity management purposes, the Society also enters into sale and repurchase agreements whereby it sells
investment securities to third parties with a commitment to repurchase them at a future date. The proceeds of the
sale and repurchase agreements are included within amounts due to credit institutions.
An analysis of Group assets pledged at 31 March is set out below.
Encumbered | Unencumbered | Encumbered | Unencumbered | |
2025 | 2025 | 2024 | 2024 | |
£m | £m | £m | £m | |
Cash and balances at the Bank | ||||
| of England | - | 159.8 | - | 491.6 |
Loans and advances to credit | ||||
| institutions | 70.2 | 18.6 | 38.8 | 7.5 |
Investment securities | - | 467.6 | 104.7 | 286.8 |
Derivative financial instruments | - | 44.9 | - | 61.8 |
Loans and advances to | ||||
| customers | 866.2 | 4,531.9 | 823.5 | 3,961.6 |
Other assets | - | 202.6 | - | 213.4 |
936.4 | 5,425.4 | 967.0 | 5,022.7 |
Included in the above, at 31 March 2025, Group loans and advances to credit institutions included £51.4m
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2025
2024
Average number of Group employees, all of which employed in the UK
739
701
Arising in the UK:
£m
£m
Group total income
105.5
108.9
Group profit before tax
36.5
32.1
Group corporation tax payments
2.9
-
Capital Requirements (Country-by-Country) reporting
The Capital Requirements (Country-by-Country Reporting) Regulations 2013 aim to give increased transparency regarding the activities of institutions.
West Bromwich Building Society (the Society) is the 8th largest building society in the United Kingdom (UK). As a mutual organisation, the Society is owned and run for
the benefit of its members with the safety of members’ funds being paramount. In providing a safe haven for members’ funds, the Society can fulfil its primary purpose of
enabling home ownership through the provision of mortgages.
These consolidated financial statements of the West Bromwich Building Society Group (the Group) include the audited results of the Society, its subsidiary undertakings
and a number of securitisation entities. The consolidated entities, their principal activities and countries of incorporation are detailed in note 15. All of the consolidated
entities are incorporated in the UK.
Basis of preparation
• The number of employees has been calculated as the average number of full and part-time employees, on a monthly basis, as disclosed in note 7.
• Turnover represents Group total income as disclosed in the Group Income Statement. Total income comprises net interest, fees and commissions receivable and other
operating income, together with fair value gain/(loss) on financial instruments.
• Pre-tax profit or loss represents the Group profit or loss before tax, as reported in the Group Income Statement.
• Corporation tax receipts/payments represent the amount of tax received/paid during the year, as disclosed in the Group Cash Flow Statement.
• Public subsidies received represent direct support by the government and exclude any central bank operations that are designed for financial stability purposes or
operations that aim to facilitate the functioning of the monetary policy transmission mechanism.
Country-by-Country Reporting
for the year ended 31 March 2025
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Report on the audit of the country-by-country information
Opinion
In our opinion, West Bromwich Building Society’s country-by-country information
for the year ended 31 March 2025 has been properly prepared, in all material
respects, in accordance with the requirements of the Capital Requirements
(Country-by-Country Reporting) Regulations 2013.
