Building Societies Database 2009

Transcription

1 Building Societies Database 2009 FINANCIAL SERVICES

2 Building Societies Database KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved

3 I am pleased to introduce the nineteenth edition of KPMG s annual Building Societies Database. Database summarises, in a series of tables of statistics, ratios and s, the financial performance of all the current UK building societies. richard.gabbertas@kpmg.co.uk Tel: If readers would like to know more about the wider services which KPMG provides to the retail financial sector, please contact me in Leeds at the address below. Richard Gabbertas Partner, KPMG Financial Services August 2009 KPMG LLP 1 The Embankment Neville Street LEEDS LS1 4DW Tel: Fax: Building Societies Database KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved

4 Building Societies Database 2009 Introduction Database 2009 provides financial information relating to the 53 building societies in the United Kingdom as at April 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 2008 and April Numbers for branches, borrowing members and investing members are as published in the Building Societies Association Yearbook 2008/ March 2009: the branches, deposits and residential mortgages of Dunfermline BS (no 14) were transferred to Nationwide BS and Dunfermline BS ceased to exist as a building society. None of these six deceased societies have been included in Database At the date of publication of Database 2009, one further merger had been completed: Britannia BS (no 2) merged into The Co-operative Financial Services Limited on 1 August Paul Boothroyd Senior Manager, KPMG Financial Services paul.boothroyd@kpmg.co.uk Tel: Number of societies Database 2009 comprises 53 societies, compared to 59 in Database The reduction is due to the following mergers: 1 December 2008: Derbyshire BS (no 9) merged into Nationwide BS (no 1). 15 December 2008: Cheshire BS (no 11) merged into Nationwide BS. 31 December 2008: Barnsley BS (no 34) merged into Yorkshire BS (no 3). 31 December 2008: Catholic BS (no 57) merged into Chelsea BS (no 5). 30 March 2009: Scarborough BS (no 17) merged into Skipton BS (no 6). Asset groupings The 53 building societies are grouped into three peer groups, based on asset size and ranked within each peer group. Other than the 6 deceased societies, there has been one change in the Peer Groups from Database 2008 due to Bath Investment BS moving from Peer Group 3 into Peer Group 2. Group versus society data 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 Tables 1, 2a and 2b, society only data is included as group data where a society does not prepare group accounts. Such societies are highlighted with an asterisk in these Tables KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved

5 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 2009 Database 2009 includes a number of significant changes to the profitability and reserves disclosures in recognition of the more difficult market conditions. To accommodate additional disclosures, including the FSCS Levies as commented on below, we have expanded what were Tables 2a and 2b from one shared Table into two separate Tables. Total sector group and society assets In Database 2009 the 53 societies held total group assets of billion, compared to Database 2008 total group assets of billion. Total group assets have increased by 16.3 billion, an increase of 4.6% (2008: 13.1%). Total sector asset movements are analysed as follows: Group bn Society bn Database 2008 total assets Growth in year Database 2009 total assets Sector asset growth 2008 to % 6.7% Prior year sector asset growth to % 13.2% Of the 2009 total sector asset growth of 4.6%, approximately 9bn has come from Nationwide with the balance of 7.3bn from the other societies. The 7.3bn increase for the rest of the sector is net of reductions in the total assets of Derbyshire, Cheshire and Dunfermline prior to their acquisition by Nationwide. Nationwide s total growth from 2008 was 13% of which approximately 8% came from the acquisitions of Derbyshire, Cheshire and Dunfermline ( 14bn), with the balance of approximately 5% being organic growth ( 9bn). Partly as a result of the acquisitions of Derbyshire, Cheshire and Dunfermline, Nationwide s total assets at April 2009 had increased to 202.4bn, representing 54.6% of building society total assets (Database 2008: 179.0bn %). Britannia, the second largest society with 37.2bn total assets, represented 10.0% of total building society group assets (2008: 10.4%). Taken together, therefore, the two largest societies held 64.7% of the total sector assets as at April 2009 (Database 2008: 61%). The greater sector society-only growth from Database 2008 to Database 2009 has arisen mainly from the accounting implications of covered bonds issued by the larger societies in particular: Yorkshire, Coventry, Chelsea and Skipton. A key feature is that only 15 societies have reported group asset growth of greater than 10%, compared with 36 in Database For 2009 these included 8 in Peer Group 1, 3 in Peer Group 2 and 4 in Peer Group 3. Building Societies Database KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved

