Building Societies Database 2010

Transcription

1 Building Societies Database 2010 Insights into the shape of UK Building Societies 20th EDITION CELEBRATING 20 YEARS FINANCIAL SERVICES AUDIT n TAX n ADVISORY

2 Welcome to the 20th edition of KPMG s annual Building Societies Database Contents Foreword from Richard Gabbertas Introduction from Paul Boothroyd Market Outlook from Simon Walker I am pleased to introduce the 20th edition of KPMG s annual Building Societies Database. This survey summarises - in a series of tables of statistics, ratios and rankings - the financial performance of all the current UK building societies. If you would like to know more about the wider services which KPMG provides to the retail financial services sector, please contact me or any of the contributors to this document. Richard Gabbertas Partner, KPMG s Financial Services practice September 2010 Tables - Peer Group 1 Tables - Peer Group 2 Tables - Peer Group 3 Explanation of the tables, statistics and ratios KPMG LLP 1 The Embankment Neville Street Leeds LS1 4DW Tel: Fax: richard.gabbertas@kpmg.co.uk Building Societies Database

3 Building Societies Database Introduction and Methodology The Building Societies Database 2010 (Database 2010) provides financial information relating to the 52 building societies in the United Kingdom as at April 2010, prior to the merger of Chelsea BS with Yorkshire BS. Paul Boothroyd Senior Manager, KPMG s Financial Services practice paul.boothroyd@kpmg.co.uk Tel: All data for building societies has been extracted from The reduction is due to Britannia BS (previously ranked published sources, being primarily the latest financial no 2) merging with The Co-operative Financial Services statements of the societies for financial year ends on 1 August between August 2009 and April Latest available numbers for branches, borrowing members and investing Since April 2010 there have been three further mergers: members are as published in the Building Societies 1 April: Chelsea BS (no 5) merged into Yorkshire BS (no 2) Association Yearbook 2009/ June 2010: Chesham BS (no 39) merged into Skipton Availability of Database 2010 BS (no 4) This survey is a key component of KPMG s commitment 1 September 2010: Stroud & Swindon BS (no 11) merged to the UK building societies sector. Therefore both the with Coventry BS (no 3). commentary and the tables are available to anyone with an interest in UK building societies and can be requested in These three societies have been included independently the following formats: this year as their November and December 2009 accounts Printed were publicly available. PDF In addition, in August 2010, Kent Reliance BS (No 13) Microsoft Office Excel (including or excluding announced that it is seeking to restructure its business in the inputs). a proposed deal that will involve the society transferring its business, assets and liabilities to a new bank that will be To download a copy visit: a subsidiary of a new industrial and provident society. Printed and/or prior editions are available on request by The key feature of this proposed deal is the injection of ing UKFS-Banking@kpmg.co.uk 50 million of capital into the new bank by a private equity Number of societies firm. The transfer is expected to be completed in 2011, Database 2010 comprises 52 societies, compared to 53 in subject to a number of conditions which include approval Database by the society s members and by the FSA.

4 Asset groupings The 52 building societies are grouped into three peer groups based on asset size, and ranked within each peer group. Other than Britannia BS, these peer groups are unchanged from those in Database Group versus society data Readers should be aware that some tables analyse group data whereas a number are based on 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. 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 No significant changes have been made from the Database 2009 tables. Total sector group and society assets In Database 2010 the 52 societies held total group assets of billion, compared to Database 2009 total group assets of billion. Total group assets have decreased by 51 billion, due to a combination of the merger of Britannia BS with The Co-operative Financial Services and balance sheet shrinkage across the sector. Total sector asset movements are analysed as follows: Group billion Society billion Database 2009 total assets Less Britannia BS (assets as at 31 December 2008) (37.2) (33.2) Adjusted 2009 total assets Sector shrinkage: 2009 to 2010 (excl Britannia) (13.8) (16.9) Database 2010 total assets Sector shrinkage (excl. Britannia) 2009 to 2010 Prior year sector growth (incl. Britannia) 2008 to 2009 (4.1%) (5.0%) 4.6% 6.7% Of the 2010 total sector asset shrinkage of 13.8 billion, approximately 11 billion has come from Nationwide BS with the balance of 2.8 billion from the other societies. Nationwide continues to dominate the building societies sector, even more so with the departure of Britannia. Nationwide s total assets at April 2010 were billion, representing 59.9 percent of building society sector total assets (Database 2009: billion representing 54.6 percent of total sector assets). The higher society only total assets continue to be a result mainly of the accounting implications of covered bonds issued by the larger societies, in particular Yorkshire and Coventry. Nationwide continues to dominate the building societies sector, even more so with the departure of Britannia. Building Societies Database