We have audited the country-by-country information for the year ended 31 March
2025 in the Country-by-Country Report.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (“ISAs (UK)”), including ISA (UK) 800 and ISA (UK) 805, and applicable
law. Our responsibilities under ISAs (UK) are further described in the Auditors’
responsibilities for the audit of the country-by-country information section of
our report. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We remained independent of the Society in accordance with the ethical
requirements that are relevant to our audit of the country-by-country information
in the UK, which includes the FRC’s Ethical Standard, as applicable to public
interest entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Emphasis of matter - Basis of preparation
In forming our opinion on the country-by-country information, which is not
modified, we draw attention to the basis of preparation note of the country-by-
country information which describes the basis of preparation. The country-by-
country information is prepared for the directors for the purpose of complying with
the requirements of the Capital Requirements (Country-by-Country Reporting)
Regulations 2013. The country-by-country information has therefore been
prepared in accordance with a special purpose framework and, as a result, the
country-by-country information may not be suitable for another purpose.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Society’s ability to continue to
adopt the going concern basis of accounting included:
• Understanding and evaluating the Group and Society’s financial forecasts;
• Evaluation and challenge of key assumptions used by the directors in their
determination of the going concern of the Group and Society;
• Review of key regulatory returns in relation to liquidity and capital and
consideration of the stress testing performed;
• Consideration as to whether our audit work had identified events or conditions
which may give rise to uncertainty as to the Group’s future ability to trade;
• Review of legal and regulatory correspondence to ensure that any compliance
issues which may impact the going concern of the Group is identified; and
• Evaluating the adequacy and appropriateness of the going concern disclosures
made in the financial statements.
Independent auditors’ report to the directors of
West Bromwich Building Society
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Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or collectively, may
cast significant doubt on the Society’s ability to continue as a going concern for a
period of at least twelve months from the date on which the country-by-country
information is authorised for issue.
In auditing the country-by-country information, we have concluded that the
directors’ use of the going concern basis of accounting in the preparation of the
country-by-country information is appropriate.
However, because not all future events or conditions can be predicted, this
conclusion is not a guarantee as to the Society’s ability to continue as a going
concern.
Our responsibilities and the responsibilities of the directors with respect to going
concern are described in the relevant sections of this report.
Responsibilities for the country-by-country information and the audit
Responsibilities of the directors for the country-by-country information
The directors are responsible for the preparation of the country-by-country
information in accordance with the requirements of the Capital Requirements
(Country-by-Country Reporting) Regulations 2013 as explained in the basis of
preparation statement to the country-by-country information, and for determining
that the basis of preparation and accounting policies are acceptable in the
circumstances. The directors are also responsible for such internal control as
they determine is necessary to enable the preparation of country-by-country
information that is free from material misstatement, whether due to fraud or error.
In preparing the country-by-country information, the directors are responsible
for assessing the Society’s ability to continue as a going concern, disclosing as
applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Society or to cease
operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the country-by-country information
It is our responsibility to report on whether the country-by-country information
has been properly prepared in accordance with the relevant requirements of the
Capital Requirements (Country-by-Country Reporting) Regulations 2013.
Our objectives are to obtain reasonable assurance about whether the country-
by-country information as a whole is free from material misstatement, whether
due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of this
country-by-country information.
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined above,
to detect material misstatements in respect of irregularities, including fraud. The
extent to which our procedures are capable of detecting irregularities, including
fraud, is detailed below.
Based on our understanding of the Society/industry, we identified that the
principal risks of non-compliance with laws and regulations related to breaches of
banking regulations including, but not limited to, the Financial Conduct Authority’s
regulations, the Prudential Regulation Authority’s regulations and UK tax legislation,
and we considered the extent to which non-compliance might have a material
effect on the country-by-country information. We also considered those laws
and regulations that have a direct impact on the country-by-country information
such as applicable tax legislation and the Capital Requirements (Country-by-
Country Reporting) Regulations 2013. We evaluated management’s incentives and
opportunities for fraudulent manipulation of the country-by-country information
(including the risk of override of controls), and determined that the principal risks
were related to posting inappropriate journal entries to reduce expenditure and
increase income and inappropriate management bias in accounting estimates.
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Audit procedures performed included:
• Review of the financial statement disclosures to underlying supporting
documentation;
• Review of correspondence with and reports to the regulators;
• Testing significant accounting estimates;
• Testing of journal entries which contained unusual account combinations back to
corroborating evidence;
• Discussions with management and those charged with governance in relation to
known or suspected instances of non-compliance with laws and regulation and
fraud; and
• Specific audit procedures over non-interest revenue streams significant to the
Group accounts.