6 Building Societies Database 2009 Profitability Not surprisingly, most societies have reported significant reductions in overall profitability (see Table 2a), with a consequent impact on total reserves and capital measures (see Table 2b). The reduction in profits has arisen due to a combination of: reduced interest margins arising from the lower interest rate and more competitive environment (43 societies have reported reduced net interest margins for 2008/9); reductions in other income sources eg mortgage transaction fees etc; for IFRS societies: fair value volatility on financial instruments; significant increases in mortgage loss provisions; FSCS Levy provisions (see Table 2a); for some societies: provisions against deposits with Icelandic banks (see below). Control over management expenses: the good news though is that, despite 39 societies reporting increases in their management expense costs, 42 societies have reported a stable or reduced management expenses ratio to mean assets the increases in such costs being less than the total asset growth. Exceptional items In 2008/9, many societies have been impacted by exceptional items, in addition to the FSCS Levies. Such societies have been identified by an X in Table 2a (Group) and Table 3 (Society) and reference should be made to the accounts of those societies for a fuller understanding of the nature and impact of such exceptional items on the current year s profitability. Where practicable, Database has eliminated the impact of such exceptional items from the disclosures for recurring profits and from the management expense ratios. The most common exceptional costs for 2008/9 have been impairment provisions against deposits with Icelandic banks these are included in the X annotation referred to above. The following societies have disclosed provisions of varying amounts against deposits with Icelandic banks: Nationwide, Britannia, Coventry, Chelsea, Skipton, Leeds, Newcastle, Kent Reliance, National Counties, Manchester, Vernon, Chesham, Chorley & District, Beverley and Earl Shilton. FSCS Levy treatment in Database: a significant majority of societies have disclosed the FSCS Levy provision after the provision for mortgage losses. However, a small number of societies have charged the FSCS Levies further up the Income and Expenditure Account. In order to maintain comparability for the various profitability ratios, including Profit pre-provisions and for Recurring Profits, Database 2009 has restated the Income and Expenditure Accounts of those societies which have charged the FSCS Levies further up the Income and Expenditure Account. IFRS societies: comments on data inputs IFRS societies 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 Database Peer Group structure and to maintain comparability with UK GAAP societies, Database applies the following principles to the input process for IFRS societies: net interest income is input, unadjusted, as net interest receivable; all fair value/gains/losses relating to derivatives etc 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; retirement benefit obligations: the surpluses or deficits on defined benefit pension schemes, as disclosed under IAS19, are input to Table 4 net of deferred tax at 28%, to maintain comparability with UK GAAP societies, which disclose these in the balance sheet net of deferred tax; all IFRS reserves are input as one number and shown separately in Table 2b KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved

7 Fair value adjustments: again in order to maintain comparability with UK GAAP societies, FSRP loans, FSOL loans, Other loans and Shares are all input, as far as society disclosures permit, excluding any fair value/hedge adjustments, where such adjustments are disclosed within the relevant notes. IFRS societies should be aware that, due to differences in the detail of their disclosures of impairment provisions, Database may make some assumptions as regards certain analyses in their Notes. Where we did not consider that a reasonable assumption was possible we have input these as n/a. In particular, a number of IFRS societies have not disclosed full analyses of their FSRP/ FSOL impairment provisions or analyses of such provisions between collective and individual 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 all analysed between collective and individual; fair value adjustments, when included in the relevant Notes, analysed between FSRP, FSOL and Other Loans. Gross group mortgage lending (Table 5) The Database disclosure is gross group mortgage lending where this is identifiable in a society s accounts, usually in the Directors Report. Database discloses gross mortgage lending as a % of prior year total group 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. Note that gross group mortgage lending, as used in Database, excludes any mortgage book acquisitions where a society discloses such acquisitions and states that they have been included within the gross lending disclosure. Gross mortgage lending is a voluntary disclosure, but almost all societies now make this disclosure as it is often one of a lender s key performance indicators. To enable the Database disclosure to be as accurate and consistent between societies as possible, it would be helpful if all societies could clearly disclose: gross group mortgage lending in the year; and clearly exclusive of any mortgage book acquisitions. Contacts for further information For further information on any aspects of Database 2009 please contact Richard Gabbertas, Partner, or Paul Boothroyd, Senior Manager, KPMG Financial Services, 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 Financial Services 7 Building Societies Database KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved

8 8 Building Societies Database 2009 Sector commentary Building societies have had a mixed credit crunch; most have remained profitable, many have grown, although there have been some notable failures driven largely by commercial lending and bought-in sub-prime mortgage portfolios. Simon Walker Partner, KPMG Financial Services simon.walker@kpmg.co.uk Tel: A combination of the general reduction in the availability of wholesale funding, combined with downgrading of many societies by rating agencies has resulted in a change in the structure of the industry s balance sheet, with retail funding levels rising. The result has been better deals for savers and no society has had a liquidity crisis similar to those suffered by some banks. As building societies look to the immediate future, the industry faces three challenges: Profitability; Funding; Capital strength. These challenges culminate in perhaps the biggest question for societies: can they once again take a significant share of gross mortgage lending, which had fallen to low levels in the first few months of 2009 though it has recently shown signs of recovery? In the slightly longer term societies face the challenge of tighter regulation, with new guidance specifically for building societies in the proposed new prudential requirements (CPO9/17), the significant tightening of regulation on liquidity and the longer term impact of the Walker Review. Profitability Although the days have gone when a society suffering a loss had to merge, long term profitability is essential to survival. Without strong profitability a society cannot build capital and so support growth. In its recent round of stress testing of societies the FSA focussed more strongly on the viability of societies business models, demonstrated by a three year business plan. The threats to building societies profitability come from several sources. The most obvious threat comes from credit losses, but for most societies who have been prudent in their lending this is not a material issue. The main sources of credit losses have been commercial lending, which is limited by the Building Societies Act and non prime lending to which most societies have limited exposure. Bigger threats to profitability come from: Narrowing of margins; FSCS levy, including the possibility of future compensation levies; Falling fee and commission income as sales of mortgage and investment products fall. The narrowing of margins is caused by a combination of factors, all of which seem likely to remain significant for at least another year. Low interest rates have the biggest impact, reducing returns on reserves, reducing to almost nothing the margin 2009 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved

