For life
making
in the
West Brom Building Society
Annual Report and Accounts
For the year ended 31 March 2026
Our highlights
4
Strategic report
6
Chair’s welcome
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
29
Risk management report
30
Climate-related financial disclosures
40
Governance
51
Corporate Governance report
52
Audit Committee report
65
Risk Committee report
68
Remuneration and People Committee report
70
Nominations and Governance Committee report
80
Directors’ report
82
Financial statements
88
Independent Auditors’ report
89
Income Statements
99
Statements of Comprehensive Income
100
Statements of Financial Position
101
Statements of Changes in Members’
Interests and Equity
102
Statements of Cash Flows
104
Notes to the Accounts
105
Country-by-Country Reporting
163
Annual Business Statement
167
Glossary
170
Contents
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Our
highlights
72%
New mortgage
lending
of the 2025/26
financial year include:
£1.1 bn
of all new
homebuyer
mortgages
went to first-
time buyers
This year, 85% (2024/25: 84%)
of new mortgages were for
homebuyers, of which 72%
(2024/25: 66%) went to first-
time buyers. This helped 5,509
(2024/25: 6,267) customers into
their first home.
We welcomed 21,119 new savers
(2024/25: 13,706), an increase of
54%. Our competitive savings rates
meant our savers’ money worked
harder, averaging 28% (2024/25:
30%) above the market
2
. In real
terms, that added up to £37.4m
(2024/25: £41.8m) more in savers’
pockets than if they’d been on
average market rates.
increase in
new savers
54%
We’ve achieved B Corp
TM
certification, an independent
recognition of being a
purpose-driven business,
that reflects our high
standards in social and
environmental responsibility,
transparency and
accountability.
B Corp certified
We’ve maintained new lending for
homeownership at over £1bn (2024/25:
£1.3bn) as we continue to help people
with a range of mortgage solutions to
buy their home.
West Brom Building Society
First-Time Mortgage
Buyers’ Choice
Award winning
We were recognised for giving outstanding
support to first-time buyers with the First-Time
Mortgage Buyers’ Choice award. We were also
named Best Variable Rate Cash ISA provider
at the Moneyfacts Awards, highlighting our
dedication to help savers make the most of
their tax-free allowance.
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1
Based on the average loan balance for a Society SVR borrower at 31 March 2026.
Average market reversion rate of 7.13% sourced from Moneyfacts March 2026.
Average Society rate based on SVR borrowers as at 31 March 2026.
2
Average market rates sourced from Bank of England Bankstats table A6.1 March 2026.
in savings
balances
£5.6
billion
Our savers’ balances grew to
£5.6bn (2024/25: £5.1 bn), a
10% uplift on last year.
£1,200
Borrowers saved around
a
year
Our market-first approach to Standard Variable Rate (SVR)
means existing customers who have a higher amount of equity
in their homes benefit from a reduced rate at the end of their
mortgage deal. On average, an SVR mortgage customer at the
West Brom would save around £1,200 (2024/25: £1,300) a year
compared with the average market SVR
1.
Profit before tax of £33.6m (2024/25:
£36.5m), supported our financial
resilience with a Common Equity Tier 1
(CET 1) capital ratio of 17.2% (2024/25:
17.1%). This capital strength is important
because it lets us support more people
to buy their own homes and means we
can continue to invest in modernising our
digital and technology estate.
CET 1 ratio of 17.2%
Supporting
our community
The Sunday Times Best Places
to Work 2026
Named in the Sunday Times Best Places to Work in 2026, an
achievement that reinforces our commitment to creating a
positive, supportive, and rewarding culture for our colleagues.
Outstanding
customer
experiences
We’re committed to
delivering exceptional
customer experiences
and have retained our
Feefo Gold Trusted
Service Award 2025
for another year.
Our independent charitable foundation has supported a range of
initiatives including donating £450,000 to its partnership with
Barnardo’s to create five Gap Homes for vulnerable young people
and £15,000 to support the YMCA Safe Space Youth Café.
West Bromwich
Building Society
Foundation
Feefo
Gold Trusted
Service Award
Together our customers, colleagues
and Society have contributed
£49,795 (2024/25:£49,266)
to support local charities and
community causes, with 1,891 hours
(2024/25: 1,894 hours) volunteered
on community projects.
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Chair’s welcome
Fellow members, I am pleased to report that
our Society continues to perform well despite
another challenging year in the UK and across
the world.
There were some signs of gradual improvement for the
UK economy, marked by easing inflation and improved
affordability in homeownership, however, the conflict
in the Middle East has once again demonstrated that
no major economy is immune from global events. As a
result the cost of borrowing increased sharply as the
markets anticipated rising inflation and interest rates,
a complete change from the previous expectation of
reductions throughout the second half of 2026. At the
time of writing, we are yet to see whether market fears
have turned to reality, which simply means we remain
in a period of uncertainty.
Despite the evolving external market, our Society is
well placed to continue to support members, both
current and future, given our financial and operational
strength. This has been built and maintained over many
years, enabling us to continue delivering stability during
periods of change. Critically, that strength also allows
us to continue our ambitious investment in a digital
technology platform that will keep us relevant for
future generations.
Above all else, the one constant that remains is our
Purpose to support the financial wellbeing of our
members. By providing a safe and good return on
the savings they entrust with us, and by promoting
homeownership, our Purpose has never felt more
relevant. I am proud that our Society has continued
to deliver, with a particular focus on helping first-
time buyers and those who need the most support.
It is a strong reminder of the important role mutual
organisations play in today’s housing market.
During the year, we saw several changes to our Board.
Julie Hopes and Lynne Shamwana stepped down from
their roles, and I would like to thank each of them for their
service and contribution to the Society. We were also
pleased to welcome new Board members, Lynne Atkin,
as Chair of the Remuneration and People Committee,
and Phillip McLelland, as Chair of the Audit Committee.
Lynne brings extensive senior leadership experience
from across the financial services sector, including her
time as HR Director at Barclays Bank UK. Phillip brings
a breadth of finance expertise, and non-executive
experience within the building society sector. We also
welcome Russell Galley back to the Board, bringing with
him a wealth of knowledge and expertise from across the
banking sector, including with Lloyds Banking Group.
As ever, I want to express my appreciation and thanks
to those who have stepped down for the expertise,
insight and commitment they brought to their roles,
and to welcome those who have joined us. The
strength and balance of our Board remain central to
ensuring the Society continues to operate with strong
governance, effective oversight and clear strategic
direction.
As we enter the new financial year from a position
of significant strength, we are well placed to build
on the positive momentum of recent years. While
the mortgage and savings markets will remain
highly competitive, we are confident in our ability
to grow sustainably, continuing to deliver value and
high-quality service to members.
Our strategy reflects this confidence. We continue
to invest in our people, processes and technology
to ensure our Society remains modern, resilient and
equipped to meet evolving member needs. As our digital
transformation progresses, our focus remains on ensuring
that the decisions we make today secure our long-term
success and support future generations of members.
Regardless of the external environment, we know
exactly where we need to focus our efforts. We will
continue to put customers at the heart of what we do,
providing straightforward, good-value products and
helping to make homeownership more achievable.
On behalf of the Board, I would like to thank our
members for their continued trust, and our colleagues
for the dedication, care and professionalism they
bring to their work every day.
John Maltby
Chair
28 May 2026
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Delivering sustainable financial
strength
Despite external pressures in the market, we
delivered a strong financial performance.
Homeownership lending of £1.1bn (2024/25:
£1.3bn) was supported by a 10% increase in savings
balances from £5.1bn to £5.6bn. Profit before tax of
£33.6m (2024/25: £36.5m) has helped maintain our
capital strength and enables us to continue to help
more people own their own home.
Putting customers first
Our continued focus on supporting aspiring
homeowners and delivering excellent service has
been recognised once again. We received the First
Time Mortgage Buyers’ Choice award for the third
year running and were highly commended as ISA
Provider of the Year at the Moneyfactscompare.
co.uk Awards 2026. We were also named Best
Variable Rate Cash ISA Provider at the Moneyfacts
Awards, reinforcing our commitment to helping
savers make the most of their tax-free allowance.
Customer experience remains central to our
approach. Our combination of competitive products,
strong service and our mutual ethos continues to
resonate with both members and brokers, which is
demonstrated by our retention of the Feefo Gold
Trusted Service Award for a second consecutive year.
Strengthening communities
With strong local roots, we remain committed to
supporting the communities across our heartlands.
This year we strengthened our local presence by
opening five branch spaces to groups, enabling
events such as financial education sessions,
wellbeing support and activities including weekly
CEO’s
review
Delivering our Purpose with
focus and resilience
As outlined in the Chair’s welcome, our Society once
again performed strongly, delivering a sustainable,
member-owned business model while remaining
steadfast in our commitment to our Purpose. We
are proud to have helped thousands move into
homeownership, while delivering meaningful value to
the savers who continue to place their trust in us.
We helped 5,509 (2024/25: 6,267) first-time buyers
purchase their own homes, with 1,407 (2024/25:
2,075) choosing shared ownership, a flexible and
increasingly important route for those building equity
at their own pace. We also continued offering our
low deposit mortgage for new build homes, providing
another way for first-time buyers to access the
housing market with a smaller upfront deposit.
For savers, we continued to deliver excellent value.
With our average savings rates sitting above those
of the wider market, our savers earned a total of
£37.4m (2024/25: £41.8m) more interest than if they’d
received the market average
2
savings rate. 21,119
(2024/25: 13,706) new savers joined us this year, a
clear demonstration of trust in both our products and
our approach.
We welcome the launch of the Government’s new
Social and Affordable Homes Programme (SAHP),
designed to increase the supply of social and
affordable homes over the coming decade. Its long-
term structure provides welcome clarity for housing
providers, and we look forward to seeing how it
develops in practice. Yet affordability remains a
significant hurdle for many aspiring homeowners, and
it is here that our Purpose has the greatest impact,
helping people overcome these barriers and take their
first steps into a home of their own.
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Driving our technology transformation
We have made significant progress with our
technology transformation programme over the
past 12 months. Working with Deloitte and 10x, we
moved from planning into delivery. Our priority is
the launch of a new ‘digital app’ for savings later this
year, enabling customers to manage their savings
more easily and giving us a flexible foundation for
introducing new products in the future.
This marks an important step in our investment
programme to modernise our technology and build
a capability that will support better service, greater
choice and stronger operational resilience in the
years ahead.
Moving forward
Looking ahead, competitive and economic pressures
are likely to continue, including cost pressures that are
largely outside our direct control, at a time when we
are investing heavily in a more sustainable future.
However, as a mutual organisation, not driven by
short-term returns for shareholders, we do not need
to scale back investment or constrain our growth.
Doing so might deliver a short-term gain, but at a
long-term cost. While this approach may reduce the
capital generated through profit in the near term,
our financial strength, rooted in mutuality, gives us
the confidence to make decisions for the long term,
focused on the years ahead, not just the next 12
months.
Our strategy remains consistent, to support the
financial wellbeing of our customers by offering
security and a competitive return on the savings they
entrust to us, and by promoting homeownership in all
its forms.
meet ups hosted by Talkin’ Tables, a discussion group
aimed at reducing loneliness and building social
connection.
We also used our branch network to deliver fraud and
scam awareness sessions, helping us connect more
effectively with the diverse communities we serve.
Our longstanding partnership with Jericho Foundation,
a charity that supports those facing extreme barriers
to employment, continues to make a meaningful
difference. Through the generosity of colleagues
and customers, we raised over £12,600 to support
employment programmes that help those facing these
barriers to build a more secure future. This was part
of over £30,300 donated to charities, community
groups and local causes by our Society, colleagues
and customers. Additionally, through the Mercian
Community Trust grant scheme, we awarded over
£19,400 to more than 50 organisations, supported by
our Community Account holders.
We were also named in the Sunday Times Best
Places to Work 2026, recognition that reflects our
commitment to creating a positive, supportive and
rewarding culture for our colleagues.
Recognised for being a ‘better
business’ – becoming a B Corp™
This year we achieved B Corp certification, an
independent recognition of being a purpose-driven
business, reflecting our high standards in social
and environmental responsibility, transparency and
accountability. Becoming a B Corp reflects who we
are as a mutual: an organisation focused on long-term
value for members, colleagues and communities, not
shareholders. It marks an important milestone for our
Society and strengthens the principles that guide how
we operate and the impact we aim to have.
I would like to thank all our colleagues across the
Society, and our Member and Employee Councils,
for their continued dedication and hard work.
Above all, I would like to thank our members for their
ongoing trust and support.
Jonathan Westhoff
Chief Executive Officer
28 May 2026
2
Average market rates sourced from Bank of England
Bankstats table A6.1 March 2026
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Who we are,
our vision and values
We know that solid futures aren’t
built overnight. They grow through
steady steps, good decisions and
the right support along the way.
We help our customers build the
life they want – bit by bit.
Whether it’s owning a home or having savings they
can rely on, we’ve been helping people make it happen
for 177 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.
Be passionate
We strive to make
a difference and to
do the best for our
customers.
Care
We do right by our
stakeholders, whether
customers, colleagues,
suppliers or the wider
community.
Do it today
We do what we say
we’ll do, proactively,
efficiently, and with
thought to what is
delivered.
Be real
We are what you
see, authentic,
transparent and
straightforward
to deal with.
Better together
Working together
we know we can
do anything.
Own it
We take responsibility
for delivering to the
highest standards in
all that we do.
Our vision is that our customers
and communities own a more
secure future
Our 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.
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Business
model
As a mutual we’re owned by our
members, who are our customers,
not shareholders.
This means that we focus on doing what’s best
for customers in the long term, rather than on
short-term profits for shareholders. 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 177 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 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 688 homes. We strive to operate this business to the highest standards as a landlord and
support our tenants into owning their homes. These properties contribute to the Society’s profit 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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Our strategy
We’ve completed the first year of delivering our refreshed strategy, called
‘Making Tomorrow’. We’ll continue to develop and refine it so we can keep
meeting our customers’ expectations and reach even more people, especially
across our heartlands.
The Making Tomorrow strategy is built on our strengths and is supported by
five strategic pillars that guide everything we do.
The five pillars are:
Our people
are customer
centric, and
purpose driven
Our culture supports
our people to be their
best and do the right
thing for our customers.
Strengthening
our communities
We support customers
in our region and play
an active role in helping
communities thrive.
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.
Keep our business
secure and
sustainable for
the future
We remain financially
strong and committed to
social and environmental
sustainability.
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.
3
2
1
5
4
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Help our
customers achieve a
more secure future
We offer products, services and a great customer
experience, that helps customers to achieve their goals.
Building secure futures
This year we’ve welcomed 21,119 new savers – a 54%
increase on last year (2024/25: 13,706). That’s more
people choosing to put their trust in us to help them
build their future. Our competitive savings rates
Opening the door for first time
buyers
Buying your first home is a milestone you never
forget, and we’re proud to have helped 5,509
(2024/25: 6,267) customers take that step this
year. Almost three quarters of all new homebuyer
mortgages went to first-time buyers.
We were honoured to be recognised for giving
outstanding support to first-time buyers with the
First-Time Mortgage Buyers’ Choice award for the
third year in a row at the Moneyfactscompare.co.uk
awards 2026.
Here’s what we’ve achieved during
2025/26
Goodbye rent -
Evie and Myles’ story
Evie and Myles had previously had some missed
payments on their credit card, but that didn’t stop
them getting a mortgage with us.
For a long time, life felt like two steps forward
and one step back for Evie and Myles. Money was
tight, and whatever they managed to save always
seemed to disappear again. They’d put a little aside
for a deposit, but with old, missed payments and
credit histories that weren’t perfect, they didn’t
think buying a home was something they’d ever do.
After a mortgage rejection and an offer in principle
from a lender known for bad credit and high rates,
things weren’t looking great.
They eventually found an adviser who looked at
their situation. They didn’t fit the “bad credit” box
at all, and their adviser suggested trying for a
mortgage with the West Brom Building Society.
Evie commented; ‘It’s good to know that
there are lenders out there who are more
understanding of people’s situations. We were
relieved to be able to find someone that offered
a good interest rate.’
We were able to give the right support and
guidance and offer Evie and Myles a mortgage,
and they are now happily settled in their first
home together.
meant their money worked harder too, averaging 28%
(2024/25: 30%) above the market
2
. In real terms, that
meant £37.4m (2024/25: £41.8m) more in savers’
pockets than if they’d been on typical market rates
2
.
Many of the customers who joined us did so because
we offered choice – flexible accounts, strong rates,
and products that fit real lives. Helping people feel
more secure, more in control, and more hopeful about
tomorrow is what drives us, and it’s at the heart of
everything we do.
Our dedication to helping savers make the most
of their tax-free allowance resulted in us being
recognised as Best Variable Rate Cash ISA provider
at the Moneyfacts Awards.
2
Average market rates sourced from Bank of England
Bankstats table A6.1 March 2026
Scan here to find
out more about
Evie and Myles' story
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Lifetime renter –
Julie’s story
Julie didn’t think she’d ever be able to buy her
own home until she started researching shared
ownership. For most of her life Julie rented her
house. She worked three jobs and still couldn’t
save enough. Every month felt like survival mode,
and the fear of not knowing whether she’d have
somewhere to live long term weighed heavily - not
just for her, but for her daughter too.
Julie commented ‘Historically I had a history of
bad credit and because of that I thought I was
never going to be able to get a mortgage’.
After researching the Shared Ownership
website, sifting through mixed opinions, she
eventually thought it could be right for her.
Her broker was a lifeline, guiding her through
the process and came back with a mortgage
option with the West Brom Building Society.
The moment she got the keys, everything
changed. For the first time, she felt safe. This
wasn’t just a place to live. It was
her
home.
A fresh start - complete with the joy of
choosing her own carpets and even installing
her first cat flap!
Shared ownership
For many, shared ownership provided a more
affordable route. The Society has championed this
form of lending for a number of years and during
the year we saw new lenders enter this market,
following in our footsteps and broadening the choices
available to customers. We’re proud of our role in
expanding the choices available to customers, but
this did mean that we saw our proportion of shared
ownership mortgages reduce slightly with 26% of
first-time buyers choosing this path versus 33% in
2024/25.
Our customer first approach
Our market first approach to Standard Variable Rate
(SVR) continued to make a real difference. By offering
lower rates to customers with more equity in their
homes, we apply the same fairness to customers at
the end of their mortgage term that we do for new
borrowers – saving the average customer around
£1,200 (2024/25: £1,300)
a year compared with the average market SVR
1
.
It’s a simple idea, but one that puts fairness first
and sets the West Brom apart from all other lenders.
We were named Best Variable Rate Cash ISA provider at
the Moneyfacts Awards, highlighting our dedication to
help savers make the most of their tax-free allowance.
Every customer is different, and so is the way
they want to be served. That’s why we continue
to offer choice – online, over the phone, and in our
34 branches, which remain a vital part of how we
support our communities.
We measure how likely our customers are to
recommend us by using a Net Promoter Score (NPS),
which is used across many industries all over the
world. This year our NPS reduced to +54 (2024/25:
+76) due to an increase in the number of customers
using our current online channels. Customers using
these channels expect their experiences to be instant
and meaningful and that’s why we’re investing in our
technology to transform digital experiences for our
members. Although the score reduced, a score over
50 is still considered good.
We’re listening
Numbers only tell part of the story, the real insight
comes from over 1,700 members on our customer
panel who share honest feedback that helps
us improve. Our customers can also share their
experience with us using Feefo, an independent
1
Based on the average loan balance for a Society SVR borrower at
31 March 2026. Average market reversion rate of 7.13% sourced
from Moneyfacts March 2026. Average Society rate based
on SVR borrowers as at 31 March 2026.
Scan here to find
out more about
Julie's story
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online review platform. Their feedback earned
us the Feefo Gold Trusted Service Award for the
second year running and a 4.7 out of 5 star rating
– recognition we’re incredibly proud of because
it comes directly from the people we serve. Their
voices have shaped clearer communications,
simpler products and better support for people
who find financial information challenging.
Key performance indicators
We monitor performance and goals using key
performance indicators (KPIs). These help us to
keep on track with our strategic ambitions. This
year we’ve taken a fresh look at our KPIs to make
sure they measure what really counts and support
the goals behind our strategic pillars.
Performance
Measure
Gross residential homeowner lending less
repayments of principal and redemptions.
Measure
A measure of how likely a customer is to
recommend our products and services.
The NPS ranges between -100 and +100.
Residential homeowner lending grew by £379m despite
increasing mortgage market competition and challenging
economic conditions. The reduction in growth from prior year
was as a result of lower gross residential lending and lower levels
of retention of our mortgage book as the accounts came to the
end of their incentive periods.
This year our NPS fell to +54 (2024/25: +76) due to an increase
in the number of customers using our online channels where
customers expect their experience to be instant and meaningful.
A score over 50 is still considered good and we continue to invest
in modernising our digital and technology estate.
2026
2025
2024
2023
2022
£379m
£757m
-£117m
£549m
Net lending for
homeownership
Net Promoter
Score – customer
satisfaction
Performance
2026
2025
2024
2023
2022
+76
+75
+74
+81
+54
£116m
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Measure
Purpose-led lending measures how we are delivering
our homeownership purpose. This represents all
new lending to first-time buyers and home movers,
and remortgages more than 80% loan to value as a
percentage of our total new lending.
Percentage of
purpose-led lending
Performance
At 89%, the majority of our lending has supported customers
with needs aligned to our homeownership purpose. Throughout
the year we have continued to support customers with a range
of competitive products with specific support for customers
looking to own with a smaller deposit through shared ownership
or own a brand new home.
2026
2025
2024
2023
89%
89%
78%
75%
Best Variable Rate
Cash ISA provider
at the Moneyfacts
Awards 2025.
72%
of all new homebuyer
mortgages went to
first-time buyers.
We achieved a 4.7 out
of 5-star rating on
Feefo
Feefo
Gold Trusted
Service Award
We achieved the
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We ran financial education
sessions for over
children and young adults.
2,100
We awarded over
£19,400
in local grants to over 50
different charities and
community groups.
We've given
1,891
volunteering hours.
2
Strengthen our
communities
We support customers in our region and play an
active role in helping communities thrive.
With our strong local roots, we’re passionate about
giving back to the people who live and work in
our heartlands, which is why strengthening our
communities is a priority.
We’ve been able to open our doors for local groups
to our community rooms in our branches. Vital events
such as financial education sessions are making a real
difference. We’ve partnered with local community
organisations to deliver practical fraud, scam and
awareness sessions in Punjabi and Urdu, helping us
connect more meaningfully with the diverse needs
of the communities we serve.
Driving community impact
Finding a job is often a key milestone in the journey
towards a secure future, which is why we’ve
partnered with Jericho for another year. Jericho
is an amazing local charity based in Birmingham
that provides work opportunities for people facing
challenges in our heartlands.
Through the support and generosity of our colleagues,
we’ve raised over £12,600 for Jericho to support their
incredible employment programmes. Together, we’re
helping individuals own a more secure future. This was
part of over £30,300 donated to charities, community
groups and local causes by our Society, colleagues and
customers.
We’ve also continued supporting local charities and
community groups through the Mercian Community
Trust grant scheme. Thanks to the generosity of
Community Account holders, we’ve awarded over
£19,400 to over 50 different charities and community
groups in our local communities.
The West Bromwich Building Society
Foundation
The West Bromwich Building Society Foundation,
an independent charity, was launched to make a
difference to our local communities. Over the last
year the Foundation has built momentum, donating
£450,000 to its partnership with Barnardo’s, to create
five Gap Homes for vulnerable young people leaving
the care system in the Black Country. The initiative
sees the development of energy-efficient, low-
maintenance homes that provide a crucial stepping-
stone for care leavers, supported day-to-day by
Barnardo’s employees. The Society will also offer
wider support such as financial education, internships
and work placements for the young people who’ll
eventually move into the new homes.
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3
Our people
are customer
centric, and purpose
driven
Our culture supports our people to be their best
and do the right thing for our customers.
Shaping the best place to work
We’ve been supporting our colleagues as they
navigate the changes brought by our strategy.
Alongside regular meetings and colleague
communications, we’ve focused on our colleague’s
wellbeing and made sure that leaders have the right
skills they need to support their teams.
A huge achievement for us this year was to be
recognised as a Sunday Times Best Place to Work.
This prestigious award only granted to a handful of
employers that truly go above and beyond for their
employees.
This year saw the launch of our new employee
recognition scheme, giving everyone access
to extra benefits and perks. The feedback from
colleagues has been great, and it’s helping people
feel recognised in ways that matters to them.
Bringing every voice to the table
We’re committed to equity, inclusion, and
diversity. Our colleague-led Connect group helps
us to raise awareness, promote inclusivity and
embrace our differences.
Connect has several dedicated working groups
including our Pride Inclusive Network, Black
Colleague Network, Accessibility In Mind Network
and Women’s Inclusive Network. Each of these
groups leads and supports activities throughout
the year to help make our workplace truly
inclusive – from celebrating Disability History
Month to raising awareness about the menopause.
With a £15,000 grant funding from the Foundation, the
Safe Space Youth Café was launched in June in
partnership with the YMCA Black Country. The Café is
a welcoming safe space for young people to socialise,
develop new skills and access the support of a
dedicated youth social worker. Through this incredible
partnership, we’ve seen over 1,200 young people visit
the café since it opened.
In September, the Foundation reached a significant
milestone by being accredited as a Living Wage Funder
by the Living Wage Foundation. This means that we
encourage any paid positions supported through
the Foundation’s grants to be paid at least at the real
Living Wage rate.
This latest achievement builds upon the Society’s
previous accreditations, which include the Living
Wage, Living Hours, and Living Pension. As a result,
we’ve become one of the very few businesses in the
UK to achieve all four accreditations from the Living
Wage Foundation, underscoring our commitment to
fair pay and good working conditions.
Giving time
Each year, we encourage our colleagues to spend up
to two days volunteering in our local communities. In
the past 12 months, we’ve given 1,891 hours to local
charities and causes including Compton Care Hospice,
Black Country Women’s Aid, Sandwell Valley Gardens
and Birmingham Children’s Hospital.
We’re helping children and young adults to feel more
confident about managing their money, so they can
own a more secure future. Over the past year, we’ve
delivered financial education workshops to over 2,100
local students across primary schools, secondary
schools and colleges. These sessions include:
• 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.
We know the importance of financial education to
make sure our customers are confident to make
money decisions and build a more secure future.
That’s why our branch colleagues have ‘popped-
up’ at over 90 events across our heartlands. These
events include mortgages and saving events, fraud
and scam presentations, and mortgage clinics.
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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, to achieve better
transparency and drive the diversity agenda.
We continue to benefit from a diverse workforce, with 37% of
colleagues from ethnic minority backgrounds, helping us to reflect
the richly diverse communities we serve in out heartland. Board level
representation has increased, and whilst a relatively small cohort, this
remains an area of ongoing focus.
Performance
2026
2025
2024
2023
2022
22%
18%
23%*
37%
37%
35%
18%
33%
20%
18%*
10%
23%*
9%
21%
37%
Performance
We continue to exceed our initial targets of 30% and are tracking
progress towards our stretch targets of 40% female representation
at both Board and Senior Leadership levels.
2026
2025
2024
2023
2022
35%
36%*
38%
36%*
34%
33%
36%
36%
40%
40%
Senior Leadership
Board
Ethnic minority – Board
Ethnic minority – Senior Leadership
Ethnic minority – Other colleagues
Officially one of
The Sunday
Times Best
Places to
Work 2026
Female
representation
Ethnic
representation
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.
