TIDMCVBP
RNS Number : 8285G
Coventry Building Society
29 July 2021
29 July 2021
Coventry Building Society delivers a strong performance,
achieving above market growth in mortgages whilst maintaining
excellent service to members and investing for the future.
Commenting on these results, Steve Hughes, Chief Executive
Coventry Building Society, said:
"The first half of 2021 has been dominated by the ongoing
effects of the pandemic with the continued impact on health,
people's lives and livelihoods. As we move into the second half of
the year there is cause for cautious optimism as we transition to a
new norm but it is important we recognise the efforts of so many in
what has been such a challenging time.
During these six months we have delivered a strong financial
performance and made good progress against our strategic goals.
This performance reflects an exceptional commitment to members and
customers by my colleagues across the Society and I am so proud of
what they have delivered. We continue to focus on running the
Society in the interest of our members and ensuring that we are set
up for long term success.
We are clear on our purpose and have refreshed our strategy
which remains grounded in mutuality with a place for all our
stakeholders, whether members, colleagues, the local communities we
support or our business partners. Our brand identity has also been
updated to reflect our purpose and belief that we are truly 'All
together, better'. "
Financial results for the six months ended 30 June 2021
include:
-- Mortgages: Mortgage balances have increased by GBP2.4bn to
GBP45.9bn. We expanded our product offering during the year and
helped 3,800 customers buy their first home.
-- Savings: Savings balances increased by GBP0.9bn to GBP39.1bn.
-- Member value: The average weighted savings rate paid to
members was 0.53% higher than the average paid in the market and
equivalent to an additional GBP100m in interest to savers(1) .
-- Service: The Society delivered outstanding service with a Net
Promoter Score of +73(2) and average call waiting times of 51
seconds(3) .
-- Supporting our colleagues: The Society has a 3 star rating
for 'World Class' colleague engagement(4) and was recognised for
being 8(th) in the Best Big Companies to Work For list(5) .
-- Supporting our communities: We have donated GBP600k to good
causes in the period, through our Poppy savings products in support
of the Royal British Legion and the release of dormant savings
funds.
-- Profit: Profit before tax was GBP124m, GBP102m higher than
the same period last year. Net interest income increased to GBP228m
from GBP178m and Net interest margin improved to 0.88% from 0.72%
for the same period last year.
-- Capital and liquidity strength: Common Equity Tier 1 (CET 1)
ratio remains well above statutory requirements at 35.2% whilst the
Society's Leverage Ratio on a UK basis was broadly maintained at
4.7%. The Liquidity Coverage Ratio of 174% is also considerably
above the regulatory minimum requirement.
-- Leading cost efficiency: At 0.48%(6) the Society continues to
report amongst the lowest cost to mean assets ratio of any UK
building society(7) , whilst continuing to invest significantly in
its technology infrastructure and digital capability.
We delivered a strong performance in the first half of 2021
despite the significant uncertainty created by the pandemic
Ensuring that we remain a safe and secure place to save and
borrow remains our priority - enabled by strong capital ratios and
our simple, focused business model.
Sustainable financial performance is key to that and we
delivered a strong set of interim results for the first six months
of the year, maintaining exceptional service levels whilst
delivering mortgage and savings growth and sustaining the pace of
investment in technology, branches and our people.
Our profit before tax of GBP124 million for the six months to 30
June 2021 compares to GBP22 million reported in the same period of
2020. We continue to focus on the long term strength and security
of your Society. Over the long-term, we retain enough profit to
maintain our capital strength and ensure we remain a safe place for
our members to save and borrow. Our key measure of this is our risk
based capital ratio (CET 1) which increased to 35.2% at 30 June
2021 (31 December 2020: 33.0%).
We increased mortgage lending and our support for first time
buyers with lower deposits
During the first six months of the year, we grew our mortgage
book by GBP2.4 billion (30 June 2020: GBP0.8 billion). Our mortgage
growth rate of 5.5% for the six months to 30 June 2021 is over
twice the rate of growth seen in the market(8) demonstrating the
strength of our product range and service to brokers and
consumers.