9 on instant access accounts and taking the rate on tracker mortgages which were sold extensively in the years before the credit crunch well below the cost of funding them. Similar issues exist with some commercial loan and social housing portfolios where interest rates have been set at a fine margin above LIBOR or in some cases base rate. Margin has been further reduced by the need to maintain higher levels of short term, high quality liquidity than in the recent past. For some societies the margin pressures are structural, due to the legacy of past lending policy, which may take many years to unwind, unless interest rates rise rapidly and wholesale funding becomes much cheaper and more plentiful. Funding Building societies have had to find more retail funding to meet the need for more liquidity and to pay down wholesale funding. The result has been savings rates materially above bank base rate, causing the margin squeeze discussed above. Societies have begun to look at other ways to raise retail funds, with some considering widening their agency network and others introducing accounts with more transactional functionality, noting the success of those societies that offer limited current accounts. More and more societies are turning to the internet as a source of savings and structured savings products look to become more widespread as societies seek to widen their product ranges. Until the bank base rate rises back to recent historic levels, the savings market is likely to remain expensive for societies. The regulatory emphasis on the importance of retail funding for all retail banks may mean that the savings market has moved to a new permanent level of competitiveness. Capital The rapid growth in mortgage lending over the last 5 years combined with low profitability has gradually reduced the capital strength of societies, although they remain on average much better capitalised than banks. The new regulatory emphasis on core tier one capital however poses some issues for the building society industry, which has relied on PIBS and subordinated debt, neither of which are seen as core tier one instruments. The West Bromwich has pioneered a new form of core tier one capital in the form of Profit Participating Deferred Shares (PPDS). However, at the time of writing it is unclear how easy it will be for other societies to follow this lead or indeed if they want to do so. If regulators require banks and building societies to hold higher levels of capital, this will constrain the growth of many societies who, with low profitability, will struggle to grow fresh capital. Some societies may respond to the need for fresh capital by disposing of assets and businesses acquired or built over the last decade. Others may enter joint ventures with providers of capital or access to markets, while some will wait to see if the regulator offers further new forms of capital instrument that they might be able to issue. The future The fall out from the credit crunch means that all financial institutions face tougher regulation. Building societies have had an insight into the future with the new Prudential Sourcebook, which for many will mean a more limited range of powers and activities. Like all financial institutions, societies will need to increase their investment in risk management and governance structures; a significant financial burden for smaller societies. If they are to prosper in this more constrained environment, with the profit pressure of higher liquidity and more expensive retail funding, societies will need to cut costs and focus on their customer facing activities. Perhaps it is not surprising that societies are once again discussing the possibilities of outsourcing their whole back offices, to enable them to focus on branches, products and customers. In the past, societies have been unwilling to take such radical steps. However, if they are to offer the wider range of products needed to compete, to have the focus on risk and governance required and the profitability that is essential to build capital, the options of outsourcing or sharing the back office and some of the risk management and compliance cost may be the only way forward. The only certainty about the future of societies is that it will be very different from the past and, as this commentator knows too well, the pace of change will be different from our expectation. Simon Walker Partner, KPMG Financial Services 9 Building Societies Database KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved

10 10 Building Societies Database 2009 Are you ready for the new Prudential Sourcebook? The turbulence in the markets in which banks and building societies operate has continued throughout 2008 and 2009 with most observers not expecting a return to normal for a number of years, if at all. Andy Capps Manager, KPMG Financial Services andrew.capps@kpmg.co.uk Tel: There is therefore a continuing heightened risk that either systemic or idiosyncratic events impact the financial viability of one or more financial institutions. In order to minimise this risk, the FSA has introduced significant proposals for new regulations. For building societies the key proposals are contained in Consultation Paper CP09/17 A Specialist Sourcebook for Building Societies: Enhanced supervisory guidance on financial and credit risk management. In summary, the Sourcebook enhances the existing five tiers of treasury financial risk management previously contained in IPRU (BSOC) to include liquidity and funding risk management requirements; and introduces three new tiers for lending risk management. The new guidance sets out, more explicitly than previously, the systems and controls requirements for each tier. The FSA state that The process will result in some firms concluding that their current systems and controls are not appropriate for their business model and deciding either to strengthen systems and controls or to change their business model. Although a precise implementation date has not been set the FSA expect to implement the proposals during Q This loosely fits with the proposed implementation of the revised liquidity regime, i.e. systems and controls should be in place in Q and the quantitative reporting phased over H depending on complexity of the organisation. What do societies need to do? Each society will be required to self-assess their financial risk management and lending processes/capabilities against the requirements for each tier and consider the implications for both their current operations and business planning. Although the financial risk management considerations have not changed much, this could be a much more onerous task for liquidity, funding and lending. The FSA hint at their expectations The expectation that a society self-assesses its systems and controls over lending, and compares the results with its lending policy, is new. We believe that this is likely to require a significant input from both technical specialists and senior management, particularly the first time that it is undertaken. Supervisors will use the self-assessments as part of the basis for the supervisory process and will consider whether their perception of management skills, systems and controls etc are consistent with the self-assessments KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved

