Building Societies Database 2006 FINANCIAL SERVICES

Transcription

1 Building Societies Database 2006 FINANCIAL SERVICES

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3 Building Societies Database KPMG s Building Societies Database 2006 I am delighted to introduce the sixteenth edition of KPMG s annual Building Societies Database. As usual, Database summarises, in a series of tables of statistics, ratios and rankings, the financial performance of all the current UK building societies. However, this year in addition to the Introduction and the Sector Commentary, we have added some observations on the impact of the introduction of International Financial Reporting Standards (IFRS) on the sector. If readers would like to know more about the wider services which KPMG provides to the retail financial sector, and building societies in particular, please contact me in Leeds at the address below. Richard Gabbertas Partner, KPMG s Financial Services practice September 2006 KPMG LLP 1 The Embankment Neville Street LEEDS LS1 4DW Tel: Fax: e Mail: richard.gabbertas@kpmg.co.uk

4 2 Building Societies Database 2006 Introduction Introduction Database 2006 provides financial information relating to all the building societies in the United Kingdom. All data for building societies has been extracted from published sources, being primarily the latest financial statements of the societies for financial year ends between August 2005 and April Numbers for branches, borrowing members and investing members are as published in the Building Societies Association Yearbook 2005/2006. Number of societies Database 2006 comprises 63 societies. There have been no building society mergers since December 2003 and thus no change in the total number of societies for several years. However, three societies, Mercantile, Lambeth and Universal, have announced their intention to put merger resolutions to their members during Total sector group and society assets In Database 2006 the 63 societies hold total group assets of billion, compared to Database 2005 total group assets of billion. Total group assets have increased by 32 billion, which is an increase of 12.9 percent. Total sector asset movements are analysed as follows: Group bn Society bn Database 2005 total assets Growth in year Database 2006 total assets Sector asset growth 2005 to % 11.8% Prior year sector asset growth 10.0% 9.7% to 2005 Of the 2006 total asset growth, 9 billion has come from Nationwide (2005: 10 billion) and a further 4.5 billion (approx) from Britannia s acquisition of the branch network and savings balances of Bristol and West from Bank of Ireland. Nationwide, the largest society with billion total assets, comprises 43 percent of total building society group assets in Database 2006 (Database percent). Britannia, the second largest society with 32.4 billion total assets, comprises 11.6 percent of total building society group assets (Database percent). Taken together, therefore, the two largest societies hold nearly 55 percent of the total sector assets. Asset groupings The 63 building societies are grouped into three Peer Groups, based on asset size and ranked within each Peer Group. There has been only one change from the Peer Groups for Database 2005: Mansfield has moved into Peer Group 2 as a result of total assets exceeding 200 million for the first time.

5 Building Societies Database 2006 Introduction 3 Total Assets analyses The table below shows the percent increases in total assets from Database 2005, by Peer Groups. Note that the Database 2005 Total Assets have been adjusted for Mansfield moving from Peer Group 3 into Peer Group 2. Database 2006: Analysis of Total Assets growth by Peer Groups Group Total Assets Society Total Assets Society Database Database Growth % Database Database Growth % numbers 2006 m 2005 m 2006 m 2005 m PG , , % 259, , % PG , , % 11, , % PG , , % 1, , % Total , , % 272, , % Total Profits analyses We also provide an analysis of total profits percent increase from Database 2005 by Peer Groups. The Database 2005 Total Profits have been adjusted for Mansfield moving into Peer Group 2. Note also that society profits can be distorted by dividends and other income from subsidiary undertakings. Database 2006: Analysis of Total Profits growth by Peer Groups Group Profits for Year Society Profits for Year Society Database Database Growth % Database Database Growth % numbers 2006 m 2005 m 2006 m 2005 m PG , , % 635, , % PG ,586 35, % 37,504 34, % PG ,536 6, % 6,487 6, % Total , , % 679, , %

6 4 Building Societies Database 2006 Introduction Group versus society data As in recent years, users of Database need to be aware that some tables analyse group data, whereas a number are society only data. Each table makes this clear at the top of the relevant sections. Note in particular that in Table 2b, Group Reserves and Capital, the information is all group, except when a society does not have any subsidiary undertakings and, therefore, the reserves and capital data is for the society only. Bases of the ratios The detailed bases for all data, statistics and ratios are set out in the Explanations section at the back of Database. Changes to the Tables for Database 2006 There are a number of format and content changes from Database Group versus society data In Table 1, for the key disclosure of total assets, we have asterisked those societies that are not group societies and we have included society total assets in the group total assets column. This is for completeness of this particular important measurement. However, we have retained the use of for all other group tables where a society does not have group data. IFRS societies These are indicated on each table with an I. The majority are in Peer Group 1, with one society, Manchester, in Peer Group 2. In order to retain IFRS societies within the existing Database Peer Group structure and to maintain comparability with UK GAAP societies, we have made a number of key decisions for the input process. The most important of these are explained below: net interest income is input, unadjusted, as net interest receivable all fair value/gains/losses relating to derivatives etcetera and disclosed after net interest income, are input as part of other income collective impairment provisions are input as general mortgage loss provisions individual impairment provisions are input as specific mortgage loss provisions FSRP loans, FSOL loans and other loans are all input excluding any fair value/ hedge adjustments, whether such adjustments are disclosed on the balance sheet or within the relevant notes shares: as for loans above, these are input excluding any fair value/ hedge adjustments, whether such adjustments are disclosed on the balance sheet or within the relevant notes; retirement benefit obligations: the deficits on defined benefit pension schemes, as disclosed under IAS19, are input to Table 4 net of deferred tax at 30 percent, to maintain comparability with UK GAAP societies all IFRS reserves are input as one number and shown separately in Table 2b IFRS societies should be aware that, due to differences in the detail of their disclosures, we have made some assumptions as regards certain analyses in their Notes. Where we did not consider that a reasonable assumption was possible we have

