West Bromwich Building Society challenges angry PIBS holders
Jul 29 2010 by Graeme Brown, Birmingham Post
West Bromwich Building Society has thrown down the gauntlet to a small band of shareholders unhappy with the way the society handled its near collapse last year.
As the 160-year-old mutual sought to distance itself from its financial crisis by launching a new logo and brand name, the spectre of the events of last year when the society stood on the brink of administration continued to haunt the board at a fiery annual general meeting.
An action group set up to represent a small group of investors was told the courts were now the only option for their grievances.
Holders of permanent interest-bearing shares (PIBS) were left out of pocket after the mutual was forced into a £182.5 million debt-for-equity deal when the financial authorities stress tested its model and decreed it inadequately capitalised last June.
They suffered a loss in interest payments and a big drop in the value of their investments as a result.
Despite the anger of PIBS holders, the mutual’s board wanted to draw a line under the fall out.
The society stressed to members that it was back on track and was seeing losses receding, and used the meeting to reveal a new logo and brand name – The West Brom.
In a bid to refresh its image after the events of last year, The West Brom is spending £5 million to refurbish branches with the new branding, a drive which will complement its planned move into new premises in West Bromwich.
But the new look and a partial turnaround in its financial situation – from a loss of £48.8 million to a loss of £18.5 million to March 2010 – did not prevent members returning to issues around the crisis last year.
The society’s chief executive Robert Sharpe effectively ruled out further discussion on the matter of PIBs, saying disgruntled investors “had recourse to the courts” if they wanted to continue their campaign.
Mr Sharpe said the board had acted on legal advice at the time of the crisis, and had spent £100,000 since in dealing with the PIBs action group so far.
“We are in different camps,” he said.
“The board has said ‘enough is enough.’
“We do we believe we should now draw a line under this matter.”
One of the PIBS activists, Peter Morgan, an accountant from Cheshire who put about £10,000 of his savings into buying PIBS, said he had understood the board had to act decisively at the time of the crisis, but felt there had been no acknowledgement of the “sacrifice” made by PIBS holders.
He said he would not rule out legal action against the West Brom.
He added that he was trying to seek redress through the Financial Services Authority and by talking to local MPs.
“There seems to be a greater acknowledgment from the board that the PIBS holders have been treated unfairly but they could not do anything about it because of the circumstances.
“We will continue to try to get the regulatory authorities to acknowledge that and see what can be done from our point of view,” he said.
Board member remuneration was also a sore subject, with members questioning Mr Sharpe’s £660,000 salary and benefits package.
One member labelling it “obscene” at a time when the society was still making a loss.
But the West Brom’s chairman Mark Nicholls defended the chief executive’s pay saying Mr Sharpe came out of retirement to “save” the society and deserved what he earned.
There were also questions about board members’ remuneration in the case of a takeover bid.
The society’s exposure to poor quality assets has left it vulnerable to a takeover, according to Moody’s, but the society rebuffed this view.
It said it had an improving financial position which would secure its independence.
