RNS Number : 1513D
Kent Reliance Building Society
27 November 2009
FINANCIAL RESULTS 2009
Kent Reliance Building Society announces financial results for the year ended September 2009.
The Society has been able to maintain profitability in a very difficult trading environment where competition from state aided financial institutions has created an uneven and unfair market. Despite these challenges the Society has been able to declare a profit due to the drive to improve efficiency and reduce relative costs by capitalising upon the India operations that service the back office and support functions of the Society.
The uncertain and volatile financial market place creates special challenges for building societies that are unable to raise additional capital in the way that Banks are able and improving capital strength will remain a priority. The Society, which has a reputation for high growth and innovation, has not been drawn into the currently unviable pricing arena in the financial markets, preferring to consolidate the business model and conserve capital.
During the previous year the Group was able to undertake a capital re structure which released a windfall profit into the business to help off set the adverse climate including the funding of a levy to the Financial Services Compensation Scheme (FSCS). For that reason comparisons between 2009 and 2008 results are not reflective of the very creditable performance for the 2009 year.
Significantly the Society has been able to maintain high retail balances such that all mortgage lending is fully funded without reliance upon wholesale deposits. For the eighth consecutive year the Society has improved the management expense ratio - largely regarded as a measure of efficiency - to 0.39% giving it the lowest published management expense ratio in the industry.
The financial highlights in summary are
Total assets £2.26bn (2008: £2.34bn) down 3.5%
Profit before tax £2.26m (2008: £12.60m) down 82%
Profit after tax £1.69m (2008: £8.94m) down 81%
Mortgage balances £1.76bn (2008: £1.88bn) down 6.5%
Retail balances £1.88bn (2008: £1.75bn) up 7.3%
Gross capital 5.65% (2008: 5.23%)
Free capital 5.52% (2008: 5.13%)
Liquid assets 20.77% (2008: 20.12%)
Management expense ratio 0.39% (2008: 0.41%) improved 4.9%
Lending ratio 11.71% Statutory limit 25%
Funding ratio 9.34% Statutory limit 50%
Net interest margin 0.58% 0.88% latest industry see note
comparable
note: Latest industry comparable for net interest margin is the average of the top 17 societies from results reported between December 2008 and April 2009 so may not be a like for like comparison.
After adjusting for items that are considered to be one off in nature, the result of timing differences or the recent market turbulence, the Group's core operating profit was as follows:
2009 2008 2007 2006
£'000 £'000 £'000 £'000
Profit before tax 2,261 12,603 5,713 5,954
Adjustments:
(Gain) on repayment of subordinated - (8,550) - -
debt
Net losses/(gains) from fair value (1,901) 1,382 (100) (445)
volatility
Impairment of investment securities 423 512 - -
Impairment of mortgage assets 2,794 3,280 - -
FSCS levy 784 1,043 - -
_______ _______ _______ _______
Core operating profit 4,361 10,270 5,613 5,509
_______ _______ _______ _______
In difficult trading conditions the Society has made higher provisions on certain of its loans. Despite these increased provisions, actual losses incurred as a result of bad debts have been insignificant to date at only £64,000.
The net interest margin remains below the industry average demonstrating that the Society is giving more back to its members through superior interest rates than the industry generally. This is largely due to the lower costs of operating the business because of Easiprocess. In addition to providing back office services to the Group this subsidiary continues to provide services to a Jamaican based mutual Building Society, is supporting a UK based Law firm and is also providing telephone support for a Sharia compliant cash card operated in conjunction with MasterCard.
Our Channel Islands subsidiaries continue to perform very well in the domestic mortgage markets of Guernsey and Jersey.
Our strategy continues to be to drive down relative costs and control real costs while at the same time continuing to run the business in a prudent manner. We believe that we are well placed to negotiate our way through the difficulties ahead in the global financial markets and we will continue to offer a safe haven for investors.
In summary we believe that we continue to live out the rationale for being a building society - offering competitively priced mortgages and a safe and secure place for savings whilst contributing to the local communities in which we operate. We expect our offshore capability to be a critical part of our future and we expect to be able to supply services to more third parties in the year to come.
KENT RELIANCE BUILDING SOCIETY GROUP
FINANCIAL RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2009
SUMMARY
INCOME STATEMENT 2009 2008
£'000 £'000
Net interest receivable 13,432 18,580
Gain on repayment of subordinated debt - 8,550
Other income and charges 2,170 (109)
Administrative expenses (8,884) (9,260)
Provisions (4,457) (5,158)
________ ________
Profit for the year before taxation 2,261 12,603
Taxation (573) (3,666)
________ ________
Profit for the year 1,688 8,937
________ ________
BALANCE SHEET 2009 2008
£'000 £'000
Assets
Liquid assets 429,710 444,186
Mortgages 1,611,580 1,784,871
Other loans 146,716 95,612
Fixed and other assets 68,933 15,252
_________ _________
Total assets 2,256,939 2,339,921
_________ _________
Liabilities
Shares 1,875,815 1,747,553
Borrowings 193,356 460,026
Other liabilities 70,840 16,860
Subordinated liabilities 26,703 27,058
Subscribed capital 36,901 36,843
Reserves 53,324 51,581
_________ _________
Total liabilities 2,256,939 2,339,921
_________ _________
Notes and background information:
1. These results are published under International Financial Reporting Standards (IFRS) and the accounting policies are
in accordance with all standards and related interpretations that have been adopted by the European Union as at 30
Sept 2009. While profits under IFRS are expected to be more volatile the net impact on this year's result has not
been substantial.
2. Comparison between 2009 and 2008 is not necessarily like for like due to the capital restructuring that took place in
2008.
3. The Kent Reliance Group is made up of Kent Reliance Building Society, Jersey Home Loans Limited, Guernsey
Homeloans Limited, Easioption Limited, Easiprocess Private Limited, EasiOption BPO Services Private Limited and
Reliance Property Loans Limited.
4. Kent Reliance is the only society to have an offshore outsource operation - Easiprocess -based in Bangalore and a third
party operation based in Pune - EasiOption.
5. The Society has pursued a branch to agent franchise programme such that it now has only two branches remaining.
6. Kent Reliance is the only building society to have a Jersey registered mortgage business - Jersey Homeloans.
7. Kent Reliance also operates on Guernsey through Guernsey Homeloans. Channel Islands business - which accounts
for 43% of the Group mortgage assets - is all serviced from the Society's offices in Chatham and Bangalore.
This information is provided by RNS
The company news service from the London Stock Exchange
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