11 Where the Supervisor considers that process and controls are inconsistent with the self-assessment, it is highly likely that the building society will be told to move to a less sophisticated tier, reducing the range and flexibility of its business operations. Further, the Supervisor is unlikely to be impressed if a building society s senior management team mis-matched its operational sophistication with that required for a specific tier. It is vital, therefore, that building societies make a realistic self assessment that can be readily proven to the FSA. How can KPMG help? KPMG can provide technical experience and structured approaches on all aspects of the proposed Sourcebook for building societies and the proposed liquidity regime for all BIPRU firms. The table below summarises our technical and sector experience to assist banks and building societies to achieve realistic self-assessments and provide guidance on how to ensure the desired risk management tier. Requirement A robust interpretation of the FSA s rules and guidance Tested past experience Cost effectiveness Working together KPMG s credentials Extensive experience of working with the FSA s rules and expectations and giving commercial and practical advice. Significant insight into current developments at the FSA gained both through secondments to the FSA at senior level and key contacts at the FSA. Individuals with many years experience of supporting clients in preparing for regulation and the change in regulation. True multi-disciplinary experience with individuals conversant in risk management systems and associated technologies. Strong team of regulatory specialists with extensive knowledge in advising banks and building societies on prudential regulatory requirements. We match our resources to the work involved in each particular area. Our level of involvement complements existing resources. We offer a flexible approach and our service can be adapted to suit particular needs. We prefer to work with our clients in a co-operative way to meet their needs, rather than to impose an approach or methodology. Our collaborative approach not only provides deliverables but we educate and mentor our clients throughout our engagements. For more information on how KPMG can help, please contact me on or andrew.capps@kpmg.co.uk 11 Building Societies Database KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved Andy Capps Manager, KPMG Financial Services

12 Database Tables 12 Building Societies Database KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved

13 13 Building Societies Database 2009 Peer Group 1 Table 1: Total Assets, Shares, Members and Branches Table 1: Total Assets, Shares, Members and Branches Group Group Society Society Society Shares Number of Average Balance Funding Limit Liquid Assets Society Total Society Society Society 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 ,361, % 4 201,101, % 7 128,284, % 12,954,871 9, % 18.50% ,661 17,436 3,337 2 Britannia I Dec ,216, % 15 33,153, % 14 18,647, % 2,680,837 6, % 33.50% ,524 10,554 1,015 3 Yorkshire I Dec ,031, % 5 28,157, % 2 13,683, % 1,629,164 8, % 25.35% ,038 11,979 1,556 4 Coventry I Dec ,364, % 2 20,162, % 1 12,354, % 955,000 12, % 23.56% ,056 19,896 4,896 5 Chelsea I Dec ,650, % 6 15,209, % 5 9,558, % 469,399 20, % 26.80% ,329 13,806 4,519 6 Skipton I Dec ,647, % 11 14,101, % 3 8,119, % 533,008 15, % 28.84% ,870 6,345 1,488 7 Leeds I Dec ,136, % 8 10,155, % 9 6,516, % 548,994 11, % 24.95% ,349 8,073 1,173 8 West Bromwich I Mar ,195, % 17 8,781, % 15 6,541, % 484,000 13, % 24.95% ,832 10,298 1,234 9 Principality I Dec ,398, % 10 6,395, % 10 4,612, % 420,279 10, % 23.98% ,916 8,406 1, Newcastle I Dec ,092, % 12 4,974, % 12 3,292, % 350,755 9, % 23.28% ,169 9,743 1, Norwich & Peterborough Dec ,985, % 3 4,988, % 6 3,126, % 348,004 8, % 28.62% 56 89,079 6,214 1, Stroud & Swindon Dec ,169, % 16 3,154, % 17 2,202, % 190,253 11, % 24.55% ,408 8, Nottingham I Dec ,060, % 14 3,060, % 16 2,199, % 161,874 13, % 23.15% 32 95,650 5,059 1, Kent Reliance I Sep ,339, % 9 2,333, % 11 1,747, % 165,994 10, % 20.12% 1 2,333, ,994 10, Progressive Dec 2008 * 1,664, % 7 1,664, % 8 1,367, % 89,637 15, % 23.12% ,306 8,149 1, Cumberland Mar ,553, % 13 1,555, % 13 1,283, % 164,000 7, % 24.21% 33 47,142 4, National Counties Dec ,393, % 1 1,359, % 4 921, % 43,214 21, % 29.51% 1 1,359,566 43,214 13,103 Total Peer Gp Total Peer Gp 357,262, ,308, % 11.47% 11.96% 12, % 25.12% 380,333 21,105 2,943 * denotes no Group: therefore Society total assets included as Group

