West Bromwich Building Society cuts its losses
May 26 2010 by Graeme Brown, Birmingham Post
The troubled West Bromwich Building society has cut its losses back sharply, after a year that saw it come close to collapse.
And it has announced it is prepared to approve a management buyout of its mortgage broking arm, Mortgage Force.
The 160-year-old building society had to devalue some of its shares and institute a new “back to basics” strategy last year after losing millions of pounds on toxic commercial mortgages.
It made a loss of £18.5 million in the year to March 31, 2010. But this was compared to a loss of £48.8 million the year before, and the management hailed the results as a sign of a turnaround at the society.
Building society chief executive Robert Sharpe said: “The improvement on last year’s results clearly indicates that we are starting to see the benefits of the West Bromwich’s ‘Back to Basics’ strategy with its renewed focus upon our traditional strengths as a regionally-based building society and concentrating on our core activities of savings and residential mortgages.
“This means that we have split the group between the traditional building society operations and those that are now in run-off, such as commercial lending, and we are applying the right management focus and skills to each.”
In September last year, holders of permanent interest bearing shares (PIBS) in West Bromwich voted for a debt-for-equity swap that lost them money but saved the loss-making society from being broken up.
Some £75 million worth of PIBS were held by about 800 predominantly small investors who saw their investment cut under the terms of the refinancing deal agreed by the Financial Services Authority.
They were polled by the society and accepted the changes by a large majority, despite earlier protests about the plans.
The UK Shareholders Association complained at first, saying PIBS holders who were under the impression they were buying fixed interest investments would see their income cut. But the society and the FSA said that without the changes investors risked losing everything.
West Bromwich said it had put the worst behind it and that customers were responding positively.
Over the last year the society attracted about 72,500 more customers.