– and proud of it.
*
Restated to reflect retrospective updates to job bands, which changed the composition of this Senior Leadership group.
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5
4
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.
We’ve made good progress with our transformation
programme over the last 12 months. Working together
with Deloitte and 10x, we’re moving from planning to
action. Right now, we’re focused on introducing a new
digital app for our savings products. This means our
customers will be able to manage their savings in the
way that suits them best.
We’re launching the new app later this year and this
will provide customers more choice and control when
interacting with our products and services.
Strengthening security and reliability
To keep our customers’ accounts and data safe, we
continue to invest in our cyber security to protect
our customers’ information, day and night.
We’re committed to providing an uninterrupted,
consistent service for our customers and
colleagues. Operational resilience is key for us, and
we’re committed to building a secure, dependable
organisation for the long term.
Keep our
business secure
and sustainable for
the future
We remain financially strong and committed to social
and environmental sustainability.
We’re B Corp
TM
certified
This year, we achieved B Corp™ certification –
independent proof that we meet some of the highest
standards of social and environmental responsibility,
transparency and accountability. Put simply, it shows
we’re serious about doing good for people and the planet.
To become certified, we went through a detailed
assessment across five key areas: governance,
workers, community, environment and customers.
Each area looks at how we operate and the positive
impact we create.
B Corp certification is a commitment to continuous
improvement. It’s about making sure the impact we
have on people and the planet is measured,
meaningful and transparent. It isn’t a one-off
achievement. We’ll keep strengthening our impact,
building on the work already underway, and living
our commitments in the way we support members,
colleagues, and communities every day.
Our carbon footprint
We’re committed to playing our part and supporting
our customers to adapt to increasing climate-related
pressures. We’ve continued to strengthen how we
identify, assess, and respond to climate-related risks
ensuring our risk management process is resilient and
focussed on providing support to our customers.
In previous years we’ve reported our direct operational
emissions, these are the emissions from the day-to-
day running of our offices and branches, this year
we’ve captured our full carbon footprint for the first
time. This means we now understand the emissions
from wider activities such as the homes we lend
against, and the impact of our supply chain. Having this
full picture means we can take smarter, targeted action
to cut emissions and improve our environmental impact.
Financially resilient
To enable the Society to continue to serve current
and future generations of customers we must remain
financially strong and sustainable. We’re pleased to
report a strong profit before tax of £33.6m (2024/25:
£36.5m) which supports our strong capital position,
with a CET1 ratio of 17.2% (2024/25: 17.1%). This
financial strength allows us to invest in our digital
transformation, continue to grow, and offer existing
and future customers products and services. More
details on the Society’s financial performance are
included in our financial review of the year section on
pages 24 to 28.
We're serious about
doing business the right
way - fairly, responsibly
and sustainably.
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Total Capital Requirement (TCR)
CET 1 ratio
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.
Performance
The CET 1 ratio at 17.2% remains comfortably above our regulatory
Total Capital Requirement and has done so throughout the year. Our
strong capital position means we can continue to grow and invest in
our digital transformation for the benefit of members.
2026
2025
2024
2023
2022
8.6%
8.7%
9.3%
9.4%
9.3%
17.2%
17.1%
17.8%
18.7%
17.0%
Underlying profit has decreased during the year, as we continued to
invest in strategic transformation, but remains at levels which support
financial resilience and sustainable growth.
Performance
2026
2025
2024
2023
2022
£33.6m
£36.5m
£26.2m
£37.2m
£28.8m
Net interest margin has remained broadly consistent year on year, as we
continued to balance the needs of borrowers and savers.
Performance
2026
2025
2024
2023
2022
1.60%
1.56%
1.42%
1.77%
1.05%
Common Equity
Tier 1 (CET 1) ratio
Underlying profit
before tax
Net interest
margin
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.
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Measure
To understand our environmental impact, we’re measuring our
full carbon footprint. As part of this we track our operational
Scope 1 and 2 carbon emissions, measured as tonnes of tCO₂e.
Due to an enhancement in the reporting of Scope 2 emissions
from 2024, this measure only looks at operational gas and
electricity usage to enable an accurate year-on-year comparison.
Measure
The management expense ratio is a measure of cost efficiency,
reflecting costs (including depreciation and amortisation) as a
percentage of mean total assets.
The management expense ratio increased to 1.12%, reflecting our
ongoing strategic transformation investment and inflationary
pressures.
Performance
2026
2025
2024
2023
2022
1.12%
1.05%
0.78%
1.02%
0.89%
Total Scope 1 & 2
emissions
Cost
efficiency
Our operational carbon emissions have reduced year-on-year.
Performance
2026
2025
2024
2023
2022
583.50 tCO
2
e
631.70 tCO
2
e
697.10 tCO
2
e
578.70 tCO
2
e
524.30 tCO
2
e
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Looking ahead
The world and wider economic environment
remain uncertain, impacting our customers and
their financial wellbeing. Throughout our 177-year
history, we have successfully navigated similar
challenges. Our commitment remains to manage
the business responsibly so we can continue to
serve customers well and remain sustainable, which
sits at the heart of the Making Tomorrow strategy.
Alongside this uncertainty, we’re seeing noticeable
shifts in how customers interact with us. There
is a growing trend towards value-consciousness,
increased use of digital channels, and demand for
clearer, tailored, and more convenient experiences.
These shifts are influencing customer engagement
preferences and underscore the importance of
staying customer-centric, adaptable, and focused
on providing services that address both current
and future needs.
As we move into the next year of delivering our
strategy, we’ll continue to develop new products
and enhance our services to help more customers
into homeownership and strengthen their financial
resilience. A particular focus will be on helping
those who find it challenging to save for a deposit,
reinforcing our ongoing commitment to new build
properties, shared ownership, and other pathways
into homeownership. We’re also sharpening our
focus on product accessibility and embracing
innovation in product design, making sure they
meet the evolving needs of customers both
regionally and nationally.
Next year, we’re preparing to launch our new
digital savings app, marking a step change in our
digital capability to deliver the level of service our
customers expect. At the same time, we recognise
that our branches and contact centre remain essential
for many customers and we’ll continue to develop
these existing channels, giving every customer
genuine choice in how they engage with us.
We want to make a bigger impact within our
communities and support young people in building
solid and secure futures. We hope to deliver more
impactful change through the West Bromwich
Building Society Foundation, including the exciting
development of our Barnardo’s Gap Homes, which are
expected to be built over the course of the year ahead.
The people who work at the West Brom are central
to our success, and we’re proud to have colleagues
who are deeply committed to our customers and our
vision. As we look ahead, we’ll continue to strengthen
our approach to equity, inclusion and diversity, building
on the work of our colleague-led Connect group a to
create a more inclusive and representative organisation.
As we look ahead, we’ll remain closely attuned to
the emerging trends shaping our industry, ensuring
we anticipate shifts rather than react to them. By
maintaining this forward-leaning perspective, we’ll
continue to identify, assess, and proactively manage
the risks and opportunities that could influence our
long-term performance.
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Glossary
Financial
review of
the year
Income statement overview
Group
2026
£m
Group
2025
£m
Net interest income
104.1
96.2
Fees, commissions and other income
5.6
4.9
Fair value gain on financial instruments*
0.8
4.4
Total income
110.5
105.5
Management expenses
(72.6)
(64.6)
Operating profit before revaluation gains,
impairment and provisions
37.9
40.9
Gains on investment properties
0.7
2.4
Impairment on loans and advances
(5.0)
(6.9)
Provisions for liabilities
-
0.1
Profit before tax
33.6
36.5
Taxation
(10.2)
(6.9)
Profit for the financial year
23.4
29.6
*Fair value gains are net of a loss on derivatives used to hedge
commercial loans of £0.8m (2024/25: £1.0m), included within the
amounts presented in note 5 to the accounts.
Summary income statement
We delivered a profit before tax of £33.6m (2024/25:
£36.5m) strengthening our financial resilience and
capacity for growth. The reduction in profitability was
driven by higher management expenses and lower fair
value gains, which more than offset the higher net
interest income, earned on a larger balance sheet. The
increase in costs reflects our continued investment in
digital transformation.
2
Average market rates sourced from Bank of England Bankstats table A6.1 March 2026.
Fair value gain on financial
instruments
Financial instruments are used to protect our 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, which is not the case where we use this
protection against our mortgage offers that are not
yet drawn down.
During the final quarter of the year we saw volatility
in market interest rates. Our financial instruments
protect against these fluctuations, which resulted
in one-off fair value gains this year as the likelihood for
future increases in Bank Rate increased.
Management expenses
Management expenses are the costs related to
the running of our Society. This year these costs
have increased from £64.6m to £72.6m reflecting
ongoing inflation, including increases to employer's
national insurance rates, and investment in our digital
transformation programme. This 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). We’ve
also been investing in our teams to further reinforce
our digital strategy.
Net interest income
Net interest income increased in the year to £104.1m
(2024/25: £96.2m), with a net interest margin of 1.60%
(2024/25: 1.56%).
After peaking in 2023 Bank Rate continued to slowly
reduce throughout 2025/26. As this happened, we
continued to balance the needs of borrowers and
savers, maintaining net interest margin at comparable
levels.
We continued to pay interest to our savings members
that was 28% (2024/25: 30%) above the market
average
2
and overall our savers received a mutual
benefit of £37.4m (2024/25: £41.8m).
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Glossary
Impairment on loans and advances
The table below shows our impairment charge/(credit)
on loans and advances.
to make the appropriate provisions against our
exposure. The nature of the portfolio means that
charges will vary year on year dependent upon
specific circumstances of borrowers and tenants
of the properties against which loans are secured.
More detail on the ECL provision is in the financial
position section below.
Financial position at 31 March
Residential loans and advances
Residential loans and advances showed further growth
in the year, driven by gross new homeowner lending
of £1.1bn (2024/25: £1.3bn) despite the increasingly
challenging and competitive market conditions. We’re
no longer adding to our buy to let lending portfolio, the
majority of which has been on our books for at least 17
years, which continues to reduce, falling 15% this year.
Our residential (excluding second charge) arrears rates
of 0.73% (2024/25: 0.93%) are slightly below the UK
Finance
3
industry average of 0.77% (2024/25: 0.89%),
with lower interest rates easing mortgage affordability
pressures for some borrowers. Arrears in lending
completed from 2012 onwards remained low at 0.37%
(2024/25: 0.34%).
Summary statement
of financial position
At 31 March
Group
2026
£m
Group
2025
£m
Assets
Residential loans and advances
5,516.8
5,288.4
Commercial loans and advances
66.6
109.7
Liquid assets
788.3
716.2
Derivative financial instruments
44.1
44.9
Fixed and other assets
210.9
202.6
Total assets
6,626.7
6,361.8
Liabilities
Retail funding
5,560.0
5,071.6
Wholesale funding
536.0
778.0
Derivative financial instruments
8.9
16.8
Other liabilities
43.5
34.2
Total liabilities
6,148.4
5,900.6
Equity
General reserves
344.1
326.5
Other equity instruments
130.9
130.9
Other reserves
3.3
3.8
Total equity
478.3
461.2
Total liabilities and equity
6,626.7
6,361.8
Year to 31 March: Impairment on loans
and advances
2026
£m
2025
£m
Residential loans
2.1
(0.4)
Commercial loans
2.9
7.3
Total impairment
5.0
6.9
Fair value movement on derivatives held to
hedge impaired commercial loans
0.8
1.0
Total impairment and related charges
5.8
7.9
Residential impairment
Impairment charges on residential lending reflect the
Expected Credit Loss (ECL) where a loan defaults.
The residential impairment charge has increased
with a charge of £2.1m this year (2024/25: credit of
£0.4m) due to continued uncertainty in the economic
outlook and with flat valuations. Notwithstanding
these challenges, arrears and defaults remain low
with total residential ECL provision requirements of
£12.2m (2024/25: £10.3m), reflecting a small increase
in provision coverage from 0.19% to 0.22%. More
detail on the ECL provision is in the financial position
section.
Commercial lending impairment
Commercial loan impairment charges arise on legacy
lending which is secured against commercial real
estate and has been in run-off since 2008. The charge
decreased in the year to £2.9m from £7.3m. After
adjusting for the impact of provision hedges, net charges
decreased by 55% to £3.7m (2024/25: £8.3m).
The commercial property sector remains sensitive to
changes in the wider economy and we’re continuing
Buy to let
Owner Occupied
Gross loans
and advances
Commercial
5,000
4,000
3,000
2,000
1,000
2022
2024
2023
2025
Analysis by lending type at 31 March
£3,277m
£1,301m
2026
£3,157m
£1,141m
£3,706m
£995m
£4,460m
£856m
£4,837m
£725m
£134m
£224m
£234m
£349m
£199m
3
UK Finance is a trade association for the UK banking and financial services sector.
£m
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We continue to support borrowers who are faced
with ongoing cost of living challenges. Encouraging
themto engage early is a key focus for us so we can
tailor the approach to help reduce the impacts. The
unpredictable wider economic outlook may impact our
customers and arrears levels going forward.
Our opening provision for impairment included an
overlay to cover market valuation difficulties with
flats including potential cladding and leasehold issues.
We’ve increased this provision overlay, in light of
ongoing challenges in the economic outlook and with
some flat valuations.
Liquid assets
Liquid assets were £0.8bn (2024/25: £0.7bn),
including £0.7bn (2024/25: £0.6bn) of high-quality
liquid assets which are either held in cash or assets
that can easily be converted 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. Our Liquidity Coverage
Ratio (LCR), which measures our ability to meet
cash outflows in a stressed scenario, stood at 141%
on average over the 12 months to 31 March 2026
(2024/25: 186%), remaining comfortably above the
regulatory minimum of 100%.
At 31 March Commercial loan portfolio
2026
£m
2025
£m
Non-core commercial balances excluding
securitisation
129.4
194.3
Securitised commercial balances
4.1
4.5
Impairment provisions
(66.9)
(89.1)
66.6
109.7
Commercial loans and advances
As part of our long-term strategy to exit the
commercial real estate sector, the commercial loan
book has reduced by 33% this year (2024/25: 11%).
After accounting for increased provisions, the portfolio
has fallen by 39% to £66.6m, now making up just 1%
(2024/25: 2%) of our total lending.
Since its peak of £1.7bn in 2008/09, commercial
exposures have been reduced by 92%.
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As a building society our primary source of funding is
retail savings, which rose by 10% to £5.6bn (2024/25:
£5.1bn) and represents 91%, (2024/25: 87%) of total
funding. The remaining funding is from wholesale
sources which includes securitisations and use of
Bank of England facilities; the latter reduced in the
year following the repayment of all outstanding
funding drawn from the Bank of England’s TFSME
(Term Funding Scheme with additional incentives for
SMEs). This reduced the ratio of wholesale funding
as a proportion of total shares and borrowing to 9%
(2024/25: 13%).
Capital
Funding
2022
£bn
2024
2023
2025
2026
6.00
5.00
4.00
3.00
2.00
1.00
0
Other wholesale
TFSME
Branch retail savings
Securitisation (RMBS)
Online and direct retail savings
As at 31 March
Funding balances
3.15
1.03
1.06
0.17
0.17
3.34
0.96
0.71
0.17
3.42
1.25
0.61
0.21
3.50
1.57
0.41
0.29
0.08
3.40
2.16
0.24
0.30
At 31 March
2026
£m
2025
£m
Capital resources
Common Equity Tier 1 capital
436.7
420.4
Tier 1 capital
436.7
420.4
Tier 2 capital¹
2.0
2.0
Total regulatory capital resources
438.7
422.4
Risk weighted assets (RWA)
2,537.7
2,455.5
Leverage ratio exposure
6,418.4
6,148.2
Capital ratios
%
%
Common Equity Tier 1
(as a percentage of
RWA)
17.2
17.1
Tier 1
(as a percentage of RWA)
17.2
17.1
Total capital
(as a percentage of RWA)
17.3
17.2
Leverage ratio
6.8
6.8
1.
Tier 2 capital comprises subordinated liabilities excluding accrued interest.
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
regulatory requirements.
As at 31 March 2026, 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 increased to 17.2% (2024/25: 17.1%)
remains well above our Total Capital Requirement
(TCR) of 8.6% (2024/25: 8.7%) of risk-weighted
assets. Our leverage ratio remains strong at 6.8%
(2024/25: 6.8%).
During the year we paid £5.8m as distributions
on our CCDS. In May 2026 our Board declared
a final distribution for the period to 31 March
2026 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 99 to 104
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 April 2026, after the financial year end being
reported, we redeemed the Society’s remaining
Permanent Interest Bearing Shares (PIBS),
reducing the financing cost of the Society’s
capital.
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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 30 to 39 and our Risk Committee
report on pages 68 to 69.
Financial outlook
During the past financial year, whilst economic
growth remained modest and markets remained
competitive, the overall environment was one of
gradual stabilisation, with easing inflation, reducing
interest rates and slowly improving business
confidence. The conflict in the Middle East has
brought a fresh wave of uncertainty to the UK’s
economic outlook. The surge in oil and gas prices
has revived inflationary pressures, forcing markets
to reassess the path of interest rates and raising the
risk of a renewed squeeze on household budgets.
We’ll navigate this unpredictable economic landscape
carefully, remaining firmly focused on our Purpose to
support the financial wellbeing of our customers.
Alex Pawley
Chief Financial Officer
28 May 2026
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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 that we have the capability to
understand and manage effectively.
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 34 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:
Risk management
report
This report tells you about:
·
How we manage risk.
·
Our risk management framework.
The final element of the framework is the formal structure for
managing risk and identifying ownership and responsibility across
the Society. This is based on the ‘Three Lines of Defence’ model
which is illustrated opposite.
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.
3
2
1
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• 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
• Defines culture and values.
• Establishes risk appetite and strategy.
• Approves frameworks, methodologies, policies,
and roles and responsibilities.
Board
Executive
Chief Executive Officer
FIRST
LINE
SECOND
LINE
THIRD
LINE
Three
Lines of
Defence
model
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Assets & Liabilities
Committee (ALCo)
Oversight of assets and
liabilities risk including
the assessment of
exposure to Treasury
counterparty credit,
market, liquidity,
capital, margin
compression, basis and
interest rate risk.
Chaired by
Chief Financial Officer
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.
Chaired by Chief Risk Officer
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.
See page 65 for more details.
Chaired by a Non-Executive Director*
Risk Committee (RC)
Oversight, management and review of
our principal and key strategic risks
identified by our Board.
See page 68 for more details.
Chaired by a Non-Executive Director*
Residential Credit
Group (RCG)
Oversight of the
exposure to credit
risks as a result of our
residential lending
activity.
Chaired by
Head of Credit Risk
Commercial Loans
Risk Group (CLRG)
Managing and
overseeing the
exposure to credit risks
and exit strategies of
our closed commercial
loan book.
Chaired by
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.
Chaired by
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.
Chaired by
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.
Chaired by
Chief Information
Security Officer
Model Risk
Group (MRG)
Overseeing our
exposure to model risk
across the business.
Chaired by
Chief Financial Officer
Board
Risk governance structure
During the year, risk governance was provided through
ten risk management committees/groups/forums.
*The list of Non-Executive Directors who chair and attend this committee are on pages 65 to 68
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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 overleaf.
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 quarterly
to review our exposure to the risk categories.
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,
Asset and Liability Management (ALM) 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
regarding the management of risk and report directly to
the Chair of the Audit Committee.
Governance and oversight are provided through a
number of management and executive committees
as detailed on page 32.
Emerging risks
Key emerging risks that affect us and the day-to-day
management of these risks, include:
Climate change
Recognised as an emerging risk across several risk
categories. Further detail on how the Society manages
climate change related physical and transition risks can
be found in the ‘Climate-related Financial Disclosures’
section on pages 40 to 50.
Economic backdrop and geopolitical tensions
Given the volatile geopolitical climate, the Society
is continuously monitoring global events and
macroeconomic risks. A further escalation in conflicts
or significant change in government policy could
adversely affect lending plans, and risks to the
housing market as well as future interest rates are
managed tightly to act quickly if needed. By running
regular stress tests, we ensure we can handle difficult
economic conditions.
Changing customer behaviour and expectations
Customer expectations and the increasing use of
digital channels continue to shape how the Society
serves its members. There is a risk that, without
adapting at pace, the Society may fall behind
evolving needs and be less effective in attracting new
members. To address this, a digital transformation
programme is well underway and the first phase will
launch later this year, following rigorous testing and
assurance. In parallel, we have plans to strengthen our
use of customer insight to better understand changing
behaviours, enabling us to shape our services and
enhance the overall member experience.
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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 continually reviews our strategy and sets out a Medium Term Plan (MTP) which
spans a five year period and is refreshed at least annually. Our Board monitors business
performance against internal forecasts, including Key Performance Indicators, and
assesses 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). These activities involve consideration of mitigating actions should identified risks
crystallise. We also maintain a Recovery Plan (RP) to effectively manage more extreme
events. The RP defines a range of Early Warning Indicators to identify the emergence
of a more extreme stress. These 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 as an emerging risk across
several principal risk categories. Further detail on how the Society manages this emerging
risk can be found in the ‘Climate-related Financial Disclosures’ section on pages 40 to 50.
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 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. 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.
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 to support the current and future risks in the business. The analysis collated
through the ICAAP incorporates capital requirements from changes in business
volumes, mix of assets and activities, and capital regulation 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.
The RC has delegated authority for the governance of capital risk management to the
ALCo which meets at least monthly. The Capital Review Group (CRG), which reports
into the ALCo, oversees our capital position under existing and future capital rules.
Our capital requirements are reviewed monthly, and the results of this monitoring are
reported to the CRG, ALCo, RC and our Board. RC reviews and recommends the ICAAP
for approval to our Board.
The detailed breakdown of our capital position can be found on page 27.
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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 causes 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 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 the
ILAAP for approval to our Board.
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.
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, and 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.
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 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.
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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 the
CRCRG, ERC 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. This area
is also supported and has Second Line oversight from the Operational Risk Team. Both teams
collaborate to support the operational risk scenario analysis that feeds into the ICAAP.
During the year there has been continued focus on our operational resilience and there have
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 regularly review our Important Business Services, impact tolerances and resource
mapping, to ensure they remain appropriate and up to date. We have continued to focus
testing against severe but plausible disruption scenarios to identify any vulnerabilities to
us remaining operationally resilient. Other risk areas such as Supplier Management, Cyber
and Transformation have remained a focus for the Society considering the risk exposure to
our operational resilience.
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.
The cyber threat landscape continues to evolve in sophistication, speed, and scale, with
financial services organisations remaining a high-value target for malicious actors. While
the broad nature of the threat environment is consistent with prior periods, changes in the
likelihood and impact of certain threat types have prompted a recalibration of the Society's
cyber security priorities.
The widespread adoption of Artificial Intelligence by both attackers and end users has
introduced new dimensions of cyber risk. AI-enabled threats are increasingly capable of
evading conventional defences, amplifying the potential impact of fraud, data loss, and
operational disruption. Alongside this, the continued threat of ransomware, supply chain
vulnerabilities, and the exploitation of third-party relationships underscores the need for
greater visibility and control across the Society's technology environment.
Cyber risk is managed through a risk-led framework that seeks to identify, assess, and
respond to threats in a proportionate and forward-looking manner. The ISF is the
principal governance body overseeing this risk management framework, strategy
and policies and ensures that security measures are aligned with business objectives,
regulatory requirements and industry best practice, fostering a strong security culture
across the organisation. Risk ownership is clearly assigned, with governance structures in
place to ensure that cyber risks are escalated appropriately and that the RC receives timely
and meaningful reporting on the Society's risk profile and control environment.
The Society is actively maturing its cyber risk and assurance capabilities, transitioning from
point-in-time assessments towards a more continuous, evidence-based understanding
of the control environment. Investment and remediation activity is prioritised according
to assessed risk, with a particular focus on third-party and technology risks and incident
detection and response capability. This approach supports the Society's commitment to
operational resilience and the sustained confidence of members and stakeholders.
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 Consumer Duty (the ‘Duty’), which has enhanced the
existing rules by setting higher and clearer standards.
Our Board attested to our compliance with the Duty in July 2025, 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.
• Implementing an ongoing review of customer journeys and associated customer
communications to ensure we’re providing good outcomes and are easy to understand.
We manage conduct risk and our compliance with the Duty at CRCRG, with secondary
oversight at ERC and reporting to RC.
We continue to maintain a Board-level Consumer Duty Champion, Sara Bennison, to ensure
robust oversight of customer outcomes and alignment with FCA expectations, although
no longer a mandatory requirement following the FCA's removal of the obligation to
appoint this role in February 2025. The Board considers this to represent good practice in
maintaining a clear and sustained focus on customer outcomes. In addition, we produce an
annual Consumer Duty Board Report, which is submitted to the Board to provide assurance
on overall compliance with the Duty.
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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, and the 12 month outlook. 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
12 month outlook
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 domestic and geopolitical risks and ongoing cost of
living pressures leading to:
• Higher inflation resulting in Bank Rate increasing.
• 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 include the potential macroeconomic impact of rising and falling
interest rates and house prices. A range of assumptions are 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 overseas 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 has been 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 Small Domestic Deposit Taker
regime) rules.
Liquidity risk
Intensification of competition for retail and wholesale funding.
Adjustment to lower reserves and tightening liquidity as the Bank of
England reduces its asset purchase facility and concludes the Term
Funding Scheme.
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.
Stable
Increasing
Decreasing
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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) tool. The MCS tool 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
Ineffective systems and controls, potentially impacting on critical and
important business services.
We maintain effective controls for Society wide risks and processes that are
regularly tested. Management of controls is key to ensuring the Society delivers
it’s Customer, Regulatory and Financial objectives.
A significant business continuity event.
Detailed business continuity plans are in place, which are regularly tested and
supported by scenario testing which assists the Society in identifying and
addressing any vulnerabilities.
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.
Failure of a Critical Supplier (3rd & 4th Parties)
We ensure that Critical Suppliers have appropriate controls. performance
capabilities and resilience to avoid service failures or loss of data that could lead to
material impacts to the Society and its customers.
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.
The Society recognises the dynamic and evolving nature of the cyber threat
landscape and maintains a robust, risk-led approach to cyber security governance.
The cyber security strategy has been refreshed to reflect the current threat
environment. RC receives regular reporting on cyber risk, controls, and assurance
activity. A dedicated Chief Information Security Officer provides leadership and
ongoing development of the Society's cyber security capabilities and defences.
Conduct risk
Actions of third party and outsourced suppliers employed by the
Society to deliver services leading to poor 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.
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Outlook
The UK economy has been showing modest growth
supported by easing inflation and lower interest rates,
though the broader geopolitical environment remains
a key source of uncertainty. The conflict in the Middle
East has added further volatility to global energy
markets and supply chains, contributing to a more
unpredictable inflation path and a cautious sentiment
across financial markets. Business sentiment remains
subdued, with firms citing global headwinds and
policy uncertainty, that has also led to disruption in
the housing market.
Inflation has fallen materially from its peak in 2023-
24, enabling the Bank of England to continue to
lower interest rates to 3.75% as at 31 March 2026.
However, inflation was not fully back to the 2% target
even before the impact of higher energy prices was
factored in, which may constrain further rate cuts.