7 Building Societies Database 2006 Introduction 5 input these as. In particular a number of IFRS societies have not disclosed full analyses of their FSRP/FSOL impairment provisions. In order to maintain comparability between IFRS societies and with UK GAAP societies, it would be helpful if all IFRS societies could clearly disclose the following for group and society and for current and prior years: balance sheet loans analysed between FSRP, FSOL and other loans impairment provisions analysed between FSRP, FSOL and other loans the above impairment provisions also analysed between collective and individual interest receivable on FSRP lending. IAS19/FRS17, Defined benefit pension scheme disclosures All societies with defined benefit schemes are now required to include such schemes on their balance sheet, whether under IAS19 or FRS17. Thus the previous SSAP24 data column has been deleted and Database now expresses the net pension deficit as a percent of General Reserves. UK GAAP societies continue to disclose the pension deficit in their balance sheet net of deferred tax at 30 percent. In order to maintain comparability, the pension deficits of IFRS societies, disclosed gross under IAS19, have been input to Database net of deferred tax at 30 percent. Increases in shares, loans FSRP, loans FSOL and other loans We have added new percent increase columns for these major categories of assets and liabilities. All classes of mortgage loans, with their percent increases, are now disclosed for both group and society, in Tables 5 and 6 respectively. Shares and the increase percent are disclosed in Table 1 for society only. Group mortgage lending and provisions We have included new Tables 5 and 7 for group mortgage lending data and related mortgage loss provisions. These are similar to the society only data which has been retained as Tables 6 and 8. Gross group mortgage lending The new group Table 5 also includes a new disclosure of group gross mortgage lending in the year, both value and as a percent of prior year total mortgage assets in the balance sheet (again, for IFRS societies, excluding any fair value hedge adjustments). Where a society does not have subsidiaries then this is a society only disclosure. This data excludes any mortgage book acquisitions where a society discloses such acquisitions and states that they have been included within the gross lending disclosure. In future, Database could include both group and society gross mortgage lending separately if all societies would disclose clearly such data.

8 6 Building Societies Database 2006 Introduction Exceptional costs and income To help facilitate comparisons between societies, Database does not include, in the Group or Society profitability ratios, any exceptional costs or income shown separately on the face of the Income and Expenditure Account. However, any such items identified within Notes to the Accounts are included within the relevant Database ratio calculation. The Group and Society profits for the year, being the first column in the second and third tables are all the bottom line profits for the year: i.e., after all charges and income of whatever nature and taxation. Contacts for further information For further information on any aspects of Database 2006 please contact Richard Gabbertas, Partner, or Paul Boothroyd, Senior Manager, at KPMG s Financial Services practice in Leeds. Responsibility Whilst reasonable steps have been taken to help ensure the accuracy of the information contained in Database, KPMG LLP accept no responsibility for any errors contained therein and there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. Paul Boothroyd Senior Manager, KPMG s Financial Services practice

9 Building Societies Database 2006 Sector Commentary 7 Sector Commentary The building society sector is becoming increasingly diverse making it difficult to produce an overall commentary for the industry or make generalisations about it. Nature limits imposed on building societies by the Building Societies Act create some common characteristics. Societies are dominated on one side of the balance sheet by mortgages and the other by retail funding. Consequently societies have little (almost none outside Nationwide) exposure to unsecured lending and credit cards (which are currently giving banks high levels of bad debt) and limited exposure to commercial lending, though that has not stopped one society recording a loss as a result of such lending. Nature limits may bring homogeneity to the sector but they are constraints and as such are beginning to chaff some of the more ambitious and aggressive societies, particularity the upper limit on wholesale funding. With the mortgage market growing by 10.5 percent in 2005 and the housing market continuing to boom the sector s total growth as shown by Database of 12.9 percent will look strong to some observers. In practice it reflects two differing factors at work within societies: Differing growth ambitions, 10 societies had 15 percent or more growth in group assets, 18 less than 5 percent growth. A generally cautious attitude to credit risk, affordability and an aversion as mutuals to new business pricing being subsidised by back book customers. Societies in general provide the public with excellent value for money, with interest spreads much lower than banks. Some, for example the National Counties are excellent value for members with a spread of just 0.23 percent with a number of others including Skipton, Nottingham and Scarborough having spreads of 0.90 percent or below. Similarly societies are generally frugally run, with several, including Coventry, Leeds and Kent Reliance having management expense ratios of under 0.60 percent. It can only be a matter of time before the sector leaders bring management expense ratios below 0.50 percent. Whilst many societies are succeeding in bringing costs down others seem to be struggling with them and have shown little if any improvement for several years. The failure of some societies to cut cost income ratios over several years highlights another increasingly common trend in the sector, the growing gap between the successful societies, with strong growth, falling cost ratios and in some cases successful diversification and those who seem to be struggling with weak growth, poor cost control and limited if any success in diversification. With the market set to become more difficult the gap between societies seems set to grow and pressure on the boards of those weaker performers will rise. Simon Walker Partner, KPMG s Financial Services practice It can only be a matter of time before the sector leaders bring management expense ratios below 0.50 percent. Whilst many societies are succeeding in bringing costs down others seem to be struggling with them and have shown little if any improvement for several years.