As a building society, we have always been proud to support
people in owning their own homes and we have been doing this since
members established the Society in 1884. In 2021 we extended our
offering for those looking to buy their first homes, providing
3,800 loans to first time buyers compared to 900 loans in the same
period of 2020.
Growth in our buy to let mortgage book was GBP0.9 billion in the
first six months of the year (30 June 2020: GBP0.9 billion).
We continued to provide market leading regular savings and Child
ISA products to encourage better savings habits
We are acutely aware of the impact that the low interest rate
environment is having for our savings members. We remain focussed
on balancing the interest we can afford to pay to members with
maintaining capital strength and investing to improve our products
and services.
Our performance has allowed us to deliver GBP100 million (H1
2020: GBP103 million) of value to savings members by paying
interest rates that were 0.53% higher than the average market
rate(1) (30 June 2020: 0.57% higher). This is in line with our
focus on delivering long term value to all members.
Our savings balances grew by GBP0.9 billion in the first half of
the year (30 June 2020: decline of GBP0.8 billion) with members
showing a preference for easy access savings products and our
regular savings account.
Our service levels continued to differentiate us from other
firms based on feedback from members and intermediaries
We continued to deliver outstanding service to members and this
is reflected in our Net Promoter Score of +73 (31 December 2020:
+73)(2) .
These high satisfaction and service levels were recognised by
awards such as our Which Recommended Mortgage Provider status, Best
Building Society from Savings champion and our Gold Ribbons for
customer experience for both savings and mortgages from Fairer
Finance.
We have continued to invest in capabilities to allow our
colleagues to work effectively whilst managing record volumes of
mortgage applications as well as supporting our savings members.
Our mortgage teams have also continued to support customers with
mortgage payment holiday requests. Our average call waiting time
increased only marginally to 51 seconds (30 June 2020: 47 seconds)
and I am grateful to our teams for how they pulled together at a
time when members needed us most .
We were placed 8(th) in the Best Top 25 Big Companies to Work
For rankings in 2021, maintaining our 'World-class' level of
employee engagement rating
Despite the challenge for our front line colleagues managing
with social distancing rules and with well over half of our people
working remotely from home, we maintained very high levels of
colleague engagement and remained one of the Best Large Companies
to work for in the UK(5) . We are putting plans in place to allow
the majority of our people to adopt a hybrid working pattern, where
teams will determine the right mix between home and office
locations.
I firmly believe this will also make us more inclusive as an
employer, allowing people to balance personal and work commitments
more easily and at the same time reducing the time, money and
energy consumed by commuting. We have proven over the last year
that colleagues can be as productive working remotely. At the same
time, we recognise the need for face to face collaboration and how
much colleagues have missed this.
Part of being a successful and growing organisation is the
creation of opportunities for people of all backgrounds. We created
an additional 50 jobs in the first half of 2021 and I am pleased we
were able to continue with our apprenticeship and graduate
programmes as well as adapting training and development for all our
teams to be delivered remotely where possible. We have not accessed
the furlough scheme for any roles at the Society since its
inception in the first half of 2020.
One of our strategic priorities is to build an inclusive,
inspiring workplace where everyone belongs and where the diversity
of our city and communities is reflected in our teams. We have some
challenging ambitions in this area which include having 50% of
management roles held by women and 25% of management roles held by
Black, Asian or Minority Ethnic colleagues by 2025. We currently
have 43% of these roles held by women and 13% by Black, Asian or
Minority Ethnic colleagues.
We continue to invest in better technology to deliver improved
digital capabilities and branch experience to our members
Spending our members' money wisely is important to us as a
mutual organisation. During the six months to 30 June 2021 our cost
to mean assets ratio of 0.48%(6) increased marginally from June
2020 and remains one of the lowest in the building society
sector(7) . We continue to invest in the business for the long
term. In the first half of 2021 this included the refurbishment of
a further 10 branches and making improvements to our digital
capabilities, including enhancing our online authentication process
and making it easier for members to find the information they are
looking for when using our online services. We continued to invest
in technology to improve the resilience and availability of
services to members and are investing heavily in our mortgage
systems to create a significantly easier process for mortgage
customers to change their product.