Mortgage rates have dropped from previous highs, but
affordability remains stretched and some borrowers
coming off older mortgage deals may still face higher
monthly payments. While mortgage arrears remain low,
we’ve improved our support for borrowers, offering
more personalised and proactive help.
Because our focus is entirely on the UK, the state of
the domestic 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 40 to 50.
David Thomas
Chair of Risk Committee
28 May 2026
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Climate-related
financial disclosures
Climate change continues to
expose the financial system to
growing physical and transition
risks, reshaping how we assess
risk and plan for the future.
These impacts are increasingly felt by customers too
with climate-related pressures amplifying financial
vulnerability and impacting property values. As the
effects of climate change are unevenly distributed,
financial institutions have an important role to play
in supporting a fair and orderly transition. We’re
committed to playing our part and supporting our
customers to adapt to increasing climate-related
pressures.
We continue 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. This year we have completed a full
carbon footprint assessment to further support our
understanding of the impact the Society has, and aid
us in reducing our overall impact.
The following disclosures align with 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. Following the release of the
PRA’s Supervisory Statement SS5/25, we are
actively engaged in the gap analysis process and,
following this, will subsequently work to address
the enhancements set out in the revised standards.
Managing climate risk is an ongoing activity,
but we’re committed to continuing this work in
a transparent and responsible way. Our focus is
on supporting our members and communities,
strengthening our understanding of the risks we
face, and driving sustainable initiatives that will
contribute to a fair and orderly Net Zero transition.
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Governance
Our approach to climate governance ensures we
have clear oversight and accountability for the
management of climate-related financial risks.
The governance framework supports informed
decision-making, outlines clear lines of responsibility,
and enables continuous improvement in line with
evolving regulatory expectations. Our recent B Corp
Certification demonstrates our high standards in
our Environmental, Social, and Governance (ESG)
approach.
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
Our 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 climate scenario
analysis outputs. The ERC also reviews proposals
relating to climate risk appetite and escalates these
to the Risk Committee for approval.
Day-to-day responsibility
Our Credit Risk team are responsible for managing
climate-related financial risks on a day-to-day basis.
They consider the implications of these risks in our
mortgage portfolios when reviewing underwriting
practices and wider credit assessments.
Training and awareness
We recognise the importance of continually building
internal capability and growing climate understanding
across the Society. This includes the ongoing
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. We’re
ensuring climate considerations are embedded in
governance, strategy, and day-to-day operations.
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Strategy
Climate is embedded within our wider business
strategy under our strategic pillar: ‘keeping our
business secure and sustainable for the future’.
Embedding climate within our core business strategy
helps us to address both the risks and opportunities
climate change presents whilst also maintaining
alignment with our Purpose. Our environmental
approach also supports the UK’s wider goal of
reaching Net Zero.
Through careful climate risk management, we aim
to support the transition to a net-zero economy and
support our members to deal with the impacts of both
physical and transition risks, whilst also driving forward
our own sustainability initiatives. Our main strategic
priority for 2025/26 was to carry out our first carbon
footprint, the results of which are presented within the
metrics section of this report.
Climate-related risks
The table on the right presents our assessment of the
climate-related risks we face, and the processes we
have in place to mitigate these risks. 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 type
Risk summary
Significance/
Impact
1
Ability to
control
2
Horizon
term risk
3
Society response
and mitigants
Business risk
Physical
More frequent
environmental events
could disrupt the delivery
of goods and services that
we rely on from third-party
providers.
Low
Medium
Long
We have a robust
supplier framework
in place to oversee
the activities of key
suppliers.
As part of our business
continuity planning,
plans are in place to
address disruption to
critical suppliers.
Transition
‘Green’ competition from
more environmentally
focused mortgage and
savings products.
Low
High
Short
Climate related pressures
increasing costs across
supply chains.
Low
Medium
Medium
Credit risk
Physical
Increased occurrence
and severity of severe
weather events with
flood/subsidence risk
materialising. Property
damage as a result can
reduce collateral value,
impacting on borrower
ability to repay with
defaults rising, resulting in
subsequent losses to the
Society.
Low
Medium
Long
Physical and transition
risk data is collected
every six months
across our portfolios.
Climate-related
risks are projected
under future climate
scenarios to model
potential exposures.
As part of our
mortgage terms,
we require building
insurance for
properties located in
flood risk areas.
We monitor significant
employers across our
borrower profile.
Transition
Tighter energy-efficiency
policies for rental
properties could affect our
buy to let, West Bromwich
Homes and commercial
lending books.
Medium
High
Medium
Loss of key employers
arising from the transition
to lower carbon economy.
Medium
Medium
Long
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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Operational
risk
Physical
Increased frequency
and severity of extreme
weather events could
disrupt our operations –
including Head Office,
branches and key suppliers.
Medium
Medium
Long
Business continuity
plans in place for
potential operational
disruption; this
includes continuity
plans for critical
suppliers.
Exposure of Head
Office and branches to
physical risks impacts
will be assessed in
2026/27.
Physical/
Transition
Suppliers may face
disruption from climate-
related events. Some
suppliers may not have
strong climate-risk plans in
place which could impact
the services we procure.
Medium
Medium
Long
Climate-related pressures
may increase our operating
costs, for example through
higher insurance premiums
or energy prices.
Low
High
Medium
Market,
liquidity,
funding risk
Physical
Climate-related events
and pressures can cause
sudden changes in financial
markets causing disruption
and volatility – this could
affect asset values, specific
sectors or regions
Medium
Medium
Long
We maintain an
environmental
credential document
for investment
purposes,
documenting our
commitment to
environmental
sustainability.
We monitor expected
credit losses of our
mortgage assets
based on future
climate scenarios.
Transition
Investors and depositors
may increasingly opt to
support organisations
with strong environmental
credentials, impacting
access to funding.
High
Medium
Medium
The Bank of England may
apply higher haircuts on
collateral with poor energy-
efficiency ratings, reducing
the value of these assets.
Medium
Medium
Medium
Members may need to
use their savings to pay
for energy-efficient home
improvements or retrofits,
or to cover income
shortfalls cause by climate-
related economic impacts.
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 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.
Our climate model currently focusses on physical
climate risks, and we use scenario analysis to assess
the resilience of our operational estate, mortgage, and
West Bromwich Homes portfolios to climate-related
risks under future climate scenarios. We are conscious
of the limitations of climate modelling which may
have impacts on outputs and we continue to monitor
our modelling approach to ensure we capture our
exposure to climate risks as accurately as possible.
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Conduct risk
Physical/
Transition
Borrowers with properties
at high risk of flooding or
subsidence, or with poorer
EPC ratings, may become
mortgage prisoners/face a
’brown’ discount – finding
it harder to switch lenders/
face less favourable pricing.
Low
Medium
Long
We do not restrict
lending based on
EPC rating. Where a
property is in a flood
risk area, adequate
buildings insurance is
required.
As part of our regular
physical and transition
risk monitoring, we are
aware of properties
on our book that
may be at higher risk
under future climate
scenarios.
We currently do
not offer any green
products.
Incentives for green
products could
unintentionally
disadvantage some
members or encourage
unsuitable choices.
Medium
High
Short
Offering green products
or guidance carries
conduct risks if members
misunderstand the support
or if products are not
clearly explained.
Low
High
Long
Regulatory,
legal and,
capital risk
Physical/
Transition
Incomplete or inadequate
climate risk disclosures may
lead to misunderstandings
about the risks we face.
Medium
High
Long
We currently align
our disclosures with
industry standards
through TCFD and PRA
SS3/19 (soon to be
replaced by SS5/25).
We are transparent
in our climate related
disclosures and report
against our physical
and transition risk
metrics and targets
Regulators may require
us to hold additional
capital if our climate-risk
governance or controls
are not considered strong
enough.
Medium
High
Medium
Reputational
risk
Physical/
Transition
If significant climate-
related risks are not
identified or disclosed,
this may undermine trust
and lead to regulatory or
financial consequences.
High
High
Medium
There is a reputational
risk if we are not seen
to be proactively
addressing climate risks
or are overstating our
environmental progress
(‘greenwashing’).
Medium
Medium
Medium
Using scenario analysis to shape our
strategy
Climate scenario analysis helps us to look ahead and
understand how future climate conditions could affect
our customers. This could be through reductions in
property values, inability to insure properties, or rising
energy costs affecting household finances. By looking
ahead, we can make more informed decisions today,
to make sure our lending remains resilient despite
potential climate risks. In short, we’re planning for an
uncertain future to protect our customers that may be
more exposed to climate-related pressures as these
risks evolve.
Our approach to scenario analysis is proportionate
and reflects the nature of our business and the long-
term time horizons over which climate risk may
materialise. As part of our continual monitoring of our
climate modelling approach, we initiated a refresh
of our climate model in September 2025 to broaden
our assessment of climate impacts. This process is
ongoing with development expected through 2026/27.
The physical risk results presented in this report are
based on an evolving model. We will use the insights
from this modelling to inform our long-term strategic
and financial planning.
Net Zero
Our long-term climate change ambition 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).
We know that our journey towards a greener future is
still in its early stages. As standards and best practice
continue to evolve, we’ll refine our targets, develop
transition plans, and evolve our disclosures to reflect
emerging expectations.
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Risk management
Climate change presents a systemic risk with foreseeable but 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 an 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. Despite this, we consider the impacts of climate
change as a sub-risk under Business Risk, with ongoing oversight from our
Board. Whilst our own financial impacts are modest, we recognise that
climate change has the potential to impact our members, so we continue to
monitor and model our exposure and ensure we keep risks for our members
as low as possible.
To support our oversight of climate risk,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.
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) (following completion
of our gap analysis, we will subsequently
align to the PRA’s Supervisory Statement
(SS5/25)), 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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Use of scenario analysis to
inform risk management
We use scenario analysis to understand
how climate-related risks may affect our
operational estate, mortgage, and West
Bromwich Homes portfolios over time.
We assess both physical risks, such as
flooding and subsidence, and transition
risks, including those related to Energy
Performance Certificate (EPC) ratings.
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.
Our physical risk modelling is developed
in partnership with SkenarioLabs and
uses the Met Office Representative
Concentration Pathways (RCPs), aligned
with Intergovernmental Panel on Climate
Change (IPCC) scenarios. We apply a high
(RCP 8.5) emissions scenario for properties
in England and Northern Ireland, and a
medium (RCP 4.5) emissions scenario for
properties in Wales, with projected impacts
modelled using a static balance sheet.
Addressing the current inconsistency in
emissions scenarios across regions is a
focus for the ongoing development of this
model.
Our flood risk exposure profile, based on
the residential mortgage portfolio as at
31 December 2025, is shown opposite.
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.
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
No Risk
Medium Risk
Low Risk
High Risk
1.0%
2.7%
1.1%
95.2%
Surface flooding
Coastal and river flooding
4.7%
6.1%
3.2%
86.0%
Number of properties
Risk Level
Distribution of flood risk: residential
portfolio
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.
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Metrics and targets
This year we've been taking significant steps to
refine and expand our climate position by conducting
our first full carbon footprint. This assessment
has provided us with a baseline view of the total
emissions across our operations and value chain,
helping us to understand where we can focus
reduction efforts.
With a clear baseline in place, we’ve reviewed our
climate targets that were originally set in 2020/21.
Many of our targets remain the same, with the
addition of 2 new targets that we believe are both
ambitious but also grounded in our Purpose and
ability as a regional building society. We aim to focus
on practical improvements across our day-to-day
operations to target energy usage reduction and
improving operational efficiencies whilst continuing to
support our members moving toward a net-zero future
and reducing our overall environmental footprint. The
below targets reflect our refreshed climate targets,
supported by our carbon footprint position.
Target
Near term
Mid term
Long term
Direct operations to be
carbon neutral by 2030
Reduce Scope 1
and 2 emissions by
10% by 2035
To be Net Zero
by 2050, with an
ambition to be
carbon negative
Maintain 100%
renewable energy
Residential portfolio
average EPC of C by
2028
tCO₂e
2025
tCO₂e
2024
% Change in
tCO₂e from
base year
% total carbon
footprint
Scope 1
Scope 1
151.8
175.0
-13.3
0.1
Scope 2
Market-based
-
1.0
-100
-
Location-based
387.2
412.7
-6.2
-
Scope 3
Category 1:
Purchased goods and services
6,386.1
5,274.1
21.1
3.1
Category 3:
Fuel and energy related activities
172.5
163.0
5.8
0.1
Category 4:
Upstream transportation and distribution
47.9
55.5
-13.7
<0.1
Category 5:
Waste
1.2
1.7
-29.4
<0.1
Category 6:
Business travel
38.4
45.9
-16.3
<0.1
Category 7:
Employee commuting
785.4
590.5
33.0
0.4
Category 13:
Downstream leased assets
1,910.7
1,960.7
-2.6
0.9
Category 15:
Investments
194,513.7
194,755.1
-0.1
95.3
Total Scope 3
203,855.9
202,846.5
0.5
Total carbon footprint (market-based)
204,007.7
203,022.5
0.5
Total carbon footprint (location-based)
204,394.9
203,434.2
0.5
Our carbon footprint
This year has been significant in building a clear picture of our environmental impact. We’ve completed a full
carbon footprint assessment across our Scope 1, 2, and 3 emissions, understanding the energy we use in our direct
operations, and the carbon impact of our wider business operations across our entire value chain.
We’re continuing to refine our data as our carbon footprint evolves. This baseline serves as a starting point to
improve our data capture to support future emissions reductions.
Scope 1:
Direct emissions from our own operations, including the usage of gas across our Head Office and branch
network, and emissions arising from our company car fleet.
Scope 2:
Emissions relating to the electricity we use in our day-to-day operations.
Scope 3:
Indirect emissions that are linked to our business activities but happen outside of our direct operations.
These emissions can be categorised as upstream emissions (including our procurement of goods and services,
waste generation and business travel) or downstream emissions (primarily category 15 emissions arising through
our mortgages and treasury investments).
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Our main Net Zero targets are:
• Direct operations to be carbon neutral by 2030.
• To be Net Zero by 2050, with an ambition to be
carbon negative.
We are focused on achieving Net Zero emissions
across our operations by 2050, with an ambition to go
even further by becoming carbon negative. This not
only covers our Scope 1 and 2 emissions, but also our
Scope 3 emissions, which include the indirect impacts
generated through our upstream and downstream
activities. Our most significant element within Scope
3 are the emissions associated with the properties we
finance.
Since 2020, we’ve made real progress towards our
direct operations becoming carbon neutral, with
less than 0.1% of our carbon emissions attributed to
our direct operations this year. We’d hoped to reach
carbon neutrality for Scope 1 and 2 by 2025 but a
small amount of residual emissions remain. When we
first set our targets, we were clear that we wanted
to avoid offsetting for as long as possible and that
commitment remains unchanged. Although we may
need to use carbon offsetting in the future, our priority
is to continue delivering real emission reductions.
We’ve revised our carbon-neutrality target for our
direction operations to 2030 to give us time to reduce
these remaining emissions as far as possible before
turning to any offsets.
We know that reaching Net Zero isn’t something we
can achieve in isolation with progress also dependent
on the decisions and actions taken by policymakers,
governments, suppliers, and our customers. These
uncertainties may make some of our targets harder to
achieve, but our current priority remains on reducing
our emissions wherever possible.
Direct emissions (Scope 1 and 2)
Target: Reduce Scope 1 and 2 emissions by 10%
by 2035
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.
How we’re reducing our emissions:
Our operational emissions are split into location and
market-based emissions.
•
Location based emissions:
This reflects our actual
operational footprint and shows our physical
electricity consumption impact on the grid – this is
based on the average carbon intensity of the local
power grid in the area in which we operate. This does
not take into account specific electricity suppliers or
tariffs.
•
Market based emissions:
This takes into
consideration our procurement of renewable energy
and reflects our chosen green energy tariffs in our
emissions reporting.
Location-based emissions
Scope 1 (natural gas) emissions saw a slight increase
in 2025, whilst Scope 2 (electricity) emissions saw a
decrease as a result of our continuous effort to reduce
our operational emissions to carbon neutral. Overall, our
combined Scope 1 and 2 emissions decreased in 2025.
Market-based emissions
Target: Maintain 100% renewable energy
We continue to source 100% renewable energy
through solar, wind and hydro REGO-backed contracts,
maintaining our target to commit to utilising renewable
energy.
Location-based emissions (tCO
2
e)
2025**
2024/25
2023/24
Scope 1
Gaseous and other fuels
137.1
129.3
187.9
Transport (owned)
-
-
-
Scope 2
Buildings electricity
387.2
449.4*
443.8
Total Scope 1 and 2
524.3
578.7
631.7
*
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.
**
Due to a change in reporting period across our climate-related data,
this period now reflects our emissions from 1 January 2025 to 31
December 2025.
Market-based emissions (tCO
2
e)
2025*
2024/25
2023/24
Scope 2
Buildings electricity
0
0
0
Total Scope 2
0
0
0
*
Due to a change in reporting period across our climate-related
data, this period now reflects our emissions from 1 January 2025 to
31 December 2025.
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% of total
mortgage lending
% of properties at
high risk surface
flooding (currently)
% of properties at
high risk coastal/
river flooding
East of England
3.0%
0.2%
-
East Midlands
12.1%
0.7%
0.2%
Greater London
6.0%
0.3%
0.1%
Northern Ireland
-
-
-
North East
5.4%
0.2%
-
North West
15.1%
0.6%
0.1%
Scotland
0.1%
-
-
South East
19.1%
1.0%
0.2%
South West
8.3%
0.4%
0.1%
Wales
4.7%
0.1%
0.1%
West Midlands
14.0%
0.7%
0.1%
Yorkshire and Humber
12.3%
0.4%
0.3%
Indirect emissions (Scope 3)
We are working to put targets in place for our Scope 3
emissions. This is the area we have the biggest impact due
to our mortgage lending. We recognise that tackling Scope
3 emissions, particularly those linked to financed emissions,
is where we can make the biggest impact. We monitor and
measure the physical and transition risk of our portfolio to
support our members and highlight where we can make
emissions reduction impact.
Physical risk metrics
We assess the impacts of flood and subsidence risks across
our operational estate, mortgage, and West Bromwich Homes
portfolios. We do this using a climate scenario model that
estimates how climate impacts could affect our expected
losses (additional ECLs) under a future high-emission climate
scenario. As mentioned previously, our model development is
ongoing therefore the physical risk results presented in this
section are based on an evolving model.
Flood risk exposure for each property is translated into an
expected annual loss (EAL) by combining the likelihood of
flood events (e.g. annual exceedance probabilities for different
hazard intensities) with estimates of potential damage impacts
and aggregating these across the full range of potential flood
event severities.
The model then adjusts property values to reflect the financial
impact of these climate risks. This results in an expected credit
loss (ECL), which represents the anticipated monetary loss by
considering both the probability of borrower default due to climate-
related impacts, and the magnitude of the loss if this default occurs.
Flood risk
Across our residential portiolio our overall flood risk exposure
remains low with 95.2% of properties not exposed to coastal
and/or river flooding under present conditions. Even under a
future high-emission climate scenario, risk remains low with
94.8% of the portfolio not at risk. Surface flooding presents
a slightly greater risk to our portfolio with 14% of properties
exposed to some level of risk at present, with this rising to
17.3% under a future high-emission climate scenario.
Our current residential mortgage exposure to high flood risk
across the UK is presented below:
Percent of properties
exposed to high flood
risk 2025
Current
Future (based on high emission scenario)
0.26
0.32
Our modelling has produced the following outputs for flood-related ECLs
and EALs across our residential mortgage portfolio:
Additional flood risk related expected credit loss £m
0.1%
0.0%
0.2%
Expected annual loss (EAL) £m
EAL/property
EAL/m
2
2.01
£50.03
£1.20
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Subsidence risk
Subsidence risk remains low across our residential
mortgage portfolio with 96.7% of the portfolio
returning low or very low risk results.
Overall, 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. Following the refresh of our
climate model, future climate reporting will be
assessed against 2025 as our revised baseline year.
Transition risk
Target: Average EPC rating of our residential
mortgage portfolio to a C by 2028
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 28 February 2026, the average EPC rating
across our 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 our mortgage portfolio.
We’re aiming to improve the average EPC rating of
our mortgage portfolio to a C by 2028. While we
Current EPC rating
Potential EPC rating
Total
%
Owner Occupied
%
Buy to let
%
Total
%
Owner Occupied
%
Buy to let
%
A
1.6
1.9
0.0
16.3
19.1
2.3
B
19.4
22.2
5.9
43.6
44.3
40.2
C
21.4
19.5
30.7
24.2
22.0
34.9
D
41.0
40.0
45.7
12.1
11.1
16.9
E
12.2
12.1
12.9
1.7
1.6
2.3
F
2.0
2.1
1.4
0.2
0.2
0.2
G
0.4
0.4
0.2
0.0
0.0
0.1
Unknown
2.0
1.7
3.2
2.0
1.7
3.2
Average
D
D
D
B
B
C
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% (2024/25: 98.5%) of these
properties. This has been achieved through a series of
retrofit projects aimed at improving energy efficiency.
Earlier this year we engaged with our Member Council
to understand their views on how we address the
challenges surrounding energy efficiency of properties
across our portfolio. The Council stressed the
importance of protecting members from becoming
mortgage prisoners and ensuring those living in lower-
efficiency homes continued to be supported, whilst
managing our overall risk exposure responsibly.
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 2026
% of properties exposed to subsidence risk
High
0.5%
Medium
2.7%
Low
10.6%
Very low
86.1%
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Governance
• Corporate Governance report
• Audit Committee report
• Risk Committee report
• Remuneration and People
Committee report
• Nominations and Governance
Committee report
• Directors’ report
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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.
• Senior Leadership team.
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 Tier 3 Sub-
Committees, Groups and Forums are
run by an Executive Director or one of
the Senior Leadership team.
Executive Committee
(ExCo)
TIER 3
TIER 2
TIER 1
Executive Risk
Committee
(ERC)
Board
Remuneration and
People Committee
Audit
Committee
Nominations and
Governance Committee
Risk
Committee
Conduct
Risk &
Customer
Review
Group
(CRCRG)
Operational
Risk &
Resilience
Group
(ORRG)
Residential
Credit
Group
(RCG)
Product
Consideration
Group
(PCG)
Information
Security
Forum
(ISF)
Commercial
Loans Risk
Group (CLRG)
Assets &
Liabilities
Committee
(ALCo)
Project
Steering
Groups
West
Bromwich
Homes
Committee
(WBHC)
Model Risk
Group
(MRG)
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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 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.
John Maltby MBE, BSc (Hons)
– appointed January 2021
Chair of the Board
Committees
– Chair of the Nominations
and Governance Committee and member of
Remuneration and People Committee
Lynne Atkin MBE
– appointed May 2025
Non-Executive Director
Committees
– Chair of Remuneration and People
Committee and member of Risk and Nominations
and Governance 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.
The Board
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Sara has over 16 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.
Sara Bennison MA
– appointed August 2023
Non-Executive Director
Committees
– Member of Remuneration and
People and Risk Committees
Martin Boyle BSc (Hons), M.Phil
– appointed April 2023
Chief Operating Officer
Committees
– Member of Executive and
Executive Risk 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.
Russell Galley
– appointed April 2026
Non-Executive Director
Committees
– Member of Remuneration and
People Committee and Risk Committee (until
5 May 2025 and re-joined from 1 April 2026) and
Audit Committee (from 1 April 2026)
Russell has a wealth of experience from a 40 year
regulated financial services career including strategy
formulation, risk management, cultural change,
colleague engagement, balance sheet and P&L
leadership, product and proposition development,
transformation programme leadership, marketing, data
and personalisation development. He left Lloyds Banking
Group as Cheif Executive Officer Retail Banking leading
40,000 colleagues across the Lloyds, Halifax and Bank
of Scotland Retail Banks. He has previous experience as
a Non-Executive Director for Yorkshire Housing, a major
social landlord and housebuilder where he also chaired
their Audit and Risk Committee.
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Nimisha is an executive leader with over 24 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 Chief Information Officer 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 BSBA
– appointed June 2024
Non-Executive Director
Committees
– Member of Audit,
Nominations and Governance and Risk
Committees
Phillip is an experienced board director and brings
executive, hands on experience across retail
financial services, government workout, and energy
infrastructure, combining finance and treasury
leadership with risk management and execution
of organisational change. He has held senior roles
including Group Finance Director and later Chief
Risk Officer at Calisen, and earlier appointments
include Finance Director at UK Asset Resolution and
at Provident Financial’s consumer credit division,
covering all aspects of financial management.
Phillip McLelland BSc (Hons),
ACMA
– appointed April 2026
Non-Executive Director
Committees
– Chair of Audit Committee,
member of Nominations and Governance and
Risk Committees (from 1 April 2026)
Manjit first 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.
Manjit Hayre
– appointed September 2021
Chief Risk Officer
Committees
– Chair of Executive Risk
Committee, member of Executive Committee
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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 43 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 MSc, ACIB, FIB
– appointed August 2020
Senior Independent Director, Deputy Chair to
the Board
Committees
– Chair of Risk Committee, Chair
of Audit Committee (from 24 July 2025 to
31 March 2026), member of Remuneration
and People Committee (to 24 October 2025),
member of Nominations and Governance
Committee (to 1 March
2026)
Jonathan Westhoff BA (Hons),
FMCA, CGMA, ACIB
– appointed May 2009
Chief Executive Officer
Committees
– Chair of Executive Committee,
Chair of the Employee Council and member of
Executive Risk Committee
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 BSc (Hons), FCA
– appointed January 2023
Chief Financial Officer
Committees
– Member of Executive and
Executive Risk Committees
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The Executive Committee,
led by Jonathan our CEO,
is responsible for the
delivery of the Society’s
strategy and the day-to-
day operations.
Martin Boyle
BSc (Hons), M.Phil
Chief Operating Officer
Manjit Hayre
Chief Risk Officer
Gurvinder Glenholme
BA (Hons), ACMA, EMBA
Head of Strategy
Wayne Tarrier
Head of Compliance
& Money Laundering
Reporting Officer
Jonathan Westhoff
BA (Hons), FMCA,
CGMA, ACIB
Chief Executive Officer
Sarah Teague
LLB, CMIIA
Chief Internal Auditor
Gareth Madeley
BA (Hons)
Chief Customer Officer
Ramona Maye
Chief Transformation
Officer
Darren Marsden
BA (Hons)
Chief Information Officer
Adele Hayward
Head of Operations
The Executive
Committee
Alex Pawley
BSc (Hons), FCA
Chief Financial Officer
Sophie Pazzaglia
BSc (Hons), ACCA, ACG
Chief People Officer
& Group Secretary
David Sorrell
BSc (Hons), MSc
Treasurer
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We’re committed to a high level of Corporate
Governance and follow the 2024 UK Corporate
Governance Code (the Code) where relevant.
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 nine 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 28 and the corporate governance report
on page 60.
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
Internal Auditor, Chief People Officer and Group
Secretary and the Head of Compliance & Money
Laundering Reporting 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 Phillip McLelland (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
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.
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.
Remuneration and People Committee
The Remuneration and People 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. It also oversees delivery of our
People Strategy.
Nominations and Governance
Committee
The Nominations and Governance 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.
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Our Non-Executive Directors commit at least
30 days each year, while the Chair and Chairs of
Board committees commit additional time.
Our Directors have access to independent
professional advice should they need it.