10 8 Building Societies Database 2006 Impact of IFRS Observations on the impact of IFRS The adoption of IFRS has been a significant challenge for most organisations; however, the financial services industry has borne the brunt of this change as a result of the extensive use of financial instruments. In particular, where previously financial instrument accounting guidance had been limited to a few principles based Statements of Recommended Practice issued by the British Banking Association (UK GAAP), it is now governed by a 300+ page rules based international accounting standard, IAS 39 Financial Instruments: Recognition and Measurement ( IAS39 ), resulting in significant changes in accounting policies and processes. We summarise below our thoughts from a first look at the financial statements of those societies which adopted IFRS for the 2005/06 reporting season the aim being to identify key themes and contentious areas and promote further discussion around these issues. These observations are based solely on information contained in the published financial statements and have not been independently verified. Overview Fifteen of the societies within Database adopted IFRS for the current reporting season. These societies, 14 of which are Peer Group 1, account for 89 percent of the total assets covered by Database. Societies which adopted IFRS. Nationwide Britannia Portman Yorkshire Coventry Chelsea Skipton West Bromwich Leeds Cheshire Principality Newcastle Nottingham Scarborough Manchester On average there was a 4.7 percent reduction in equity 1 on adoption of IFRS (including IAS 32 Financial Instruments and Disclosure IAS32 and IAS39); however, the magnitude of the adjustments to equity ranged from a reduction of 11.5 percent (Scarborough) to an increase of 9.8 percent (Chelsea). Similarly, on adoption of IFRS (including IAS32 & 39) the average impact on assets of these societies was an increase of 1.6 percent, with the range of impact on previously reported assets being a 9.2 percent increase (Britannia) to a 0.1 percent decrease (Manchester). 1 Equity is defined as total reserves

11 Building Societies Database 2006 Impact of IFRS 9 The true impact on profit of IFRS adoption is somewhat obscured by the transitional provisions of IFRS resulting in the financial instrument accounting standards (IAS 32 and 39) only being applied for periods commencing on or after 1 January 2005 without restatement of comparatives. However, the average impact of IFRS adoption (excluding IAS 32 and 39) on previously reported profits of the societies was a 1.7 percent increase with the adjustments ranging from a 26.3 percent increase (West Bromwich) to a 2.5 percent decrease (Chelsea) of previously reported profit. The key areas driving the adjustments to previously reported profits were cessation of goodwill amortisation, fair value of investment properties and increased pension charges. The impact of IFRS must also be considered in light of the fundamental changes to accounting policies, processes and disclosures. A simple illustration of this is the length of the financial statements for the societies reporting under IFRS with the increase on previous year s financial statements for these societies ranging from 8 36 pages. Impact of adoption of IAS 32 and 39 IAS 32 and 39 have been the most difficult of the IFRSs for Building societies to adopt and also the most variable in terms of accounting impact. All societies adopting IFRS for periods commencing on or after 1 January 2005 chose not to restate comparatives for IAS 32 and 39. The impact on opening equity for periods commencing on or after 1 January 2005 for those societies adopting IFRS ranged from a 10.4 percent increase (Chelsea) to an 11.5 percent decrease (Scarborough) on previously reported equity. Impact of adoption of IAS32/39 on previously reported equity Society % Nationwide 0.4 Britannia -1.9 Portman 4.0 Yorkshire 2.5 Coventry -1.1 Chelsea 10.4 Skipton 2.5 West Bromwich -6.4 Leeds 3.7 Cheshire 1.5 Principality 2.8 Newcastle -2.3 Nottingham 6.4 Scarborough Manchester 2.1 Recognition of impairment losses and interest on an effective yield basis are two of the more subjective IFRS adjustments for societies. Where published, the range of effective interest rate ( EIR ) adjustments on first time adoption of IFRS as a percentage of previously reported loans and advances to customers was an increase of 150bps (Scarborough) to a decrease of 1bp (Nationwide). As a rule of thumb positive EIR adjustments tend to be created on mortgages (typically due to upfront incentives) which are offset by negative EIR adjustments on commercial loans (due to upfront fees).

12 10 Building Societies Database 2006 Impact of IFRS In a number of the financial statements it was not always clear from the accounting policies and/or note analysis where certain financial instruments balances (particularly derivatives) were reflected in the line items of the income statement/balance sheet, including: Fair value gains/losses Hedging adjustments where fair value hedging is used Derivative interest receivable/payable Fair value line on the income statement but not clear what is included. Where fair value volatility was disclosed in the income statement the range of this volatility equated to a reduction to 2005 profit after tax of 6 percent (Britannia) through to an increase of 12 percent (Chelsea). Impairment IAS 39 introduces a number of key changes in the way that provisions for bad debt/impairment are recognised, most notably: The concepts of specific (impaired) and general provision (impaired but not identified) under UK GAAP are replaced by assessments of impairment made on an individual (loan-by-loan) or on a collective (portfolio basis). Impairment provisions are required to be justified using objective/observable evidence of impairment. This is being interpreted a lot more strictly than under UK GAAP, particularly in relation to general/collective provisions, leading to a potential reduction in provisions. Impairment provisions are required to take account of the difference between current value and net present value of recoveries leading to a potential increase in provisions. The conflicting forces of using objective evidence of impairment and discounting has resulted in significant variations in the adjustments required to provisions levels on adoption of IFRS. The adjustments to impairment provisions on adoption of IAS 39 as a percentage of previously reported provisions against loans and advances to customers ranged from a 75 percent reduction (Nottingham) to an 82 percent increase (West Bromwich). Interestingly, four of the 15 societies recorded no adjustments to provision levels on adoption of IFRS. Impact of adoption of IAS39 on previously reported UK GAAP provisions against loans and advances to customers Society % Change Nationwide -36 Britannia -38 Portman -34 Yorkshire -25 Coventry -41 Chelsea -60 Skipton 0 West Bromwich 82 Leeds -56 Cheshire 7 Principality 67 Newcastle 0 Nottingham -75 Scarborough 0 Manchester 0