14 Peer Group 1 Table 2a: Group / Society Profitability Ratios Table 2a: Group / Society Profitability Ratios Excep. Items Mortgage Loss Provisions Recurring Profit Recurring Profit in addition to Group Profit Profit Group/Society Group Net Group Cost / Group ManEx (Group ManEx Charge / (Credit) Charge / (Credit) Inc M loss Inc M loss Change FSCS Levy FSCS Levy FSCS Levy for Year Change Profit for Year Interest Margin Income Ratio / Mean Assets Other Income) for year for year / Profit provisions provisions Charge Basis Curr yr / Mean Assets / Mean Assets / Mean Assets pre-provision Curr yr Prior yr X '000 % % % % % Rank % '000 % '000 '000 % '000 1 Nationwide I Apr Britannia I Dec Yorkshire I Dec Coventry I Dec Chelsea I Dec Skipton I Dec Leeds I Dec West Bromwich I Mar Principality I Dec Newcastle I Dec Norwich & Peterborough Dec Stroud & Swindon Dec Nottingham I Dec Kent Reliance I Sep Progressive Dec Cumberland Mar National Counties Dec 2008 X 162, % 0.08% 0.92% 60.33% 0.72% % 394, % 512, ,000 (34.19%) 241, mths X 5, % 0.01% 0.83% 60.37% 0.65% % 57, % 100, ,600 (12.39%) 19, mths - 8, % 0.04% 0.76% 73.65% 0.56% % 25, % 18,800 58,500 (67.86%) 14, mths X 18, % 0.12% 0.72% 47.43% 0.40% % 8, % 63,300 67,000 (5.52%) 11, mths X -29, % -0.21% 0.79% 55.33% 0.50% % 23, % 31,900 63,000 (49.37%) 10, mths X 23, % 0.18% 0.66% 82.89% 3.31% % 34, % 54, ,700 (66.73%) 16, mths X 14, % 0.15% 0.96% 40.19% 0.48% % 32, % 36,500 63,500 (42.52%) 9, mths X -39, % -0.42% 0.71% 58.87% 0.59% % 65, % -26,500 39,700 (166.75%) 12, mths - 5, % 0.09% 1.38% 58.04% 1.04% % 31, % 14,500 30,600 (52.61%) 5, mths X -25, % -0.52% 0.78% 75.04% 0.96% % 12, % 3,700 17,600 (78.98%) 6, mths - 4, % 0.09% 1.12% 74.87% 1.20% % 7, % 11,600 23,600 (50.85%) 5, mths - -2, % -0.09% 0.69% 87.54% 0.68% % 1, % 1,283 7,748 (83.44%) 4, mths X % 0.02% 0.79% 82.49% 0.81% % 1, % 4,200 8,200 (48.78%) 2, mths * X 8, % 0.40% 0.83% 50.13% 0.41% % 3, % 5,608 5,713 (1.84%) 1,043 6 mths - 1, % 0.12% 0.76% 61.93% 0.51% % % 4,024 9,022 (55.40%) 1, mths - 5, % 0.34% 1.43% 60.99% 1.07% % % 9,975 8, % 2, mths X -5, % -0.46% 0.89% 64.09% 0.70% % 4, % 938 5,860 (83.99%) 1, mths % 0.00% 0.88% 64.36% 0.86% 0.45% * denotes no Group: therefore Society profitability measures included as Group 14 Building Societies Database 2009

15 15 Building Societies Database 2009 Peer Group 1 Table 2b: Group / Society Reserves and Capital Table 2b: Group / Society Reserves and Capital General IFRS Revaluation Other Reserves / Total Total Reserves/ Total Reserves / Prior Year PIBS Subordinated Gross Free Reserves Reserves Reserve Minority Reserves Total Assets Change on Total Reserves Total Reserves/ Debt Capital Capital Interests prior year Total Assets '000 '000 '000 '000 '000 % % '000 % '000 '000 % % 1 Nationwide I Apr Britannia I Dec Yorkshire I Dec Coventry I Dec Chelsea I Dec Skipton I Dec Leeds I Dec West Bromwich I Mar Principality I Dec Newcastle I Dec Norwich & Peterborough Dec Stroud & Swindon Dec Nottingham I Dec Kent Reliance I Sep Progressive Dec Cumberland Mar National Counties Dec 2008 * 6,234,000-2,009,000 69, ,294, % % 6,008, % 1,526,000 2,233, % 3.90% 1,203, , ,072, % -9.66% 1,187, % 326, , % 5.50% 1,042, , , % -4.66% 953, % 167, , % 5.22% 574,900-23, , % -0.76% 555, % 161,100 70, % 4.58% 489,000 1,300 27, , % -6.62% 554, % 0 202, % 4.70% 737,000-33, , , % -2.44% 725, % 26, , % 4.95% 433,700-4,400 16,900 14, , % 3.30% 445, % 25,000 41, % 5.58% 278,300-17,600 4, , % % 327, % 74, , % 5.05% 283,500 1, , % 2.96% 276, % 68, , % 7.94% 183,300 5, , % % 210, % 29,900 60, % 5.15% 205, , % 0.29% 205, % 0 15, % 4.26% 109, , % -1.92% 111, % 0 52, % 4.87% 143,000 1, , % -0.07% 144, % 26, % 5.41% 51, , % 20.94% 42, % 36,843 27, % 4.94% 72,260-3, , % 1.84% 74, % % 4.05% 96, , % 4.25% 92, % % 6.17% 103, , % -5.96% 109, % % 7.16% * denotes no Group: therefore Society reserves and capital included as Group 4.06% 5.97% 5.26%