Composition, succession and
evaluation
The Nominations and Governance Committee
is responsible for the recruitment of our Board
members and Senior Leadership team.
More details are included in the Nominations and
Governance Committee report on pages 80 to 81.
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 Leadership. 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, Risk Committee
report on pages 68 to 69 and risk management report
on pages 30 to 39.
Remuneration
More information can be found in the Remuneration
and People Committee report on pages 70 to 79.
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.
Evaluation of the Board and its
effectiveness
The Board effectiveness review is conducted
externally every three years, with the next external
review scheduled for March 2027. The most recent
review was carried out internally under the supervision
of the Society’s Chief People Officer and Group
Secretary. During the financial year, the Society
continued to ensure that the Board remains effective
with a focus on what matters most for the Society’s
long-term success. We are committed to continue
learning and growing together as a Board. Rather than
just relying on our existing skills and experience, we
are committed to ongoing training and development.
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The Board has strengthened its
commitment to diversity and
ongoing progression by joining
the Empowering People of Colour
(EPOC) programme. As part of this
initiative, an EPOC Fellow joins the
Board to ensure that a broader and
more diverse range of perspectives
is represented at Board level.
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. This 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 Chief Customer Officer, with the CEO and one of the Non-
Executive Directors in attendance.
We frequently refresh the people sitting on the Member Council
to make sure it continues to represent a broad cross-section of
our member base and fresh perspectives are put forward.
Over the last 12 months the Member Council has supported
the Board by providing valuable input across a range of topics
including; new mortgage propositions, initiatives to deepen our
presence within local communities, B Corp accreditation and
Executive Director remuneration.
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 1,700 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. In November 2025 the Employer Council
refreshed its membership, retaining some existing members and
also bringing some new perspectives onboard.
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.
Over the last 12 months our Employee Council has provided
colleague insight on matters such as ways of working, annual
colleague survey results and Executive Director remuneration.
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.
Our Board receives regular updates on our community activities.
Over the last 12 months we have continued to support the
Birmingham-based charity Jericho whose 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.
This year our charitable foundation has supported a range of
community initiatives. In June this included the launch of the
Safe Space Youth Café. Supporting the YMCA with funding
towards activity sessions for children and young adults. Donations
provided by members attending our AGM were also used to
support activities and equipment needed by the Cafe.
The 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.
Our branches operate at the heart of our local communities;
opening their doors in new ways through the course of the year to
support the communities they serve. This year branch spaces have
been used by local groups, charities and neighbours who need a
safe space to connect or host events.
Colleagues from across our network have also been out in our
communities with pop up events held across our region. Various
topics have been covered including fraud and scam awareness.
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 51 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 pages 17 to 18 of our strategic report.
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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
Our commitment to environmental sustainability is embedded
within pillar 5 of our business strategy meaning climate
considerations are 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 including
relevant information to support the assessment of physical and
transition risks. This year the Board were involved in reviewing
and approving our climate and environmental targets and
subsequently the onward trajectory of our climate strategy.
Sustainability principles are incorporated into our lending
policies, procurement, and operational decisions, ensuring a
long-term commitment to environmental responsibility.
We have completed our first full carbon footprint assessment,
providing us with an overview of our environmental impact across
Scope 1, 2 and 3 emissions. This information will be used to drive
meaningful reductions.
With various regulatory changes across the climate landscape
(notably the PRA’s revision of SS3/19 to SS5/25, and the proposed
roll-out of the UK Sustainability Reporting Standards) we have
actively engaged in consultations and working groups to ensure our
views are heard.
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 communications, 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 40 to 50.
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
and Governance
Audit
Risk
Remuneration
and People
Sara Bennison
8 (9)
5 (6)
4 (4)
Martin Boyle *
9 (9)
Russell Galley
1 (1)
1 (1)
Manjit Hayre *
8 (9)
Julie Hopes
1 (2)
0 (1)
1 (1)
John Maltby (Chair)
9 (9)
7 (7)
4 (4)
Nimisha Patel
9 (9)
6 (7)
4 (4)
6 (6)
Lynne Atkin
7 (8)
7 (7)
5 (5)
4 (4)
Alex Pawley *
9 (9)
Lynne Shamwana
4 (4)
1 (1)
2 (2)
David Thomas
9 (9)
5 (5)
4 (4)
6 (6)
2 (2)
Jonathan Westhoff *
9 (9)
Attendance records – Board and Board Committee meetings
Our Board met nine 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 Corporate Governance 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).
• In line with the FRC’s Corporate Governance Code section 2
Division of Responsibilities and good-practice guidance (Provision
221), the Society notes that the Audit Committee and the Risk
Committee were both chaired by David Thomas for a period
between July 2025 and March 2026, following the stepping down
of Audit Committee Chair Lynne Shamwana at the end of her term
and the Society’s efforts to identify a suitable replacement. This
temporary arrangement was discussed with, and approved by, the
Prudential Regulation Authority (PRA) in advance. The Society
ensured that appropriate safeguards and reporting structures
remained in place throughout this period to maintain effective
oversight.
During 2025/26, 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 2026
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Board diversity
and engagement
The experience and diversity of our Board
is essential to achieving our Purpose.
27%
Female = 3
73%
Male = 8
Gender split
<1
7
4
11
2
9
6
13
1
8
5
12
3
10
14
Board members
Years
The Board analysis detailed represents the Board as at 28 May 2026.
2
1
2
1
2
1
2
15
16
17
Tenure of Board members
Ethnic diversity
Ethnically
diverse = 2
Non-ethnically
diverse = 9
18%
82%
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Advanced or higher level skills/ experience
Indirect skills/experience
10
1
The output of the ‘Boards skills and experience’ is self-assessed by each individual Director.
Board skills and experience
2
9
Risk Management
Banking & Financial Services
Corporate Governance
Strategy
People Strategy
Major Change, Transformation & Projects
Technology & Data
Accounting & Financial Reporting Oversight
CEO Experience
Customer Insight
Community Engagement
Digital Customer Experience
Marketing & Brand
Sustainability & Environment
5
6
4
7
5
6
6
5
8
3
6
5
5
6
3
8
3
8
8
3
2
9
3
5
6
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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.
• 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.
Committee membership and
responsibilities
The Committee’s made up of:
• Phillip McLelland – Chair (joined the Committee
01/04/26)
• David Thomas (Interim Chair from 24/07/25 to
31/03/26)
• Nimisha Patel
• Russell Galley (joined the Committee 01/04/26)
Previous members within the reporting period:
• Lynne Shamwana (previous Chair, stepped down
from the Committee 23/07/25)
• Julie Hopes (stepped down from the Committee
31/05/25)
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.
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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.
Capitalisation of
intangible assets
• We’ve reviewed the IAS 38 rules for capitalising intangible assets and made sure that costs are appropriately
capitalised.
• We reviewed and will continue to review the key assumptions for the estimated useful lives of intangible assets to
ensure they remain appropriate, in particular the assets created as part of our digital transformation programme.
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.
Financial reporting oversight
The committee reviewed our financial
statements and interim report. The key
areas that needed more attention are in
the table below.
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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 30 to 39 and our
Risk Committee report on pages 68 to 69.
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 2025/26 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 2025/26.
This year, the main areas we reviewed were:
• Cyber security.
• 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 and 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 sixth 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 three 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.
David Thomas
Chair of Audit Committee (to 31/03/26)
28 May 2026
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Risk
Committee
report
• The Risk Committee’s
responsibilities and
activities over the year.
This report tells you about:
The Committee is responsible for:-
• Overseeing the development, implementation and
maintenance of the Society’s risk management
framework, including its risk appetite statements and
metrics, to ensure they are appropriate and align with
business strategy, current and emerging regulatory,
corporate governance and industry practice.
• Ensuring that all material and business risks are
properly identified and appropriate systems of
assessment, monitoring and controls are in place.
• Reviewing management reports which assess the
nature and extent of the current and emerging risks
facing the Society.
• Assessing reports of any material breaches and the
adequacy of proposed remedial action.
• Reviewing management information and making
recommendations for change as and when
appropriate.
• Analysing reports in relation to provisioning
that include model risk; agreement of economic
scenarios; adequacy of risk identification and
provisioning as relating to the adequacy of the
current and future capital position; and risk
mitigation strategies such as MIG.
• Reviewing risk appetite statements and metrics.
• Assessing the ICAAP, ILAAP and Recovery Plan and
recommending them for approval to the board.
You can find out more about how we manage risk in
our risk management report on pages 30 to 39.
Purpose of the Committee
The purpose of the Risk Committee is to assist
the Board of Directors in fulfilling its oversight
responsibilities by ensuring that the Society (and
its subsidiaries as applicable) has a robust risk
management framework to identify, assess, monitor
and control risk and that the risk functions are
appropriately independent, resourced and effective.
Committee membership and
responsibilities
The Committee’s made up of:
• David Thomas (Chair)
• Sara Bennison
• Nimisha Patel
• Lynne Atkin (joined the Committee 01/05/25)
• Lynne Shamwana (stepped down from the
Committee 23/07/25)
• Russell Galley (was a member until 05/05/25 and
re-joined the Committee 01/04/26)
• Phillip McLelland (joined the Committee 01/04/26)
All members are Non-Executive Directors. The Chief
Executive Officer and other members of ExCo will be
in attendance and our Chair and other Non-Executive
Directors, may also attend meetings.
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Key areas of focus
The Risk Committee met six times this year and their
key areas of focus were:-
• Reviewing principal risk appetite proposals and
risk appetite statements for the financial year.
• Approving the Compliance & Financial Crime Annual
Plan, Operational Risk Oversight Plan, the Financial
Crime & Anti-Money Laundering Annual Report
(MLRO Report) and macroeconomic scenario
assumptions.
• Reviewing for recommendation to the Board our
Cyber Security Strategy, Recovery Plan annual
update, various Level 1 policies (such as the Risk
Management Framework Policy, Residential New
Lending Policy and Governance and Policy Guidance)
and the ICAAP and ILAAP for 2025.
Risk Committee effectiveness
Every three years an external firm assesses
the Committee’s effectiveness, looking at time
management, processes, support, work and future
priorities. This was last completed in December 2024
with the conclusion positive and that the Committee is
operating effectively. 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 and presentations on current topics and
emerging risks.
David Thomas
Chair of Risk Committee
28 May 2026
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Remuneration
and People
Committee
report
• The Remuneration and
People 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:
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.
• Overseeing the Society’s People Strategy, including
culture, organisational development, talent
management, people value proposition, etc., to
ensure alignment with the overall Society vision and
strategic plan.
The Committee demonstrates the importance of our
members’ views on remuneration by making their
votes on the Remuneration Policy binding, rather than
advisory, every three years, accordingly, the Policy will
be subject to a binding vote in 2026.
An update has been made to reflect changes in
remuneration regulations under which variable pay
deferral arrangements for Executive Directors and other
Code Staff are no longer mandatory from the 2026/27
financial year onwards where threshold requirements
are not met. The Society is supportive of the reforms
that were made by regulators as it enables us to ensure
our executive pay is equitable, proportionate and
attracts and retains high calibre colleagues.
If you’d like a copy of the Committee’s
terms of reference, please email us at
communications@westbrom.co.uk
Purpose of the Committee
The key purpose of the Remuneration and People
Committee is to review colleagues’ pay and benefits
and to make sure our people policies and strategies
align with the Society’s values, risk appetites, along
with external legal and regulatory requirements.
During the year, the Committee’s remit was
expanded to include wider oversight of the
Society’s People Strategy. This enhanced scope
strengthens the Committee’s ability to take a
more integrated view of remuneration, culture and
people related matters, ensuring alignment with the
Society’s vision and strategic objectives.
Committee membership and
responsibilities
The Committee’s made up of:
• Lynne Atkin (Chair) (joined the Committee
01/05/25, Chair from 01/06/25)
• John Maltby
• Sara Bennison
• Russell Galley (was a member of the Committee
until 05/05/25, then re-joined 01/04/26)
Previous members within the reporting period:
• Julie Hopes (previous Chair) (stepped down from
the Committee 31/05/25)
• David Thomas (stepped down from the
Committee 24/10/25)
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.
*
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.
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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 and People
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.
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, awards may be subject
to deferral, to allow the Remuneration and People
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.
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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.
Remuneration policy and practice
Components of remuneration
The tables below show the Policy for Code Staff (other
than Non-Executive Directors).
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
In accordance with remuneration regulation, up to 40% of the
performance-related pay earned may be deferred over up to a
four-year period. Where deferral takes place, deferred payments are
made over up to 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), which is for a
period of seven years for Executive Directors, and five years for any
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.
Note:
Under the recently reformed remuneration regulations,
our Executive Directors do not meet the new thresholds for
performance-related pay deferral requirements.
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 2025/26
remained at 50% of basic salary.
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 allowance).
Opportunity
A pension contribution or cash allowance equal to the maximum
pension contribution available to all other colleagues (for 2025/26:
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.
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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 and
People 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.
Whilst Non-Executive Directors do not participate in
any performance-related pay scheme, their overall
performance is reviewed annually by the Chair.
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 and People 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.
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.
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.
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Employment conditions across 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.
Remuneration scenarios
The chart shows the breakdown of the component
parts of the remuneration package for Executive
Directors 2025/26 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.
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.
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 72, the
Remuneration and People Committee has the right
to allow an increase in performance-related award
to 75% if deemed appropriate, with effect from
financial year 2019/20).
Total Maximum Remuneration
Target Remuneration
Fixed Remuneration
Chief
Executive
Officer
Chief
Financial
Officer
Chief
Operating
Officer
Chief Risk
Officer
£803,000
£740,000
£556,000
£383,000
£512,000
£507,000
£349,000
£467,000
£470,000
£324,000
£434,000
£554,000
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 other Code Staff.
• Review of People Strategy and Culture.
• Society’s position on the recent regulatory and legal
changes such as joint PRA and FCA Remuneration
Reform and the Employment Rights Bill.
• 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.
• Society and individual performance-related pay
objectives for our Executive Directors and other
Code Staff (except Non-Executive Directors who
do not participate in any performance-related pay
scheme) for the 2026/27 financial year.
• Approach for Gender Pay Gap and Ethnicity Pay Gap
reporting.
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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.
The following Executive Director pay increases were
agreed:
• Chief Executive Officer 3%.
• Chief Financial Officer 6.35%.
• Chief Risk Officer 3%.
• Chief Operating Officer 3%.
Our Executive Directors’ remuneration, including
performance-related pay can be found on pages 76 to 77.
FIT Consultants reviewed Non-Executive Director fees
for next year. To stay competitive and keep a strong
Board, the Committee agreed to increase the fee for
Non-Executive fees by 3%, the fee for Chairs of
Board Committees by 5% and the fee for Board
Chair by 5.45%.
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 2026 gender and ethnicity pay gap
report on our website.
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 2026,
base salary increments applied to eligible colleagues
ranged between 1% and 32%. The upper end of this
range reflects the re-scoping of a role as part of a
team restructure.
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.
At 31 March 2026, one Director (2024/25: one
Director) or persons connected with Directors had
mortgage loans granted in the ordinary course
of business totalling £0.2m (2024/25: £0.2m). In
accordance with Section 68 of the Buildings Societies
Act 1986, a register containing details of loans and
transactions between the Society and its Directors is
maintained and will be available for inspection 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.
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Non-Executive Directors' fees (audited)
Executive Director remuneration – 2025/26 (audited)
Executive
Director
Basic
salary
£000
Performance
- related pay
(1)
£000
Pension
£000
Other
benefits
£000
Total
£000
Jonathan Westhoff
(Chief Executive Officer)
497
222
53
4
776
Martin Boyle
(Chief Operating Officer)
345
152
37
1
535
Alex Pawley
(Chief Financial Officer)
315
138
33
1
487
Manjit Hayre
(Chief Risk Officer)
292
125
31
1
449
Total
1,449
637
154
7
2,247
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 £9,000 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
2025/26
Fees
(1)
£000
2025/26
Benefits
(2)
£000
2024/25
Fees
£000
2024/25
Benefits
(2)
£000
John Maltby
(Society Chair since
01/03/21)
04/01/21
137
3
135
3
David Thomas
(Senior Independent
Director, Deputy Chair since
01/06/25, Risk Committee
Chair since 04/05/21 and
Audit Committee Chair
since 24/07/25)
01/08/20
78
2
69
2
Lynne Atkin
(Remuneration and People
Committee Chair since
01/06/25)
01/05/25
62
2
-
-
Sara Bennison
01/08/23
55
1
54
2
Nimisha Patel
01/06/24
55
2
45
2
Lynne Shamwana
(Audit Committee Chair
until 23/07/25)
01/02/19
23
1
69
2
Julie Hopes
(Remuneration and
People Committee Chair
and Deputy Chair until
31/05/25)
01/04/16
13
-
79
2
Russell Galley
(until 05/05/25)
01/05/24
5
-
50
2
David Dyer
(until 24/07/24)
01/09/21
-
-
18
1
Anne Gunther
(until 24/07/24)
01/11/21
-
-
18
1
Total
428
11
537
17
Notes:
1.
The Society’s Chair (John Maltby) and other Non-Executive Directors received a 1.85% increase in their
base fee from April 2025.
2.
In addition to the payment of fees, Non-Executive Directors receive expenses for travel and
accommodation in relation to their attendance at meetings.
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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
Martin Boyle
(Chief Operating Officer)
338
161
36
1
536
Alex Pawley
(Chief Financial Officer)
300
138
32
1
471
Manjit Hayre
(Chief Risk Officer)
286
127
30
1
444
Total
1,411
658
150
6
2,225
Executive
Director
% awarded
for Society
objectives
% awarded
for personal
objectives
Total %
awarded
Jonathan Westhoff
(Chief Executive Officer)
26.25%
18.50%
44.75%
Martin Boyle
(Chief Operating Officer)
26.25%
17.75%
44.00%
Alex Pawley
(Chief Financial Officer)
26.25%
17.50%
43.75%
Manjit Hayre
(Chief Risk Officer)
8.75%
34.25%
43.00%
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.
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.
Objectives
% of overall
award
potential
% of
award
achieved
Help our customers achieve a more financially secure future
•
Net lending, proportion of purpose led lending and NPS score
20%
15%
Strengthening our communities
•
New customers in West Midlands and Brand awareness
7.5%
5%
We are customer centric, and purpose driven
•
Colleagues enabled to perform and understanding their
contribution to our vision and strategy
10%
7.5%
Modernise our digital and technology estate
•
Digital transformation milestones, metrics and change plans
delivered to time, quality, cost and within risk appetite
30%
27.5%
Keep our business secure and sustainable for the future
•
Profit, cost efficiency, net interest margin, strategic risk
management and environmental sustainability
22.5%
22.5%
Overall assessment of Executive performance
10%
10%
Overall Society objectives
100%
87.5%
Our objectives for the year include:
The Remuneration policy gives us the option to increase Executive Directors’
maximum performance-related pay award up to 75% of basic salary.
This year (2025/26), the total performance-related pay for our Executive Directors is:
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Deferred performance
-related pay
Previously, part of the Executive
Directors’ performance-related pay was
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.
According to the recently reformed
remuneration regulations, our Executive
Directors and other Code Staff do not
meet the threshold requirements for
performance-related pay deferrals to be
enforced.
The Remuneration Policy has been
updated to ensure compliance with the
regulation.
Deferred performance-related payments
for relevant prior years have been
approved for payment at the end of the
2025/26 financial year. These payments
are for our:
• Chief Executive Officer.
• Chief Financial Officer.
• Chief Risk Officer.
• Chief Operating Officer.
• Former Group Finance &
Operations Director.
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.
Payable in future years
Payable after year ending
Executive Director
Deferred from
2025/26
£000
2026/27
£000
2027/28
£000
2028/29
£000
2029/30
£000
Jonathan Westhoff
2021/22
17
-
-
-
-
2022/23
19
19
-
-
-
2023/24
22
22
22
-
-
2024/25
23
23
23
23
-
2025/26
-
22
22
22
22
Total
81
86
67
45
22
Ashraf Piranie
(until 31/12/2022)
2021/22
12
-
-
-
-
2022/23
10
10
-
-
-
Total
22
10
-
-
-
Manjit Hayre
2021/22
1
7
-
-
-
-
2022/23
10
10
-
-
-
2023/24
12
12
12
-
-
2024/25
13
13
13
13
-
2025/26
-
13
13
13
13
Total
42
48
38
26
13
Alex Pawley
2022/23
2
6
6
-
-
-
2023/24
12
12
12
-
-
2024/25
14
14
14
14
-
2025/26
-
14
14
14
14
Total
32
46
40
28
14
Martin Boyle
2023/24
15
15
15
-
-
2024/25
16
16
16
16
-
2025/26
-
15
15
15
15
Total
31
46
46
31
15
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Chief Executive Officer (CEO) pay ratio
Statement on member voting at the 2025 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 2026.
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 2026/27
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.
Lynne Atkin
Chair of Remuneration and People Committee
28 May 2026
Year
Method
25th
Percentile
Median
75th
Percentile
2025-26
Option A
29:1
22:1
15:1
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
27,194
35,916
52,414
Salary
25,080
33,847
48,000
Vote
Votes
for
% Votes for
Votes against
Withheld*
To approve
the Directors’
Remuneration Report
9,567
92.86%
736
246
* The withheld figures are not included in the calculation of % ‘votes for’.
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Nominations
and Governance
Committee report
• The Nominations and
Governance Committee’s
responsibilities and
activities over the year.
This report tells you about:
Purpose of the Committee
The purpose of the Nominations and Governance
Committee is to ensure the composition of Board is
of the appropriate size, skill, experience and diversity
to enable it to fulfil its regulatory and corporate
governance responsibilities. The scope and objectives
of this Committee have been expanded to include the
Society’s broader governance framework, which is now
reflected in the updated Terms of Reference.
Committee membership and
responsibilities
The Committee’s made up of:
• John Maltby (Chair)
• Lynne Atkin (joined the Committee 01/05/25)
• Nimisha Patel
• Phillip McLelland (joined the Committee on
01/04/26)
Previous members within the reporting period:
• Julie Hopes (stepped down from the Committee
31/05/25)
• David Thomas (stepped down from the Committee
on 01/03/26)
All members are Non-Executive Directors. Our Chief
Executive Officer 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 Senior Leadership team.
• Ensuring the Board is the right size and has the skills
and experience to govern the Society.
• Overseeing the corporate governance framework for
the Board and its Committees, including adherence
to the Code, regulatory rules and disclosures and
ensure it provides effective mechanisms for the
oversight and governance of the Society’s strategy
and objectives.
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 seven 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.
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
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.
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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 Leadership
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 and Governance Committee
28 May 2026
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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
2026. 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 64 in the
Corporate Governance report.
In addition, the following Directors served for part of
the financial year:
• Russell Galley (resigned 05/05/25) - had stepped
down from the Board for personal reasons; however,
he was reappointed as a Non-Executive Director with
effect from 1st April 2026
• Julie Hopes (resigned 31/05/25)
• Lynne Shamwana (resigned 23/07/25)
• Lynne Atkin (appointed 01/05/25)
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 2026 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 welcome on page 7, the CEO’s review
on pages 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 £33.6m (2024/25: £36.5m). Our
capital position can be found in the financial review
of the year on pages 24 to 28 and the annual business
statement on page 167.
Country-by-country reporting
Information in respect of the Capital Requirements
(country-by-country reporting) Regulations 2013 can
be found on page 163.
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 30 to 39. In
addition to these principal risks there are, because
of the 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, capital and liquidity
risks. The Board manages these risks through its
risk management framework, Board policies and the
Treasury, Finance 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 31 to 34 of the financial
statements. Any other emerging risks concerning the
Society can be found in the risk management section
on pages 30 to 50.
Mortgage arrears
At 31 March 2026 there were 103 residential and
8 commercial mortgage accounts (2024/25: 123
residential and 7 commercial mortgage accounts)
where payments were 12 months or more in arrears.
The total amount outstanding on these accounts
was £111.1m (2024/25: £105.4m), of which £99.3m
(2024/25: £91.1m) related to commercial mortgage
accounts. The total amount outstanding represented
1.95% (2024/25: 1.92%) of mortgage balances. The
amount of arrears was £21.9m (2024/25: £18.7m),
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
We agree on payment terms before trading with a
supplier and to pay according to the contractual and
other legal obligations. At 31 March 2026, the creditors’
days figure was 35 days (2024/25: 27 days).
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 pages 17 to 18. During the year,
the Society made charitable donations of £2,976
(2024/25: £3,671) of which £1,467 was donated to
YMCA Black Country (2024/25: £1,592 to Jericho)
from the number of votes received at the 2025 Annual
General Meeting (AGM).
No donations were made for political purposes.
We encourage our colleagues to take part in
community affairs, we do not support any of our
colleagues in the pursuit of political activity.
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.
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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.
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.
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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 to 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 50,
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 6 to 28. Our
financial position, including our capital structure, risk
management and control processes for managing
exposure to credit, market, capital, liquidity and
operational risk are described in the strategic report
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on pages 24 to 28 and the risk management report on
pages 30 to 39.
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 2029.
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 Auditors are 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 Auditors are 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 60 to 61.
On behalf of our Board,
John Maltby
Chair
28 May 2026
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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
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Report on the audit of the financial statements
Opinion
In our opinion, West Bromwich Building Society’s Group financial statements and
Society financial statements (the “financial statements”):
• give a true and fair view of the state of the Group’s and of the Society’s affairs as
at 31 March 2026 and of the Group’s and the Society’s income and expenditure
and the Group’s and the Society’s cash flows for the year then ended;
• have been properly prepared in accordance with UK-adopted international
accounting standards; and
• have been prepared in accordance with the requirements of the Building
Societies Act 1986.
We have audited the financial statements, included within the Annual Report and
Accounts (the “Annual Report”), which comprise:
• the Group and Society statements of financial position as at 31 March 2026;
• the Group and Society income statements and statements of comprehensive
income, the Group and Society statements of cash flows, and the Group and
Society statements of changes in members’ interests and equity for the year
then ended;
• and the notes to the financial statements, comprising material accounting policy
information and other explanatory information.
Our opinion is consistent with our reporting to the Audit Committee.
Separate opinion in relation to international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union
As explained in note 1 to the financial statements, the Group, in addition to
applying UK-adopted international accounting standards, has applied international
financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union.
In our opinion, the Group financial statements have been properly prepared in
accordance with international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union.
Basis for opinions
We conducted our audit in accordance with International Standards on Auditing
(UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are
further described in the Auditors’ responsibilities for the audit of the financial
statements 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 group in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK,
which includes the FRC’s Ethical Standard applicable to public interest entities
and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
Other than those disclosed in the note 6 to the financial statements, we have
provided no non-audit services to the Group in the period from 1 April 2025 to
31 March 2026.
Independent Auditors’ report to the members of
West Bromwich Building Society
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Our audit approach
Overview
Audit scope
• We conducted all of our audit work over the Group and its components using
one audit team, using information obtained from the Group’s 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 seven other entities. Our audit procedures
provide coverage over 94.7% of the interest income of the Group and 85.1% of
the total assets of the Group.
Key audit matters
• The application of key judgements and assumptions in relation to applying
expected credit loss provisioning to loans and advances to customers.
(Group & Society)
Materiality
• £4.7m (2025: £4.5m) - Group financial statements
• Based on approximately 1% of Group net assets
• £3.85m (2025: £3.8m) - Society financial statements
• Based on approximately 1% of net assets
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of
material misstatement in the financial statements. 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.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement,
were of most significance in the audit of the financial statements 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 financial statements 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.