5 Building Societies Database Balance sheet changes A key balance sheet feature is that 35 societies have reported a reduction in total group assets, including 13 of the 16 societies in Peer Group 1. The three societies in Peer Group 1 reporting increases in total assets were Coventry, Skipton and Cumberland: Skipton being impacted by the addition of total assets of 2.6 billion on the merger with Scarborough in March The highest asset growth achieved in the sector was 37.7 percent by Swansea, which has moved the society up to the 41st ranking within Peer Group 3. The reduction in total assets for many societies is a result of a combination of the following key trends: 34 societies have reduced society FSRP loan books 42 societies have reduced society FSOL loan books, including all of Peer Group 2 22 societies have reduced total shares, although 12 of the 16 Peer Group 1 societies reported an increase in total shares. A key balance sheet feature is that 35 societies have reported a reduction in total group assets, including 13 of the 16 societies in Peer Group 1. Other significant balance sheet statistics include: Liquidity: a mixed picture with 32 societies reporting an increase in their proportion of liquid assets to total shares and deposits, probably due to a combination of increased FSA regulatory expectations, low mortgage lending activity and a comfort factor: however, conversely, 20 societies have reported a reduction in their liquid asset ratio Lending Limit: 37 societies have reported a decrease, thus showing a clear move by the sector to core residential property lending Funding Limit: similarly, 37 societies have reported a reduction in their funding limit ratio, thus showing a clear move to less reliance on wholesale funding Total reserves as a percentage of total assets: 40 societies (including 13 of the 16 Peer Group 1 societies) reported an increase in this ratio, which has benefited from the low or negative asset growth Gross and Free Capital: 38 societies reported an increase in their Gross Capital ratio and 38 societies also reported an increase in the Free Capital ratio; these ratios benefiting from the low or negative changes in shares and wholesale funds.

6 Profitability trends Given the continuing difficult market conditions, it is not surprising that societies have continued to report low profitability. Database 2010 shows 19 societies with a reduced profit for the year and 6 societies (5 of these in Peer Group 1) reported a loss for the year, the latter compared to 9 in Database Key features include: 40 societies reported reduced society net interest margins 45 societies reported stable or reduced society management expenses ratios 32 societies have also reported a reduction in the absolute value of their management expenses (including 13 of the 16 societies in Peer Group 1) cost control has been a key plus point in societies recent performance Mortgage loss provision charges: a mixed picture with 21 societies reporting absolute value decreases in charges but 30 reporting increases, despite declining asset bases. Some societies, in particular the larger Peer Group 1 societies, are still making significant mortgage loss provision charges and this is evidenced by the percentage increases in most of the average group and society general and specific provisions in Tables 7 and 8 from Database Other profitability factors include: for IFRS societies: ongoing fair value volatility on financial instruments FSCS Levy: 17 societies have reported a credit for this item due to the change in basis for such provisions (see Table 2a) for some societies: provisions against deposits with Icelandic banks have been reduced due to increased expectations of recoverability (see over). Building Societies Database

7 Building Societies Database Exceptional items Many societies continue to be 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 2010 has eliminated the impact of such exceptional items from the disclosures for mortgage loss provisions as a percentage of profit, for recurring profits and for the management expense ratios. The following societies have disclosed, in their 2009/2010 accounts, a credit of varying amounts for a reduction in their provisions against deposits in Icelandic banks: Coventry, Skipton, Chelsea, Leeds, Newcastle, National Counties, Manchester, Vernon, Chesham, 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 Levy further up the face of the Income and Expenditure Account. In order to maintain comparability for the various profitability ratios, including Profit Pre-Provisions and for Recurring Profits, Database 2010 has restated the Income and Expenditure Accounts of those societies which have charged the FSCS Levy 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 2010 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 and losses relating to derivatives, 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 percent, 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.

8 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 of the 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 2010 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 percentage 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 2010, 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 usually considered to be one of any lender s key performance indicators. To enable this survey s disclosure to be as accurate and consistent between societies as possible, it would be helpful if all societies could continue to clearly disclose: gross group mortgage lending in the year; and the amount clearly exclusive of any mortgage book acquisitions. 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 paul.boothroyd@kpmg.co.uk Building Societies Database

9 Market Outlook Building Societies Database The market and regulatory changes that have followed the credit crunch favour financial institutions that are well capitalised, retail funded and proportionately less exposed to specialist lending. This description fits the vast majority of building societies and many societies are performing well. Simon Walker Partner, KPMG s Financial Services practice simon.walker@kpmg.co.uk Tel: Please note that all percentages quoted use figures calculated from the Building Societies Database 2009 and The last couple of months have seen the announcements of exceptional interim results from the Leeds and Coventry building societies compared to 2009, and over 63 percent of societies reporting increased profits at their last year end. Despite this good news, many societies continue to face short term pressures, especially at interest margin level, with 77 percent of societies reporting a fall in their last full year s accounts. In addition, over two thirds of societies reported reduced total assets. In the short term, societies face the following issues: Balance sheet structure Profitability Capital. Balance sheet structure When the credit crunch struck, many banks and building societies faced two changes that pushed up the demand for mid term retail funds: firstly, the closure of the wholesale markets, which had been providing inexpensive short term funding; and secondly, prudential pressure to carry higher levels of liquidity. Faced with a sudden shortage of funding, banks and building societies competed strongly for new retail funding, pushing up the cost of retail money. Much of the new expensive money was raised in the form of fixed term bonds which was great news for savers. As the markets have settled post credit crunch, many societies have been able to reduce the levels of liquidity they carry and ease back on their need for expensive retail bond based funding. The impact of the changes in the funding market has been twofold: Societies cost of funding has risen sharply The high marginal cost of funding has made it hard for some societies to compete for new mortgage lending against some of the large internationally diversified banks.

