The West Brom today announces its results for the financial year ended 31 March 2022, reporting a pre-tax profit of £23.2m.

Key highlights of the financial year include:

• £756m in new mortgage lending (2020/21: £784m), with 54% of loans for house purchase supporting first-time buyers onto the property ladder (2020/21: 48%).
• Savers rewarded with rates that were, by the end of the year, more than three times the average rates paid by the market* (end of 2020/21: more than double). Only passed on a quarter of the increases led by the Bank Rate to borrowers on Standard Variable Rate; equivalent to a combined benefit to our members of £9.2m (2020/21: £5.3m).
• A Net Promoter Score®** of +81 (2020/21: +76) with customer satisfaction maintained at 96%.
• Statutory profit before tax of £23.2m (2020/21: £4.7m), driven by strong net interest income, fair value gains, the release of residential mortgage provisions that increased during the pandemic and a lower commercial impairment charge.
• Strong capital position maintained with an improved Common Equity Tier 1 (CET 1) capital ratio of 17.0% (2020/21: 16.4%) and a leverage ratio of 6.5% (2020/21: 6.8%).
• Recognised in three categories of the Moneyfacts 2021 awards, including Winner of Best Building Society Mortgage Provider. Also awarded the highest accolade in the Financial Adviser Service Award for the 4th consecutive year.
• Supported refugees from the Ukrainian conflict by making homes from our rental property portfolio available to house families impacted by the crisis.

Jonathan Westhoff, Chief Executive, commented:

After an extended period of uncertainty, we report our results today under more ‘normal’ circumstances. Supporting the financial wellbeing of our members has underpinned our decision making throughout the pandemic and will remain at the fore as we navigate the economic impacts of the actions taken to manage the economy throughout the last two years and now the effects of the invasion by Russia of Ukraine. 

Purpose-led performance

 Throughout the past few years, we have remained guided by our mutual ethos and Purpose – supporting the financial wellbeing of members by providing safe and good returns on the savings they entrust with us and promoting home ownership through responsible lending.

We delivered £756m in total residential lending (20/21: £784m) and we received £0.9bn in new applications (20/21: £1.2bn). Although the housing market remained buoyant and competitive throughout the year, the downside consequences of this tend to affect those seeking to purchase their first home, as price inflation makes affordability more challenging, and can further marginalise other borrowers who do not fit the standard mortgage market offerings. That’s why it’s pleasing to report that more than half of all new home purchase lending was for first-time buyers, increasing from 48% in 20/21.  These borrowers are at the heart of our Purpose and we continue to provide options that meet their needs, including products for those with smaller deposits and recently re-entering Shared Ownership, underpinned by a strong focus on our underwriting to ensure we lend responsibly.

At the start of the pandemic in 2020, the Bank of England introduced an abundance of low cost funding, primarily via the Term Funding Scheme, to ensure banks and building societies had sufficient access to funding to support lending activities. This meant that average savings rates drifted lower for most of the year and did not always benefit from material increases when interest rates in general began to increase in the second half of 2021 and early 2022.

To support our savers, we were in the minority of those who restricted the impact of this low cost funding by maintaining interest rates where we could and passing on benefits of the general increase to interest rates led by the Bank Rate. This meant that, whilst we already started the year with average savers rates for our members that were double the market average, by the end of the year, our rates were on average more than three times those of the market. We also restricted interest rate increases for our borrowing members on the Society’s Standard Variable Rate (SVR), to just a quarter of the increases led by the Bank of England Bank Rate. Combined, we believe that these approaches delivered some £9.2m in direct financial benefit to our members.

Having delivered these benefits to members, £24.4m post-tax profit was added to reserves, strengthening the Society’s capital. The key measure of capital, the Common Equity Tier 1 ratio, improved to 17.0% (31 March 2021: 16.2%), which provides not only strong protection for the Society’s members should further economic shocks occur, but moreover a capability for the Society to support future home ownership.

Our support for our members was recognised in the Moneyfacts Awards 2021 where the Society was awarded ‘Best Building Society Mortgage Provider’, highly commended in the ‘Best Fixed Rate Mortgage Provider’ category and commended in the ‘Innovation in Personal Finance’ category for our work with mortgage prisoners. We were also awarded ‘Best Regional Building Society’ at the Mortgage Finance Gazette awards at the start of 2022 and achieved 5 stars for the 4th consecutive year in the Financial Adviser Service Awards.

It is pleasing that the more pessimistic predictions about the impact of the pandemic on employment and household income haven’t, to date, come to fruition. In fact, arrears for the core residential book decreased to 0.31% (20/21: 0.43%) which continues to compare favorably against the UK Finance average of 0.77%. That said, the anticipated cost of living crisis will potentially put a strain on many across the UK, with the pressure on incomes becoming unavoidable in many cases. This will potentially mean that some may temporarily find meeting their mortgage payments a challenge. As a mutual we will be looking to help our members, if affected in this way, through such periods. The Society adopts a compassionate, fair and flexible approach towards borrowers who are unable to meet their payments.