13 Building Societies Database 2006 Impact of IFRS 11 Provisions/Impairment coverage (bps) of loans and advances to customers Society PY UK GAAP On adoption of IAS39 Nationwide Britannia Portman Yorkshire Coventry Chelsea 21 8 Skipton West Bromwich Leeds Cheshire 4 4 Principality Newcastle Nottingham 11 3 Scarborough Manchester Whilst all of the IFRS societies' impairment accounting policies made reference to both individual and collective assessments of impairment, three of the societies did not provide a numerical split between individual and collective impairment within the notes to the financial statements. From the information available the average percentage of provision regarded as collective on adoption of IFRS for the societies was 62 percent compared to 57 percent of the previously reported provision regarded as general under UK GAAP. Retirement Benefits IAS 19 Employee Benefits ( IAS19 ) treatment of defined benefit pension schemes results in greater prominence of retirement benefit obligations. With the exception of Cheshire ( 2.3million surplus; 1 percent of equity), all of the societies reported a retirement benefit liability ranging from 14 percent (Skipton) to 1 percent (Manchester and Principality) of equity reflecting deficits on defined benefit schemes. The treatment of related income statement balances also varied significantly amongst the 15 societies with five of the societies reflecting service cost and interest on pension scheme assets and liabilities within admin expenses. The remaining societies reflected service cost in admin expenses and the interest on pension scheme assets/liabilities within other operating income/expense or the interest lines. The comparability and level of disclosure around the assumptions used to value pension scheme deficits continues to be an issue under IFRS, as it was with FRS 17 Retirement Benefits. For instance one of the most significant assumptions for retirement benefit obligations relates to mortality, seven of the societies did not disclose any mortality assumptions and a further two made only narrative reference to use of standard mortality tables (PA92). Taxation Whilst effective tax rates continue to vary between the societies, ranging between 27.7 percent (Skipton) and 38.1 percent (Cheshire) for the current reporting season, the average (simple) effective tax rate remains constant at 30.1 percent for the current (IFRS) and prior periods (UK GAAP). However, the amount of cash tax being paid has reduced due to the spreading of tax relief/payment on IFRS adjustments and not taxing certain fair value adjustments. Current tax rates have reduced to 27.3 percent for the current period compared to 28.6 percent for the prior period (UK GAAP).

14 12 KPMG Building Societies Database 2006 Impact of IFRS Disclosure Adhering to the disclosure requirements of IAS 32 was also a key challenge in this year s reporting season, clearly indicated by the increase in the size of the financial instruments and risk management note length for the IFRS societies, which totalled 100 pages for the fourteen societies reporting under IFRS in the current reporting season, against 67 pages in the prior period. Whilst most of the risk management analysis was included towards the back of the financial statements a few, notably West Bromwich and Leeds, included them upfront (Note 2). The nature of risk analysis provided is broadly consistent across all the societies but the level of detail varies significantly with disclosures ranging from 2 to 12 pages for the IFRS societies. IFRS 7 Financial Instruments: Disclosure ( IFRS7 ) with its initial application date of 1 January 2007 is the next significant IFRS which will impact those societies which have already adopted IFRS, though Nationwide chose to early adopt for the current reporting season. Although only a disclosure standard, it requires significant additional analysis including: analysis of non performing loans detailed information on assessment of loan impairment losses information on the measurement basis of financial instruments information on the impact of financial instruments on the income statement quantitative analysis showing the use of hedge accounting and detailed information on the use of derivatives. current information which will form the comparative figures when IFRS 7 is first adopted. The future In May 2006, the UK Accounting Standards Board issued proposals that all UK public quoted and other publicly accountable companies should be required to apply full international standards, irrespective of turnover and whether or not they present group accounts. Building societies are likely to meet the definition of publicly accountable and therefore the 48 societies included in Database who currently report under UK GAAP will, if the proposals are finalised in their current form, be expected to report under IFRS for financial periods commencing no later than 1 January 2009, although we expect certain of these societies to apply IFRS for the 2006/07 reporting season. In the meantime the embedding of EIR and hedge accounting into business as usual will remain an ongoing focus for many societies, in addition to the review and refinement of models that were initially developed for adoption of IFRS. Jonathan Bingham Senior Manager, KPMG s Financial Services practice Matthew Lyon Manager, KPMG s Financial Services practice. Comparative information is required in the year of adoption and thus consideration needs to be given to availability of