There are inherent limitations in the audit procedures described above. We are less
likely to become aware of instances of non-compliance with laws and regulations
that are not closely related to events and transactions reflected in the country-
by-country information. Also, the risk of not detecting a material misstatement
due to fraud is higher than the risk of not detecting one resulting from error, as
fraud may involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
A further description of our responsibilities for the audit of the country-
by-country information is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinion, has been prepared for and only for the Society’s
directors in accordance with the Capital Requirements (Country-by-Country
Reporting) Regulations 2013 and for no other purpose. We do not, in giving this
opinion, accept or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come, save where
expressly agreed by our prior consent in writing.
The engagement partner responsible for this audit is Daniel Brydon.
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
28 May 2025
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1. Statutory percentages
Statutory | ||
2025 | limit | |
% | % | |
Proportion of business assets not in the form of loans secured on | ||
residential property | 5.0 | 25.0 |
Proportion of shares and borrowings not in the form of shares held by | ||
individuals | 8.8 | 50.0 |
The above percentages have been calculated in accordance with the provisions of the Building Societies Act
1986.
Business assets are the total assets of the Group plus allowance for losses on loans and advances less liquid
assets, investment properties, intangible assets and property, plant and equipment as shown in the Group
Statement of Financial Position.
Securitised assets and related liabilities are excluded from the lending limit and funding limit calculations in line
with the Building Societies Act 1986 (Modification of the Lending Limit and Funding Limit Calculations) Order
2004.
The statutory limits are as laid down under the Building Societies Act 1986 and ensure that the principal
purpose of a building society is that of making loans which are secured on residential property and are funded
substantially by its members.
The above percentages have been prepared from the Group’s accounts and in particular:
•
‘Shares and borrowings’ represent the total of shares, amounts due to credit institutions, amounts due to
other customers and debt securities in issue, in each case including accrued interest.
•
‘Gross capital’ represents the aggregate of general reserves, revaluation reserve, fair value reserve, core
capital deferred shares, subscribed capital and subordinated liabilities.
•
‘Free capital’ represents gross capital less intangible assets, investment properties and property, plant and
equipment.
•
‘Mean total assets’ represent the amount produced by halving the aggregate of total assets at the beginning
and end of the financial year.
•
‘Liquid assets’ represent the total of cash and balances with the Bank of England, loans and advances to
credit institutions and investment securities.
•
‘Management expenses’ represent the aggregate of administrative expenses, depreciation and amortisation.
2. Other percentages
2025 | 2024 | |
% | % | |
As a percentage of shares and borrowings: | ||
Gross capital | 7.92 | 8.13 |
Free capital | 4.77 | 4.77 |
Liquid assets | 12.24 | 16.91 |
As a percentage of mean total assets: | ||
Profit for the financial year | 0.48 | 0.42 |
Management expenses | 1.05 | 1.02 |
Annual Business Statement
for the year ended 31 March 2025
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Name, qualification and age | Role | Date of appointment | Other directorships and interests | |
Sara Bennison | Non-Executive Director | 1 August 2023 | Dual Corporate Risks Ltd | Northbailey Ltd |
MA (Oxon) | Lawn Tennis Association | Brandface Ltd | ||
Age 57 | Openwork Holdings Ltd | Equifax Ltd | ||
Openwork Ltd | TDX Group Ltd | |||
Sara Bennison Ltd | ||||