16 Peer Group 1 Table 3: Society Profitability Ratios Excep. Items Mortgage Loss Provisions in addition to Society Profit Profit Net Interest Interest Interest Interest Other Income Cost/Income Charge / (Credit) Charge / (Credit) Total ManEx ManEx / Mean Assets ManEx - FSCS Levy for Year Change Margin / Mean Receivable / Payable / Spread for & Charges / Ratio for year for year as % Other Income / Curr yr Assets Mean FSRP Mean Shares Members Total Income Profit pre-provision Mean Assets X '000 % % % % % % % '000 % '000 % Rank % 1 Nationwide I Apr Britannia I Dec Yorkshire I Dec Coventry I Dec Chelsea I Dec Skipton I Dec Leeds I Dec West Bromwich I Mar Principality I Dec Newcastle I Dec Norwich & Peterborough Dec Stroud & Swindon Dec Nottingham I Dec Kent Reliance I Sep Progressive Dec Cumberland Mar National Counties Dec 2008 X 57, % 0.75% 4.80% 3.78% 1.02% 27.12% 67.91% 256, % 1,327, % % X 9, % 0.66% 5.34% 4.67% 0.67% 28.80% 64.68% 9, % 197, % % - -49, % 0.31% 5.93% 5.31% 0.62% % % % 120, % % X 16, % 0.63% 5.98% 5.09% 0.89% 15.10% 48.61% 6, % 63, % % X 7, % 0.72% 6.61% 5.33% 1.28% 17.06% 54.84% 22, % 66, % % X 13, % 0.54% 6.21% 5.68% 0.53% 32.69% 59.21% 4, % 61, % % X 10, % 0.95% 6.26% 5.33% 0.93% 13.27% 40.66% 31, % 42, % % X 10, % 0.61% 5.93% 4.56% 1.37% 26.47% 61.59% 1, % 44, % % - 18, % 1.05% 6.22% 4.84% 1.38% 16.47% 58.50% 3, % 45, % % X -27, % 0.80% 7.05% 4.97% 2.08% 33.16% 77.49% 12, % 45, % % - 4, % 1.09% 5.71% 4.37% 1.34% 27.32% 72.53% 6, % 50, % % - -1, % 0.62% 6.04% 5.14% 0.90% 12.74% 90.07% % 19, % % X 1, % 0.79% 6.17% 5.05% 1.12% 14.34% 76.95% 1, % 21, % % X 7, % 0.78% 6.62% 5.60% 1.02% -3.43% 53.33% 3, % 9, % % - 1, % 0.76% 5.76% 4.87% 0.89% 9.51% 61.93% % 8, % % - 5, % 1.43% 5.33% 3.79% 1.54% 14.78% 57.22% % 14, % % X -5, % 0.74% 6.31% 5.36% 0.95% 6.87% 60.17% 2, % 5, % % % 0.78% 6.02% 4.93% 1.09% 15.36% 70.80% 23.89% 0.62% 0.44% 16 Building Societies Database 2009

17 17 Building Societies Database 2009 Peer Group 1 Table 4: Society Staff Ratios, Pension Costs & Group IAS19/FRS17 Data Table 4: Society Staff Ratios, Pension Costs & Group IAS19/FRS17 Data Society staff costs Society pension costs Group IAS19/FRS17 disclosures Total Total Staff Costs Profit for Year Total Assets Total wages Other Pension Defined Group IAS19/FRS17 Key IAS19/FRS17 assumptions 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 Britannia I Dec Yorkshire I Dec Coventry I Dec Chelsea I Dec Skipton I Dec Leeds I Dec West Bromwich I Mar Principality I Dec Newcastle I Dec Norwich & Peterborough Dec Stroud & Swindon Dec Nottingham I Dec Kent Reliance I Sep Progressive Dec Cumberland Mar National Counties Dec , , , ,000 91, % Y - Closed -238, % ,593 95, ,227 81,800 5, % Y - Closed % ,089 70, ,479 59,700 5, % Y - Closed 20, % ,194 34, ,894 30,500 1, % Y - Closed 6, % , ,380 27,400 2, % Y - Closed -2, % ,237 36, ,399 30,500 2, % Y - Closed -27, % , ,873 20,000 2, % Y - Closed -2, % , ,447 28,600-5, % Y - Closed -1, % n/a 7.00 n/a , ,993 19,900 1, % Y - Closed % ,027 27, ,846 23,900 1, % Y - Closed -5, % , ,787 23,200 2, % Y - Closed -2, % , ,691 9, % Y - Closed % , ,610 10, % Y - Closed -1, % , ,674 2, % No n/a n/a n/a n/a n/a 121 3, ,755 3, % Y - Closed % , ,549 7, % Y - Closed % , ,276 2, % Y - Closed -1, % , % 0.74%