We enhanced support for people in our home city and wider
communities as well as progressing our environmental
commitments
Whilst lockdown restrictions continued to limit face to face
activity in the first half of the year, we have found ways of
continuing with our financial education and employability support
for young people delivered through technology.
We were able to have a positive impact in our communities by
donating GBP0.3 million of funds from dormant accounts towards
local and national charities in addition to a donation of GBP0.3
million to the Royal British Legion from our Poppy savings
products. This takes our total donations to the Legion to GBP19
million since 2008. The Legion is celebrating its 100(th) year
anniversary in 2021 and we are proud that with our members support
we have created better futures for those who have served our
country and their families through supporting their housing needs,
training needs and supporting mental health.
We have also continued to progress our sustainability agenda and
we were accepted as a signatory by the United Nations Global
Compact and Principles for Responsible Banking Initiatives. We are
on track to be Scope 1 and Scope 2 emissions Net Zero in 2021 and
have developed a three year roadmap of product initiatives which
have environmental and social impacts at their core.
Later this year, we expect to publish the Society's first ever
Climate Action Plan, which will set out our ambition on the climate
agenda in more detail.
We increased our visibility in the City of Coventry and beyond
as well as updating our brand identity
As the 2(nd) biggest building society in the UK, we believe that
awareness of our brand can be improved. This awareness is critical
to maintaining our success whether we are attracting the membership
of the future, recruiting new colleagues or working with partner
organisations.
Coventry is the UK City of Culture in 2021 and we are proud to
be sponsoring the events and excited at how the City is finding
creative ways to welcome artists and audiences from the UK and
beyond as well as providing opportunities for many local people to
get involved.
We have also signed a 10 year sponsorship agreement with Wasps
Rugby Club to re-name what was the Ricoh Arena as the Coventry
Building Society Arena. The 40,000 capacity sporting, concert and
conference arena will create not just local but national awareness
for our brand. However it's not just about brand and there will be
exciting opportunities for members, schools and community groups to
use the arena and its facilities.
Finally we have refreshed our visual and brand identity across
our branches and digital channels and this will also feature in new
advertising campaigns and our customer communications. It aligns to
our purpose, which is summed up with the phrase 'All together,
better'. It's an important and exciting investment in our brand as
we look to build relevance for existing and future generations of
members.
Outlook
The economic outlook improved over the last six months and the
housing market has been stimulated by government support and
housing demand outstripping supply. The labour market has also
received continued support through the furlough scheme. We expect
uncertainty to remain in the period ahead, and we will always take
a prudent approach to running the business in order to protect the
interest of our members over the long term.
We will maintain focus on delivering industry leading service,
growing our membership and investing for the future. This is
underpinned by our sustainable financial performance and strong
capital position. As a mutual, member owned organisation we will
work in the interest of our members but also our colleagues,
communities and wider society as we continue to deliver on our
purpose.
1. Based on the Society's average month end savings rate
compared to the CACI market average rate for savings accounts and
excluding current accounts, for the latest available data for the
five months ended 31 May 2021. This measure has been updated in the
period to use CACI data for the market rate, previous source Bank
of England adjusted average rates. If H1 2020 had been calculated
on an equivalent basis, Member Value would have been reported as
GBP105 million.
2. A measure of customer advocacy that ranges between -100 and
+100 which represents how likely a customer is to recommend our
products and services.
3. Based on average call waiting times between 1 January 2021
and 30 June 2021.
4. Source: Best Companies - 3 Star accreditation is awarded to
organisations that receive an index score of 738 or higher
reflecting 'world class' levels of workforce engagement.
5. Source: Best Companies '25 Best Big Companies to Work For'
listing 2021.
6. Administrative expenses, depreciation and
amortisation/Average total assets.
7. As at 28 July 2021 based on available market data.
8. Source: Bank of England - latest published data as at 31 May
2021.