Martin Boyle | Chief Operating Officer | 3 April 2023 | Insignia Finance Ltd | |
BSc, M.Phil (Cantab.) | West Bromwich Mortgage Company Ltd | |||
Age 54 | White Label Lending Ltd | |||
Russell Galley | Non-Executive Director | 1 May 2024 | Yorkshire Housing Ltd | |
Age 62 | ||||
Manjit Hayre | Chief Risk Officer | 1 September 2021 | ||
Age 57 | ||||
Julie Hopes | Deputy Chair | 1 April 2016 | SAGA Services Ltd | |
MBA, ACIB | SAGA Plc | |||
Age 57 | Kingston Gorse Estate (Sussex) Ltd | |||
Secure Trust Bank Plc | ||||
John Maltby | Chair | 1 January 2021 | Allica Bank Ltd | |
MBE | Max Nicholas Renewables Ltd | |||
Age 63 | Nordea Bank ABP (FC035482) | |||
Nimisha Patel | Non-Executive Director | 1 June 2024 | ||
BSc | ||||
Age 46 | ||||
Alex Pawley | Chief Financial Officer | 1 January 2023 | Insignia Finance Ltd | West Bromwich Homes Ltd |
BSc, FCA | White Label Lending Ltd | |||
Age 42 | West Bromwich Mortgage Company Ltd | |||
Lynne Shamwana | Non-Executive Director | 1 February 2019 | Southbank Centre Enterprises Ltd | Overs Farm Residents Company Ltd |
BA, FCA | Southbank Centre Ltd | Antin Infrastructure Partners AS | ||
Age 62 | 61 Queens Gardens (Freehold) Ltd | |||
David Thomas | Non-Executive Director | 1 August 2020 | Harrogate Homeless Project Ltd | |
MSc, ACIB, FIB (Ireland) | TD Bank Europe Ltd | |||
Age 63 | ||||
Jonathan Westhoff | Chief Executive | 5 May 2009 | West Bromwich Commercial Ltd | West Bromwich Building Society Foundation |
BA (Hons) Financial Services, | West Bromwich Homes Ltd | Livv Maintenance Ltd | ||
FCMA, CGMA, ACIB | West Bromwich Mortgage Company Ltd | Livv Homes Ltd | ||
Age 60 | Insignia Finance Ltd | |||
White Label Lending Ltd |
Information relating to Directors’ and Officers’ other directorships and interests at 31 March 2025
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All Directors are members of the Society. None of the Directors have at any time in
the year, or at the year end, any beneficial interest in shares or debentures of any
associated body of the Society.
Service contracts
Our policy in relation to the duration of contracts for the Executive Directors is that
their contract would normally continue until termination by either party, subject to
the required notice or until retirement. The service contract is terminable with 12
months’ notice if given by us or six months’ notice if given by the Director. Jonathan
Westhoff entered into his contract as Chief Executive on 25 May 2011, Alex Pawley
entered into his service contract as Chief Financial Officer on 1 January 2023,
Manjit Hayre entered into his service contract as Chief Risk Officer on 1 September
2021 and Martin Boyle entered into his service contract as Chief Operating Officer
on 3 April 2023, on this basis. For further details of the Executive Directors’ service
contracts, see the Remuneration Committee report on pages 68 to 76. Documents
may be served on any of the above-named Directors at the following address:
Addleshaw Goddard, 3 Sovereign Square, Sovereign Street, Leeds, LS1 4ER.
Senior management | Role | Group directorships |
Alex Windle | Chief Customer Officer | |
BA (Oxon), MSt. (Oxon) | ||
John McErlean | Chief Internal Auditor | |
MIIA, FIIA | ||
Sophie Pazzaglia | Chief People Officer | West Bromwich Building |
BSc (Hons), FCCA, ACG | and Group Secretary | Society Foundation |
Secretary White Label | ||
Lending Ltd |
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Glossary
Set out below are the definitions
of the terms used within the
Annual Report and Accounts to
assist the reader and to facilitate
comparison with other financial
institutions:
Arrears
Money due from a customer that has fallen behind, or not met,
their mortgage payments.
Asset backed securities (ABS)
Debt securities made by pooling assets such as mortgages
or loans and turning them into financial instruments where
investors receive payments from the money generated by
these assets.
Basel III
An international framework for capital and liquidity adequacy,
designed to strengthen the global financial system.