15 Database Tables

16 14 Building Societies Database 2006 Database Tables Peer Group 1 Table 1: Total Assets, Shares, Members and Branches Asset Society IFRS Year End Group Group Society Society Society Shares Number of Average Balance Funding Limit Liquid Assets Society Total Society Society Society ranking Total Assets Asset Growth Total Assets Asset Growth Society per Shareholder ratio Branches Assets per Branch Shareholders Borrowers Growth Shareholders per Branch per Branch '000 % Rank '000 % Rank '000 % % % Number '000 1 Nationwide I Apr ,586, % ,228, % 12 80,918, % 26.60% 13.40% ,355 2 Britannia I Dec ,431, % 1 28,953, % 2 16,913, % 1,976,350 8, % 40.30% ,831 10,569 1,459 3 Portman I Dec ,765, % 7 17,724, % 7 11,363, % 1,422,920 7, % 23.85% ,606 9, Yorkshire I Dec ,298, % 16 16,178, % 17 10,172, % 1,615,156 6, % 26.00% ,498 12,329 2,134 5 Coventry I Dec 2005 * 11,090, % 4 11,090, % 4 7,455, % 748,543 9, % 18.70% ,327 15,276 2,164 6 Chelsea I Dec ,656, % 14 9,601, % 15 7,190, % 482,315 14, % 23.80% ,409 14,186 2,555 7 Skipton I Dec ,155, % 9 8,821, % 10 5,239, % 479,000 10, % 21.50% ,659 6, West Bromwich I Mar ,207, % 3 6,604, % 3 3,975, % 577,000 6, % 22.50% ,498 11, Leeds I Dec ,064, % 6 7,083, % 6 4,535, % 496,000 9, % 22.98% ,121 8,552 1, Derbyshire Dec ,096, % 5 5,084, % 5 2,957, % 380,555 7, % 19.42% 52 97,779 7, Cheshire I Dec ,677, % 20 4,667, % 20 2,799, % 335,618 8, % 20.57% 52 89,758 6, Principality I Dec ,384, % 17 4,372, % 18 3,223, % 356,367 9, % 19.90% 51 85,731 6,988 1, Newcastle I Dec ,863, % 10 3,694, % 9 2,038, % 372,281 5, % 18.84% 52 71,050 7,159 1, Norwich & Peterborough Dec ,402, % 21 3,411, % 21 2,088, % 325,000 6, % 22.42% 56 60,920 5,804 1, Stroud & Swindon Dec ,514, % 13 2,499, % 13 1,604, % 185,000 8, % 23.06% ,630 8,409 1, Nottingham I Dec ,428, % 11 2,426, % 11 1,745, % 173,001 10, % 18.21% 33 73,540 5,242 1, Dunfermline Dec ,317, % 8 2,317, % 8 1,809, % 291,000 6, % 22.40% 33 70,229 8,818 1, Scarborough I Apr ,732, % 19 1,735, % 19 1,221, % 158,739 7, % 22.24% 9 192,812 17,638 2, Kent Reliance Sep ,298, % 2 1,297, % 1 876, % 135,800 6, % 21.36% 4 324,250 33,950 2, Progressive Dec 2005 * 1,248, % 12 1,248, % 14 1,022, % 102,000 9, % 21.46% ,467 9,273 1, Cumberland Mar ,185, % 15 1,187, % , % 164,000 6, % 17.65% 34 34,916 4, Lambeth Jan ,129, % 22 1,124, % , % 73,408 9, % 26.00% 9 124,923 8,156 1,905 Total Peer Gp Total Peer Gp 266,534, ,350,816 Average of Peer Group Societies 12.31% 12.05% 10.47% 8, % 22.12% 131,514 10,366 1,481 * denotes no Group: Society total assets included as Group

17 Building Societies Database 2006 Database Tables 15 Peer Group 1 Table 2a: Group Profitability Ratios Table 2b: Group Reserves and Capital Asset Society IFRS Year End Group Profit Growth Group/Society Profit Group Net Group Cost / Group ManEx / Mean Assets (Group ManEx PIBS Subordinated General IFRS Revaluation Total Reserves/ Gross Free ranking for Year for Year/Mean Assets Interest Margin Income Ratio Other Income) Debt Reserves Reserves Reserve Total Assets Capital Capital / Mean Assets / Mean Assets '000 % % % % % Rank % '000 '000 '000 '000 '000 % % % 1 Nationwide I Apr , % 0.34% 1.06% 59.87% 0.85% % 741,200 1,446,300 4,825,600 88, , % 6.60% 6.00% 2 Britannia I Dec , % 0.18% 1.01% 62.23% 0.73% % 313, ,900 1,065,000 4, % 7.10% 5.90% 3 Portman I Dec , % 0.36% 1.03% 58.70% 0.74% % 196, , , % 6.91% 6.35% 4 Yorkshire I Dec , % 0.32% 1.00% 59.99% 0.73% % 0 108, ,400-4,600-1, % 6.36% 5.86% 5 Coventry I Dec % 41,600 90, , % 5.70% 5.54% 6 Chelsea I Dec , % 0.38% 1.02% 52.30% 0.60% % 0 100, , , % 6.10% 5.20% 7 Skipton I Dec , % 0.73% 1.08% 78.12% 4.00% % 26, , , % 7.74% 5.80% 8 West Bromwich I Mar , % 0.42% 0.93% 55.58% 0.74% % 76, , , , % 7.58% 5.41% 9 Leeds I Dec , % 0.53% 1.10% 44.37% 0.62% % 25,000 40, ,500 2,800 13, % 6.31% 6.09% 10 Derbyshire Dec , % 0.26% 1.08% 70.89% 0.92% % 0 100, ,300-8, % 6.88% 6.22% 11 Cheshire I Dec , % 0.18% 0.91% 76.43% 0.82% % 40,500 65, ,000-3,300 3, % 6.34% 5.81% 12 Principality I Dec , % 0.37% 1.26% 67.93% 1.23% % 58, , % 7.31% 6.36% 13 Newcastle I Dec , % 0.19% 0.90% 65.57% 0.76% % 19,900 49, , % 7.03% 6.26% 14 Norwich & Peterborough Dec , % 0.33% 1.31% 74.46% 1.55% % 0 40, , % 6.73% 6.08% 15 Stroud & Swindon Dec , % 0.29% 1.13% 62.23% 0.81% % 0 42,000 96, % 5.84% 5.24% 16 Nottingham I Dec , % 0.26% 1.00% 69.54% 0.86% % 23, , % 6.75% 6.41% 17 Dunfermline Dec , % 0.20% 1.15% 79.38% 1.14% % 0 49, , % 5.10% 3.80% 18 Scarborough I Apr , % 0.23% 0.97% 73.54% 0.94% % 14,669 35,273 52, % 6.34% 5.15% 19 Kent Reliance Sep , % 0.24% 0.91% 63.27% 0.59% % 14,714 22,829 34, % 5.88% 5.67% 20 Progressive Dec % ,205-4, % 5.27% 4.41% 21 Cumberland Mar , % 0.49% 1.54% 60.61% 1.17% % , % 7.32% 6.70% 22 Lambeth Jan , % 0.21% 0.87% 79.50% 0.78% % , % 7.91% 7.81% Average of peer group societies -2.07% 0.33% 1.06% 65.73% 1.03% 0.56% 4.58% 6.60% 5.82%