Financial Review
Income Statement Year ended
Period to Period to 31 Dec 2020
30 June 30 Jun
2021 (Unaudited) 2020 (Unaudited) (Audited)
GBPm GBPm GBPm
============================= ================== ================== ============
Net interest income 227.7 178.4 408.5
============================= ================== ================== ============
Fees and commissions (1.4) (0.9) (2.3)
============================= ================== ================== ============
Other income 0.6 0.3 2.2
============================= ================== ================== ============
Gain/(loss) on derivatives
and hedge accounting 4.6 1.2 (0.7)
============================= ================== ================== ============
Total income 231.5 179.0 407.7
============================= ================== ================== ============
Management expenses (123.9) (117.2) (245.6)
============================= ================== ================== ============
Expected credit losses 17.1 (39.4) (36.4)
============================= ================== ================== ============
Provisions - (0.5) (0.5)
============================= ================== ================== ============
Charitable donation to Poppy
Appeal (0.3) (0.4) (0.8)
============================= ================== ================== ============
Profit before tax 124.4 21.5 124.4
============================= ================== ================== ============
Net interest income for the period was GBP228 million (30 June 2020:
GBP178 million). The increase in net interest income of GBP49 million
includes the impact of an adjustment to our Effective Interest Rate (EIR)
calculation which is explained below. The increase reflects both an improvement
in mortgage interest receivable due to higher margins on new lending and
lower interest payable to savers following the changes made after the
fall in the Bank of England Base Rate in March 2020. This improved performance
delivered a Net Interest Margin (NIM) of 0.88% (30 June 2020: 0.72%).
Net interest income includes an adjustment of GBP27 million which reflects
a change to the future assumptions on mortgage redemption behaviour which
forms part of the EIR calculation. This adjustment reflects an expectation
that customers will spend less time paying the Standard Variable Rate
of interest at the end of their fixed rate period than is currently the
case. The Society recognises an EIR asset to reflect expected future Standard
Variable Rate mortgage income which, after this adjustment, reduced to
GBP50 million in the first half of 2021 (31 December 2020: GBP71 million).
The impact of the adjustment reduced the Society's NIM in the first half
of the year by 0.10%, without which reported NIM would have been 0.98%.
Gain on derivatives and hedge accounting of GBP4.6 million (30 June 2020:
GBP1.2 million gain). The Society uses derivative financial instruments
to manage interest rate and currency risks arising from its mortgage and
savings activity and from wholesale funding, including non-sterling issuances.
The gain in the first half of the year represents hedge ineffectiveness
where movements in the fair value of derivatives did not fully offset
movements in the fair value of the underlying hedged item in addition
to fair value movements on derivatives which were not designated in hedge
relationships.
Management expenses including depreciation and amortisation for the period
were GBP124 million (30 June 2020: GBP117 million). The increase in costs
of GBP7 million was driven by an increase in day to day running costs
of GBP6 million which primarily relates to additional employee costs.
There was a GBP1 million increase in spending related to the Society's
strategic investment programmes with total spend on investment programmes
of GBP27 million (30 June 2020: GBP26 million). This investment has been
focused on activity to digitise our services, whilst enabling significant
progress in delivery of our infrastructure programmes, and the Society's
new mortgage platform, together with the ongoing redesign of the branch
network. Investing to improve resilience of services for members whilst
maintaining cost efficiency are key goals and will remain a focus for
future periods.
The cost to mean assets ratio of 0.48%(1) is broadly in line with the
first six months of 2020 and is expected to remain among the lowest in
the building society sector(2) . The cost to income ratio has reduced
to 54% (30 June 2020: 65%) reflecting the growth in income relative to
our cost base in the period.
Expected credit losses
The performance of our mortgage book and the overall economic outlook
has improved compared to our expectations, with lower unemployment and
higher growth in house prices than anticipated at 31 December 2020. The
Society has granted c. 40,000 mortgage payment holidays since March 2020
of which only 358 remain active at 30 June 2021, with 98% of affected
customers returning to making mortgage payments at the end of the payment
holiday. As a result, the expected credit loss provision has been reduced
to GBP31 million (31 December 2020: GBP48 million) and a corresponding
release of GBP17 million has been recognised in the Income Statement (30
June 2020: charge of GBP39 million).