Capital
Capital, most of which comes from profits we have made
in the past, provides a safety net to absorb losses that
the Society could make in the future, as well as allowing
us to grow and invest in the Society for the benefit of our
customers.
Capital ratios
A capital ratio is a measure of financial strength that
compares capital to risk-weighted assets or, in the case of the
leverage ratio, to the leverage ratio exposure.
Capital Requirements Regulation (CRR)
Rules, setting out capital and liquidity requirements, which
regulators use to supervise us.
Closed commercial loan book
Up to 2008 we provided mortgages on commercial
properties. Our 'closed commercial loan book' is made up of
the mortgages that are still open today.
Commercial lending
Mortgages extended to businesses to purchase commercial
properties.
Common Equity Tier 1 (CET 1) capital
Common Equity Tier 1 (CET 1) capital is the highest quality
regulatory capital as it will fully absorb losses. Most of our CET
1 comes from retained profits the Society has made in the
past.
Common Equity Tier 1 ratio
Common Equity Tier 1 (CET 1) ratio is the CET 1 capital shown
as a percentage of risk-weighted assets, showing the financial
strength of the Society.
Contractual maturity
The date when a loan, bond, mortgage or financial agreement
must be fully paid off.
Core Capital Deferred Shares (CCDS)
A form of Common Equity Tier 1 (CET 1) capital issued by
building societies.
Debt securities in issue
Debt securities in issue are certificates/notes representing
loans from external investors to the Society.
D
eferred tax assets
Deferred tax assets can be used to reduce our tax charges
in future years. They come from timing differences between
accounting and tax rules. Certain deferred tax assets do not
count towards regulatory capital so must be subtracted when
calculating regulatory capital resources.
Derivative financial instruments
A derivative financial instrument is a contract whose value
depends on an underlying asset or index. Interest rate swaps
are a type of derivative financial instrument used by the
Society to manage market risk. They involve the swapping of
one stream of future interest payments for another.
Effective interest method
The method used to measure the carrying value of a financial
asset or a liability and to allocate the respective interest
income or expense. The calculation includes all amounts paid
or received that are integral to the contract.
Encumbered assets
Assets held on the Statement of Financial Position which have
been used as security for funding or otherwise pledged.
Environmental, Social and Governance (ESG)
Standards that measure a company's impact on the world.
Environmental looks at sustainability, Social focuses on people
and communities, and Governance checks how a company is
run. It's about doing good while doing business.
Equity, Inclusion, Diversity (E,I,D)
A framework which ensures fair treatment and opportunity
for all. It aims to eradicate prejudice and discrimination on
the basis of an individual's or group of individuals' protected
characteristics.
Expected credit loss (ECL)
The amount of money a lender can expect to lose if a
borrower defaults on a loan. The calculation accounts for
potential future losses under different scenarios.
Exposure at default (EAD)
An estimate of the outstanding balance on a financial asset at
the time of default.
Fair value
The value an asset or liability could be bought or sold for in
current market conditions, where the buyer and seller freely
agree on the price.
Fair value through profit or loss (FVTPL) assets
Financial assets held at fair value in the financial statements,
any profit or loss arising from the change in fair value is
recognised in the Income Statement.
Fair value through other comprehensive income
(FVOCI) assets
Financial assets held at fair value in the financial statements,
any profit or loss arising from the change in fair value is
recognised through other comprehensive income.
Financial Conduct Authority (FCA)
The conduct regulator for financial services firms in the UK,
with objectives to protect consumers and financial markets
and to promote competition.
Forbearance
This is where the Society agrees temporary measures to
support a mortgage customer because they are experiencing
financial difficulty. This can take several forms such as
temporarily reducing mortgage payments.
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Funding limit
At least 50% of a building society's funding must come from
member savings. This means no more than 50% can come
from other sources, known as the "funding limit".