18 16 Building Societies Database 2006 Database Tables Peer Group 1 Table 3: Society Profitability Ratios Asset Society IFRS Year End Society Profit Growth Net Interest Interest Interest Interest Other Income Cost/Income Provision Charge/ Total ManEx ManEx / Mean Assets ManEx ranking for Year Margin / Mean Receivable / Payable / Spread for & Charges / Ratio (Credit) for Year Other Income / Assets Mean FSRP Mean Shares Members Total Income / Profit pre- Mean Assets '000 % % % % % % % Provision % '000 % Rank % 1 Nationwide I Apr , % 0.91% 5.16% 4.07% 1.09% 25.73% 67.73% 10.97% 935, % % 2 Britannia I Dec , % 0.66% 3.94% 32.94% 68.07% -0.73% 174, % % 3 Portman I Dec , % 0.78% 5.24% 4.07% 1.17% 29.41% 62.64% -1.60% 115, % % 4 Yorkshire I Dec , % 0.75% 5.05% 4.11% 0.94% 33.10% 63.15% -0.94% 109, % % 5 Coventry I Dec , % 0.96% 5.51% 4.24% 1.27% 14.47% 50.65% 5.12% 58, % % 6 Chelsea I Dec , % 0.92% 5.60% 4.48% 1.12% 17.08% 54.47% 1.72% 55, % % 7 Skipton I Dec , % 0.74% 5.41% 4.51% 0.90% 41.27% 47.40% -0.18% 50, % % 8 West Bromwich I Mar , % 0.81% 5.43% 4.37% 1.06% 20.58% 67.36% -8.37% 41, % % 9 Leeds I Dec , % 1.10% 5.63% 4.36% 1.27% 15.47% 44.07% 1.46% 37, % % 10 Derbyshire Dec , % 0.77% 5.34% 4.30% 1.04% 35.68% 71.35% -1.84% 40, % % 11 Cheshire I Dec , % 0.80% 5.33% 4.23% 1.10% 14.45% 84.12% -7.46% 35, % % 12 Principality I Dec , % 1.23% 5.67% 4.33% 1.34% 15.03% 63.24% 1.78% 38, % % 13 Newcastle I Dec , % 0.93% 4.32% 20.39% 64.62% -0.69% 26, % % 14 Norwich & Peterborough Dec , % 1.29% 5.44% 4.09% 1.35% 31.96% 71.04% -0.55% 44, % % 15 Stroud & Swindon Dec , % 0.78% 5.41% 4.15% 1.26% 44.11% 55.73% -1.49% 17, % % 16 Nottingham I Dec , % 1.00% 5.32% 4.46% 0.86% 9.36% 66.46% 0.48% 16, % % 17 Dunfermline Dec , % 1.13% 5.67% 4.43% 1.24% 20.30% 77.07% 3.10% 23, % % 18 Scarborough I Apr , % 0.65% 5.32% 4.57% 0.75% 21.19% 75.43% -4.46% 10, % % 19 Kent Reliance Sep , % 0.82% 5.37% 4.18% 1.19% 3.05% 69.70% -2.01% 6, % % 20 Progressive Dec , % 1.06% 5.42% 4.35% 1.07% 11.69% 53.43% -4.46% 7, % % 21 Cumberland Mar , % 1.54% 5.42% 4.02% 1.40% 14.81% 57.70% -9.27% 11, % % 22 Lambeth Jan , % 0.80% 5.21% 4.67% 0.54% 11.99% 86.29% % 8, % % Average of Peer Group Societies 33.62% 0.93% 5.40% 4.28% 1.10% 22.00% 64.62% -1.92% 0.76% 0.50%

19 Building Societies Database 2006 Database Tables 17 Peer Group 1 Table 4: Society Staff Ratios, Pension Costs and Group IAS19/FRS17 Data Society staff costs Society pension costs Group IAS19/FRS17 disclosures Asset Society IFRS Year End Total Total Staff Costs Profit for Year Total Assets Total wages Other Pension Defined Group IAS19/FRS17 Key IAS19/FRS17 assumptions ranking Number Staff per Staff per Staff per Staff and salaries pension costs / Benefit (Deficit) / Surplus Salary Discount Inflation of Staff Costs Member Member ("TW&S") costs TW&S Scheme? After def. tax % of Gen increase rate rate '000 '000 / staff '000 / staff '000 / staff '000 '000 % '000 Reserves % % % 1 Nationwide I Apr , , , ,000 75, % Y - Open -205, % Britannia I Dec ,106 79, ,322 70,600 3, % Y - Closed -51, % Portman I Dec ,101 69, ,438 56,700 6, % Y - Closed -22, % Yorkshire I Dec ,082 66, ,772 55,400 6, % Y - Closed -38, % Coventry I Dec ,037 31, ,694 26,300 2, % Y - Closed -5, % Chelsea I Dec , ,494 25,000 1, % Y - Closed -10, % Skipton I Dec ,042 28, ,466 23,800 2, % Y - Closed -48, % West Bromwich I Mar , ,016 21,500 1, % Y - Closed -3, % Leeds I Dec , ,362 17,100 1, % Y - Closed -8, % Derbyshire Dec , ,907 14,800 2, % Y - Closed -6, % Cheshire I Dec , ,019 16,200 1, % Y - Closed 1, % Principality I Dec , ,843 15,300 1, % Y - Closed -1, % Newcastle I Dec , ,547 14,600 1, % Y - Closed -10, % Norwich & Peterborough Dec , ,489 19,700 2, % Y - Closed -2, % Stroud & Swindon Dec , ,183 9, % Y - Closed -6, % Nottingham I Dec , ,130 7,427 1, % Y - Closed -6, % Dunfermline Dec , ,867 8,996 1, % Y - Closed -5, % Scarborough I Apr , ,330 4, % Y - Closed -1, % Kent Reliance Sep , ,358 2, % Y - Closed 20 Progressive Dec , ,979 3, % Y - Closed % Cumberland Mar , ,944 5, % Y - Closed -2, % Lambeth Jan , ,141 3, % Y - Closed -1, % Average of peer group societies , % 3.31%