18 Peer Group 1 Table 5: Group Loans and Advances (1): Arrears and Provisions Table 5: Group Loans and Advances (1): Arrears and Provisions Group/Society Group Group / Society Total Year End FSRP Provisions FSOL Provisions Lending Gross Mortgage Lending FSRP FSOL Other Arrears 12 mths Mortgage Charge/ Year End Charge/ (Credit) Provision to Charge/ (Credit) Provision to 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 '000 % '000 % '000 % Number '000 '000 '000 % % % % P/Yr loans 1 Nationwide I Apr Britannia I Dec Yorkshire I Dec Coventry I Dec Chelsea I Dec Skipton I Dec Leeds I Dec West Bromwich I Mar Principality I Dec Newcastle I Dec Norwich & Peterborough Dec Stroud & Swindon Dec Nottingham I Dec Kent Reliance I Sep Progressive Dec Cumberland Mar National Counties Dec % 21,200, % 138,794, % 11,750, % 4,219, % 2, ,000 93, , % 0.09% 1.42% 1.61% 19.40% 2,400, % 21,990, % 2,166, % 91, % n/a 79,400 67,000 66, % 0.30% 0.45% 0.61% 7.70% 2,529, % 15,857, % 4, % 0 n/a ,400 25,100 41, % 0.26% 0.00% 0.00% 2.28% 3,100, % 13,073, % % 99, % 66 20,900 3,700 16, % 0.12% 0.00% 0.00% 4.30% 2,229, % 10,293, % 149, % 0 n/a 72 26,100 23,800 26, % 0.25% 0.00% 0.00% 13.59% 1,623, % 8,774, % 526, % 79, % ,100 33,200 40, % 0.46% 0.11% 0.28% 16.60% 1,280, % 6,525, % 604, % 200, % ,300 11,000 17, % 0.26% 3.05% 3.36% 18.70% 400, % 5,436, % 1,486, % % 67 82,200 16,500 31, % 0.58% 3.17% 3.29% 14.70% 1,125, % 4,177, % 588, % 86, % ,300 31,700 38, % 0.91% 0.00% 0.00% 17.66% 607, % 3,192, % 575, % 86, % 35 16,200 n/a n/a n/a n/a n/a n/a 11.62% 785, % 3,188, % 333, % 31, % 43 13,300 4,900 9, % 0.28% 0.09% 0.42% 1.86% 315, % 2,372, % 21, % % 226 5,151 1,918 5, % 0.21% 0.12% 0.25% 5.89% 429, % 2,245, % 66, % 0 n/a 9 1, % 0.02% 1.48% 1.63% 5.91% 534, % 1,784, % 95, % 0 n/a 28 3,899 3,240 3, % 0.20% 0.38% 0.38% 0.64% 246, % n/a n/a n/a n/a n/a n/a 9 n/a n/a n/a n/a n/a n/a n/a 14.94% 202, % 1,016, % 167, % 1, % 10 3, , % 0.16% 0.17% 1.13% 8.66% 206, % 918, % 35, % 36, % 6 5, , % 0.20% 6.69% 6.83% 10.67% 18.95% 3.71% % -4.63% 0.19% 0.29% 1.14% 1.32% 18 Building Societies Database 2009

19 19 Building Societies Database 2009 Peer Group 1 Table 6: Society Loans and Advances (1): Provisions Society Total Year End FSRP Provisions FSOL Provisions Lending Number of FSRP FSOL Other Mortgage Charge/ Year End Charge/ (Credit) Provision to Charge/ (Credit) Provision to 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 Britannia I Dec Yorkshire I Dec Coventry I Dec Chelsea I Dec Skipton I Dec Leeds I Dec West Bromwich I Mar Principality I Dec Newcastle I Dec Norwich & Peterborough Dec Stroud & Swindon Dec Nottingham I Dec Kent Reliance I Sep Progressive Dec Cumberland Mar National Counties Dec % 2,479, ,927, % 11,368, % 2,431, % 296,000 6,000 22, % 0.02% 1.46% 1.66% 19.40% 257,778 11,623, % 664, % 60, % 11, % 0.00% 1.66% 1.71% 7.70% 211,576 9,335, % 4, % 0 n/a % 0.01% 0.00% 0.00% 2.28% 235,000 11,128, % % 74, % 18,300 2,200 14, % 0.13% 0.00% 0.00% 4.30% 153,630 10,163, % 149, % 0 n/a 26,100 22,000 26, % 0.26% 0.00% 0.00% 13.59% 124,984 7,031, % 526, % 27, % 8,900 3,000 6, % 0.09% 0.11% 0.28% 16.60% 79,747 6,345, % 604, % 200, % 42,900 10,100 15, % 0.25% 3.05% 3.36% 18.70% 58,000 2,568, % 30, % 0 n/a 15,300 1,300 15, % 0.59% 0.00% 0.00% 14.70% 66,417 3,513, % 588, % % 12,300 3,500 12, % 0.35% 0.00% 0.00% 17.66% 39,916 3,149, % 471, % 86, % 16,200 n/a n/a n/a n/a n/a n/a 11.62% 58,079 2,949, % 333, % 31, % 13,100 4,700 8, % 0.30% 0.09% 0.42% 1.86% 20,318 1,915, % 2, % 0 n/a % 0.02% 0.64% 1.59% 5.89% 45,387 2,245, % 66, % 0 n/a 1, % 0.02% 1.48% 1.63% 5.91% 10, , % 95, % 0 n/a 3,887 3,478 3, % 0.38% 0.38% 0.38% 0.64% 13,910 1,277, % 7, % 0 n/a 1, , % 0.08% 0.00% 0.45% 14.94% 19,515 1,016, % 167, % 1, % 3, , % 0.16% 0.17% 1.13% 8.66% 13, , % 23, % 1 n/a 3, , % 0.13% 8.01% 8.21% 10.67% 2.27% % % 0.08% 0.17% 1.07% 1.30%