10 On the asset side of the balance sheet, the relatively long term nature of mortgage lending, much of it initially lent on either fixed rate or discounted deals, has made it hard for many societies to increase their income from lending as fast as the cost of funding has risen, leading to margin shrinkage. Over 75 percent of societies net interest margins shrank last year. For the vast majority of societies this is a short term issue with mortgages reverting to variable rate after the initial fixed rate or tracker period expires. Indeed, as a result of falling house prices and tighter credit criteria, the rate of remortgaging has fallen sharply, meaning that for most societies over the next year the proportion of borrowers on variable rate will rise steadily, so boosting margins. In the long term the shape of societies balance sheets is likely to change from the height of the boom, with retail funding becoming more dominant. Last year 70 percent of societies reduced the proportion of their balance sheet funded by the money markets. Consequently, there is likely to be renewed interest from societies in savers and meeting their needs. This should be good news for consumers with more societies liable to offer simple current account facilities, some looking to widen distribution via agencies, and others looking to the SME sector as a source of deposits. Profitability With margins squeezed by the cost of funding, many societies face profitability pressures. One of the most common ways in which societies have dealt with profitability pressures has been to cut costs, with 60 percent of societies reporting an absolute reduction in management expenses and over 85 percent reporting stable or falling management expenses ratios. At some societies significant further cost reductions can be achieved, so more falls in costs can be expected next year. In the mid term the solution to societies profitability pressures should come from widening margins, back to pre-credit crunch levels or wider. There will be two sources of margin widening: a modest contribution from a greater management focus on savings; and a rather larger contribution from higher margins on lending. In the mid term mortgage prices should rise to cover the higher cost of liquidity resulting from the new regulatory approach and the increased cost of retail versus wholesale funding. In the short term subdued market demand and strong competition from retail banks who have limited other opportunities to lend is likely to hold down prices. Capital Post credit crunch regulators expectations around capital have changed. They now require more capital and better quality capital. Banks have generally met this challenge by raising fresh equity capital either from the market or the government. Societies are generally better capitalised than banks but the pressure on the quality of capital is a major issue. The new capital regime means that PIBS (Permanent Interest Bearing Shares), which historically have been treated as tier one capital, are no longer regarded as such and will be phased out as a capital instrument over time. This means that societies will need new ways of raising core tier one capital. European regulators have indicated that a solution for European mutuals will be found in CRD (Capital Requirements Directive) 4 which is expected to be in force by Whilst the theoretical availability of a new capital instrument from 2013 provides a mid term solution, some societies are keen for a way forward more quickly. The innovative approach taken by Kent Reliance, backing into a specially formed industrial provident society, raising fresh capital from a private equity fund, may be an indicator of things to come. Conclusion Building societies are well placed for the mid term being well capitalised, retail funded and with low credit risk lending. In the shorter term they face some challenges but the evidence from the Building Societies Database 2010 suggests that the overwhelming majority of societies are facing up to them well. Simon Walker Partner, KPMG s Financial Services practice simon.walker@kpmg.co.uk Building Societies Database

11 Database Tables Building Societies Database

12 Building Societies Database Table 1 Total Assets, Shares, Members and Branches Peer Group 1 Asset Society IFRS Year End Group Group Society Society Society Society Number of Average Funding Liquid Society Total Society Society Society Ranking Total Asset Total Asset Shares Shares Society Balance per Limit Assets Branches Assets per Shareholders Borrowers Assets Growth Assets Growth Growth Shareholders Shareholder Ratio Branch per Branch per Branch '000 % Rank '000 % Rank '000 % % % Number '000 1 Nationwide I Apr ,397, % 8 190,497, % 8 120,943, % 13,800,000 8, % 16.80% ,663 15,333 1,556 2 Yorkshire I Dec ,722, % 5 25,193, % 5 13,794, % 1,850,343 7, % 31.94% ,180 12,939 1,489 3 Coventry I Dec ,402, % 2 21,037, % 2 13,218, % 996,000 13, % 23.89% ,279 20,750 5,063 4 Skipton I Dec ,568, % 1 15,858, % 1 10,461, % 708,608 14, % 28.95% ,206 7,873 1,584 5 Chelsea I Dec ,413, % 10 13,406, % 10 10,968, % 517,057 21, % 27.50% ,029 14,773 4,120 6 Leeds I Dec ,545, % 9 9,555, % 9 6,750, % 558,022 12, % 22.02% ,525 8,206 1,152 7 West Bromwich I Mar ,335, % 12 7,962, % 12 6,544, % 527,000 12, % 22.47% ,089 11,457 1,304 8 Principality I Dec ,218, % 6 6,212, % 6 4,921, % 416,156 11, % 24.49% ,822 8,160 1,082 9 Newcastle I Dec ,620, % 11 4,514, % 11 3,777, % 358,042 10, % 28.20% ,392 9,946 1, Norwich & Peterborough Dec ,248, % 15 4,250, % 15 3,312, % 373,816 8, % 23.80% 56 75,907 6,675 1, Stroud & Swindon Dec ,736, % 14 2,723, % 14 2,117, % 208,308 10, % 27.89% ,780 9,469 1, Nottingham I Dec ,599, % 16 2,599, % 16 1,872, % 170,574 10, % 22.11% 32 81,247 5,330 1, Kent Reliance I Sep ,256, % 7 2,251, % 7 1,875, % 175,000 10, % 20.77% 1 2,251, ,000 10, Progressive Dec ,664, % 4 1,664, % 4 1,448, % 91,807 15, % 21.89% ,678 7,651 1, Cumberland Mar ,573, % 3 1,575, % 3 1,320, % 160,663 8, % 25.80% 33 47,745 4, National Counties Dec ,245, % 13 1,209, % , % 54,078 16, % 25.63% 1 1,209,591 54,078 13,154 Total Peer Gp Total Peer Gp 306,548, ,512,037 Average of Peer Group Societies -4.93% -5.21% 4.51% 12, % 24.63% 367,163 23,282 2,936 denotes no Group: therefore Society total assets included as Group