Risk of inappropriate manual adjustments made in the hedging process, which was
a key audit matter last year, is no longer included because of simplifications made
by management in the prior period in respect to the manual adjustments required
to be posted to system outputs to achieve compliance with the accounting
standards, reducing the inherent risk.
Risk of material misstatement in the valuation of investment property through
inappropriate assumptions applied in the year end valuation, which was a key
audit matter last year, is no longer included because management have continued
to rationalise the portfolio, further decreasing magnitude of the exposure.
Concentration risk has also reduced compared to the prior period, including a
decreased exposure to flats and other less homogeneous asset classes, reducing
the inherent risk.
Independent Auditors’ report to the members of West Bromwich Building Society
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Key audit matter
How our audit addressed the key audit matter
The application of key judgements and assumptions in relation to applying
expected credit loss provisioning to loans and advances to customers.
(Group & Society)
The Group and Society hold expected credit loss (‘ECL’) provisions against loans
and advances to customers in accordance with IFRS 9.
Determining ECL involves management judgement and is subject to a high
degree of estimation uncertainty.
Management makes various assumptions when estimating ECL. We performed
a risk assessment to identify those assumptions with significant levels of
management judgement and for which variations had the most material impact
on ECL;
• In relation to the residential portfolio, assumptions in the forward looking
economic scenarios and their probability weightings used within the ECL
calculation. The level of estimation uncertainty in this area has remained
high as a result of uncertainties in the macroeconomic and geopolitical
environment. (Group & Society)
• In relation to the commercial portfolio, assumptions in determining the ECL on
individually assessed exposures, specifically around cash flow assumptions and
where applicable, valuation of collateral. (Group only)
See notes 14 and 32 to the financial statements for the IFRS 9 impairment
disclosures.
We performed the following procedures to address the areas of judgement and
estimates used in the calculation of residential ECL:
• We engaged our economic experts in assessing the reasonableness of the
assumptions in the forward-looking economic scenarios and probability
weightings assigned to these scenarios. We focused on whether the scenarios
adequately captured future potential economic risks, such as risks caused by
the geopolitical environment. These assessments considered the sensitivity
of ECLs to variations in the severity and probability weighting of economic
scenarios.
We performed the following procedures to address the areas of judgement and
estimates used in the calculation of commercial ECL:
• In respect to a sample of individually assessed commercial exposures, we
assessed the significant assumptions used to estimate the discounted cash
flow projections, and where appropriate we involved valuation experts
to assess the underlying collateral. We further considered whether the
judgements made in selecting the significant assumptions would give rise to
indicators of possible management bias.
Finally, we tested the Credit Risk disclosures made in the Annual Report.
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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 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). The Group’s
mortgage book is predominantly secured on UK residential owner-occupied
property. The Group is formed of the Society, subsidiaries (West Bromwich
Mortgage Company Limited, West Bromwich Homes Limited, West Bromwich
Commercial Limited, Insignia Finance Limited and White Label Lending Limited)
and several structured entities which administer the Group’s funding programmes.
Throughout our risk assessment, we tailored our determination as to which entities
and balances we needed to perform testing over to support our Group and Society
opinions, taking into account the group structure, accounting processes and
controls. The risk of material misstatement can be reduced to an acceptable level
by testing the most financially significant entities within the Group and those that
drive particular significant risks identified as part of our risk assessment, providing
us with sufficient coverage for each financial statement line item ('FSLI').
We performed a full scope audit of the significant component, namely West
Bromwich Building Society (Society). West Bromwich Mortgage Company
Limited, West Bromwich Homes Limited and West Bromwich Commercial Limited,
identified as being individually financially significant in respect of only one or more
account balances (Loans & Advances to customers, associated expected credit
losses, Investment Property and Rental Income) were non-significant components
and thus subject to specific audit procedures over those account balances.
All audit work over the Group and its components was performed by a single
audit team.
Independent Auditors’ report to the members of West Bromwich Building Society
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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 financial
statements
Society financial
statements
Overall materiality
£4.7m (2025: £4.5m)
£3.85m (2025: £3.8m)
How we determined it
Approximately 1% of
net assets.
Approximately 1% of
net assets.
Rationale for
benchmark applied
We believe that the subscribed capital and reserves
(“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 £2.8m to £4.5m.
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% (2025: 75%) of
overall materiality, amounting to £3.6m (2025: £3.4m) for the Group financial
statements and £2.9m (2025: £2.9m) for the Society financial statements.
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 (Group and Society) (2025: £0.2m) as well
as misstatements below those amounts, that, in our view, warranted reporting for
qualitative reasons.
Independent Auditors’ report to the members of West Bromwich Building Society
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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:
• We reviewed and challenged the key assumptions used by the directors in their
determination of the going concern of the Group and Society;
• We reviewed management’s stress test scenarios and considered whether the
Group and Society would continue to operate above required regulatory capital
and liquidity minima during times of stress;
• We considered as to whether our audit work had identified events or conditions
which may give rise to uncertainty of the Group and Society’s future ability to
trade; and
• We reviewed legal and regulatory correspondence, and met with the PRA, 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 when the financial
statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use
of the going concern basis of accounting in the preparation of the financial
statements 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 financial statements and our auditors’ report thereon. The directors are
responsible for the other information. Our opinion on the financial statements
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 financial statements, our responsibility is to
read the other information and, in doing so, consider whether the other information
is materially inconsistent with the financial statements 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
financial statements 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.
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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 the 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 2026
is consistent with the accounting records and the financial statements; 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.
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Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ responsibilities in respect of the Annual
Report, the Annual Business Statement, the Directors’ Report and Annual Accounts,
the directors are responsible for the preparation of the financial statements 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 financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing
the Group’s and 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 Group or the Society
or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements 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
financial statements.
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 Group and 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 financial statements. We also considered those
laws and regulations that have a direct impact on the financial statements such
as the Building Societies Act 1986. We evaluated management’s incentives and
opportunities for fraudulent manipulation of the financial statements (including the
risk of override of controls) and determined that the principal risks were related
to the posting of inappropriate manual journal entries to manipulate financial
performance and management bias in significant accounting estimates. Audit
procedures performed by the engagement team included:
• Review of internal audit findings throughout the year;
• Reading key correspondence with the Financial Conduct Authority and Prudential
Regulation Authority;
• Incorporation of an element of unpredictability in our testing through altering the
nature, timing and/or extent of work performed;
• Challenging assumptions and judgements made by management in their
significant accounting estimates; and
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• Identifying and testing journal entries, in particular any journal entries posted
to unusual account combinations based on our understanding of usual business
operations.
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 financial
statements. 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.
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 financial
statements 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 financial statements 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.
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Appointment
Following the recommendation of the audit committee, we were appointed by
the members on 20 September 2020 to audit the financial statements for the
year ended 31 March 2021 and subsequent financial periods. The period of total
uninterrupted engagement is 6 years, covering the years ended 31 March 2021
to 31 March 2026.
Other matter
The society is required by the Financial Conduct Authority Disclosure Guidance
and Transparency Rules to include these financial statements in an annual financial
report prepared under the structured digital format required by DTR 4.1.15R –
4.1.18R and filed on the National Storage Mechanism of the Financial Conduct
Authority. This auditors’ report provides no assurance over whether the structured
digital format annual financial report has been prepared in accordance with those
requirements.
Nikhil Dhiri
(Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
28 May 2026
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Income Statements
for the year ended 31 March 2026
Note(s)
Group
2026
£m
Group
2025
£m
Society
2026
£m
Society
2025
Restated*
£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
(199.5 )
(220.2 )
(206.6 )
(222.6 )
Net interest receivable
Fees and commissions receivable
Other operating income
4
Fair value gain on financial instruments
5
Total income
Administrative expenses
6
(64.0 )
(57.6 )
(61.1 )
(54.9 )
Depreciation and amortisation
16,18
(8.6 )
(7.0 )
(8.6 )
(7.0 )
Operating profit before revaluation gains, impairment and provisions
Gains on investment properties
17
Impairment on loans and advances
14
(5.0 )
(6.9 )
(0.6 )
(0.3 )
Provisions for liabilities
24
Provisions against investments in subsidiary undertakings
15
(5.1 )
(8.0 )
Profit before tax
Taxation
9
(10.2 )
(6.9 )
(7.6 )
(8.2 )
Profit for the financial year
The profit for the year derives wholly from continuing operations.
*Society 2025 "Fair value gain on financial instruments" and "Taxation" have been restated as explained in note 39.
The notes on pages 105 to 162 form part of these financial statements.
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Statements of Comprehensive Income
for the year ended 31 March 2026
Note
Group
2026
£m
Group
2025
£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 taken to equity
(0.5 )
(0.6 )
Taxation
29
Items that will not subsequently be reclassified to profit or loss
Actuarial losses on defined benefit assets
30
(0.1 )
(4.5 )
Taxation
29
Other comprehensive expense for the financial year, net of tax
(0.5 )
(3.8 )
Total comprehensive income for the financial year
Note
Society
2026
£m
Society
2025
Restated*
£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 taken to equity
(0.5 )
(0.6 )
Taxation
29
Items that will not subsequently be reclassified to profit or loss
Actuarial losses on defined benefit assets
30
(0.1 )
(4.5 )
Taxation
29
Other comprehensive expense for the financial year, net of tax
(0.5 )
(3.8 )
Total comprehensive income for the financial year
*Society 2025 "Profit for the financial year" has been restated as explained in note 39.
The notes on pages 105 to 162 form part of these financial statements.
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*Society 2025
"Amounts due to other customers", "Current tax liabilities" and "General reserves" have been restated as explained in note 39.
The accounting policies and notes on pages 105 to 162 form part of these financial statements.
Approved by the Board of Directors on 28 May 2026 and signed on its behalf by:
John Maltby
Chair
Jonathan Westhoff
Chief Executive Officer
Alex Pawley
Chief Financial Officer
Statements of Financial Position
at 31 March 2026
Note
Group
2026
£m
Group
2025
£m
Society
2026
£m
Society
2025
Restated*
£m
Assets
Cash and balances with the Bank of England
10
Loans and advances to credit institutions
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
16
Investment properties
17
Property, plant and equipment
18
Retirement benefit asset
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
26
Subscribed capital
25
General reserves
Revaluation reserve
Fair value reserve
Total members' interests and equity
Total members' interests, equity and liabilities
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Statements of Changes in Members’ Interests and Equity
for the year ended 31 March 2026
Group
Core capital
deferred
shares
£m
Subscribed
capital
£m
General
reserves
£m
Revaluation
reserve
£m
Fair value
reserve
£m
Total
£m
At 1 April 2025
Profit for the financial year
Other comprehensive expense for the year (net of tax)
Retirement benefit assets
(0.1 )
(0.1 )
Realisation of previous revaluation gains
(0.1 )
Fair value through other comprehensive income investments
(0.4 )
(0.4 )
Total other comprehensive expense
(0.1 )
(0.4 )
(0.5 )
Total comprehensive income for the year
(0.1 )
(0.4 )
Distribution to the holders of core capital deferred shares
(5.8 )
(5.8 )
At 31 March 2026
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
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Statements of Changes in Members’ Interests and Equity
for the year ended 31 March 2026
Society
Core capital
deferred
shares
£m
Subscribed
capital
£m
General
reserves
£m
Revaluation
reserve
£m
Fair value
reserve
£m
Total
£m
At 1 April 2025
Profit for the financial year
Other comprehensive expense for the year (net of tax)
Retirement benefit assets
(0.1 )
(0.1 )
Realisation of previous revaluation gains
(0.1 )
Fair value through other comprehensive income investments
(0.4 )
(0.4 )
Total other comprehensive expense
(0.1 )
(0.4 )
(0.5 )
Total comprehensive income for the year
(0.1 )
(0.4 )
Distribution to the holders of core capital deferred shares
(5.8 )
(5.8 )
At 31 March 2026
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 (restated)*
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 (restated)*
(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 (restated)*
*Society 2025 "Profit for the financial year" has been restated as explained in note 39.
The notes on pages 105 to 162 form part of these financial statements.
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Statements of Cash Flows
for the year ended 31 March 2026
Group
2026
£m
Group
2025
£m
Society
2026
£m
Society
2025
£m
Net cash inflow/(outflow) from operating
activities (see note 40)
(491.7 )
(101.4 )
(184.4 )
Cash flows from investing activities
Purchase of investment securities
(356.1 )
(333.6 )
(356.1 )
(524.7 )
Proceeds from disposal of investment securities
Proceeds from disposal of investment properties
Purchase of property, plant and equipment,
intangible assets and investment properties
(14.1 )
(6.3 )
(12.5 )
(5.6 )
New funding to subsidiaries
(39.3 )
(48.1 )
Repayment of funding from subsidiaries
Net cash (outflow)/inflow from investing activities
(48.5 )
(74.6 )
(123.8 )
Cash flows from financing activities
Net (repayment)/issuance of debt securities
(51.1 )
Interest paid on subordinated liabilities
(0.2 )
(0.2 )
(0.2 )
(0.2 )
Payment of lease liabilities
(0.4 )
(0.5 )
(0.4 )
(0.5 )
Distribution to the holders of core capital
deferred shares
(5.8 )
(5.8 )
(5.8 )
(5.8 )
Repurchase of subscribed capital
(3.4 )
(3.4 )
Net cash (outflow)/inflow from financing activities
(57.5 )
(6.4 )
(9.9 )
Net increase/(decrease) in cash
(289.3 )
(318.1 )
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Group
2026
£m
Group
2025
£m
Society
2026
£m
Society
2025
£m
Cash in hand (including Bank of England
Reserve account)
Loans and advances to credit institutions
Investment securities
The Group’s loans and advances to credit institutions include £28.8 m (2024/25: £28.3 m) of balances belonging
to the Society’s structured entities which are not available for general use by the Society.
For the purposes of the statements of cash flows, cash and cash equivalents comprise the following balances
with up to 90 days original maturity:
The notes on pages 105 to 162 form part of these financial statements.
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Notes to the Accounts for the year
ended 31 March 2026
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’s accounting policies. IFRS 18 Presentation and Disclosure in Financial Statements was issued
in April 2024 and is effective for periods beginning on or after 1 January 2027. This standard sets out the
requirements for the presentation and disclosure of information in financial statements. The Company is
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 entity - Group
As outlined further below, management has judged that the securitisation Sandwell Commercial Finance No.
2 Plc does not meet the consolidation criteria set out in IFRS 10.
The principal activity of the entity is that of holding a non-core commercial mortgage portfolio comprising
assets transferred when the securitisation was established. Whilst the structured entity is 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. 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 this entity, 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 entity.
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1. Accounting policies
(continued)
The table below indicates the interests in the unconsolidated structured entity.
| 31 March 2026 | 31 March 2025 | |||||||
Maximum | Maximum | |||||||
exposure | exposure | |||||||
Notes | to loss in | Notes | to loss in | |||||
Deemed | held in | unconsolidated | Deemed | held in | unconsolidated | |||
loan | Mortgages | structured | structured | loan | Mortgages | structured | structured | |
balances | transferred | entity | entity | balances | transferred | entity | entity | |
£m | £m | £m | £m | £m | £m | £m | £m | |
Group | 4.5 | 4.1 | 0.3 | 0.3 | 4.8 | 4.5 | 0.3 | 0.3 |
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 SPPI 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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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 tool
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. 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.
Total PMAs for 2025/26 of £2.5m (2024/25 £3.3m) 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 concentration risk applied to a sub-population of BTL mortgages on flats.
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 and unemployment. 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 2026 and
31 March 2025.
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 tool 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 analysis. 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 2026 and 31 March 2025 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 assets expires. The Group also derecognises financial assets that it transfers to another party
provided the transfer of the assets also transfers the right to receive the cash flows of the financial assets
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) and subscribed capital 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
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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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 |
Up to 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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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 has been funded by contributions from the Society at rates assessed by independent actuaries,
with these contributions 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
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. 2 Plc, management judge that this entity no longer meets
the consolidation criteria set out in IFRS 10. In particular, the Group’s limited exposure to credit losses in
this entity (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 and tools 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 and tools incorporate four macroeconomic forecasts (central, upside,
downside and stress), each comprising a number of economic variables considered to be credit risk drivers.
Economic scenarios and weightings are regularly reviewed and updated to reflect the changing economic
conditions to which the Group is exposed.
Impairment on loans and advances – macroeconomic scenarios
The following table indicates the main economic variables included within the IFRS 9 macroeconomic
scenarios at 31 March 2026 and the associated weightings, along with the sensitivity of the Group
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 2025 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 at 31 March 2026:
(Decrease)/ | ||||||||||
(Decrease)/ | Increase in | |||||||||
Increase in | provision with | |||||||||
| Current scenario (%) | provision with | 10% increase | ||||||||
100% scenario | in scenario | |||||||||
Scenario | weighting | weighting* | ||||||||
weighting | Metric | 2026/27 | 2027/28 | 2028/29 | 2029/30 | 2030/31 | 5 year average | £m | £m | |
Bank Rate | 3.8 | 3.8 | 3.8 | 3.8 | 3.8 | 3.8 | ||||
Central | HPI | 1.5 | 1.6 | 2.9 | 3.0 | 3.2 | 2.4 | |||
| scenario | 55% | Unemployment | 5.5 | 5.2 | 5.1 | 4.9 | 4.9 | 5.1 | (6.7) | - |
GDP | 0.7 | 1.3 | 1.3 | 1.4 | 1.5 | 1.2 | ||||
Bank Rate | 3.5 | 3.5 | 3.5 | 3.3 | 3.0 | 3.3 | ||||
Upside | HPI | 3.3 | 3.9 | 4.1 | 5.1 | 5.1 | 4.3 | |||
| scenario | 5% | Unemployment | 4.9 | 4.7 | 4.6 | 4.4 | 4.2 | 4.6 | (8.9) | (0.2) |
GDP | 1.4 | 1.7 | 1.8 | 1.7 | 1.9 | 1.7 | ||||
Bank Rate | 6.0 | 5.3 | 4.0 | 3.0 | 2.5 | 4.2 | ||||
| Downside | HPI | (5.3) | (5.0) | (2.0) | 1.7 | 2.0 | (1.7) | |||
| scenario | 30% | Unemployment | 6.0 | 6.6 | 6.0 | 6.3 | 6.6 | 6.3 | 6.4 | 1.4 |
GDP | (0.6) | (0.4) | 1.1 | 1.2 | 1.2 | 0.5 | ||||
Bank Rate | 6.5 | 0.5 | 1.0 | 1.5 | 2.0 | 2.3 | ||||
| Stress | HPI | (9.4) | (12.1) | (9.5) | 7.4 | 6.9 | (3.3) | |||
| scenario | 10% | Unemployment | 6.3 | 8.2 | 8.1 | 7.3 | 6.5 | 7.3 | 21.9 | 2.9 |
GDP | (4.3) | - | 1.4 | 1.4 | 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 at 31 March 2025:
(Decrease)/ | ||||||||||
(Decrease)/ | Increase in | |||||||||
Increase in | provision with | |||||||||
Year ended 31 March 2025 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 | |||
scenario | 5% | Unemployment | 4.1 | 3.8 | 3.9 | 4.1 | 4.1 | 4.0 | (11.5) | (0.3) |
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) | |||
scenario | 30% | Unemployment | 5.3 | 6.2 | 6.0 | 5.8 | 6.1 | 5.9 | 6.1 | 1.5 |
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) | |||
scenario | 15% | Unemployment | 5.7 | 8.4 | 8.2 | 7.5 | 6.8 | 7.3 | 21.9 | 3.1 |
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)
Impairment on loans and advances – residential mortgages (core and second charge)
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 previous tables and the
forecast of future house price inflation (HPI). The sensitivity of the residential provision calculations to the
HPI growth assumption in the current and prior year is as follows:
(Decrease)/increase in |
(Decrease)/increase in |
||
impairment provision |
impairment provision |
||
Change to current |
2026 |
2025 |
|
Assumption |
assumption |
£m |
£m |
HPI growth |
Increase of 5.0% |
(0.5) |
(0.4) |
HPI growth |
Decrease of 5.0% |
0.6 |
0.6 |
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 55%, 5%, 30% and 10%
respectively (2024/25: 50%, 5%, 30% and 15% respectively).
In addition to the scenario weightings and account-specific factors that impact cash flows, the key
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 calculation, compensating economic
hedge arrangements would substantially offset the provision movement in profit or loss terms with an
opposing fair value movement.
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 |
||
2026 |
2025 |
||
Assumption |
Change to current assumption |
£m |
£m |
Increase weighting by 10% (with |
|||
Upside scenario |
a corresponding reduction to the |
(0.1) |
(0.1) |
weighting |
central scenario) |
||
Downside |
Increase weighting by 10% (with |
||
scenario |
a corresponding reduction to the |
0.7 |
1.0 |
weighting |
central scenario) |
||
Increase weighting by 10% (with |
|||
Stress scenario |
a corresponding reduction to the |
1.2 |
1.5 |
weighting |
central scenario) |
||
Exit yield |
|||
requirement |
Increase of 0.5% across all scenarios |
0.6 |
0.9 |
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
Group |
Group |
Society |
Society |
|
2026 |
2025 |
2026 |
2025 |
|
£m |
£m |
£m |
£m |
|
On financial assets not at fair value through |
||||
profit or loss: |
||||
Loans fully secured on |
||||
| residential property |
252.8 |
233.8 |
218.5 |
185.3 |
Other loans |
||||
Connected undertakings |
- |
- |
34.0 |
44.7 |
Loans fully secured on land |
5.0 |
4.0 |
- |
- |
Investment securities |
21.2 |
20.2 |
29.0 |
25.3 |
Other liquid assets |
10.2 |
21.9 |
9.3 |
21.4 |
On financial assets at fair value through |
||||
profit or loss: |
||||
Loans fully secured on |
||||
| residential property |
0.7 |
0.8 |
0.7 |
0.8 |
Net Income on derivative |
||||
| financial instruments |
13.7 |
35.7 |
11.5 |
32.8 |
Total interest receivable and similar income |
303.6 |
316.4 |
303.0 |
310.3 |
Interest receivable includes: |
||||
Income from fixed income securities |
4.9 |
2.9 |
4.9 |
2.9 |
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2. Interest receivable and similar income
(continued)
During the year ended 31 March 2026, the total interest receivable and similar income calculated using the
effective interest method was: Group £268.0m (2024/25: £259.7m) and Society £260.3m (2024/25: £251.4m)
for financial assets held at amortised cost, and Group £21.2m (2024/25: £20.2m) and Society £29.0m (2024/25:
£25.3m) for financial assets held at fair value through other comprehensive income. 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 £4.3m (2024/25: £5.1m) and Society £2.4m (2024/25: £2.4m) and interest accrued on impaired
commercial mortgage assets: Group £1.7m (2024/25: £4.3m) and Society £nil (2024/25: £nil). For the purposes of
Group | Group | Society | Society | |
2026 | 2025 | 2026 | 2025 | |
£m | £m | £m | £m | |
On financial liabilities not at fair value | ||||
through profit or loss: | ||||
Shares held by individuals | 171.3 | 180.6 | 171.4 | 180.6 |
Deposits from banks and other deposits | 15.7 | 31.8 | 17.2 | 31.8 |
Debt securities in issue | 12.3 | 7.6 | - | - |
Subordinated liabilities | 0.2 | 0.2 | 0.2 | 0.2 |
Deemed loans | - | - | 17.8 | 10.0 |
Total interest expense and similar charges | 199.5 | 220.2 | 206.6 | 222.6 |
Group | Group | Society | Society | |
2026 | 2025 | 2026 | 2025 | |
£m | £m | £m | £m | |
Other operating income includes: | ||||
Rent receivable on investment property | 7.1 | 7.1 | - | - |
Operating expenses on investment | ||||
property | (2.6) | (3.2) | - | - |
Pension fund net interest (note 30) | - | 0.3 | - | 0.3 |
Dividends received from Group | ||||
undertakings | - | - | 3.0 | - |
Total other operating income | 4.5 | 4.2 | 3.0 | 0.3 |
Group | Group | Society | Society | |
2026 | 2025 | 2026 | 2025 | |
Restated* | ||||
£m | £m | £m | £m | |
Fair value hedges | ||||
Derivatives designated as fair value | ||||
| hedges | 7.8 | (18.0) | 7.8 | (18.0) |
Adjustments to hedged items in fair value | ||||
| hedge relationships | (8.0) | 20.1 | (8.0) | 20.1 |
Fair value (loss)/gain on hedge accounting | (0.2) | 2.1 | (0.2) | 2.1 |
Other derivatives | 0.8 | 2.4 | 2.5 | (0.2) |
Financial instruments mandatorily at fair | ||||
| value through profit or loss | 0.2 | (0.1) | 0.2 | (0.1) |
Total fair value gain on financial | ||||
| instruments | 0.8 | 4.4 | 2.5 | 1.8 |
Group | Group | Society | Society | |
2026 | 2025 | 2026 | 2025 | |
£m | £m | £m | £m | |
Staff costs | ||||
Wages and salaries | 29.3 | 29.0 | 28.7 | 28.3 |
Social security costs | 3.6 | 2.9 | 3.5 | 2.9 |
Other pension costs | 3.1 | 2.5 | 3.1 | 2.4 |
Other administrative expenses | 28.0 | 23.2 | 25.8 | 21.3 |
64.0 | 57.6 | 61.1 | 54.9 | |
Other administrative expenses include: | ||||
Remuneration of auditors | ||||
(including VAT) | ||||
Audit of these financial statements | 0.5 | 0.5 | 0.5 | 0.5 |
Audit of the subsidiary financial | ||||
| statements | 0.3 | 0.3 | - | - |
Wages and salaries include £0.2m (2024/25: £0.2m) 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 (2024/25: £11,000) in respect of
audit-related assurance services and £nil (2024/25: £nil) in respect of other assurance services, in each case
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Group and | Group and | |
Society | Society | |
2026 | 2025 | |
The average number of employees employed throughout the year was: | ||
Full time | 544 | 542 |
Part time | 196 | 197 |
740 | 739 | |
Building Society | ||
Central administration (Society and subsidiaries) | 575 | 567 |
Branches | 165 | 172 |
740 | 739 |
Total Directors' emoluments including expenses amounted to £2.7m (2024/25: £2.8m). Full details are given in
Group | Group | Society | Society | |
2026 | 2025 | 2026 | 2025 | |
Restated* | ||||
£m | £m | £m | £m | |
UK corporation tax at 25% (2024/25: 25%) | 1.6 | 1.4 | 1.8 | 2.7 |
Corporation tax - adjustment in respect of | ||||
prior years | 0.9 | (0.5) | (0.4) | 0.2 |
Total current tax | 2.5 | 0.9 | 1.4 | 2.9 |
Deferred tax | ||||
Current year | 7.7 | 5.3 | 6.2 | 4.7 |
Adjustment in respect of prior years | - | 0.7 | - | 0.6 |
Tax on profit on ordinary activities | 10.2 | 6.9 | 7.6 | 8.2 |
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 | |
2026 | 2025 | 2026 | 2025 | |
Restated* | ||||
£m | £m | £m | £m | |
Profit before tax | 33.6 | 36.5 | 28.0 | 20.6 |
Profit before tax multiplied by the UK | ||||
| standard rate of tax of 25% (2024/25: 25%) | 8.4 | 9.1 | 7.0 | 5.2 |
Effects of: | ||||
Income not taxable and expenses not | ||||
| deductible for tax purposes | 0.2 | 0.3 | 0.7 | 2.2 |
Securitisation profits | 0.1 | (1.9) | - | - |
Adjustment in respect of prior years | 0.9 | 0.2 | (0.4) | 0.8 |
Transfer pricing adjustments | - | - | (0.4) | (0.6) |
Chargeable gains | 0.7 | 0.6 | 0.7 | 0.6 |
Movement in deferred tax not recognised | - | (1.0) | - | - |
Revaluation | (0.1) | (0.4) | - | - |
Tax charge | 10.2 | 6.9 | 7.6 | 8.2 |
Group | Group | Society | Society | |
2026 | 2025 | 2026 | 2025 | |
£m | £m | £m | £m | |
Cash in hand | 1.3 | 1.3 | 1.3 | 1.3 |
Other deposits with the Bank of England | 178.3 | 158.5 | 178.3 | 158.5 |
179.6 | 159.8 | 179.6 | 159.8 |
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118
Group |
Group |
Society |
Society |
|
2026 |
2025 |
2026 |
2025 |
|
£m |
£m |
£m |
£m |
|
Listed transferable investment securities: |
||||
Fair value through other comprehensive |
||||
| income |
515.1 |
467.3 |
515.1 |
467.3 |
Amortised cost |
- |
- |
165.0 |
191.0 |
Fair value through profit or loss |
0.3 |
0.3 |
0.3 |
0.3 |
Total investment securities |
515.4 |
467.6 |
680.4 |
658.6 |
The movement in investment securities is summarised as follows:
Group |
Group |
Society |
Society |
|
2026 |
2025 |
2026 |
2025 |
|
£m |
£m |
£m |
£m |
|
At beginning of year |
467.6 |
391.5 |
658.6 |
391.5 |
Treated as cash and cash equivalents: |
||||
Additions |
5.0 |
- |
5.0 |
- |
Investment securities with maturities |
||||
> 90 days at date of acquisition: |
||||
Additions |
356.1 |
333.6 |
356.1 |
524.7 |
Disposals (sale and redemption) |
(314.2) |
(256.8) |
(340.2) |
(256.9) |
Losses from changes in fair value |
(0.5) |
(0.7) |
(0.5) |
(0.7) |
Other movements |
1.4 |
- |
1.4 |
- |
At end of year |
515.4 |
467.6 |
680.4 |
658.6 |
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 |
No |
mortgage loss |
changes in |
floating interest |
hedge |
|
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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119
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 | |
2026 | 2026 | 2026 | |
Group | £m | £m | £m |
Interest rate swaps | |||
Designated as fair value hedges | 3,204.6 | 34.5 | (2.5) |
Economic hedges | 1,051.4 | 9.6 | (6.4) |
Total derivatives held for hedging purposes | 4,256.0 | 44.1 | (8.9) |
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 | |
2026 | 2026 | 2026 | |
Society | £m | £m | £m |
Interest rate swaps | |||
Designated as fair value hedges | 3,204.6 | 34.5 | (2.5) |
Economic hedges | 668.7 | 3.3 | (6.4) |
Total derivatives held for hedging purposes | 3,873.3 | 37.8 | (8.9) |
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) |
(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 gain on financial instruments’ on the
Income Statement.