We have carried out extensive work in order to determine the appropriate
provision and, as was the case at the 2020 year end, significant judgement
and estimates have been required in the calculation of expected credit
losses.
Uncertainty remains as to the impact of the removal of government and
central bank intervention which have helped to support the economy. The
performance of the mortgage book remains strong with less than 400 Covid-19
mortgage payment holidays active at 30 June 2021, reduced from 34,000
at the same time last year.
Of the total expected credit loss provision, GBP23.2 million relates to
post model adjustments (PMAs) where existing models do not fully reflect
the expected credit loss given the unprecedented environment. These adjustments
reflect the potential impact of Covid-19 on the mortgage book in addition
to other overlays for potential negative equity and risks of house price
falls over and above the forward looking economic scenarios. We have introduced
a further PMA in 2021 to reflect the potential risk around remediation
for cladding on flats where fire safety standards have not been met.
The remaining GBP7.4 million of provision relates to the modelled expected
credit loss (ECL) provision across a range of alternative economic scenarios
which reflect various possible outcomes as the economy emerges from the
pandemic.
As a result of these changes the expected credit loss provision now equates
to 0.07% of the overall mortgage book (31 December 2020: 0.11%).
Under IFRS 9 the Society is required to categorise its mortgages into
one of three 'stages'. At 30 June 2021 92.3% of the Society's loans and
advances to customers were within the Stage 1 'performing' category (31
December 2020: 91.3%), 7.3% were in Stage 2 (31 December 2020: 8.2%) reflecting
a significant increase in credit risk since origination and 0.4% were
in default or Stage 3 (31 December 2020: 0.5%). This profile has improved
during 2021 as a result of the continued performance of accounts previously
subject to payment holidays as well as the improved economic outlook.
The Corporation tax charge represents an effective rate of tax of 20.4%
(30 June 2020: 13.0%). The increase in rate is driven by the increase
in profits during the year including the impact of the 8.0% banking surcharge
which was not applied at 30 June 2020 as the Society did not meet the
threshold.
Balance Sheet 30 June 2021
30 Jun 2020 31 Dec 2020
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
================================ ============= ============ ===========
Assets
================================ ============= ============ ===========
Loans and advances to customers 45,869.6 43,030.0 43,482.8
================================ ============= ============ ===========
Liquidity 7,099.3 6,444.0 7,314.5
================================ ============= ============ ===========
Other 454.3 886.0 701.0
================================ ============= ============ ===========
Total assets 53,423.2 50,360.0 51,498.3
================================ ============= ============ ===========
Liabilities
================================ ============= ============ ===========
Retail funding 39,079.4 35,438.6 38,151.1
================================ ============= ============ ===========
Wholesale funding 11,564.9 11,926.6 10,367.9
================================ ============= ============ ===========
Subordinated liabilities and
subscribed capital 67.1 67.1 67.2
================================ ============= ============ ===========
Other 399.8 780.9 706.0
================================ ============= ============ ===========
Total liabilities 51,111.2 48,213.2 49,292.2
================================ ============= ============ ===========
Equity
================================ ============= ============ ===========
General reserve 1,927.3 1,776.0 1,835.1
================================ ============= ============ ===========
Other equity instruments 415.0 415.0 415.0
================================ ============= ============ ===========
Other (30.3) (44.2) (44.0)
================================ ============= ============ ===========
Total equity 2,312.0 2,146.8 2,206.1
================================ ============= ============ ===========
Total liabilities and equity 53,423.2 50,360.0 51,498.3
================================ ============= ============ ===========
Loans and advances to customers: The Society's business model remains
focused on high quality, low loan to value owner-occupier and buy to let
lending within the prime residential market, distributed mainly through
mortgage intermediaries. We started 2021 with a substantial mortgage pipeline
following a successful final quarter and we have continued to see strong
volumes in the first half of 2021 supported by a buoyant housing market.
During the period, the Society advanced GBP5.4 billion of mortgages (30
June 2020: GBP3.5 billion), with net mortgage lending of GBP2.4 billion
(30 June 2020: GBP0.8 billion).