13 Table 2a Group or Society Profitability Ratios Peer Group 1 Asset Society IFRS Year End Excep. Items Group Profit Group/Society Group Net Group Cost/ Group ManEx/ Group ManEx Mortgage Loss Provisions Recurring Profit Recurring Profit Change FSCS Levy FSCS Levy Ranking in Addition to Profit for Change Profit for Year/ Interest Margin/ Income Ratio Mean Assets Other Income/ Charge/(Credit) Charge/(Credit) Inc M Loss Inc M Loss Charge/ Provision FSCS Levy Year Mean Assets Mean Assets Mean Assets for Year for Year/Profit Provisions Provisions (Credit) Current Year Pre-provision Current Year Prior Year X '000 % % % % % Rank % '000 % '000 '000 % '000 '000 1 Nationwide I Apr 2010 X 264, % 0.13% 0.87% 62.06% 0.68% % 549, % 274, , % -117,000 93,000 2 Yorkshire I Dec 2009 X -3, % -0.01% 0.65% 69.17% 0.54% % 59, % -3,600 18, % 2,700 12,100 3 Coventry I Dec 2009 X 43, % 0.24% 0.70% 47.66% 0.38% % 19, % 55,100 63, % 2,000 n/s 4 Skipton I Dec 2009 X 57, % 0.39% 0.36% 87.20% 2.63% % 43, % 12,700 50, % -4,300 11,100 5 Chelsea I Dec 2009 X -20, % -0.14% 0.48% 79.56% 0.46% % 57, % -41,100 31, % 2,300 8,900 6 Leeds I Dec 2009 X 22, % 0.23% 1.12% 35.66% 0.45% % 52, % 27,600 36, % -1,300 5,800 7 West Bromwich I Mar 2010 X -17, % -0.19% 0.34% % 0.49% % 20, % -20,700-30, % -5,400 4,700 8 Principality I Dec , % 0.17% 1.69% 52.08% 0.95% % 39, % 15,700 14, % 1,400 5,000 9 Newcastle I Dec 2009 X % 0.00% 0.42% % 0.86% % 8, % -9,800 4, % -1,300 4, Norwich & Peterborough Dec % 0.02% 0.70% 94.23% 1.06% % 3, % 0 11, % -1,800 2, Stroud & Swindon Dec 2009 X -4, % -0.15% 0.33% % 0.64% % 2, % -8,865 1, % -1,530 2, Nottingham I Dec , % -0.06% 0.67% % 0.73% % 1, % -1,800 2, % 100 1, Kent Reliance I Sep 2009 X 1, % 0.07% 0.58% 56.94% 0.39% % 3, % 3,468 5, % 784 1, Progressive Dec , % 0.06% 0.51% 79.03% 0.48% % % 1,641 4, % Cumberland Mar , % 0.41% 1.21% 64.29% 1.00% % % 7,974 9, % , National Counties Dec 2009 X 3, % 0.23% 0.91% 63.54% 0.69% % 4, % % Average of Peer Group Societies -6.94% 0.09% 0.72% 77.92% 0.78% 0.44% denotes no Group: therefore Society profitability measures included as Group Building Societies Database

14 Building Societies Database Table 2b Group or Society Reserves and Capital Peer Group 1 Asset Society IFRS Year End General IFRS Revaluation Other Total Total Total Prior Year PIBS Subordinated Gross Free Ranking Reserves Reserves Reserve Reserves/ Reserves Reserves/ Reserves/ Total Total Debt Capital Capital Minority Total Assets Change on Reserves Reserves/ Interests Prior Year Total Assets '000 '000 '000 '000 '000 % % '000 % '000 '000 % % 1 Nationwide I Apr ,363, ,000 68, ,716, % 33.61% 4,278, % 1,524,000 2,166, % 4.80% 2 Yorkshire I Dec ,600-75, , % -1.04% 909, % 159, , % 5.13% 3 Coventry I Dec ,000-31, , % 6.01% 551, % 161,200 70, % 4.51% 4 Skipton I Dec ,500-18, , , % 8.33% 707, % 83, , % 5.79% 5 Chelsea I Dec ,800 1,800 24, , % -6.82% 517, % 0 202, % 4.90% 6 Leeds I Dec ,500-8,600 16,900 14, , % 3.82% 460, % 25,000 40, % 6.06% 7 West Bromwich I Mar ,500-2,100 3, , % -1.92% 265, % 74, , % 5.38% 8 Principality I Dec ,900 1, , % 1.65% 285, % 65, , % 8.71% 9 Newcastle I Dec , , % -4.93% 188, % 29,900 60, % 5.58% 10 Norwich & Peterborough Dec , , % -1.17% 205, % 0 15, % 5.00% 11 Stroud & Swindon Dec , , % -7.88% 108, % 0 52, % 5.36% 12 Nottingham I Dec , , % -4.50% 144, % 25, % 6.23% 13 Kent Reliance I Sep , , % 3.38% 51, % 36,901 26, % 5.52% 14 Progressive Dec ,592-3, , % -0.90% 76, % % 4.01% 15 Cumberland Mar , , % 6.66% 96, % % 6.62% 16 National Counties Dec , , % 2.44% 103, % % 8.44% West Bromwich: the 179.9m in the Sub Debt column are Profit Participating Deferred Shares Average of Peer Group Societies 4.43% 6.38% 5.75% denotes no Group: therefore Society reserves and capital included as Group