Making a real impact 

 Throughout this year, we have continued our focus on being a responsible lender and began exploring new ways the Society’s mutual ethos can be used to support customers and communities. One of our goals is to see how we can support borrowers who are either underserved or overcharged by the wider mortgage market. Helping mortgage prisoners has been a motivation of ours since September 2020, when we were the first lender to introduce products specifically tailored for these borrowers, with some saving up to £1,000 a month on their mortgage. In the last 12 months, we have extended our mortgage prisoner product range, providing the most comprehensive options on the market, and we continue to call on the industry to work together with the government and regulators to find further solutions to help these borrowers. 

Following a period of limited fundraising options due to the restrictions of the pandemic, we were pleased to announce our new charity partnership with Barnardo’s in August 2021. As part of the partnership, we have an ambition to donate £500k via the Dormant Account Scheme to build four ‘Gap Homes’ in Sandwell and are working with our local council to gain their support and commitment in the next year. Whilst we still await approval of the scheme from Sandwell Council, the homes will be used to support young people leaving the care system in the area to help them transition into adult life. When people leave care, they can face many challenges adapting to independent living and don’t always have a support network or safety net to help them.

A situation that has been devastating to watch unfold has been the conflict in Ukraine. In March 2022, we offered an initial 11 homes to the Government’s Homes for Ukraine scheme as a way we could support those fleeing the conflict. The homes are a mix of accommodation located above our branches and from West Bromwich Homes Limited, the Society’s rental subsidiary. We are looking to add further homes to the scheme where availability allows. We have also been returning the £350 ‘Thank You’ payment to the refugees by providing essentials like furniture, appliances, clothing, toiletries, fuel and food to those living in our accommodation. Whilst we cannot begin to imagine what these refugees have been through, we felt this was one way we could use the Society’s Purpose to support them. 

A sustainable future 

 Like many businesses in the UK, we are committed to supporting the green agenda and ensuring our operations are more sustainable. Initially, we set ourselves the target of zero carbon emissions by 2035, and because of the great progress we have made, we have now moved this target forward to 2025.

We know that we also have a part to play in helping our customers improve their carbon footprint and take advantage of green home initiatives now and in the future. Heating and powering homes currently accounts for 40% of the UK’s total energy usage whilst contributing to 22% of all greenhouse gas emissions in the UK . Therefore, homeowners are looking at ways to make their homes more sustainable. We’re exploring ways in which we can help any customer looking to make their homes more efficient through green financing options and promoting eco-initiatives.

New ways of working

 Throughout the pandemic, we learned much about how we can adapt our operational model to serve both our customers and colleagues. We have adopted a truly hybrid model, with teams and individuals given autonomy to choose working patterns that will deliver the best outcomes for customers. To support this, we have created a ‘Hybrid Working Group’ of colleagues across the business that are tasked with implementing new initiatives to deliver true hybrid working. The group has been working on reconfiguring our head office spaces to encourage more collaborative working and have added areas to support creativity. 

We implemented our new branch operating model during the year. This maintains the presence of the ‘local branch’ for our members by ensuring our network is on a sound financial footing through the improved efficiency that the updated model creates.

Diversity and inclusion in the workplace, including gender and BAME (Black, Asian and minority ethnic) representation, remains a strategic priority. This year we published, on a voluntary basis, the Society’s first Ethnicity Pay Gap report being one of the few companies in financial services to do so. This supports our ongoing drive to increase transparency and drive the diversity ambition. Whilst there is always more to be done, it is pleasing to see that the Society’s ethnicity pay gap statistics and representation across all levels of the Society are in a strong position.

Looking Ahead

 Whilst we have emerged from the pandemic with a stronger economy than predicted, there will be more challenges ahead with the Russian invasion of Ukraine and the looming cost of living crisis. As we have demonstrated over the last two years, thanks to the continued commitment and resilience of our colleagues, the Society is well positioned to weather any future storms and serve our customers, colleagues and communities. As well as supporting our core members, our work with mortgage prisoners has shown how mutuality can help those who are being underserved or overcharged in the mainstream market. Using our Purpose to develop propositions to help these savers and borrowers will continue to be our strategic focus over the next 12 months.

*Average market rates sourced from Bank of England Bankstats table A6.1

**Net Promoter Score and NPS are trademarks of Satmetrix Systems, Inc., Bain & Company, Inc., and FredReichheld.

[1] New homes to produce nearly a third less carbon - GOV.UK (www.gov.uk)