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120
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 2026
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) | 43.7 | 382.8 | 2,709.9 | 46.2 |
Average fixed rate | 2.69% | 2.14% | 3.68% | 2.42% |
Fair value hedge of fixed rate | ||||
commercial loans | ||||
Interest rate swap notional (£m) | - | 5.7 | 16.3 | - |
Average fixed rate | - | 5.08% | 5.07% | - |
Society | ||||
Fair value hedge of fixed rate | ||||
residential loans | ||||
Interest rate swap notional (£m) | 39.9 | 339.3 | 2,645.8 | 45.3 |
Average fixed rate | 2.69% | 2.06% | 3.68% | 2.42% |
Fair value hedge of | ||||
intercompany loans* | ||||
Interest rate swap notional (£m) | 3.8 | 49.2 | 80.4 | 0.9 |
Average fixed rate | 2.63% | 3.92% | 4.37% | 2.42% |
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% |
*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 2026
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 | ineffectiveness | Statement | ||
Group | £m | £m | £m | SOFP line | £m | £m | Income Statement line |
Fair value hedge of fixed | |||||||
| rate residential loans | 3,182.6 | 34.5 | (2.2) | Derivative financial instruments | 7.5 | (0.2) | Fair value gain on financial instruments |
Fair value hedge of fixed | |||||||
| rate commercial loans | 22.0 | - | (0.3) | Derivative financial instruments | 0.3 | 0.4 | Fair value gain on financial instruments |
Society | |||||||
Fair value hedge of fixed | |||||||
| rate residential loans | 3,070.3 | 33.6 | (2.1) | Derivative financial instruments | 8.0 | (0.2) | Fair value gain on financial instruments |
Fair value hedge of | |||||||
| intercompany loans* | 134.3 | 0.9 | (0.4) | Derivative financial instruments | (0.2) | 0.4 | Fair value gain on financial instruments |
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 | ineffectiveness | Statement | ||
| Group | £m | £m | £m | SOFP line | £m | £m | Income Statement line |
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 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 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 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 on financial instruments |
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122
12. Derivative financial instruments and hedge accounting
(continued)
Hedged items at 31 March 2026
Change in fair |
||||
| Accumulated |
value used for |
|||
Carrying value |
fair value |
recognising |
||
Hedged assets |
in the SOFP |
adjustments |
ineffectiveness |
|
and liabilities |
£m |
£m |
SOFP line |
£m |
Group |
||||
Fixed rate |
Loans and advances |
|||
residential loans |
3,146.9 |
(32.1) |
to customers |
(7.3) |
Fixed rate |
Loans and advances |
|||
commercial loans |
21.9 |
1.0 |
to customers |
(0.7) |
Society |
||||
Fixed rate |
Loans and advances |
|||
residential loans |
3,038.0 |
(31.3) |
to customers |
(7.8) |
Loans and advances |
||||
Intercompany loans* |
130.8 |
0.1 |
to customers |
(0.2) |
Hedged items at 31 March 2025
Change in fair |
||||
Accumulated |
value used for |
|||
Carrying value |
fair value |
recognising |
||
Hedged assets |
in the SOFP |
adjustments |
ineffectiveness |
|
and liabilities |
£m |
£m |
SOFP line |
£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 |
Loans and advances |
||||
Intercompany loans* |
160.8 |
0.4 |
to customers |
1.5 |
*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 |
|
2026 |
2025 |
2026 |
2025 |
|
£m |
£m |
£m |
£m |
|
Amortised cost |
||||
Loans fully secured on residential property |
5,556.6 |
5,316.2 |
4,915.1 |
4,558.1 |
Loans fully secured on land |
132.5 |
196.5 |
- |
- |
5,689.1 |
5,512.7 |
4,915.1 |
4,558.1 |
|
At fair value through profit or loss |
||||
Loans fully secured on residential property |
4.5 |
5.6 |
4.5 |
5.6 |
5,693.6 |
5,518.3 |
4,919.6 |
4,563.7 |
|
Fair value adjustment for hedged risk |
(31.1) |
(20.8) |
(31.3) |
(21.1) |
Less: impairment provisions |
(79.1) |
(99.4) |
(5.1) |
(4.3) |
5,583.4 |
5,398.1 |
4,883.2 |
4,538.3 |
Included within loans and advances to customers are
£133.5m (2024/25: £198.8m) of commercial lending
balances of which £4.1m (2024/25: £4.5m) have been
sold by the Group to bankruptcy remote structured
entities. A balance of £383.5m (2024/25: £464.5m) 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 £165.3m (2024/25: £191.4m). 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 2025 |
10.3 |
89.1 |
99.4 |
4.3 |
Amounts written off net of recoveries |
(0.2) |
(24.8) |
(25.0) |
0.2 |
Charge for the year comprising: |
||||
Provision for loan impairment |
2.7 |
2.6 |
5.3 |
1.0 |
Provision for securitisation assets |
- |
0.3 |
0.3 |
- |
Adjustments to provisions resulting from recoveries |
(0.6) |
- |
(0.6) |
(0.4) |
Charge for the year |
2.1 |
2.9 |
5.0 |
0.6 |
Deemed loans |
- |
(0.3) |
(0.3) |
- |
At 31 March 2026 |
12.2 |
66.9 |
79.1 |
5.1 |
| 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 net of recoveries |
(0.2) |
(10.0) |
(10.2) |
0.4 |
(Credit)/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 |
During the year there were impairment charges of £0.3m (2024/25: £0.3m) 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 (2024/25: £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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124
Shares in subsidiary |
Loans to subsidiary |
|||||
undertakings |
undertakings |
Total |
||||
2026 |
2025 |
2026 |
2025 |
2026 |
2025 |
|
Society |
£m |
£m |
£m |
£m |
£m |
£m |
Cost |
||||||
At beginning of year |
0.6 |
0.6 |
1,146.8 |
1,297.1 |
1,147.4 |
1,297.7 |
Decrease for the year |
- |
- |
(165.7) |
(150.3) |
(165.7) |
(150.3) |
At end of year |
0.6 |
0.6 |
981.1 |
1,146.8 |
981.7 |
1,147.4 |
Provisions |
||||||
At beginning of year |
0.5 |
0.5 |
234.9 |
226.9 |
235.4 |
227.4 |
Charge for the year |
- |
- |
5.1 |
8.0 |
5.1 |
8.0 |
At end of year |
0.5 |
0.5 |
240.0 |
234.9 |
240.5 |
235.4 |
Net book value at end of year |
0.1 |
0.1 |
741.1 |
911.9 |
741.2 |
912.0 |
The Society's approach to the assessment of impairment against investments in subsidiary undertakings is
discussed within the accounting policies in 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 £3.5m (2024/25: £8.8m). 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 charge of £1.6m has been recognised against the investment (2024/25: £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 |
Kenrick No.4 Holdings Limited |
United Kingdom |
Holding company |
Kenrick No.4 Plc |
United Kingdom |
Securitisation entity |
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 securitisation entities listed above. Unless stated otherwise
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125
Goodwill |
Purchased software |
Development costs |
Total |
Goodwill |
Purchased software |
Development costs |
Total |
|
2026 |
2026 |
2026 |
2026 |
2025 |
2025 |
2025 |
2025 |
|
Group |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
Cost |
||||||||
At beginning of year |
0.5 |
14.3 |
39.4 |
54.2 |
0.5 |
19.5 |
35.8 |
55.8 |
Additions |
- |
0.4 |
18.3 |
18.7 |
- |
0.6 |
11.2 |
11.8 |
Transfers |
- |
- |
- |
- |
- |
(1.9) |
1.9 |
- |
Disposals |
- |
(0.1) |
(0.5) |
(0.6) |
- |
(3.9) |
(9.5) |
(13.4) |
At end of year |
0.5 |
14.6 |
57.2 |
72.3 |
0.5 |
14.3 |
39.4 |
54.2 |
Aggregate amortisation |
||||||||
At beginning of year |
0.5 |
13.3 |
19.7 |
33.5 |
0.5 |
16.4 |
25.0 |
41.9 |
Charge for the year |
- |
0.8 |
5.5 |
6.3 |
- |
0.8 |
4.2 |
5.0 |
Disposals |
- |
(0.1) |
(0.5) |
(0.6) |
- |
(3.9) |
(9.5) |
(13.4) |
At end of year |
0.5 |
14.0 |
24.7 |
39.2 |
0.5 |
13.3 |
19.7 |
33.5 |
Net book value at end of year |
- |
0.6 |
32.5 |
33.1 |
- |
1.0 |
19.7 |
20.7 |
Net book value at beginning of year |
- |
1.0 |
19.7 |
20.7 |
- |
3.1 |
10.8 |
13.9 |
Purchased software |
Development costs |
Total |
Purchased software |
Development costs |
Total |
|
2026 |
2026 |
2026 |
2025 |
2025 |
2025 |
|
Society |
£m |
£m |
£m |
£m |
£m |
£m |
Cost |
||||||
At beginning of year |
14.3 |
39.4 |
53.7 |
19.5 |
35.8 |
55.3 |
Additions |
0.4 |
18.3 |
18.7 |
0.6 |
11.2 |
11.8 |
Transfers |
- |
- |
- |
(1.9) |
1.9 |
- |
Disposals |
(0.1) |
(0.5) |
(0.6) |
(3.9) |
(9.5) |
(13.4) |
At end of year |
14.6 |
57.2 |
71.8 |
14.3 |
39.4 |
53.7 |
Aggregate amortisation |
||||||
At beginning of year |
13.3 |
19.7 |
33.0 |
16.4 |
25.0 |
41.4 |
Charge for the year |
0.8 |
5.5 |
6.3 |
0.8 |
4.2 |
5.0 |
Disposals |
(0.1) |
(0.5) |
(0.6) |
(3.9) |
(9.5) |
(13.4) |
At end of year |
14.0 |
24.7 |
38.7 |
13.3 |
19.7 |
33.0 |
Net book value at end of year |
0.6 |
32.5 |
33.1 |
1.0 |
19.7 |
20.7 |
Net book value at beginning of year |
1.0 |
19.7 |
20.7 |
3.1 |
10.8 |
13.9 |
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126
Group |
Group |
|
2026 |
2025 |
|
£m |
£m |
|
Valuation |
||
At beginning of year |
143.2 |
148.7 |
Additions |
1.6 |
0.7 |
Disposals |
(7.6) |
(8.6) |
Revaluation gains |
0.7 |
2.4 |
At end of year |
137.9 |
143.2 |
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 (2025: Level 3).
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127
| 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 2025 |
5.0 |
20.0 |
0.5 |
11.2 |
3.1 |
39.8 |
Additions |
- |
- |
- |
3.3 |
- |
3.3 |
Disposals |
- |
- |
- |
(0.1) |
- |
(0.1) |
At 31 March 2026 |
5.0 |
20.0 |
0.5 |
14.4 |
3.1 |
43.0 |
Accumulated |
||||||
depreciation |
||||||
At 1 April 2025 |
0.2 |
7.3 |
0.3 |
9.6 |
2.1 |
19.5 |
Charge for the year |
0.1 |
0.8 |
- |
1.1 |
0.3 |
2.3 |
Disposals |
- |
- |
- |
(0.1) |
- |
(0.1) |
At 31 March 2026 |
0.3 |
8.1 |
0.3 |
10.6 |
2.4 |
21.7 |
Net book value |
||||||
At 31 March 2026 |
4.7 |
11.9 |
0.2 |
3.8 |
0.7 |
21.3 |
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 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 |
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128
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 2025 | 5.0 | 20.0 | 0.5 | 10.9 | 3.1 | 39.5 |
Additions | - | - | - | 3.3 | - | 3.3 |
Disposals | - | - | - | (0.1) | - | (0.1) |
At 31 March 2026 | 5.0 | 20.0 | 0.5 | 14.1 | 3.1 | 42.7 |
Accumulated | ||||||
depreciation | ||||||
At 1 April 2025 | 0.2 | 7.3 | 0.3 | 9.3 | 2.1 | 19.2 |
Charge for the year | 0.1 | 0.8 | - | 1.1 | 0.3 | 2.3 |
Disposals | - | - | - | (0.1) | - | (0.1) |
At 31 March 2026 | 0.3 | 8.1 | 0.3 | 10.3 | 2.4 | 21.4 |
Net book value | ||||||
At 31 March 2026 | 4.7 | 11.9 | 0.2 | 3.8 | 0.7 | 21.3 |
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 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 |
The average remaining term of right-of-use assets at 31 March 2026 was 2.3 years (2024/25: 3.2 years).
The net book value of land and buildings occupied for the Society's own activities at 31 March 2026 was
£16.8m (2024/25: £17.6m).
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 (2024/25: Level 3).
If land and buildings were carried at historical cost less depreciation, the carrying amount would be £12.7m
(2024/25: £13.5m).
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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129
Deferred tax is calculated on all temporary differences under the liability method using an effective
tax rate of 25% (2024/25: 25%). The movement on the deferred tax account is as follows:
Group |
Group |
Society |
Society |
|
2026 |
2025 |
2026 |
2025 |
|
£m |
£m |
£m |
£m |
|
At beginning of year |
- |
4.8 |
4.8 |
8.9 |
| Current year Income |
||||
Statement charge |
(7.7) |
(5.3) |
(6.2) |
(4.7) |
Amount recognised directly in |
||||
other comprehensive income |
0.1 |
1.2 |
0.1 |
1.2 |
Adjustments in respect of |
||||
prior years |
- |
(0.7) |
- |
(0.6) |
At end of year |
(7.6) |
- |
(1.3) |
4.8 |
Deferred tax assets and liabilities are attributable to the following items:
Group |
Group |
Society |
Society |
|
2026 |
2025 |
2026 |
2025 |
|
£m |
£m |
£m |
£m |
|
Deferred tax assets |
||||
Accelerated tax depreciation |
- |
1.1 |
- |
1.1 |
Carried forward tax losses |
6.7 |
8.8 |
3.6 |
5.2 |
Other temporary differences |
2.0 |
3.0 |
0.4 |
0.6 |
8.7 |
12.9 |
4.0 |
6.9 |
|
Deferred tax liabilities |
||||
Accelerated tax depreciation |
(3.9) |
- |
(3.8) |
- |
Property valuations |
(12.0) |
(11.8) |
(1.1) |
(1.0) |
Other temporary differences |
(0.4) |
(0.7) |
(0.4) |
(0.7) |
Pensions and other post-retirement |
||||
benefits |
- |
(0.4) |
- |
(0.4) |
(16.3) |
(12.9) |
(5.3) |
(2.1) |
The deferred tax charge in the Income Statement comprises the following temporary differences:
Group |
Group |
Society |
Society |
|
2026 |
2025 |
2026 |
2025 |
|
£m |
£m |
£m |
£m |
|
Accelerated tax depreciation |
(4.9) |
(4.7) |
(4.9) |
(4.5) |
| Pensions and other post-retirement |
||||
benefits |
0.3 |
- |
0.3 |
- |
Other provisions |
(0.8) |
(0.9) |
- |
- |
Carried forward tax losses |
(2.2) |
(0.2) |
(1.6) |
(0.8) |
Property valuations |
(0.1) |
(0.2) |
- |
- |
(7.7) |
(6.0) |
(6.2) |
(5.3) |
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 2026, amounted to Group: £19.0m
(2024/25: £19.0m) and Society: £nil (2024/25: £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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130
Group | Group | Society | Society | |
2026 | 2025 | 2026 | 2025 | |
£m | £m | £m | £m | |
Prepayments and accrued income | 9.1 | 4.3 | 8.8 | 4.1 |
Other | 0.7 | - | 0.7 | - |
9.8 | 4.3 | 9.5 | 4.1 |
| Group | Group | Society | Society | |
| 2026 | 2025 | 2026 | 2025 | |
Restated* | ||||
£m | £m | £m | £m | |
Deemed loans | 4.5 | 4.8 | 366.9 | 445.1 |
Other customers | 20.2 | 24.3 | 21.4 | 24.2 |
24.7 | 29.1 | 388.3 | 469.3 |
Group | Group | Society | Society | |
2026 | 2025 | 2026 | 2025 | |
£m | £m | £m | £m | |
Non-recourse finance on | 238.1 | 289.8 | - | - |
securitised advances | 238.1 | 289.8 | - | - |
The non-recourse finance comprises mortgage backed floating rate 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 | |
2026 | 2025 | 2026 | 2025 | |
£m | £m | £m | £m | |
At beginning of year | 289.8 | - | - | - |
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 | (51.1) | (12.1) | - | - |
Non-cash flows: | ||||
Change in accrued interest | (0.8) | 2.8 | - | - |
Amortisation | 0.2 | 0.1 | - | - |
At end of year | 238.1 | 289.8 | - | - |
During the prior year debt securities were issued relating to the Kenrick 4 securitisation. See note 15 for
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131
Group |
Group |
Society |
Society |
|
2026 |
2025 |
2026 |
2025 |
|
£m |
£m |
£m |
£m |
|
Accruals |
13.1 |
12.5 |
12.2 |
11.9 |
Lease liabilities |
0.7 |
1.1 |
0.7 |
1.1 |
Other creditors |
9.2 |
5.2 |
8.9 |
4.9 |
23.0 |
18.8 |
21.8 |
17.9 |
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:
2026 |
2025 |
|
Group and Society |
£m |
£m |
At beginning of year |
1.1 |
1.5 |
Interest charged |
- |
0.1 |
Lease payments |
(0.4) |
(0.5) |
At end of year |
0.7 |
1.1 |
Group |
Group |
Society |
Society |
|
2026 |
2025 |
2026 |
2025 |
|
£m |
£m |
£m |
£m |
|
At beginning of year |
0.4 |
0.5 |
0.3 |
0.4 |
Release for the year |
- |
(0.1) |
- |
(0.1) |
At end of year |
0.4 |
0.4 |
0.3 |
0.3 |
Provisions for liabilities
Provisions for liabilities include 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
accounts, appropriate level of remediation and resulting administrative costs. Provisions for liabilities also
include expected credit loss allowances for undrawn loan commitments where a mortgage offer has been made
Number of shares |
Carrying value |
|||
2026 |
2025 |
2026 |
2025 |
|
Group and Society |
£m |
£m |
||
Permanent interest bearing shares |
||||
At beginning of year |
3,938 |
7,847 |
3.9 |
7.8 |
Purchase and cancellation of PIBS |
- |
(3,909) |
- |
(3.9) |
At end of year |
3,938 |
3,938 |
3.9 |
3.9 |
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 April 2026, having obtained
regulatory approval, the Society exercised its option to call the remaining PIBS which were repaid in full at
their principal amount, together with accrued unpaid interest.
Following redemption, the PIBS have been cancelled and no further interest payments will be made. The PIBS
Number of |
CCDS nominal |
Share |
||
shares |
amount |
premium |
Total |
|
Group and Society |
£m |
£m |
£m |
|
At 31 March 2025 |
1,288,813 |
1.3 |
125.7 |
127.0 |
At 31 March 2026 |
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 2025 which was paid in February 2026. This distribution
has been recognised in the Statement of Changes in Members' Interests and Equity. In May 2026 the Directors
declared a final distribution for the period to 31 March 2026 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
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132
2026 |
2025 |
|
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.
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.
2026 |
2025 |
|
Group and Society |
£m |
£m |
At beginning of year |
2.1 |
2.1 |
Financing cash flows |
||
Interest paid on subordinated liabilities |
(0.2) |
(0.2) |
Non-cash flows: |
||
Accrued interest (settled during the year) |
0.1 |
0.1 |
Accrued interest (carried forward) |
0.1 |
0.1 |
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.
2026 |
2025 |
|
Group and Society |
£m |
£m |
At beginning of year |
5.6 |
7.0 |
Interest added |
0.7 |
0.8 |
Redemptions |
(2.0) |
(2.1) |
Changes in fair value |
0.2 |
(0.1) |
At end of year |
4.5 |
5.6 |
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 tool which incorporates a number of judgemental assumptions to
determine the amount and timing of future cash flows arising on mortgage redemption. Certain inputs to
the calculation, 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 assumptions, such as house
price indices, are based on the Group’s view of future economic conditions. The discount factor used to
calculate the present value of the future cash flows has been determined with due regard to credit, market and
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133
other comprehensive income
Before tax amount |
Taxation |
Net of tax amount |
|
2026 |
2026 |
2026 |
|
Group and Society |
£m |
£m |
£m |
| Fair value through other comprehensive |
|||
income investments |
(0.5) |
0.1 |
(0.4) |
Retirement benefit obligations |
(0.1) |
- |
(0.1) |
Other comprehensive income |
(0.6) |
0.1 |
(0.5) |
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) |
2026 |
2025 |
2024 |
2023 |
2022 |
|
Group and Society |
£m |
£m |
£m |
£m |
£m |
Net defined benefit pension |
|||||
scheme asset |
0.1 |
1.2 |
6.1 |
10.9 |
14.9 |
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 current and former 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 2025/26 (2024/25: £nil).
At the start of the year, the SRS was invested in two buy-in insurance policies, one purchased in 2024 and
one purchased in 2013. The insurance policies pay an income to the SRS which matches the pensions to be
paid by the SRS to members.
In March 2026, the Trustee transferred the responsibility of paying pensions to members of the insurance
policy purchased in 2013, to the insurance provider. This resulted in a settlement, reducing both assets and
obligations by £11m as shown in the reconciliations below. From March 2026, these individuals now each hold
an individual policy with the insurer that replicates the benefits they were owed under the SRS, and the
Trustee is no longer legally responsible for paying their benefits. In May 2026, the Trustee transferred the
responsibility of paying pensions to members of the insurance policy purchased in 2024 to the insurance
provider, meaning that these individuals now each hold an individual policy with that insurer that replicates
the benefits they were owed under the SRS, and the Trustee is no longer legally responsible for paying their
benefits.
As at the 31 March 2026 reporting date, the insurance policy purchased in 2024 covers almost all remaining
benefits under the SRS and so 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.
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, potentially leading to additional liabilities beyond those promised under the rules as
previously understood. In September 2025 the government published proposed legislation, with the
Pensions Schemes Act 2026 gaining Royal Assent on the 29 April 2026, that would enable such confirmation
to be obtained retrospectively.
The Trustee and their advisors are working to obtain the relevant retrospective actuarial confirmations
required to cover any potential liabilities identified.
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. 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 13 years.