15 Table 3 Society Profitability Ratios Peer Group 1 Asset Society IFRS Year End Except. Items Society Profit Net Interest Interest Interest Interest Other Income Cost/ Mortgage Loss Provisions Total ManEx ManEx / Mean Assets ManEx - Ranking in Addition to Profit Change Margin/Mean Receivable/ Payable/ Spread for and Charges/ Income Charge/(Credit) Charge/(Credit) Other Income/ FSCS Levy for Year Assets Mean FSRP Mean Shares Members Total Income Ratio for Year for Year/Profit Mean Assets Current Year Pre-provision X '000 % % % % % % % '000 % '000 % Rank % 1 Nationwide I Apr 2010 X 481, % 0.71% n/a 1.29% n/a 36.24% 59.68% 450, % 1,301, % % 2 Yorkshire I Dec 2009 X 66, % 0.13% 5.69% 4.96% 0.73% 84.57% 55.38% 7, % 123, % % 3 Coventry I Dec 2009 X 39, % 0.55% 3.72% 3.29% 0.43% 13.63% 50.92% 14, % 66, % % 4 Skipton I Dec 2009 X 43, % 0.21% 3.70% 2.56% 1.14% 69.83% 50.86% 10, % 53, % % 5 Chelsea I Dec 2009 X -20, % 0.47% 4.34% 2.84% 1.50% 17.13% 80.18% 56, % 63, % % 6 Leeds I Dec 2009 X 14, % 1.04% 3.73% 2.69% 1.04% 5.89% 37.99% 50, % 41, % % 7 West Bromwich I Mar 2010 X -10, % 0.30% 3.33% 2.87% 0.46% 21.30% % 1, % 36, % % 8 Principality I Dec , % 0.96% 3.23% 1.82% 1.41% 7.47% 68.14% 7, % 44, % % 9 Newcastle I Dec 2009 X 1, % 0.41% 3.64% 2.38% 1.26% 49.35% % 8, % 39, % % 10 Norwich & Peterborough Dec 2009 X 1, % 0.70% 2.38% 1.77% 0.61% 40.55% 82.94% 3, % 45, % % 11 Stroud & Swindon Dec 2009 X % 0.39% 2.98% 2.56% 0.42% 14.54% % % 16, % % 12 Nottingham I Dec , % 0.67% 3.36% 2.40% 0.96% 1.05% % 1,700 n/a 19, % % 13 Kent Reliance I Sep 2009 X 1, % 0.57% 3.18% 3.11% 0.07% 13.19% 59.71% 3, % 9, % % 14 Progressive Dec , % 0.51% 3.68% 2.72% 0.96% 16.77% 79.03% % 7, % % 15 Cumberland Mar , % 1.21% 3.35% 1.74% 1.61% 16.49% 61.73% % 14, % % 16 National Counties Dec 2009 X 6, % 0.75% 3.03% 2.79% 0.24% 7.43% 56.94% % 5, % % Average of Peer Group Societies 78.52% 0.60% 3.55% 2.61% 0.86% 25.96% 74.28% 92.12% 0.57% 0.35% Building Societies Database

16 Building Societies Database Table 4 Society Staff Ratios, Pension Costs and Group IAS19/FRS17 Data Peer Group 1 Society Staff Costs Society Pension Costs Group IAS19/FRS17 Disclosures Asset Society IFRS Year End Ranking Total Total Staff Staff Costs per Profit for Year Total Assets Total Wages Other Pension Defined Group IAS19/FRS17 Number Costs Staff Member per Staff Member per Staff and Salaries Pension Costs/ Benefit (Deficit)/Surplus Key IAS19/FRS17 Assumptions of Staff ("TW&S") Costs TW&S Scheme? After Def. Tax % of Gen Salary Discount Inflation '000 '000/Staff '000/Staff '000/Staff '000 '000 % '000 Reserves Increase % Rate % Rate % 1 Nationwide I Apr , , , ,000 69, % Y - Closed -365, % Yorkshire I Dec ,080 73, ,115 61,800 5, % Y - Closed -3, % Coventry I Dec ,186 35, ,738 31,300 1, % Y - Closed 4, % Skipton I Dec ,270 27, ,487 31,900-7, % Y - Closed -34, % n/a Chelsea I Dec , ,572 26,600 1, % Y - Closed -13, % Leeds I Dec , ,512 20,200 2, % Y - Closed -2, % West Bromwich I Mar , ,659 22,700 1, % Y - Closed -1, % n/a 5.60 n/a 8 Principality I Dec , ,117 21,700 1, % Y - Closed -7, % Newcastle I Dec , ,637 21,800-1, % Y - Closed -1, % Norwich & Peterborough Dec , ,381 20,300 1, % Y - Closed -4, % Stroud & Swindon Dec , ,129 8, % Y - Closed -3, % Nottingham I Dec , ,138 7, % Y - Closed -4, % Kent Reliance I Sep , ,084 2, % No n/a n/a n/a n/a n/a 14 Progressive Dec , ,598 3, % Y - Closed -1, % Cumberland Mar , ,978 6, % Y - Closed % National Counties Dec , ,292 3, % Y - Closed % Average of Peer Group Societies , % 1.89% 4.27% 5.71% 3.51%