General Data Protection Regulation (GDPR)
A legal framework providing guidelines for the collection and
processing of personally identifiable data within the UK and
EU. This ensures organisations processing personal data do so
in a transparent and responsible manner.
House Price Index (HPI)
The measure of the change in house price, in percentage
terms, from a specific start date.
IFRS 9 transitional arrangements
IFRS 9 was a new set of accounting rules first implemented
in 2018. Transitional arrangements allow for the impact of
these rules on our capital to be spread over a number of years,
ending this financial year.
Impaired loans
Impaired loans are those which meet the Society's default
criteria and have been allocated to Stage 3 under IFRS 9 rules.
I
mpairment provisions
Where we believe we may not receive the full amount due on a
mortgage back from the borrower, an impairment provision is
created for the expected shortfall. The creation, or increase, in
our impairment provision is an impairment cost to the Society.
Intangible assets
Intangible assets have value but no physical substance.
For the Society, intangible assets are either purchased or
internally developed software. They do not count towards
regulatory capital so must be subtracted when calculating
regulatory capital resources.
Internal Capital Adequacy Assessment Process (ICAAP)
Our internal assessment of the capital we need in relation
to current and future risks, including capital to withstand a
severe but plausible stress scenario. The PRA uses our ICAAP
to set our regulatory capital requirements.
Internal Liquidity Adequacy Assessment Process (ILAAP)
Our internal assessment of the liquidity we need to meet
our cash flow needs under a range of stressed conditions.
The PRA uses our ILAAP to inform our regulatory liquidity
requirements.
Investment securities
Tradeable assets, where the holder is due to receive a
payment from a bank, public body or other institution.
Law of Property Act (LPA) Receiver
A receiver appointed to manage a property, held as security
for a mortgage, where the contractual terms of the mortgage
have not been met.
Lending limit
At least 75% of a building society's business assets must
be residential mortgages. This means no more than 25% of
business assets can be in other forms, known as the "lending
limit".
Leverage ratio
Tier 1 capital shown as a percentage of the leverage ratio
exposure, showing the financial strength of the Society
without measuring risk.
Leverage ratio exposure
The value of our assets, including off-balance sheet items (like
mortgage offers) and regulatory adjustments but without any
adjustment for risk.
Liquid assets
Assets that are cash or easily converted to cash. For the
Society, liquid assets include cash in hand and balances with
the Bank of England, loans and advances to credit institutions
and investment securities.
Liquidity coverage ratio (LCR)
A regulatory measure which requires banks and building
societies to hold enough liquidity to meet their needs for a 30
day period under severe stress conditions.
Loan to Value (LTV)
A ratio which expresses the balance of a mortgage as a
percentage of the value of the property on which it is secured.
The Group calculates residential mortgage LTV on an indexed
basis. The value of the property is updated on a quarterly basis
to reflect changes in the House Price Index (HPI).
Loans past due / past due loans
Loans on which payments are overdue including those on
which partial payments are being made.
Loss given default (LGD)
The difference between exposure at default (EAD) and the
net amount expected to be recovered on a defaulted loan,
expressed as a percentage of EAD.
Management expense ratio
This is the cost of running the Society (our administrative
expenses) compared to our assets.
Management expenses
Management expenses represent administrative expenses
plus depreciation and amortisation. The management
expenses ratio is calculated as management expenses
expressed as a percentage of mean total assets.
Mean total assets
Represents the amount produced by halving the aggregate of
total assets at the beginning and end of the financial year.
Member
A person who has a share investment or a mortgage loan with
the Society.
Mortgage backed securities (MBS)
Debt securities that are made up of a group of mortgage
loans. Investors in these securities receive payments from the
money generated by the mortgages.
Net interest income/Net interest receivable
This is the difference between the interest earned by the
Society (mainly the interest we receive on mortgage lending)
less the interest paid on our funding (mainly the interest paid
to savers).
Net interest margin
Net interest income as a percentage of mean total assets.