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134
30. Retirement benefit asset
(continued)
The key assumptions used by the actuary in the updated calculation were:
Group and Society | 2026 | 2025 | 2024 | 2023 | 2022 |
Pension increases in payment | |||||
(RPI capped at 5%) | 3.2% | 3.0% | 3.1% | 3.1% | 3.4% |
Pension increases in payment | |||||
(CPI capped at 2.5%) | 1.9% | 1.8% | 1.8% | 1.9% | 2.1% |
Discount rate | 6.1% | 5.8% | 4.8% | 4.8% | 2.8% |
Life expectancy of male | |||||
aged 65 at year end date | 21.7 | 21.3 | 21.2 | 21.5 | 21.6 |
Life expectancy of female | |||||
aged 65 at year end date | 23.8 | 23.6 | 23.5 | 23.7 | 23.8 |
Life expectancy of male | |||||
aged 65 at year end date plus | 23.0 | 22.6 | 22.5 | 22.8 | 22.9 |
20 years | |||||
Life expectancy of female | |||||
aged 65 at year end date plus | 25.2 | 25.0 | 24.9 | 25.2 | 25.2 |
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:
2026 | 2025 | |
(Decrease)/Increase | (Decrease)/Increase | |
Group and Society | £m | £m |
Discount rate | ||
Effect on defined benefit obligation of a 1% increase | (6.2) | (7.5) |
Inflation | ||
Effect on defined benefit obligation of a 1% increase | 4.3 | 5.4 |
Life expectancy | ||
Effect on defined benefit obligation of a 1 year increase | 1.4 | 2.4 |
The amounts recognised in the Statement of Financial Position are as follows:
2026 | 2025 | 2024 | 2023 | 2022 | |
Group and Society | £m | £m | £m | £m | £m |
Present value of funded obligations | 58.2 | 69.6 | 82.3 | 83.9 | 109.7 |
Present value of unfunded obligations | 0.5 | 0.5 | 0.5 | 0.5 | 0.7 |
58.7 | 70.1 | 82.8 | 84.4 | 110.4 | |
Fair value of scheme assets | (58.8) | (71.3) | (88.9) | (95.3) | (125.3) |
Net asset in the Statement of Financial | |||||
| Position | (0.1) | (1.2) | (6.1) | (10.9) | (14.9) |
The amounts recognised in the Income Statement are as follows:
2026 | 2025 | 2024 | |
Group and Society | £m | £m | £m |
Interest cost | 4.0 | 3.9 | 3.9 |
Interest receivable on plan assets | (4.0) | (4.2) | (4.5) |
Running costs | 0.9 | 0.7 | 0.5 |
Settlements | 0.1 | - | - |
Total pension fund cost | 1.0 | 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:
2026 | 2025 | |
Group and Society | £m | £m |
Actuarial (gains)/losses arising from: | ||
Financial assumptions | (1.4) | (8.8) |
Demographic assumptions | 0.5 | (0.2) |
Experience adjustments | 0.2 | (3.5) |
Loss on plan assets (excluding interest) | 0.8 | 17.0 |
Total amount recognised in Other Comprehensive Income | 0.1 | 4.5 |
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135
30. Retirement benefit asset
(continued)
Change in benefit obligations
2026 |
2025 |
2024 |
|
Group and Society |
£m |
£m |
£m |
Benefit obligations at beginning of year |
70.1 |
82.8 |
84.4 |
Interest cost |
4.0 |
3.9 |
3.9 |
Actuarial gains |
(0.7) |
(12.5) |
(1.5) |
Benefits paid |
(3.8) |
(4.1) |
(4.0) |
Settlements |
(10.9) |
- |
- |
Benefit obligations at end of year |
58.7 |
70.1 |
82.8 |
Change in scheme assets
2026 |
2025 |
2024 |
|
Group and Society |
£m |
£m |
£m |
Fair value of scheme assets at beginning of year |
71.3 |
88.9 |
95.3 |
Interest receivable on plan assets |
4.0 |
4.2 |
4.5 |
Actuarial losses |
(0.8) |
(17.0) |
(8.7) |
Contribution by employer |
- |
- |
2.3 |
Running costs |
(0.9) |
(0.7) |
(0.5) |
Benefits paid |
(3.8) |
(4.1) |
(4.0) |
Settlements |
(11.0) |
- |
- |
Fair value of scheme assets at end of year |
58.8 |
71.3 |
88.9 |
The amount recognised outside profit and loss in the Statement of Comprehensive Income for 2025/26 is an
actuarial loss of £0.1m (2024/25: loss of £4.5m). The cumulative amount recognised outside profit and loss at
31 March 2026 is an actuarial loss of £71.7m.
History of experience gains and losses
Group and Society |
2026 |
2025 |
2024 |
2023 |
2022 |
Experience (losses)/gains on scheme assets: |
|||||
Amount (£m) |
(0.8) |
(17.0) |
(8.7) |
(36.0) |
0.7 |
Percentage of scheme assets |
(1%) |
(19%) |
(9%) |
(29%) |
1% |
Experience (gains)/losses on scheme liabilities: |
|||||
Amount (£m) |
(0.7) |
(12.5) |
(1.5) |
7.6 |
2.0 |
Percentage of scheme liabilities |
(1%) |
(15%) |
(2%) |
7% |
2% |
Scheme assets
The value of the scheme assets at 31 March 2026 was £58.8m, analysed as follows:
2026 |
2025 |
2024 |
|
Group and Society |
£m |
£m |
£m |
Corporate bonds (Quoted) |
- |
- |
11.8 |
Fixed interest government bonds (Quoted) |
- |
- |
7.6 |
Index-linked government bonds (Quoted) |
- |
- |
21.1 |
Liability driven investment (Quoted) |
- |
- |
12.6 |
Short duration credit (Quoted) |
- |
- |
2.5 |
Insurance asset (Unquoted) |
58.1 |
69.1 |
12.4 |
Cash and other assets (Quoted) |
0.7 |
2.2 |
20.9 |
58.8 |
71.3 |
88.9 |
Stakeholder scheme
The total cost for the year of the stakeholder plan to the Group and Society was £1.9m (2024/25: £1.7m).
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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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 2026
Fair value | ||||
through other | Fair value | |||
comprehensive | through profit | |||
Group | Amortised cost | income | or loss | Total |
Assets | £m | £m | £m | £m |
Cash and balances with | ||||
the Bank of England | 179.6 | - | - | 179.6 |
Loans and advances to | ||||
credit institutions | 93.3 | - | - | 93.3 |
Investment securities | - | 515.1 | 0.3 | 515.4 |
Derivative financial instruments | - | - | 44.1 | 44.1 |
Loans and advances to customers | 5,578.9 | - | 4.5 | 5,583.4 |
Total financial assets | 5,851.8 | 515.1 | 48.9 | 6,415.8 |
Non-financial assets | 210.9 | |||
Total assets | 6,626.7 |
Fair value | |||
through profit | |||
Amortised cost | or loss | Total | |
Liabilities | £m | £m | £m |
Shares | 5,560.0 | - | 5,560.0 |
Amounts due to credit institutions | 273.2 | - | 273.2 |
Amounts due to other customers | 24.7 | - | 24.7 |
Derivative financial instruments | - | 8.9 | 8.9 |
Debt securities in issue | 238.1 | - | 238.1 |
Subordinated liabilities | 2.1 | - | 2.1 |
Total financial liabilities | 6,098.1 | 8.9 | 6,107.0 |
Non-financial liabilities | 41.4 | ||
Total liabilities | 6,148.4 |
At 31 March 2025
Fair value | ||||
through other | Fair value | |||
comprehensive | through profit | |||
Group | Amortised cost | income | or loss | Total |
Assets | £m | £m | £m | £m |
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 | |
Liabilities | £m | £m | £m |
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 |
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31. Financial instruments
(continued)
At 31 March 2026
Fair value | ||||
through other | Fair value | |||
comprehensive | through profit | |||
Society | Amortised cost | income | or loss | Total |
Assets | £m | £m | £m | £m |
Cash and balances with | ||||
the Bank of England | 179.6 | - | - | 179.6 |
Loans and advances to | ||||
credit institutions | 62.9 | - | - | 62.9 |
Investment securities | 165.0 | 515.1 | 0.3 | 680.4 |
Derivative financial instruments | - | - | 37.8 | 37.8 |
Loans and advances to | ||||
customers | 4,878.7 | - | 4.5 | 4,883.2 |
Investments | 741.2 | - | - | 741.2 |
Total financial assets | 6,027.4 | 515.1 | 42.6 | 6,585.1 |
Non-financial assets | 68.0 | |||
Total assets | 6,653.1 |
Fair value | |||
through profit | |||
Amortised cost | or loss | Total | |
Liabilities | £m | £m | £m |
Shares | 5,560.0 | - | 5,560.0 |
Amounts due to credit | |||
institutions | 275.7 | - | 275.7 |
Amounts due to other | |||
customers | 388.3 | - | 388.3 |
Derivative financial instruments | - | 8.9 | 8.9 |
Subordinated liabilities | 2.1 | - | 2.1 |
Total financial liabilities | 6,226.1 | 8.9 | 6,235.0 |
Non-financial liabilities | 29.1 | ||
Total liabilities | 6,264.1 |
At 31 March 2025
Fair value | ||||
through other | Fair value | |||
comprehensive | through profit | |||
Society | Amortised cost | income | or loss | Total |
Assets | £m | £m | £m | £m |
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 | |
Liabilities | £m | £m | £m |
Shares | 5,071.6 | - | 5,071.6 |
Amounts due to credit | |||
institutions | 460.2 | - | 460.2 |
Amounts due to other | |||
customers (restated)* | 469.3 | - | 469.3 |
Derivative financial instruments | - | 16.8 | 16.8 |
Subordinated liabilities | 2.1 | - | 2.1 |
Total financial liabilities (restated)* | 6,003.2 | 16.8 | 6,020.0 |
Non-financial liabilities (restated)* | 21.6 | ||
Total liabilities | 6,041.6 |
*Society "Amounts due to other customers" and "Non-financial liabilities" at 31 March 2025 have been
restated as explained in note 39.
31. Financial instruments
(continued)
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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 analysis, comparison to similar instruments for which market observable prices exist and other valuation methodologies. 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.
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 2026
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 | 179.6 | 179.6 | - | - | 179.6 |
Loans and advances to credit | |||||
institutions | 93.3 | - | 93.3 | - | 93.3 |
Loans and advances to customers | 5,578.9 | - | - | 5,695.8 | 5,695.8 |
5,851.8 | 179.6 | 93.3 | 5,695.8 | 5,968.7 | |
Financial liabilities | |||||
Shares | 5,560.0 | - | - | 5,544.1 | 5,544.1 |
Amounts due to credit institutions | 273.2 | - | 273.2 | - | 273.2 |
Amounts due to other customers | 24.7 | - | 20.2 | 4.4 | 24.6 |
Debt securities in issue | 238.1 | 238.2 | - | - | 238.2 |
Subordinated liabilities | 2.1 | - | 2.1 | - | 2.1 |
6,098.1 | 238.2 | 295.5 | 5,548.5 | 6,082.2 |
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 |
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31. Financial instruments
(continued)
At 31 March 2026
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 | 179.6 | 179.6 | - | - | 179.6 |
Loans and advances to credit | |||||
institutions | 62.9 | - | 62.9 | - | 62.9 |
Investment securities | 165.0 | - | 165.1 | - | 165.1 |
Loans and advances to customers | 4,878.7 | - | - | 5,266.1 | 5,266.1 |
Investments | 741.2 | - | - | 741.2 | 741.2 |
6,027.4 | 179.6 | 228.0 | 6,007.3 | 6,414.9 | |
Financial liabilities | |||||
Shares | 5,560.0 | - | - | 5,544.1 | 5,544.1 |
Amounts due to credit institutions | 275.7 | - | 275.7 | - | 275.7 |
Amounts due to other customers | 388.3 | - | 21.4 | 379.7 | 401.1 |
Debt securities in issue | - | - | - | - | - |
Subordinated liabilities | 2.1 | - | 2.1 | - | 2.1 |
6,226.1 | - | 299.2 | 5,923.8 | 6,223.0 |
At 31 March 2025
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 | |||||
(restated)* | 469.3 | - | 24.2 | 460.6 | 484.8 |
Subordinated liabilities | 2.1 | - | 2.1 | - | 2.1 |
6,003.2 | - | 486.5 | 5,513.0 | 5,999.5 |
*Society "Amounts due to other customers" at 31 March 2025 have been restated for Society as explained in
note 39.
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31. Financial instruments
(continued)
a) Cash and balances with the Bank of England
The carrying value of cash and balances with the Bank of England is assumed to approximate their fair value.
b) 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 2026.
c) 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 2026.
d) 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 tool 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.
At 31 March 2026
Level 1 | Level 2 | Level 3 | Total | |
2026 | 2026 | 2026 | 2026 | |
Group | £m | £m | £m | £m |
Financial assets | ||||
Investment securities | ||||
At fair value through other | ||||
comprehensive income | 515.1 | - | - | 515.1 |
At fair value through profit or loss | 0.3 | - | - | 0.3 |
Derivative financial instruments | - | 44.1 | - | 44.1 |
Loans and advances to customers | - | - | 4.5 | 4.5 |
515.4 | 44.1 | 4.5 | 564.0 | |
Financial liabilities | ||||
Derivative financial instruments | - | 8.9 | - | 8.9 |
- | 8.9 | - | 8.9 |
At 31 March 2025
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 |
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31. Financial instruments
(continued)
At 31 March 2026
Level 1 | Level 2 | Level 3 | Total | |
2026 | 2026 | 2026 | 2026 | |
Society | £m | £m | £m | £m |
Financial assets | ||||
Investment securities | ||||
At fair value through other | ||||
comprehensive income | 515.1 | - | - | 515.1 |
At fair value through profit or loss | 0.3 | - | - | 0.3 |
Derivative financial instruments | - | 37.8 | - | 37.8 |
Loans and advances to customers | - | - | 4.5 | 4.5 |
515.4 | 37.8 | 4.5 | 557.7 | |
Financial liabilities | ||||
Derivative financial instruments | - | 8.9 | - | 8.9 |
- | 8.9 | - | 8.9 |
At 31 March 2025
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 |
The Society's equity release mortgage portfolio is measured at fair value using a discounted cash flow tool
for which key inputs are not based on observable market data. The calculation therefore meets the definition
of a level 3 valuation technique.
The table below analyses movements in the level 3 portfolio during the period.
2026 | 2025 | |
| Group and Society | £m | £m |
Equity release portfolio | ||
At beginning of year | 5.6 | 7.0 |
Items recognised in the Income Statement | ||
Interest receivable and similar income | 0.7 | 0.8 |
Fair value gains/(losses) on financial instruments | 0.2 | (0.1) |
Redemptions | (2.0) | (2.1) |
At end of year | 4.5 | 5.6 |
There have been no transfers of financial assets or liabilities between levels of the valuation hierarchy in the
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(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 138 to 141.
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 | |
2026 | 2025 | 2026 | 2025 | |
Concentration by loan type | £m | £m | £m | £m |
Prime owner occupied | 4,809.8 | 4,433.8 | 4,767.5 | 4,383.3 |
Buy to let | 724.5 | 855.8 | 147.3 | 174.4 |
Other | 22.3 | 26.0 | 0.3 | 0.4 |
Gross balances | 5,556.6 | 5,315.6 | 4,915.1 | 4,558.1 |
Expected credit loss provisions | (12.2) | (10.3) | (5.1) | (4.3) |
Fair value hedge adjustments | (32.1) | (22.4) | (31.3) | (21.1) |
5,512.3 | 5,282.9 | 4,878.7 | 4,532.7 |
(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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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.
At 31 March 2026
| 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 | 671.5 | 34.6 | - | 706.1 | 445.5 | 16.2 | - | 461.7 |
0.25 to < 0.50 | 808.5 | 49.8 | - | 858.3 | 780.7 | 42.2 | - | 822.9 |
0.50 to < 0.75 | 2,375.3 | 188.0 | - | 2,563.3 | 2,365.5 | 187.8 | - | 2,553.3 |
0.75 to < 1.00 | 210.8 | 35.7 | - | 246.5 | 208.3 | 34.9 | - | 243.2 |
1.00 to < 5.00 | 536.0 | 302.8 | - | 838.8 | 359.0 | 280.0 | - | 639.0 |
5.00 to < 10.00 | 31.4 | 72.0 | - | 103.4 | 2.0 | 62.2 | - | 64.2 |
10.00 to < 100.00 | 74.5 | 77.3 | - | 151.8 | 16.8 | 68.3 | - | 85.1 |
100.00 (default) | - | - | 85.0 | 85.0 | - | - | 45.6 | 45.6 |
Second charge | 1.9 | 0.7 | 0.8 | 3.4 | - | 0.1 | - | 0.1 |
4,709.9 | 760.9 | 85.8 | 5,556.6 | 4,177.8 | 691.7 | 45.6 | 4,915.1 | |
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 | |
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 | |
2026 | 2025 | 2026 | 2025 | |
£m | £m | £m | £m | |
Not past due | 5,480.1 | 5,236.9 | 4,868.0 | 4,515.3 |
Past due 1 to 3 months | 27.1 | 25.5 | 20.9 | 16.4 |
Past due 3 to 6 months | 15.4 | 18.6 | 10.6 | 11.2 |
Past due 6 to 12 months | 11.2 | 14.0 | 7.6 | 7.9 |
Past due over 12 months | 11.6 | 14.0 | 6.2 | 5.6 |
Possessions | 11.2 | 6.6 | 1.8 | 1.7 |
5,556.6 | 5,315.6 | 4,915.1 | 4,558.1 |
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32. Credit risk
(continued)
(ii) Expected credit losses
The tables 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 2026
| 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 | 4,709.9 | 2.3 | 0.05% | 4,177.8 | 1.3 | 0.03% |
Stage 2 | ||||||
> 30 days past due | 20.5 | 0.3 | 1.46% | 16.2 | 0.3 | 1.85% |
Other SICR indicators | 740.4 | 2.8 | 0.38% | 675.5 | 2.3 | 0.34% |
Provision overlays | - | 2.5 | - | - | 0.1 | - |
Stage 3 | 85.8 | 4.3 | 5.01% | 45.6 | 1.1 | 2.41% |
5,556.6 | 12.2 | 0.22% | 4,915.1 | 5.1 | 0.10% | |
Loan commitments | ||||||
Stage 1 | 410.7 | 0.1 | 0.02% | 410.6 | 0.1 | 0.02% |
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 | - | 0.00% | 250.0 | - | 0.00% |
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32. Credit risk
(continued)
The tables which follow analyse the movement in gross residential exposures and the related expected credit loss allowances for the years ended 31 March 2026 and 31 March 2025:
| 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 2025 | 4,395.3 | 830.3 | 90.0 | 5,315.6 | 3,806.8 | 707.6 | 43.7 | 4,558.1 |
Transfers due to | ||||||||
increased credit risk: | ||||||||
From stage 1 to | ||||||||
stage 2 | (310.1) | 310.1 | - | - | (295.6) | 295.6 | - | - |
From stage 1 to | ||||||||
stage 3 | (14.8) | - | 14.8 | - | (8.6) | - | 8.6 | - |
From stage 2 to | ||||||||
stage 3 | - | (14.2) | 14.2 | - | - | (10.1) | 10.1 | - |
Transfers due to | ||||||||
decreased credit risk: | ||||||||
From stage 2 to | ||||||||
stage 1 | 260.3 | (260.3) | - | - | 212.4 | (212.4) | - | - |
From stage 3 to | ||||||||
stage 1 | 2.3 | - | (2.3) | - | 0.6 | - | (0.6) | - |
From stage 3 to | ||||||||
stage 2 | - | 9.7 | (9.7) | - | - | 6.3 | (6.3) | - |
Mortgage advances | 1,101.2 | - | - | 1,101.2 | 1,101.2 | - | - | 1,101.2 |
| Net redemptions and | ||||||||
repayments | (724.2) | (114.7) | (20.2) | (859.1) | (638.0) | (95.3) | (9.7) | (743.0) |
Amounts written off | - | - | (0.9) | (0.9) | - | - | (0.2) | (0.2) |
Other movements | (0.1) | - | (0.1) | (0.2) | (1.0) | - | - | (1.0) |
At 31 March 2026 | 4,709.9 | 760.9 | 85.8 | 5,556.6 | 4,177.8 | 691.7 | 45.6 | 4,915.1 |
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 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 |
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32. Credit risk
(continued)
| 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 2025 | 1.4 | 5.5 | 3.4 | 10.3 | 0.9 | 2.5 | 0.9 | 4.3 |
Transfers due to | ||||||||
increased credit risk: | ||||||||
From stage 1 to | ||||||||
stage 2 | (0.1) | 0.9 | - | 0.8 | (0.1) | 1.0 | - | 0.9 |
From stage 1 to | ||||||||
stage 3 | (0.1) | - | 0.3 | 0.2 | (0.1) | - | 0.2 | 0.1 |
From stage 2 to | ||||||||
stage 3 | - | (0.1) | 0.3 | 0.2 | - | (0.1) | 0.2 | 0.1 |
Transfers due to | ||||||||
decreased credit risk: | ||||||||
From stage 2 to | ||||||||
stage 1 | 0.6 | (1.2) | - | (0.6) | 0.3 | (0.7) | - | (0.4) |
From stage 3 to | ||||||||
stage 2 | - | 0.1 | (0.2) | (0.1) | - | - | (0.1) | (0.1) |
Remeasurement of | ||||||||
expected credit losses | 0.7 | - | 2.0 | 2.7 | 0.4 | 0.1 | 0.2 | 0.7 |
with no stage transfer | ||||||||
Redemptions | (0.2) | (0.3) | 0.5 | - | (0.1) | (0.1) | 0.1 | (0.1) |
Amounts written off | - | - | (0.9) | (0.9) | - | - | (0.2) | (0.2) |
Movement in provision | ||||||||
overlays | - | 0.7 | - | 0.7 | - | - | - | - |
Other movements | - | - | (1.1) | (1.1) | - | - | (0.2) | (0.2) |
At 31 March 2026 | 2.3 | 5.6 | 4.3 | 12.2 | 1.3 | 2.7 | 1.1 | 5.1 |
Group | Society | |||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |
£m | £m | £m | £m | £m | £m | £m | £m | |
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 | (0.2) | - | (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 |
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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 | |
2026 | 2025 | 2026 | 2025 | |
£m | £m | £m | £m | |
East Anglia | 169.2 | 150.2 | 154.0 | 132.3 |
East Midlands | 651.6 | 586.5 | 596.6 | 522.3 |
Greater London | 432.6 | 465.1 | 288.0 | 295.8 |
Northern Ireland | 1.6 | 1.9 | - | - |
North | 288.6 | 257.9 | 263.9 | 229.7 |
North West | 810.0 | 779.1 | 733.9 | 687.6 |
Scotland | 30.7 | 38.4 | 6.8 | 8.9 |
South East | 1,065.9 | 1,008.7 | 938.8 | 858.1 |
South West | 448.3 | 424.6 | 409.9 | 378.1 |
Wales | 259.4 | 247.1 | 231.5 | 214.2 |
West Midlands | 748.8 | 739.0 | 692.0 | 672.2 |
Yorkshire | 649.9 | 617.1 | 599.7 | 558.9 |
5,556.6 | 5,315.6 | 4,915.1 | 4,558.1 |
The table below shows the indexed loan to value distribution of the residential loan portfolio at the year
end date:
Group | Group | Society | Society | |
2026 | 2025 | 2026 | 2025 | |
£m | £m | £m | £m | |
>95% | 96.7 | 15.5 | 96.5 | 15.8 |
91% - 95% | 577.3 | 327.1 | 577.1 | 326.9 |
86% - 90% | 767.7 | 618.5 | 767.3 | 618.3 |
76% - 85% | 1,114.0 | 885.7 | 1,047.3 | 807.9 |
51% - 75% | 1,717.2 | 1,959.9 | 1,438.6 | 1,635.4 |
<51% | 1,283.7 | 1,508.9 | 988.3 | 1,153.8 |
5,556.6 | 5,315.6 | 4,915.1 | 4,558.1 |
The Group's average indexed loan to value at the year end date is 59.8% (2024/25: 56.3%), 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 | |
2026 | 2025 | 2026 | 2025 | |
Fair value of collateral held | £m | £m | £m | £m |
Stage 1 | 9,369.3 | 9,368.6 | 8,113.6 | 7,998.9 |
Stage 2 | 1,509.4 | 1,562.0 | 1,341.5 | 1,254.0 |
Stage 3 | 200.9 | 216.0 | 104.3 | 103.2 |
11,079.6 | 11,146.6 | 9,559.4 | 9,356.1 |
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 | |
2026 | 2026 | 2026 | 2026 | 2026 | |
Group | £m | £m | £m | £m | £m |
Not past due | 4.7 | 0.1 | 3.6 | 0.2 | 8.6 |
Past due 1 to 3 months | 0.3 | 0.1 | 0.1 | - | 0.5 |
Past due 3 to 6 months | 1.5 | - | 0.3 | - | 1.8 |
Past due 6 to 12 months | 0.4 | - | 0.1 | - | 0.5 |
Past due over 12 months | 2.4 | - | - | - | 2.4 |
9.3 | 0.2 | 4.1 | 0.2 | 13.8 |
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32. Credit risk
(continued)
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 |
(c) Commercial assets
Commercial assets comprise a closed portfolio of non-core commercial loans which is analysed in the
table below.
Group | Group | |
2026 | 2025 | |
£m | £m | |
Concentration by loan type | ||
Loans secured on commercial property | 132.5 | 196.5 |
Loans secured on residential property | - | 0.6 |
Gross balances | 132.5 | 197.1 |
Fair value adjustments | 1.0 | 1.7 |
Gross exposures | 133.5 | 198.8 |
Impairment provisions | (66.9) | (89.1) |
66.6 | 109.7 |
Of the Group fair value adjustments, £1.0m (2024/25: £1.7m) relate to loans secured on commercial property
and £nil (2024/25: £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 tables which
follow.
At 31 March 2026
Group | ||||
Stage 1 | Stage 2 | Stage 3 | Total | |
£m | £m | £m | £m | |
Performing | 13.8 | - | - | 13.8 |
Default: | ||||
In Law of Property Act Receivership | - | - | 119.6 | 119.6 |
Other default | - | - | 0.1 | 0.1 |
13.8 | - | 119.7 | 133.5 | |
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 | |
The table below provides further information on the Group's commercial assets by payment due status
at 31 March:
Group | Group | |
2026 | 2025 | |
£m | £m | |
Not past due | 30.0 | 66.7 |
Past due up to 3 months | - | 12.4 |
Past due 3 to 6 months | 1.2 | - |
Past due 6 to 12 months | 2.9 | 28.5 |
Past due over 12 months | 99.4 | 91.2 |
133.5 | 198.8 |
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32. Credit risk
(continued)
(ii) Expected credit losses
The tables below illustrate the IFRS 9 staging distribution of commercial loans and advances to customers and
related expected credit loss provisions at the year end.