17 Table 5 Group Loans and Advances (1): Arrears and Provisions Peer Group 1 Asset Society IFRS Year End Lending Group/Society Group Group/Society Total Year FSRP Provisions FSOL Provisions Ranking Limit Gross Mortgage Lending FSRP Increase FSOL Increase Other Increase Arrears 12 End Mortgage Charge/ Year End Charge/(Credit) Provision Charge/(Credit) Provision Loans Loans Loans Mths and Over Provisions (Credit) Provision to FSRP Loans to FSRP to FSOL Loans to FSOL % to Total Loans Loans % '000 P/Yr Loans '000 % '000 % '000 % Number '000 '000 '000 % % % % 1 Nationwide I Apr % 13,800, % n/a n/a n/a n/a n/a n/a 2, ,000 n/a n/a n/a n/a n/a n/a 2 Yorkshire I Dec % 936, % 14,700, % 4, % 0 n/a ,700 59,000 50, % 0.34% 0.00% 0.00% 3 Coventry I Dec % 2,700, % 13,991, % % 83, % ,400 16,400 20, % 0.15% 0.00% 0.00% 4 Skipton I Dec % 408, % 10,036, % 516, % 74, % ,100 36,400 75, % 0.74% 1.07% 1.36% 5 Chelsea I Dec % 576, % 9,522, % 147, % 0 n/a ,300 53,700 50, % 0.53% 2.65% 2.65% 6 Leeds I Dec % 922, % 6,499, % 544, % 188, % ,100 12,200 20, % 0.31% 6.95% 5.97% 7 West Bromwich I Mar % 11, % 5,028, % 1,407, % % ,000 17,300 38, % 0.76% 0.23% 3.12% 8 Principality I Dec % 683, % 4,055, % 594, % 0 n/a ,300 39,500 49, % 1.20% 0.00% 0.00% 9 Newcastle I Dec % 119, % 2,858, % 529, % 72, % 61 22,100 2,200 5, % 0.17% 1.08% 2.93% 10 Norwich & Peterborough Dec % 124, % 2,900, % 322, % 34, % 49 13, , % 0.27% 0.25% 0.68% 11 Stroud & Swindon Dec % 49, % 1,959, % 17, % % 195 5,837 2,729 5, % 0.29% -0.02% 0.28% 12 Nottingham I Dec % 288, % 1,946, % 70, % 0 n/a 19 3,000 1,600 2, % 0.10% 0.14% 1.40% 13 Kent Reliance I Sep % 95, % 1,611, % 146, % 0 n/a 43 7,086 2,617 6, % 0.38% 0.43% 0.68% 14 Progressive Dec % 141, % n/a n/a n/a n/a n/a n/a 25 n/a n/a n/a n/a n/a n/a n/a 15 Cumberland Mar % 152, % 1,034, % 145, % 1, % 7 4, , % 0.16% 0.42% 1.65% 16 National Counties Dec % 74, % 862, % 41, % 31, % 13 7, , % 0.21% 0.36% 1.57% Average of Peer Group Societies 9.79% 8.12% -5.03% 1.28% -8.29% 0.25% 0.40% 0.97% 1.59% Building Societies Database

18 Building Societies Database Table 6 Society Loans and Advances (1): Provisions Peer Group 1 Asset Society IFRS Year End Lending Number of Society Total Year FSRP Provisions FSOL Provisions Ranking Limit Society FSRP Increase FSOL Increase Other Increase End Mortgage Charge/ Year End Charge/(Credit) Provision Charge/(Credit) Provision Borrowers Loans Loans Loans Provisions (Credit) Provision to FSRP Loans to FSRP to FSOL Loans to FSOL Loans Loans % '000 % '000 % '000 % '000 '000 '000 % % % % 1 Nationwide I Apr % 1,400,000 n/a n/a n/a n/a n/a n/a 578,000 n/a n/a n/a n/a n/a n/a 2 Yorkshire I Dec % 212,856 8,565, % 4, % 0 n/a 2, , % 0.03% 0.00% 0.00% 3 Coventry I Dec % 243,000 11,337, % % 59, % 17, , % 0.13% 0.00% 0.00% 4 Skipton I Dec % 142,564 7,560, % 516, % 23, % 20, , % 0.15% 1.07% 1.36% 5 Chelsea I Dec % 144,204 9,338, % 147, % 0 n/a 53, , % 0.53% 2.65% 2.65% 6 Leeds I Dec % 78,355 6,498, % 545, % 188, % 58, , % 0.31% 6.90% 5.92% 7 West Bromwich I Mar % 60,000 2,323, % 27, % 0 n/a 12, , % 0.53% 0.00% 0.00% 8 Principality I Dec % 55,207 3,429, % 594, % 0 n/a 12, , % 0.36% 0.00% 0.00% 9 Newcastle I Dec % 36,249 2,820, % 430, % 72, % 22, , % 0.18% 1.32% 3.58% 10 Norwich & Peterborough Dec % 58,163 2,645, % 322, % 34, % 13, , % 0.29% 0.25% 0.68% 11 Stroud & Swindon Dec % 26,750 1,511, % 2, % 0 n/a % 0.02% -0.09% 1.68% 12 Nottingham I Dec % 45,209 1,946, % 70, % 0 n/a 3, , % 0.10% 0.14% 1.40% 13 Kent Reliance I Sep % 10, , % 104, % 0 n/a 7, , % 0.67% 0.59% 0.94% 14 Progressive Dec % 14,429 1,297, % 6, % 0 n/a 1, , % 0.11% 0.00% 0.47% 15 Cumberland Mar % 19,397 1,034, % 145, % 1, % 4, , % 0.16% 0.42% 1.65% 16 National Counties Dec % 13, , % 27, % % 1, , % 0.16% -0.01% 0.11% Average of Peer Group Societies 9.79% -5.29% -1.99% -4.84% 0.12% 0.25% 0.88% 1.36%