Net Promotor Score (NPS)
A measure of how likely a customer is to recommend our
products and services. The NPS ranges between -100 and
+100.
Non-recourse finance
Funding secured by collateral (such as an underlying pool
of mortgages) where, if the borrower defaults, the lender's
recovery is limited to the collateral alone.
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Operational resilience
This is the Society's ability to continue operating smoothly
during disruptions or unexpected challenges.
Other income
The income received from selling non-mortgage and savings
products (e.g. home and contents insurance, investment
products, other insurances. It also includes rental income from
investment property).
Permanent interest bearing shares (PIBS)
PIBS are a type of share issued by building societies. Our PIBS
do not count towards our regulatory capital so we exclude
these when calculating our regulatory capital resources.
Prime
Prime mortgages are those granted to the most creditworthy
category of borrower.
Principal risks
Principal risks are the categories of risk that have the potential
to have the greatest impact on the Society.
Probability of default (PD)
The estimated likelihood, typically expressed as a percentage,
that a borrower will fail to meet their debt obligations within a
fixed time period.
Probability of possession
If a borrower defaults on a loan, this is the estimated
likelihood, typically expressed as a percentage, that a lender
will take control of the underlying collateral (such as a
mortgaged property)
Profit participating deferred shares (PPDS)
A form of unsecured Common Equity Tier 1 capital, fully
cancelled following the Liability Management Exercise
completed in April 2018.
Provision coverage
Provision coverage is the impairment provision expressed as a
percentage of the asset's carrying value before provisions are
applied.
Prudential Regulation Authority (PRA)
The prudential regulator for UK banks, building societies and
insurers, with a general objective to promote the safety and
soundness of the firms it regulates.
Regulatory capital resources
The total value of Tier 1 and Tier 2 capital.
Renegotiated loans
Loans are classed as renegotiated with the customer’s
consent, when their terms have changed during the year.
Loans and advances are generally renegotiated either as part
of an ongoing customer relationship or in response to an
adverse change in the circumstances of the borrower.
Residential loans
Mortgage lending secured against residential property
Residential mortgage-backed securities (RMBS)
A type of debt security backed by a pool of residential
mortgages. Holders of the RMBS receive payments made from
the receipts from mortgage holders.
Retirement benefit asset
The assets of the Society's defined benefit pension scheme
are higher than its liabilities. The difference is shown as a
retirement benefit asset on the balance sheet but does not
count towards regulatory capital so must be subtracted when
calculating regulatory capital resources.
Revaluation gain
The increase in the market value of our investment properties
during the financial period.
Risk appetite
The articulation of the level of risk that the Society is willing
to accept (or not accept) in order to safeguard the interests of
its members whilst achieving business objectives.
Risk weighted assets
Risk-weighted assets are the value of our assets (mainly
mortgages) adjusted for risk using percentages set by the
Prudential Regulation Authority for each asset type. The
higher the risk of loss, the higher the percentage.
Royal Institution of Chartered Surveyors (RICS)
A professional body promoting and enforcing international
standards in the valuation, management and development of
land, real estate, construction and infrastructure.
Securitisation
A process by which a group of assets, usually loans, are
grouped together into a pool which is used to back the
issuance of new securities. An entity transfers these assets to
a structured entity which then issues securities backed by the
assets. The Group has established securitisation structures as
part of its funding activities.
Shares
Money deposited by a person in a retail savings account with
the Society. Such funds are recorded as liabilities for the
Society.
Shares and borrowings
The total of shares, amounts due to credit institutions,
amounts due to other customers and debt securities in issue,
including accrued interest and fair value adjustments for
hedged risk.
Significant increase of credit risk (SICR)
A term used in IFRS 9 where quantitative and/or qualitative
factors indicate that the credit risk associated with a non-
defaulted loan has increased significantly since it was initially
recognised in the Statement of Financial Position. Where a
SICR has occurred, the loan is categorised as stage 2 requiring
the recognition of lifetime expected credit losses.