20 Peer Group 1 Table 7: Group Loans and Advances (2): Provisions Table 7: Group Loans and Advances (2): Provisions Loans Fully Secured on Residential Property FSRP Loans Fully Secured on Land FSOL General Specific General to Specific General Provision/ Specific Provision/ General Specific General to Specific General Provision/ Specific Provision/ Provision Provision Provision Total FSRP Total FSRP Provision Provision Provision Total FSOL Total FSOL '000 '000 % % % '000 '000 % % % 1 Nationwide I Apr Britannia I Dec Yorkshire I Dec Coventry I Dec Chelsea I Dec Skipton I Dec Leeds I Dec West Bromwich I Mar Principality I Dec Newcastle I Dec Norwich & Peterborough Dec Stroud & Swindon Dec Nottingham I Dec Kent Reliance I Sep Progressive Dec Cumberland Mar National Counties Dec ,000 59, % 0.05% 0.04% 31, ,000 19% 0.26% 1.35% n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 5,800 35,600 16% 0.04% 0.22% 0 0 n/a 0.00% 0.00% 4,700 11,500 41% 0.04% 0.09% 0 0 n/a 0.00% 0.00% 22,200 3, % 0.22% 0.04% 0 0 n/a 0.00% 0.00% 13,200 27,700 48% 0.15% 0.31% % 0.15% 0.13% 9,000 8, % 0.14% 0.13% 7,000 14,000 50% 1.12% 2.24% 3,100 28,500 11% 0.06% 0.52% 17,900 32,700 55% 1.16% 2.13% n/a n/a n/a n/a n/a 0 0 n/a 0.00% 0.00% n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 3,100 6,000 52% 0.10% 0.19% % 0.18% 0.24% 1,738 3,360 52% 0.07% 0.14% 53 0 n/a 0.25% 0.00% % 0.01% 0.01% % 0.59% 1.04% 188 3,343 6% 0.01% 0.19% % 0.12% 0.26% n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 1,615 0 n/a 0.16% 0.00% 1, % 1.03% 0.09% 368 1,478 25% 0.04% 0.16% 51 2,550 2% 0.13% 6.69% Total Total Peer Gp Ratio Total Total Peer Gp Ratio 129, ,781 68% 59, ,855 28% 0.08% 0.16% 0.36% 1.01% 20 Building Societies Database 2009

21 21 Building Societies Database 2009 Peer Group 1 Table 8: Society Loans and Advances (2): Provisions Table 8: Society Loans and Advances (2): Provisions Loans Fully Secured on Residential Property FSRP Loans Fully Secured on Land FSOL General Specific General to Specific General Provision/ Specific Provision/ General Specific General to Specific General Provision/ Specific Provision/ Provision Provision Provision Total FSRP Total FSRP Provision Provision Provision Total FSOL Total FSOL '000 '000 % % % '000 '000 % % % 1 Nationwide I Apr Britannia I Dec Yorkshire I Dec Coventry I Dec Chelsea I Dec Skipton I Dec Leeds I Dec West Bromwich I Mar Principality I Dec Newcastle I Dec Norwich & Peterborough Dec Stroud & Swindon Dec Nottingham I Dec Kent Reliance I Sep Progressive Dec Cumberland Mar National Counties Dec ,000 13,000 69% 0.01% 0.01% 31, ,000 19% 0.27% 1.39% n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a % 0.00% 0.01% 0 0 n/a 0.00% 0.00% 4,300 9,800 44% 0.04% 0.09% 0 0 n/a 0.00% 0.00% 22,200 3, % 0.22% 0.04% 0 0 n/a 0.00% 0.00% 3,300 2, % 0.05% 0.04% % 0.15% 0.13% 8,400 7, % 0.13% 0.12% 7,000 14,000 50% 1.12% 2.24% ,800 3% 0.02% 0.57% 0 0 n/a 0.00% 0.00% n/a n/a n/a n/a n/a 0 0 n/a 0.00% 0.00% n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 3,000 5,900 51% 0.10% 0.20% % 0.18% 0.24% % 0.01% 0.01% 40 0 n/a 1.59% 0.00% % 0.01% 0.01% % 0.59% 1.04% 176 3,343 5% 0.02% 0.36% % 0.12% 0.26% % 0.02% 0.06% 33 0 n/a 0.45% 0.00% 1,615 0 n/a 0.16% 0.00% 1, % 1.03% 0.09% % 0.04% 0.09% 51 2,075 2% 0.20% 8.01% Total Total Peer Gp Ratio Total Total Peer Gp Ratio 53,744 63,187 85% 41, ,680 23% 0.06% 0.11% 0.38% 0.89%