20 18 Building Societies Database 2006 Database Tables Peer Group 1 Table 5: Group Loans and Advances (1): Arrears and Provisions Group/Society Group Group / Society Total Year End FSRP Provisions FSOL Provisions Asset Society IFRS Year End Lending Gross Mortgage Lending FSRP FSOL Other Arrears 12 months Mortgage Charge/ Year End Charge/ (Credit) Provision to Charge/ (Credit) Provision to ranking Limit Loans Increase Loans Increase Loans Increase and over Provisions (Credit) Provision to FSRP Loans FSRP Loans to FSOL Loans FSOL Loans % '000 % to total P/Yr '000 % '000 % '000 % Number '000 '000 '000 % % % % loans 1 Nationwide I Apr % 22,400, % 89,587, % 8,050, % 3,592, % , , % 0.04% 0.02% 0.41% 2 Britannia I Dec % 6,900, % 18,952, % 1,911, % 1, % 82 50,000 3 Portman I Dec % 4,300, % 13,456, % 124, % ,000 2,100 20, % 0.15% 0.00% 0.00% 4 Yorkshire I Dec % 3,154, % 12,049, % 8, % , , % 0.10% 0.00% 0.00% 5 Coventry I Dec % 3,009, % 40 6 Chelsea I Dec % 2,200, % 7,380, % 1, % ,600 7 Skipton I Dec % 2,242, % 6,609, % 304, % 108, % 22 16,700 2,000 9, % 0.14% 0.03% 0.46% 8 West Bromwich I Mar % 2,193, % 4,544, % 1,108, % % 13 19,000-1,500 17, % 0.38% 0.00% 0.14% 9 Leeds I Dec % 1,695, % 4,980, % 358, % 169, % 18 9, , % 0.13% 0.19% 0.77% 10 Derbyshire Dec % 674, % 4,081, % 4, % 0 7 4, , % 0.12% -2.13% 0.00% 11 Cheshire I Dec % 754, % 3,418, % 262, % 0 5 2, , % 0.06% -0.04% 0.00% 12 Principality I Dec % 965, % 3,091, % 423, % ,400 1,300 5, % 0.17% 0.16% 0.75% 13 Newcastle I Dec % 684, % 2,636, % 319, % 123, % 45 3, Norwich & Peterborough Dec % 677, % 2,383, % 255, % 6, % 17 3, , % 0.08% -0.04% 0.20% 15 Stroud & Swindon Dec % 567, % 1,900, % 40, % 1, % 140 2,937 1,177 2, % 0.15% -0.04% 0.07% 16 Nottingham I Dec % 538, % 1,987, % 1, % % 0.03% 0.00% 1.39% 17 Dunfermline Dec % 510, % 1,613, % 184, % % 20 1, , % 0.07% 0.13% 0.39% 18 Scarborough I Apr % 215, % 1,335, % % 0 5 1, , % 0.14% -1.53% 0.00% 19 Kent Reliance Sep % 347, % 1,007, % 26, % % 0.02% -0.01% 0.02% 20 Progressive Dec % 235, % Cumberland Mar % 228, % 862, % 113, % % 17 3, , % 0.22% 0.00% 1.29% 22 Lambeth Jan % 219, % 848, % % % 0 1,469-1,211 1, % 0.17% 0.00% 0.00% Average of peer group societies 6.56% 30.49% 11.15% 14.23% % -0.01% 0.13% -0.19% 0.35%

21 Building Societies Database 2006 Database Tables 19 Peer Group 1 Table 6: Society Loans and Advances (1): Provisions Society Total Year End FSRP Provisions FSOL Provisions Asset Society IFRS Year End Lending Number of FSRP FSOL Other Mortgage Charge/ Year End Charge/ (Credit) Provision to Charge/ (Credit) Provision to ranking Limit Society Loans Increase Loans Increase Loans Increase Provisions (Credit) Provision to FSRP Loans FSRP Loans to FSOL Loans FSOL Loans % Borrowers '000 % '000 % '000 % '000 '000 '000 % % % % 1 Nationwide I Apr % 82,821, % 7,771, % 1,887, % 110, , % 0.03% 0.03% 0.42% 2 Britannia I Dec % 272,766 10,880, % 1,082, % 1, % 23,300 3 Portman I Dec % 116,544 10,089, % 117, % 0 9,800-1,100 9, % 0.10% 0.00% 0.00% 4 Yorkshire I Dec % 279,507 8,663, % 8, % 0 3, , % 0.04% 0.00% 0.00% 5 Coventry I Dec % 106,057 9,013, % % 53, % 17,000 1,100 14, % 0.17% 0.00% 0.00% 6 Chelsea I Dec % 86,880 7,348, % 1, % 0 6,600 7 Skipton I Dec % 64,000 5,240, % 304, % 28, % 8, , % 0.07% 0.03% 0.46% 8 West Bromwich I Mar % 42,000 3,522, % 30, % 0 14,800-1,700 14, % 0.42% 0.00% 0.00% 9 Leeds I Dec % 106,000 4,979, % 358, % 169, % 9, , % 0.13% 0.19% 0.77% 10 Derbyshire Dec % 45,806 3,010, % 4, % % 0.02% -2.13% 0.00% 11 Cheshire I Dec % 48,138 2,950, % 262, % % 0.01% -0.04% 0.00% 12 Principality I Dec % 86,118 2,919, % 423, % 0 6, , % 0.12% 0.16% 0.75% 13 Newcastle I Dec % 60,797 2,636, % 172, % 123, % 3, Norwich & Peterborough Dec % 59,500 2,372, % 255, % 6, % 3, , % 0.08% -0.04% 0.20% 15 Stroud & Swindon Dec % 27,000 1,589, % 6, % % % 0.05% -0.23% 0.37% 16 Nottingham I Dec % 51,038 1,987, % 1, % % 0.03% 0.00% 1.39% 17 Dunfermline Dec % 52,000 1,605, % 188, % 20, % 1, , % 0.07% 0.13% 0.38% 18 Scarborough I Apr % 20,512 1,018, % % % 0.05% -1.53% 0.00% 19 Kent Reliance Sep % 9, , % 26, % % 0.02% -0.01% 0.02% 20 Progressive Dec % 14, , % 8, % % 0.02% -0.43% 0.40% 21 Cumberland Mar % 20, , % 113, % % 3, , % 0.22% 0.00% 1.29% 22 Lambeth Jan % 17, , % % 59, % 1, , % 0.16% 0.00% 0.00% Average of peer group societies 6.56% 9.04% -4.00% % -0.02% 0.10% -0.20% 0.34%