During the first half of the year the Society also introduced a range
of up to 95% loan to value mortgages in order to support first time buyers
entering the housing market. In addition the Society repurchased two buy
to let mortgage portfolios totalling GBP0.5 billion. These loans were
originated by the Society and have been recognised on the Balance Sheet
within loans and advances to customers from the point of repurchase.
The balance weighted average indexed loan to value at 30 June 2021 was
51.4% (31 December 2020: 52.8%).
Liquidity: On-balance sheet liquid assets have decreased to GBP7.1 billion
(31 December 2020: GBP7.3 billion) and the Liquidity Coverage Ratio (LCR)
at 30 June 2021 was 174% (31 December 2020: 179%), significantly in excess
of the regulatory minimum.
Retail savings: The Society continues to be predominantly funded by retail
savings, with balances of GBP39.1 billion at 30 June 2021 (31 December
2020: GBP38.2 billion). Additional savings balances have been used to
fund the growth in the mortgage book.
Wholesale funding: The Society uses wholesale funding(3) to provide diversification
of funding, supporting growth and lowering risk as well as providing value
to members through lowering the overall cost of funding. Wholesale funding
in the period has increased by GBP1.2 billion as a result of drawdowns
on the Bank of England Term Funding Scheme and issuances in the period,
partially offset by maturities.
The Society has accessed the Bank of England's Term Funding Schemes with
balances of GBP5.21 billion outstanding at 30 June 2021 (31 December 2020:
GBP4.55 billion). Other new issuances in the year include GBP0.3 billion
senior non-preferred notes issued in April 2021 and a further GBP0.4 billion
issued from the Economic Master Issuer RMBS programme. This programme
received recognition during 2021 from both the International Financing
Review and the Global Capital awards.
Pension benefit surplus (included in Other assets): The pension benefit
surplus has increased to GBP17 million (31 December 2020: GBP10 million)
as a result of market movements, in particular an improvement in UK corporate
bond yields which have reduced the scheme liabilities since 31 December
2020.
General reserves: The growth in General reserves of GBP92 million in
the first half of the year (30 June 2020: GBP3 million) reflects retained
profit for the period of GBP99 million (30 June 2020: GBP19 million),
gain on remeasurement of the defined benefit pension scheme of GBP7 million
(30 June 2020: loss of GBP2 million) offset by GBP14 million distribution
to Additional Tier 1 capital holders (30 June 2020: GBP14 million).
Total equity: Total equity has increased by GBP0.1 billion to GBP2.3
billion (31 December 2020: GBP2.2 billion).
Capital Ratios
The table below provides a summary of the Society's capital
resources and CRD IV ratios on an end-point basis (i.e. assuming
all CRD IV requirements were in force in full with no transitional
provisions permitted).
End-point End-point
30 Jun End-point 31 Dec
2021 30 Jun 2020 2020
GBPm GBPm GBPm
======================================== ============ ================ =========
Capital resources:
======================================== ============ ================ =========
Common Equity Tier 1 (CET 1)
capital 1,853.6 1,718.7 1,783.3
=========================================== ============ ================ =========
Total Tier 1 capital 2,268.6 2,133.7 2,198.3
=========================================== ============ ================ =========
Total Tier 2 capital - 11.8 -
=========================================== ============ ================ =========
Total capital 2,268.6 2,145.5 2,198.30
=========================================== ============ ================ =========
Risk weighted assets 5,265.7 5,423.3 5,410.6
=========================================== ============ ================ =========
CRD IV ratios: %% %
======================================== ============ =============== =========
Common Equity Tier 1 (CET 1)
ratio 35.2 31.7 33.0
=========================================== ============ ================ =========
CRR Leverage ratio 4.2 4.2 4.3
=========================================== ============ ================ =========
UK Leverage ratio 4.7 4.5 4.6
=========================================== ============ ================ =========
Risk Weighted Assets (RWAs) have decreased by 2.7% from 31 December 2020.
The impact of growth in the mortgage book of 5% has been more than offset
by improved credit conditions, predominantly driven by increases in HPI.