19 Table 7 Group Loans and Advances (2): Provisions Peer Group 1 Loans Fully Secured on Residential Property FSRP Loans Fully Secured on Land FSOL Asset Society IFRS Year End General Specific General to General Specific General Specific General to General Specific Ranking Provision Provision Specific Provision/Total Provision/Total Provision Provision Specific Provision/Total Provision/Total Provision FSRP FSRP Provision FSOL FSOL '000 '000 % % % '000 '000 % % % 1 Nationwide I Apr 2010 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2 Yorkshire I Dec ,700 47,000 8% 0.03% 0.32% 0 0 n/a 0.00% 0.00% 3 Coventry I Dec ,300 15,300 35% 0.04% 0.11% 0 0 n/a 0.00% 0.00% 4 Skipton I Dec ,300 50,800 48% 0.24% 0.50% 5,300 1, % 1.01% 0.34% 5 Chelsea I Dec ,400 44,900 12% 0.06% 0.47% 0 4,000 n/a 0.00% 2.65% 6 Leeds I Dec ,000 11,300 80% 0.14% 0.17% 5,000 29,600 17% 0.86% 5.11% 7 West Bromwich I Mar ,200 33,400 16% 0.10% 0.66% 13,200 32,200 41% 0.91% 2.22% 8 Principality I Dec 2009 n/a n/a n/a n/a n/a 0 0 n/a 0.00% 0.00% 9 Newcastle I Dec ,200 3,800 32% 0.04% 0.13% 2,400 13,600 18% 0.44% 2.49% 10 Norwich & Peterborough Dec ,300 5,600 41% 0.08% 0.19% 900 1,300 69% 0.28% 0.40% 11 Stroud & Swindon Dec ,029 4,758 22% 0.05% 0.24% 50 0 n/a 0.28% 0.00% 12 Nottingham I Dec ,700 18% 0.02% 0.09% % 0.42% 0.98% 13 Kent Reliance I Sep ,873 4% 0.01% 0.36% % 0.33% 0.35% 14 Progressive Dec 2009 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 15 Cumberland Mar ,690 0 n/a 0.16% 0.00% 2, % 1.52% 0.13% 16 National Counties Dec ,521 22% 0.04% 0.18% % 0.07% 1.50% Total Total Peer Gp Ratio Total Total Peer Gp Ratio 59, ,952 27% 29,915 84,540 35% Average of Peer Group Societies 0.08% 0.26% 0.44% 1.16% Building Societies Database

20 Building Societies Database Table 8 Society Loans and Advances (2): Provisions Peer Group 1 Loans Fully Secured on Residential Property FSRP Loans Fully Secured on Land FSOL Asset Society IFRS Year End General Specific General to General Specific General Specific General to General Specific Ranking Provision Provision Specific Provision/Total Provision/Total Provision Provision Specific Provision/Total Provision/Total Provision FSRP FSRP Provision FSOL FSOL '000 '000 % % % '000 '000 % % % 1 Nationwide I Apr 2010 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 2 Yorkshire I Dec ,100 5% 0.00% 0.02% 0 0 n/a 0.00% 0.00% 3 Coventry I Dec ,600 11,700 31% 0.03% 0.10% 0 0 n/a 0.00% 0.00% 4 Skipton I Dec ,300 3, % 0.10% 0.05% 5,300 1, % 1.01% 0.34% 5 Chelsea I Dec ,400 44,900 10% 0.05% 0.48% 0 4,000 n/a 0.00% 2.65% 6 Leeds I Dec ,000 11,300 80% 0.14% 0.17% 5,000 29,300 17% 0.86% 5.06% 7 West Bromwich I Mar ,800 5% 0.03% 0.51% 0 0 n/a 0.00% 0.00% 8 Principality I Dec 2009 n/a n/a n/a n/a n/a 0 0 n/a 0.00% 0.00% 9 Newcastle I Dec ,200 3,800 32% 0.04% 0.13% 2,400 13,600 18% 0.54% 3.04% 10 Norwich & Peterborough Dec ,200 5,600 39% 0.08% 0.21% 900 1,300 69% 0.28% 0.40% 11 Stroud & Swindon Dec % 0.00% 0.02% 38 0 n/a 1.68% 0.00% 12 Nottingham I Dec ,700 18% 0.02% 0.09% % 0.42% 0.98% 13 Kent Reliance I Sep ,873 4% 0.02% 0.65% % 0.45% 0.49% 14 Progressive Dec ,210 23% 0.02% 0.09% 33 0 n/a 0.47% 0.00% 15 Cumberland Mar ,690 0 n/a 0.16% 0.00% 2, % 1.52% 0.13% 16 National Counties Dec % 0.04% 0.12% 30 0 n/a 0.11% 0.00% Total Total Peer Gp Ratio Total Total Peer Gp Ratio 31, ,011 30% 16,727 51,413 33% Average of Peer Group Societies 0.05% 0.19% 0.49% 0.87%