Solely payments of principal and interest (SPPI) test
An assessment of whether the contractual terms of a financial
asset give rise to cash flows which are solely payments of
principal and interest on the principal amount outstanding. It
is used to determine the appropriate measurement basis for
the financial asset under IFRS 9.
Stage 1
Financial assets which are not credit impaired and have not
experienced a significant increase in credit risk since initial
recognition are categorised as stage 1. A provision is made for
12 month ECLs, this is the losses from default events expected
to occur within the next 12 months. Assets remain in stage 1
until such time as they meet the criteria for another stage or
are derecognised.
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Stage 2
Financial assets which are not in default, but have experienced
a significant increase in credit risk since initial recognition,
are categorised as stage 2.
The loss allowance recognised is
equivalent to lifetime ECL, being the loss arising from default
events expected to occur over the lifetime of the financial
asset.
Stage 3
Defaulted or credit-impaired financial assets are categorised
as stage 3, requiring recognition of lifetime ECLs.
Sterling Overnight Index Average (SONIA)
A benchmark interest rate that reflects the cost of borrowing
in the overnight unsecured sterling money market. It's based
on actual transactions and is used as a reference for financial
products like loans, mortgages, and derivatives in the UK.
Streamlined Energy & Carbon Reporting (SECR)
A UK government initiative that requires large companies
to report their energy use and carbon emissions. It's aimed
at improving transparency and encouraging businesses
to reduce their environmental impact. SECR is part of the
UK's broader efforts to meet climate goals and promote
sustainability.
Subordinated liabilities
For the Society, subordinated liabilities are unsecured notes
that pay a fixed rate of interest until 2038. They count as Tier
2 capital.
Taskforce on Climate-Related Financial Disclosures (TCFD)
A global framework for companies to disclose climate-related
financial risks and opportunities. The TCFD helps businesses
report how climate change could affect their operations,
helping investors make more informed decisions based on
sustainability factors.
Term Funding Scheme with additional incentives for
SMEs (TFSME)
A monetary policy tool used by the Bank of England, providing
term funding to banks and building societies with the aim of
promoting UK lending growth.
Tier 1 capital
Tier 1 capital is the total of Common Equity Tier 1 (CET 1) and
Additional Tier 1 (AT 1) capital. As we currently have no AT 1
capital, our Tier 1 capital is the same as our CET 1 capital.
Tier 1 ratio
Tier 1 capital shown as a percentage of risk-weighted assets,
showing the financial strength of the Society.
Tier 2 capital
This is a type of debt that, in certain circumstances is available
to absorb losses, therefore protecting
savers of the Society.
This is part of the Society's regulatory capital.
Tier 2 subordinated debt
This is a form of Tier 2 capital. For the Society, Tier 2
subordinated debt comprises unsecured notes that pay a
fixed rate of interest until 2038. During the year ended 31
March 2024, the Society bought back the majority of its Tier 2
notes, incurring a one-off cost but reducing ongoing interest
costs.
Total Capital Requirement (TCR)
The minimum amount of capital the Society is required to
hold, set by the PRA and informed by the ICAAP.
Wholesale funding
Funding raised by financial institutions by borrowing
from other banks or investors, rather than from individual
customers.
Braille, audio and large print versions of this document are
available upon request. Please contact us on 0345 241 3784.
Head Office: 2 Providence Place, West Bromwich B70 8AF
www.westbrom.co.uk
Registered Number: 651B
Calls and electronic communications may be monitored and/or
recorded for your security and may be used for training purposes.
Your confidentiality will be maintained.
West Bromwich Building Society is authorised by the Prudential
Regulation Authority and regulated by the Financial Conduct
Authority and the Prudential Regulation Authority.
Register No: 104877. ‘the West Brom’ and ‘West Brom Building
Society’ are trading names of West Bromwich Building Society.
1627-05/25-01