As a result, the CET 1 ratio has increased by 2.2% in the first six months
of 2021. At 35.2%, our CET 1 ratio remains significantly ahead of the
Total Capital Requirements set by the PRA for the Society of 10.7% of
risk weighted assets as at 30 June 2021.
During early 2022, there are two changes to the capital requirements due
to be implemented. Firstly, the PRA released a policy statement (PS16/21):
"Internal Ratings Based UK mortgage risk weights: Managing deficiencies
in model risk capture", which recommends flooring average IRB UK mortgage
risk weights. Based on the June 2021 capital ratios, the expected impact
to the Group's CET 1 ratio would be a reduction by approximately 4%, which
is less than initially expected due to the policy not flooring individual
mortgages. Secondly, the Society will be required to transition to updated
IRB models to meet the latest regulatory requirements contained in the
EBA roadmap and largely covered within supervisory statement SS11/13.
The expected impact of these updated models is an increase in RWAs due
to an increase in the probability of possession given default and LTV
at default. The range of outcomes is still uncertain and subject to approval
from the PRA but the update may reduce the Society's CET 1 ratio by up
to one third. This would effectively bring forward the risk weights the
Society would report based on the implementation of Basel IV RWA floors
which are due to be phased in from 2023 to 2028 and are described below.
From 2023, Basel IV RWA floors are being phased in and will reduce the
Group's reported CET 1 ratio further, as they do not give full credit
for the Group's very low risk mortgage book. Applying the Basel IV RWA
floors to the 30 June 2021 figures on a full transition basis would result
in a CET 1 ratio of 17.3%. The reduction in reported CET 1 measures has
been included within the Society's financial plans and does not materially
reduce the capital surplus to regulatory requirements, ensuring we remain
safe and secure.
The Society's Leverage ratios have been maintained at 4.7% and 4.2% on
a UK and CRR basis respectively, significantly above both regulatory minima
and the Society's internal risk appetite. The FPC and PRA have released
a consultation paper (CP14/21) "Consultations by the FPC and PRA on changes
to the UK leverage ratio framework" which sets out the review of the leverage
framework in the UK. The consultation maintains that only firms with GBP50
billion retail deposits will be in the scope of the UK leverage regime,
and as such the Society is not currently in scope for this requirement.
This will lower the Society's expectation of the planned Minimum Requirement
for own funds and Eligible Liabilities (MREL) requirements.
The capital disclosures above are on a Group basis, including all subsidiary
entities. For regulatory purposes the Group also reports on an Individual
Consolidated basis, which only includes those subsidiaries meeting particular
criteria contained within CRD IV. The Individual Consolidated CET 1 ratio
on an end-point basis at 30 June 2021 is 0.5% higher than the Group ratio
due to assets held by entities that sit outside of the Individual Consolidation,
primarily those held by the Group's securitisation and covered bond entities.
1. Administrative expenses, depreciation and amortisation/Average total
assets.
2. As at 28 July 2021 based on available market data.
3. Deposits from banks, Other deposits, Amounts owed to other customers
and Debt securities in issue.
---------------------------------------------------------------------------------
Other Information
A copy of the Interim Financial Report is available here:
http://www.rns-pdf.londonstockexchange.com/rns/8285G_1-2021-7-28.pdf
The Interim Financial Report has also been placed on the website
of Coventry Building Society , at
www.coventrybuildingsociety.co.uk/results
The directors are responsible for the maintenance and integrity
of the information on the Society's website. Information published
on the internet is accessible in many countries with different
legal requirements. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions .
Forward Looking Statements
Certain statements in this Interim Financial Report are forward
looking. The Society, defined in this Interim Financial Report as
Coventry Building Society and its subsidiary undertakings, believes
that the expectations reflected in these forward looking statements
are reasonable based on the information available at the time of
the approval of this report. However, we can give no assurance that
these expectations will prove to be an accurate reflection of
actual results; because these statements involve risks and
uncertainties, actual results may differ materially from those
expressed or implied by these forward looking statements. We
undertake no obligation to update any forward looking statements
whether as a result of new information, future events or
otherwise.
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END
IR BIGDRLSDDGBI
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July 29, 2021 02:00 ET (06:00 GMT)
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