22 20 KPMG Building Societies Database 2006 Database Tables Peer Group 1 Table 7: Group Loans and Advances (2): Provisions Loans Fully Secured on Residential Property FSRP Loans Fully Secured on Land FSOL Asset Society IFRS Year End General Specific General to Specific General Provision/ Specific Provision/ General Specific General to Specific General Provision/ Specific Provision/ ranking Provision Provision Provision Total FSRP Total FSRP Provision Provision Provision Total FSOL Total FSOL '000 '000 % % % '000 '000 % % % 1 Nationwide I Apr ,100 1, % 0.03% 0.00% 23,200 9, % 0.29% 0.12% 2 Britannia I Dec Portman I Dec ,900 3, % 0.13% 0.02% % 0.00% 4 Yorkshire I Dec ,000 2, % 0.07% 0.02% % 0.00% 5 Coventry I Dec Chelsea I Dec Skipton I Dec ,700 2, % 0.10% 0.04% % 0.16% 0.29% 8 West Bromwich I Mar ,500 16,000 9% 0.03% 0.35% 0 1, % 0.14% 9 Leeds I Dec , % 0.13% 0.00% 2, % 0.00% 10 Derbyshire Dec ,400 1, % 0.08% 0.03% % 0.00% 11 Cheshire I Dec , % 0.04% 0.02% % 0.00% 12 Principality I Dec Newcastle I Dec Norwich & Peterborough Dec , % 0.05% 0.03% % 0.00% 15 Stroud & Swindon Dec ,215 1,694 72% 0.06% 0.09% % 0.06% 0.01% 16 Nottingham I Dec % 0.03% 0.00% % 0.00% 17 Dunfermline Dec % 0.04% 0.03% % 0.00% 18 Scarborough I Apr , % 0.12% 0.01% % 0.00% 19 Kent Reliance Sep % 0.00% % 0.00% 20 Progressive Dec Cumberland Mar , % 0.00% 1, % 0.00% 22 Lambeth Jan , % 0.17% 0.00% % 0.00% Total Total Peer Gp Ratio Total Total Peer Gp Ratio 84,325 31, % 29,254 12, % Average of Peer Group Societies 0.08% 0.04% 0.29% 0.03%

23 KPMG Building Societies Database 2006 Database Tables 21 Peer Group 1 Table 8: Society Loans and Advances (2): Provisions Loans Fully Secured on Residential Property FSRP Loans Fully Secured on Land FSOL Asset Society IFRS Year End General Specific General to Specific General Provision/ Specific Provision/ General Specific General to Specific General Provision/ Specific Provision/ ranking Provision Provision Provision Total FSRP Total FSRP Provision Provision Provision Total FSOL Total FSOL '000 '000 % % % '000 '000 % % % 1 Nationwide I Apr ,400 1, % 0.03% 0.00% 23,200 9, % 0.30% 0.12% 2 Britannia I Dec Portman I Dec , % 0.09% 0.01% % 0.00% 4 Yorkshire I Dec , % 0.04% 0.01% % 0.00% 5 Coventry I Dec ,100 3, % 0.12% 0.04% % 0.00% 6 Chelsea I Dec Skipton I Dec , % 0.00% % 0.16% 0.29% 8 West Bromwich I Mar , % 0.42% % 0.00% 9 Leeds I Dec , % 0.13% 0.00% 2, % 0.00% 10 Derbyshire Dec % 0.00% % 0.00% 11 Cheshire I Dec % 0.00% % 0.00% 12 Principality I Dec Newcastle I Dec Norwich & Peterborough Dec , % 0.05% 0.03% % 0.00% 15 Stroud & Swindon Dec % 0.05% 0.00% % 0.35% 0.01% 16 Nottingham I Dec % 0.03% 0.00% % 0.00% 17 Dunfermline Dec % 0.04% 0.03% % 0.00% 18 Scarborough I Apr % 0.00% % 0.00% 19 Kent Reliance Sep % 0.00% % 0.00% 20 Progressive Dec % 0.01% 0.01% % 0.00% 21 Cumberland Mar , % 0.00% 1, % 0.00% 22 Lambeth Jan , % 0.16% 0.00% % 0.00% Total Total Peer Gp Ratio Total Total Peer Gp Ratio 62,735 23, % 29,287 10, % Average of Peer Group Societies 0.06% 0.03% 0.29% 0.02%