At 31 March 2026
| Group | |||
Expected credit loss | |||
Gross exposure | provision | Provision coverage | |
£m | £m | % | |
Commercial loans | |||
Stage 1 | 13.8 | - | 0.0% |
Stage 3 | |||
Other defaults | 119.7 | 66.9 | 55.9% |
133.5 | 66.9 | 50.1% | |
At 31 March 2025
Group | |||
Expected credit loss | |||
Gross exposure | provision | Provision coverage | |
£m | £m | % | |
Commercial loans | |||
Stage 1 | 27.7 | 0.4 | 1.4% |
Stage 3 | |||
Provision overlays | - | 1.5 | - |
Other defaults | 171.1 | 87.2 | 51.0% |
198.8 | 89.1 | 44.8% | |
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 2025 | 27.7 | - | 171.1 | 198.8 |
Transfers due to increased credit risk: | ||||
From stage 1 to stage 3 | (1.2) | - | 1.2 | - |
Net redemptions, repayments and fair | ||||
value adjustments for hedged risk | (12.3) | - | (28.2) | (40.5) |
Amounts written off | (0.4) | - | (24.4) | (24.8) |
At 31 March 2026 | 13.8 | - | 119.7 | 133.5 |
| 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) | (6.2) | (14.8) |
Amounts written off | - | (0.5) | (9.5) | (10.0) |
At 31 March 2025 | 27.7 | - | 171.1 | 198.8 |
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32. Credit risk
(continued)
Group | ||||
Stage 1 | Stage 2 | Stage 3 | Total | |
£m | £m | £m | £m | |
Expected credit loss allowance | ||||
At 1 April 2025 | 0.4 | - | 88.7 | 89.1 |
Transfers due to increased credit risk: | ||||
From stage 1 to stage 3 | (0.1) | - | 0.5 | 0.4 |
Remeasurement of expected credit | ||||
losses with no stage transfer | 0.1 | - | 5.1 | 5.2 |
Redemptions | - | - | (1.5) | (1.5) |
Amounts written off | (0.4) | - | (24.4) | (24.8) |
Movement in provision overlays | - | - | (1.5) | (1.5) |
At 31 March 2026 | - | - | 66.9 | 66.9 |
| 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 |
(iii) Industry analysis of commercial loans
The analysis of commercial loans by industry type is as follows:
Group | Group | |
2026 | 2025 | |
£m | £m | |
Healthcare | 27.8 | 41.2 |
Leisure | 8.3 | 18.5 |
Industrial and warehouse | 3.1 | 3.3 |
Retail | 94.3 | 135.2 |
Residential | - | 0.6 |
133.5 | 198.8 |
(iv) Geographical analysis
The table below shows the geographic spread of the commercial loan portfolio at the year end date:
Group | Group | |
2026 | 2025 | |
£m | £m | |
East Anglia | 5.5 | 8.5 |
East Midlands | 0.7 | 18.4 |
Greater London | 0.9 | 8.5 |
North | 17.2 | 18.4 |
North West | 85.0 | 102.1 |
South East | 12.9 | 24.2 |
South West | 5.1 | 5.8 |
West Midlands | 2.5 | 2.4 |
Yorkshire | 3.7 | 10.5 |
133.5 | 198.8 |
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151
32. Credit risk
(continued)
(v) Collateral
The Group's average unindexed loan to value at the year end date is 135.0% (2024/25: 126.3%), 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 | 2026 | 2025 |
Value of collateral held | £m | £m |
Stage 1 | 34.3 | 52.4 |
Stage 2 | 0.3 | 0.7 |
Stage 3 | 71.2 | 110.4 |
105.8 | 163.5 |
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 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 | |
2026 | 2026 | 2026 | 2026 | |
Group | £m | £m | £m | £m |
Not past due | 9.0 | - | - | 9.0 |
Past due 6 to 12 months | 2.9 | - | - | 2.9 |
Past due over 12 months | 3.8 | - | - | 3.8 |
15.7 | - | - | 15.7 |
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 |
(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 2026, 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% (2024/25: 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 | |
2026 | 2025 | 2026 | 2025 | |
Restated* | ||||
£m | £m | £m | £m | |
Concentration by credit grading | ||||
AAA | 380.2 | 373.2 | 499.6 | 518.6 |
AA+ to AA- | 314.5 | 253.9 | 314.5 | 253.9 |
A+ to A- | 93.3 | 88.8 | 62.9 | 58.3 |
Other | 0.3 | 0.3 | 45.9 | 46.0 |
788.3 | 716.2 | 922.9 | 876.8 | |
Concentration by sector | ||||
Financial institutions | 93.3 | 88.8 | 62.9 | 58.3 |
Asset backed securities | 287.7 | 266.3 | 452.7 | 457.4 |
Supranational institutions | 92.8 | 107.3 | 92.8 | 107.3 |
Sovereign | 314.5 | 253.8 | 314.5 | 253.8 |
788.3 | 716.2 | 922.9 | 876.8 | |
Concentration by region | ||||
UK | 666.7 | 580.7 | 830.1 | 769.5 |
North America | 28.8 | 28.2 | - | - |
Supranational | 92.8 | 107.3 | 92.8 | 107.3 |
788.3 | 716.2 | 922.9 | 876.8 |
*The Society 2025 analysis of concentration by credit grading has been restated to reclassify £45.7m of class B
notes issued by Kenrick No. 4 Plc from AAA to Other
(e) Intercompany loans
An ECL provision of £240.0m (2024/25: £234.9m) is held against intercompany loans of £887.9m (2024/25:
£1,048.5m) 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 £93.2m (2024/25: £98.3m)
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152
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 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 2026 | 2026 | 2026 | 2026 | |
£m | £m | £m | £m | |
Market value | (7.1) | (3.7) | (7.1) | (0.8) |
Net interest income | (0.7) | (3.8) | (6.5) | (0.7) |
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) |
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
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153
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 30 to 39.
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 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 2026
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 | 179.6 | - | - | - | - | - | 179.6 |
Loans and advances to | |||||||
credit institutions | 39.3 | 54.0 | - | - | - | - | 93.3 |
Investment securities | - | 44.1 | 131.7 | 210.6 | 129.0 | - | 515.4 |
Derivative financial | |||||||
instruments | - | 0.1 | 3.2 | 36.3 | 4.5 | - | 44.1 |
Loans and advances to | |||||||
customers | - | 121.7 | 60.0 | 292.4 | 5,218.1 | (108.8) | 5,583.4 |
Total financial assets | 218.9 | 219.9 | 194.9 | 539.3 | 5,351.6 | (108.8) | 6,415.8 |
Financial liabilities | |||||||
Shares | 3,398.9 | 623.9 | 848.5 | 688.3 | 0.4 | - | 5,560.0 |
Amounts due to credit | |||||||
institutions | - | 161.6 | 111.6 | - | - | - | 273.2 |
Amounts due to other | |||||||
customers | 3.0 | 14.8 | 6.9 | - | - | - | 24.7 |
Derivative financial | |||||||
instruments | - | - | 0.4 | 8.5 | - | - | 8.9 |
Debt securities in issue | - | - | - | 238.1 | - | - | 238.1 |
Subordinated liabilities | - | - | - | - | 2.1 | - | 2.1 |
Total financial liabilities | 3,401.9 | 800.3 | 967.4 | 934.9 | 2.5 | - | 6,107.0 |
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34. Liquidity risk
(continued)
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 |
At 31 March 2026
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 | 179.6 | - | - | - | - | - | 179.6 |
Loans and advances to | |||||||
credit institutions | 8.9 | 54.0 | - | - | - | - | 62.9 |
Investment securities | - | 44.1 | 131.7 | 210.6 | 294.0 | - | 680.4 |
Derivative financial | |||||||
instruments | - | 0.1 | 3.2 | 30.1 | 4.4 | - | 37.8 |
Loans and advances to | |||||||
customers | - | 13.6 | 14.3 | 104.8 | 4,783.7 | (33.2) | 4,883.2 |
Investments | - | - | - | - | - | 741.2 | 741.2 |
Total financial assets | 188.5 | 111.8 | 149.2 | 345.5 | 5,082.1 | 708.0 | 6,585.1 |
Financial liabilities | |||||||
Shares | 3,398.9 | 623.9 | 848.5 | 688.3 | 0.4 | - | 5,560.0 |
Amounts due to credit | |||||||
institutions | - | 164.1 | 111.6 | - | - | - | 275.7 |
Amounts due to other | |||||||
customers | 3.0 | 14.8 | 2.5 | 1.8 | 366.2 | - | 388.3 |
Derivative financial | |||||||
instruments | - | - | 0.4 | 8.5 | - | - | 8.9 |
Debt securities in issue | - | - | - | - | - | - | - |
Subordinated liabilities | - | - | - | - | 2.1 | - | 2.1 |
Total financial liabilities | 3,401.9 | 802.8 | 963.0 | 698.6 | 368.7 | - | 6,235.0 |
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34. Liquidity risk
(continued)
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 | - | - | - | - | - | 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 (restated)* | 4.6 | 18.3 | 1.5 | 1.0 | 443.9 | - | 469.3 |
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 | 446.6 | - | 6,020.0 |
*Society "Amounts due to other customers" at 31 March 2025 have been restated as explained in note 39.
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:
2026 | 2026 | 2025 | 2025 | |
Group | £m | % | £m | % |
Cash in hand and balances with | ||||
| the Bank of England | 179.6 | 22.8 | 159.8 | 22.3 |
Cash with banks and building | ||||
| societies | 93.3 | 11.8 | 88.8 | 12.4 |
Gilts | 56.4 | 7.2 | 37.9 | 5.3 |
Treasury bills | 78.5 | 10.0 | 56.2 | 7.8 |
Fixed rate bonds | 62.1 | 7.9 | 61.6 | 8.6 |
Floating rate notes | 30.7 | 3.9 | 45.7 | 6.4 |
Covered bonds | 195.1 | 24.7 | 154.5 | 21.6 |
Mortgage backed securities | 92.6 | 11.7 | 111.7 | 15.6 |
Total | 788.3 | 100.0 | 716.2 | 100.0 |
The following tables show the gross contractual cash flows payable under financial liabilities:
At 31 March 2026
Less than 3 | 3 to 12 | 1 to | Over | ||
months | months | 5 years | 5 years | Total | |
Group | £m | £m | £m | £m | £m |
Liabilities | |||||
Shares | 4,020.6 | 896.2 | 706.4 | 0.4 | 5,623.6 |
Amounts due to credit | |||||
institutions and other customers | 180.2 | 115.7 | - | - | 295.9 |
Derivative financial instruments | 0.7 | 1.7 | 2.3 | - | 4.7 |
Debt securities in issue | 16.5 | 6.4 | 236.5 | - | 259.4 |
Subordinated liabilities | 0.1 | 0.1 | 0.9 | 3.7 | 4.8 |
4,218.1 | 1,020.1 | 946.1 | 4.1 | 6,188.4 | |
Loan commitments | 410.7 | - | - | - | 410.7 |
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34. Liquidity risk
(continued)
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* |
15.3 |
9.6 |
314.6 |
- |
339.5 |
Subordinated liabilities |
0.1 |
0.1 |
0.9 |
3.9 |
5.0 |
3,633.4 |
1,266.7 |
1,106.7 |
4.6 |
6,011.4 |
|
Loan commitments |
250.2 |
- |
- |
- |
250.2 |
*For consistency with the current year presentation, the 2025 cash flows for "Debt securities in issue" have been
reanalysed to show the note principal payable in April 2025 (based on underlying pool receipts to March 2025) in
the "Less than 3 months" category.
At 31 March 2026
Less than 3 |
3 to 12 |
1 to |
Over |
||
months |
months |
5 years |
5 years |
Total |
|
Society |
£m |
£m |
£m |
£m |
£m |
Liabilities |
|||||
Shares |
4,020.6 |
896.2 |
706.4 |
0.4 |
5,623.6 |
Amounts due to credit |
|||||
| institutions and other customers |
180.2 |
115.7 |
- |
- |
295.9 |
Derivative financial instruments |
0.7 |
1.7 |
2.3 |
- |
4.7 |
Subordinated liabilities |
0.1 |
0.1 |
0.9 |
3.7 |
4.8 |
4,201.6 |
1,013.7 |
709.6 |
4.1 |
5,929.0 |
|
Loan commitments |
410.6 |
- |
- |
- |
410.6 |
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 |
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The maturity analysis of lease liabilities is analysed in the table shown below:
Group | Group | Society | Society | |
2026 | 2025 | 2026 | 2025 | |
£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 | 0.2 | 0.3 | 0.2 | 0.3 |
Between one and five years | 0.4 | 0.6 | 0.4 | 0.6 |
After five years | - | 0.1 | - | 0.1 |
0.7 | 1.1 | 0.7 | 1.1 |
The Society earns rental income on letting out parts of four (2024/25: three) of its freehold branches to
residential and commercial tenants. The income received from this is negligible (less than £0.1m) and included
in other operating income.
b) Loan commitments | ||||
Undrawn loan facilities | 410.7 | 250.2 | 410.6 | 250.0 |
c) Capital commitments | ||||
Capital expenditure | ||||
contracted but not yet | 5.0 | 1.5 | 5.0 | 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 and People Committee report on pages 70
to 79.
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 during the 2026 financial year, 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 | |
2026 | 2026 | 2025 | 2025 | |
Group and Society | £000 | £000 | ||
Savings balances at | ||||
31 March | 9 | 169 | 13 | 162 |
Interest payable on savings | ||||
balances | 9 | 6 | 13 | 5 |
Of the £169k savings balance at 31 March 2026 ,
£13.8k (31 March 2025: £2.7k) relates to directors and their
connected persons who stepped down in the year.
Mortgage loans and savings are available to key management personnel and members of their close family at
normal commercial terms. At 31 March 2026, there were mortgage loans outstanding to Directors and their
connected persons of £0.2m (31 March 2025: £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 (2024/25: £nil) 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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36. Related party transactions
(continued)
v) Transactions with subsidiary companies
Interest paid |
Interest paid |
|
to Society |
to Society |
|
2026 |
2025 |
|
£m |
£m |
|
Insignia Finance Limited |
0.1 |
0.1 |
West Bromwich Commercial Limited |
11.8 |
15.0 |
West Bromwich Homes Limited |
2.2 |
2.4 |
West Bromwich Mortgage Company Limited |
19.9 |
27.2 |
34.0 |
44.7 |
At the year end the following balances were outstanding with subsidiary companies:
Loans owed by |
Loans owed (to)/ |
|
subsidiaries |
by subsidiaries |
|
2026 |
2025 |
|
£m |
£m |
|
Insignia Finance Limited |
2.2 |
(0.1) |
West Bromwich Commercial Limited |
197.2 |
292.9 |
West Bromwich Homes Limited |
91.0 |
98.4 |
West Bromwich Mortgage Company Limited |
450.7 |
520.7 |
741.1 |
911.9 |
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 £226.2m (2024/25:
£222.7m) 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.
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37. Business segments
(continued)
Income Statements for the year ended 31 March 2026
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 | 298.2 | 5.7 | - | (14.7) | 289.2 |
On instruments measured at fair | |||||
| value through profit or loss | 14.4 | - | - | - | 14.4 |
Total interest receivable and similar | |||||
| income | 312.6 | 5.7 | - | (14.7) | 303.6 |
Interest expense and similar charges | (207.0) | (5.0) | (2.2) | 14.7 | (199.5) |
Net interest receivable/(expense) | 105.6 | 0.7 | (2.2) | - | 104.1 |
Fees and commissions receivable | 1.1 | - | - | - | 1.1 |
Other operating income | - | - | 4.5 | - | 4.5 |
Fair value gain/(loss) on financial | |||||
| instruments | 2.0 | (1.2) | - | - | 0.8 |
Total income | 108.7 | (0.5) | 2.3 | - | 110.5 |
Administrative expenses | (62.6) | (0.7) | (0.7) | - | (64.0) |
Depreciation and amortisation | (8.6) | - | - | - | (8.6) |
Operating profit/(loss) before | |||||
revaluation gains, impairment and | 37.5 | (1.2) | 1.6 | - | 37.9 |
provisions | |||||
Gains on investment properties | - | - | 0.7 | - | 0.7 |
Impairment on loans and advances | (2.1) | (2.9) | - | - | (5.0) |
Profit/(Loss) before tax | 35.4 | (4.1) | 2.3 | - | 33.6 |
Statements of Financial Position at 31 March 2026
Commercial | Consolidation | Total | |||
Retail | real estate | Property | adjustments | Group | |
£m | £m | £m | £m | £m | |
Total assets | 6,708.1 | 90.4 | 141.3 | (313.1) | 6,626.7 |
Total liabilities | 6,266.8 | 318.0 | 102.5 | (538.9) | 6,148.4 |
Capital expenditure | 22.0 | - | - | - | 22.0 |
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 |
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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 | |
2026 | 2026 | 2025 | 2025 | |
£m | £m | £m | £m | |
Cash and balances at the Bank | ||||
| of England | - | 179.6 | - | 159.8 |
Loans and advances to credit | ||||
| institutions | 73.2 | 20.1 | 70.2 | 18.6 |
Investment securities | - | 515.4 | - | 467.6 |
Derivative financial instruments | - | 44.1 | - | 44.9 |
Loans and advances to | ||||
| customers | 537.1 | 5,046.3 | 866.2 | 4,531.9 |
Other assets | - | 210.9 | - | 202.6 |
610.3 | 6,016.4 | 936.4 | 5,425.4 |
Included in the above, at 31 March 2026, Group loans and advances to credit institutions included £54.0m
During the year ended 31 March 2025, the Society and Kenrick No.4 Plc entered into back-to-back interest rate
swap arrangements with an external counterparty, this being a standard feature of a securitisation transaction.
These swaps each had a fair value at inception, creating a derivative liability for the Society and a derivative asset
for Kenrick No. 4 Plc, settled via the deemed loan between the Society and Kenrick No. 4 Plc. At inception, the
Society correctly reported its derivative liability but did not record the appropriate deemed loan adjustment,
instead recognising a fair value loss on financial instruments. The prior year financial statements for the Society
have therefore been restated to reflect the initial fair value of the derivative as an adjustment to the deemed loan
and amend the taxation charge for the year accordingly.
The restatement had no impact on accounting periods prior to the year ended 31 March 2025.
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The table below shows the effect of the retrospective restatement on the Society statement of financial position
at 31 March 2025.
Society | Society | ||
As reported | Restated | ||
2025 | Restatement | 2025 | |
£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 | 658.6 | - | 658.6 |
Derivative financial instruments | 36.2 | - | 36.2 |
Loans and advances to customers | 4,538.3 | - | 4,538.3 |
Deferred tax assets | 6.9 | - | 6.9 |
Trade and other receivables | 4.1 | - | 4.1 |
Investments | 912.0 | - | 912.0 |
Intangible assets | 20.7 | - | 20.7 |
Property, plant and equipment | 20.3 | - | 20.3 |
Retirement benefit asset | 1.2 | - | 1.2 |
Total assets | 6,416.5 | - | 6,416.5 |
Liabilities | |||
Shares | 5,071.6 | - | 5,071.6 |
Amounts due to credit institutions | 460.2 | - | 460.2 |
Amounts due to other customers | 474.4 | (5.1) | 469.3 |
Derivative financial instruments | 16.8 | - | 16.8 |
Debt securities in issue | - | - | - |
Current tax liabilities | - | 1.3 | 1.3 |
Deferred tax liabilities | 2.1 | - | 2.1 |
Trade and other payables | 17.9 | - | 17.9 |
Provisions for liabilities | 0.3 | - | 0.3 |
Subordinated liabilities | 2.1 | - | 2.1 |
Total liabilities | 6,045.4 | (3.8) | 6,041.6 |
Members' interests and equity | |||
Core capital deferred shares | 127.0 | - | 127.0 |
Subscribed capital | 3.9 | - | 3.9 |
General reserves | 236.4 | 3.8 | 240.2 |
Revaluation reserve | 3.2 | - | 3.2 |
Fair value reserve | 0.6 | - | 0.6 |
Total members' interests and equity | 371.1 | 3.8 | 374.9 |
Total members' interests, equity and liabilities | 6,416.5 | - | 6,416.5 |
The table below shows the effect of the retrospective restatement on the Society income statement for the year
ended 31 March 2025.
Society | Society | ||
As reported | Restated | ||
2025 | Restatement | 2025 | |
£m | £m | £m | |
Interest receivable and similar income | |||
Calculated using the effective | |||
| interest method | 276.7 | - | 276.7 |
On instruments measured at fair value | 33.6 | - | 33.6 |
through profit or loss | |||
Total interest receivable and similar income | 310.3 | - | 310.3 |
Interest expense and similar charges | (222.6) | - | (222.6) |
Net interest receivable | 87.7 | - | 87.7 |
Fees and commissions receivable | 0.9 | - | 0.9 |
Other operating income | 0.3 | - | 0.3 |
Fair value (loss)/gain on financial instruments | (3.3) | 5.1 | 1.8 |
Total income | 85.6 | 5.1 | 90.7 |
Administrative expenses | (54.9) | - | (54.9) |
Depreciation and amortisation | (7.0) | - | (7.0) |
Operating profit before revaluation gains, | |||
| impairment and provisions | 23.7 | 5.1 | 28.8 |
Impairment on loans and advances | (0.3) | - | (0.3) |
Provisions for liabilities | 0.1 | - | 0.1 |
Provisions against investments in | (8.0) | - | (8.0) |
subsidiary undertakings | |||
Profit before tax | 15.5 | 5.1 | 20.6 |
Taxation | (6.9) | (1.3) | (8.2) |
Profit for the financial year | 8.6 | 3.8 | 12.4 |
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Group
Group
Society
Society
2026
2025
2026
2025
Restated*
Restated*
£m
£m
£m
£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
(0.7 )
(2.4 )
Non-cash movements on investment securities
(1.4 )
(1.4 )
Provisions against investments in subsidiary undertakings
Interest on subordinated liabilities
Interest paid on lease liabilities
Fair value gain on financial instruments
(0.8 )
(4.4 )
(2.5 )
(1.8 )
Changes in operating assets and liabilities
Loans and advances to customers
(198.1 )
(599.9 )
(353.3 )
(734.1 )
Derivative financial instruments
Shares
Deposits and other borrowings
(190.9 )
(334.1 )
(265.5 )
Trade and other receivables
(5.5 )
(0.4 )
(5.4 )
(0.3 )
Trade and other payables
(4.9 )
(5.5 )
(5.2 )
(5.7 )
Retirement benefit obligations
Tax paid
(0.8 )
(2.9 )
(0.8 )
(2.9 )
Net cash inflow/(outflow) from operating activities
(491.7 )
(101.4 )
(184.4 )
*Society 2025 "Profit before tax" and "Deposits and other borrowings" have been restated as explained in note 39. Group and Society 2025 cash flows from operating activities have been restated to correct the disclosure of
non-cash items related to fair value changes in derivatives which are now disclosed within "Fair value gain on financial instruments". This has led to a decrease in the previously stated changes in operating assets and liabilities,
2026
2025
Average number of Group employees, all of which employed in the UK
740
739
Arising in the UK:
£m
£m
Group total income
110.5
105.5
Group profit before tax
33.6
36.5
Group corporation tax payments
0.8
2.9
Public subsidies received by the Group
-
-
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 homeownership 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 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 payments represent the amount of tax paid during the year, as disclosed in the Group Statement of Cash Flows.
• 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 2026
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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 2026 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
2026 in Country-by-Country Reporting.
Basis for opinions
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:
• We reviewed and challenged the key assumptions used by the directors in their
determination of the going concern of the Society;
• We reviewed management’s stress test scenarios and considered whether the
Society would continue to operate above required regulatory capital and liquidity
minima during times of stress;
• We considered as to whether our audit work had identified events or conditions
which may give rise to uncertainty of the Society’s future ability to trade; and
• We reviewed legal and regulatory correspondence to ensure that any compliance
issues which may impact the going concern of the Society had not been
identified.
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 financial statements (including the
risk of override of controls) and determined that the principal risks were related
to the posting of inappropriate manual journal entries to manipulate financial
performance and management bias in significant accounting estimates.
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Audit procedures performed by the engagement team included:
• Review of internal audit and compliance monitoring findings throughout the year;
• Reading key correspondence with the Financial Conduct Authority and Prudential
Regulation Authority;
• Incorporation of an element of unpredictability in our testing through altering the
nature, timing and/or extent of work performed;
• Challenging assumptions and judgements made by management in their
significant accounting estimates;
• Identifying and testing journal entries, in particular any journal entries posted
to unusual account combinations based on our understanding of usual business
operations.
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 Nikhil Dhiri.
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
28 May 2026
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1. Statutory percentages
Statutory | ||
2026 | limit | |
% | % | |
Proportion of business assets not in the form of loans secured on | ||
residential property | 3.6 | 25.0 |
Proportion of shares and borrowings not in the form of shares held by | ||
individuals | 5.1 | 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
2026 | 2025 | |
% | % | |
As a percentage of shares and borrowings: | ||
Gross capital | 7.88 | 7.92 |
Free capital | 4.73 | 4.77 |
Liquid assets | 12.93 | 12.24 |
As a percentage of mean total assets: | ||
Profit for the financial year | 0.36 | 0.48 |
Management expenses | 1.12 | 1.05 |
Annual Business Statement
for the year ended 31 March 2026
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Name, qualification and age | Role | Date of appointment | Other directorships and interests | |
Lynne Atkin MBE | Non-Executive Director | 1 May 2025 | Stray View Management Limited | |
Age 60 | Action for Children | |||
Sara Bennison | Non-Executive Director | 1 August 2023 | Dual Corporate Risks Ltd | Northbailey Ltd |
MA | Lawn Tennis Association Ltd | Brandface Ltd | ||
Age 58 | 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 (Hons), M.Phil | West Bromwich Mortgage Company Ltd | |||
Age 55 | White Label Lending Ltd | |||
Manjit Hayre | Chief Risk Officer | 1 September 2021 | ||
Age 58 | ||||
John Maltby | Chair | 4 January 2021 | Allica Bank Ltd | |
MBE | Max Nicholas Renewables Ltd | |||
Age 64 | Maltby Coaching Ltd | |||
Nimisha Patel | Non-Executive Director | 1 June 2024 | ||
BSBA | ||||
Age 47 | ||||
Alex Pawley | Chief Financial Officer | 1 January 2023 | Insignia Finance Ltd | |
BSc, FCA | White Label Lending Ltd | |||
Age 43 | West Bromwich Mortgage Company Ltd | |||
West Bromwich Homes Ltd | ||||
West Bromwich Commercial Ltd | ||||
David Thomas | Non-Executive Director | 1 August 2020 | Harrogate Homeless Project Ltd | |
MSc, ACIB, FIB (Ireland) | TD Bank Europe Ltd | |||
Age 64 | ||||
Jonathan Westhoff | Chief Executive Officer | 5 May 2009 | West Bromwich Commercial Ltd | West Bromwich Building Society |
BA (Hons), FCMA, CGMA, ACIB | West Bromwich Homes Ltd | Foundation | ||
Age 61 | West Bromwich Mortgage Company Ltd | Livv Maintenance Ltd | ||
Insignia Finance Ltd | Livv Homes Ltd | |||
White Label Lending Ltd | St Anton Limited |
Information relating to Directors’ and Officers’ other directorships and interests at 31 March 2026
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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 Officer 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 and People Committee report on
pages 70 to 79. 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 |
Sophie Pazzaglia | Chief People Officer | West Bromwich Building |
BSc (Hons), FCCA, ACG | and Group Secretary | Society Foundation |
Secretary White Label | ||
Lending Ltd | ||
Sarah Teague | Chief Internal Auditor | None |
LLB CMIIA | ||
Alex Windle | Chief Customer Officer | None |
BSc (Hons), FCCA, ACG | (until 3 April 2026) |
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Below are the definitions of
the terms used in the Annual
Report and Accounts to help
you understand our disclosures
and compare them 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.
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.
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 (CET 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.
Credit risk
This is the risk that a mortgage customer may not repay all or
part of their mortgage, causing the Society financial loss.
Cyber risk
The risk that our IT and communications systems come under
threat, causing disruption or loss.
Debt securities in issue
Debt securities in issue are certificates/notes representing
loans from external investors to the Society.
Deferred 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 and 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.
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Financial instruments
A financial instrument is a contract between two parties
which results in one party owning a financial asset and the
other party taking on a financial liability or issuing equity.
Our financial assets include mortgages, cash, investment
securities and derivatives. Our financial liabilities include
customers’ savings (known as shares), debt securities in issue
and derivatives.
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.
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".
House Price Index (HPI)
The measure of the change in house price, in percentage
terms, from a specific start date.
Impaired loans
Impaired loans are those which meet the Society's default
criteria and have been allocated to Stage 3 under IFRS 9 (an
accounting standard) 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 management
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 Promoter Score (NPS)
A measure of how likely a customer is to recommend our
products and services. The NPS ranges between -100 and
+100.
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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.
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. The
remaining PIBS were redeemed and cancelled in April 2026.
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).
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 the accounting standard 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.
Total Capital Requirement (TCR)
The minimum amount of capital the Society is required to
hold, set by the PRA and informed by the ICAAP.
West Bromwich Building Society Foundation
The West Bromwich Building Society Foundation was set up
in 2023 to provide funding to support our local people and
communities. The foundation runs independently from the
Society and is not a subsidiary of the Society.
Wholesale funding
Funding raised by financial institutions by borrowing
from other banks or investors, rather than from individual
customers.
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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.
1627-05/26-01