21 Table 1 Total Assets, Shares, Members and Branches Peer Group 2 Asset Society IFRS Year End Group Group Society Society Society Society Number of Average Funding Liquid Society Total Society Society Society Ranking Total Asset Total Asset Shares Shares Society Balance per Limit Assets Branches Assets per Shareholders Borrowers Assets Growth Assets Growth Growth Shareholders Shareholder Ratio Branch per Branch per Branch '000 % Rank '000 % Rank '000 % % % Number ' Manchester I Dec , % 7 906, % 7 736, % 33,102 22, % 27.50% 1 906,809 33,102 5, Cambridge Dec , % 8 908, % 8 819, % 112,396 7, % 27.32% 19 47,798 5, Furness Dec , % , % , % 101,165 6, % 24.96% 11 76,554 9, Saffron Dec , % 9 835, % 9 673, % 101,375 6, % 27.20% 12 69,589 8, Leek United Dec , % , % , % 86,338 7, % 23.90% 12 61,248 7, Monmouthshire Apr , % 4 692, % 4 588, % 53,758 10, % 26.67% 11 62,921 4, Hinckley & Rugby Nov , % , % , % 60,000 8, % 27.10% 11 58,564 5, Newbury Oct , % , % , % 48,440 11, % 21.40% 9 69,926 5, Darlington Dec , % , % , % 79,775 6, % 22.80% 13 44,916 6, Ipswich Nov , % 3 462, % 3 356, % 62,105 5, % 29.14% 9 51,382 6, Market Harborough Dec , % , % , % 51,657 6, % 24.01% 6 69,371 8, Melton Mowbray Dec , % , % , % 55,007 6, % 26.41% 4 102,612 13,752 1, Marsden Dec , % , % , % 51,957 5, % 25.73% 12 29,682 4, Tipton & Coseley Dec , % , % , % 36,464 7, % 25.06% 4 87,605 9,116 1, Hanley Economic Aug , % , % , % 32,648 8, % 29.14% 5 69,581 6, Scottish Jan , % 2 325, % 2 259, % 25,323 10, % 27.90% 6 54,262 4, Dudley Mar , % 5 313, % 5 282, % 30,603 9, % 28.69% 7 44,718 4, Loughborough Oct , % 6 277, % 6 228, % 27,433 8, % 28.30% 3 92,647 9, Mansfield Dec , % , % , % 22,555 10, % 25.16% 4 68,428 5,639 1, Teachers Dec , % , % , % 17,408 12, % 24.29% 1 257,362 17,408 2, Bath Investment Dec , % 1 251, % 1 173, % 21,933 7, % 31.70% 5 50,342 4, Vernon Dec , % , % , % 33,904 5, % 26.70% 7 35,117 4, Chesham Nov , % , % , % 15,596 12, % 25.63% 3 76,942 5, Total Peer Gp Total Peer Gp 11,328,287 11,296,263 Average of Peer Group Societies -2.31% -2.29% 0.31% 8, % 26.38% 108,190 8,268 1,005 denotes no Group: therefore Society total assets included as Group Building Societies Database

22 Building Societies Database Table 2a Group or Society Profitability Ratios Peer Group 2 Asset Society IFRS Year End Excep. Items Group Profit Group/Society Group Net Group Cost/ Group ManEx/ Group ManEx Mortgage Loss Provisions Recurring Profit Recurring Profit Change FSCS Levy FSCS Levy Ranking in Addition to Profit for Change Profit for Year/ Interest Margin/ Income Ratio Mean Assets Other Income/ Charge/(Credit) Charge/(Credit) Inc M Loss Inc M Loss Charge/ Provision FSCS Levy Year Mean Assets Mean Assets Mean Assets for Year for Year/Profit Provisions Provisions (Credit) Current Year Pre-provision Current Year Prior Year X '000 % % % % % Rank % '000 % '000 '000 % '000 ' Manchester I Dec 2009 X % -0.01% 0.97% 66.26% 0.72% % % 2,515 5, % Cambridge Dec 2009 X % 0.05% 1.09% 86.96% 1.01% % % 390 4, % Furness Dec , % 0.13% 0.93% 78.68% 0.84% % % 1,756 2, % Saffron Dec , % 0.20% 1.02% 73.51% 0.84% % % 2,002 2, % 0 1, Leek United Dec , % 0.37% 1.18% 58.14% 0.80% % % 4,179 3, % Monmouthshire Apr , % 0.28% 1.04% 65.49% 0.78% % % 2,616 3, % Hinckley & Rugby Nov % 0.04% 0.74% 92.38% 0.77% % % 428 2, % Newbury Oct , % 0.21% 1.12% 65.14% 0.77% % % 2,563 2, % Darlington Dec 2009 X % 0.10% 1.36% 70.49% 0.99% % % 2,230 1, % Ipswich Nov 2009 X % 0.06% 1.21% 90.36% 1.16% % % % Market Harborough Dec 2009 X 1, % 0.24% 1.31% 68.77% 0.99% % % 1,660 1, % Melton Mowbray Dec 2009 X % 0.00% 1.16% 88.66% 1.27% % % % Marsden Dec 2009 X % 0.17% 1.55% 82.94% 1.39% % % 380 1, % Tipton & Coseley Dec % 0.26% 1.22% 62.39% 0.83% % % 1,143 1, % Hanley Economic Aug 2009 X % 0.27% 1.30% 74.22% 1.06% % 1, % , % Scottish Jan % 0.19% 1.64% 79.64% 1.29% % % 954 1, % Dudley Mar % 0.30% 1.44% 64.48% 0.96% % % 1,090 1, % Loughborough Oct % 0.14% 1.14% 69.35% 0.86% % % 996 1, % Mansfield Dec % 0.09% 0.82% 91.78% 0.89% % % % Teachers Dec % 0.11% 0.77% 90.22% 0.80% % % % Bath Investment Dec % 0.29% 1.72% 72.39% 1.41% % % 1, % 169 n/s 38 Vernon Dec 2009 X % 0.20% 1.17% 82.67% 1.06% % % 471 1, % Chesham Nov 2009 X % 0.34% 0.38% % 0.80% % % % Average of Peer Group Societies 38.65% 0.18% 1.14% 81.62% 0.97% 0.86% denotes no Group: therefore Society profitability measures included as Group