REG - Secure Trust BankArbuthnot Banking - Final Results for the year to 31 December 2015 <Origin Href="QuoteRef">ARBB.L</Origin> <Origin Href="QuoteRef">STBS.L</Origin> - Part 2
17/03/2016 07:05
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portfolios.
Operating expenses have increased, in line with expectations, as significant investments have been made in the
infrastructure and human capital of the Group to achieve our growth targets within the Group's risk appetite. This
investment will continue to generate further returns in the future.
Underlying profit before tax was £39.3 million, which is an increase of 18% on 2014. Underlying profit removes the effects
from the income statement of acquisition costs, fair value amortisation arising from acquisitions, share option scheme
costs and net ABG management recharges.
Taxation
The effective underlying tax rate is 21.1% (2014: 21.5%), which is broadly in line with the weighted average corporate tax
rate during the year. The prior year's tax rate reflected the effects of acquisition adjustments relating to deferred tax.
The Bank's effective tax rate will increase in 2016 as a result of the new Bank Corporation tax surcharge of 8%, which is
effective from 1 January 2016.
Distributions to shareholders
The directors recommend the payment of a final dividend of 55 pence per share which, together with the interim dividend of
17 pence per share paid on 18 September 2015, represents a total dividend for the year of 72 pence per share (2014: 68
pence per share).
The Board is also proposing to pay a special dividend of 165 pence per share for 2016. The dividend is dependent on the
completion of the sale of ELG, which includes regulatory approval of the change of control, transferral of ownership and
the inclusion of the gain within the Company's capital resources. Following completion, the Board would also review the
financial position and prospects of the Company further before declaring any such special dividend.
Earnings per share
Detailed disclosures of earnings per ordinary share are shown in Note 11 to the financial statements. Basic earnings per
share increased by 29% to 157.8 pence per share (2014: 122.3p), whilst the underlying basic earnings per share increased by
9% to 170.4 pence per share (2014: 155.8p per share).
Summarised balance sheet
2015 2015 2015 2014
Continuing operations Discontinued operations Total Total
£million £million £million £million
Assets
Cash and balances at central banks 131.8 - 131.8 81.2
Debt securities held-to-maturity 3.8 - 3.8 16.3
Loans and advances to banks 9.8 1.7 11.5 39.8
Loans and advances to customers 960.6 114.3 1,074.9 622.5
Other assets 22.9 2.5 25.4 22.5
1,128.9 118.5 1,247.4 782.3
Liabilities
Due to banks 35.0 - 35.0 15.9
Deposits from customers 1,033.1 - 1,033.1 608.4
Other liabilities 29.4 8.7 38.1 33.1
1,097.5 8.7 1,106.2 657.4
The total assets of the Group increased by 59% to £1,247.4 million reflecting the continued growth in both Business and
Consumer lending. Real Estate Finance lending balances increased by 175% to £368.0 million at the year-end after just 2
years of lending. Asset Finance lending balances increased from £4.5 million to £70.7 million and Commercial Finance from
£5.0 million to £29.3 million in their first full year. During the year the Retail Finance business increased lending
balances by 89% to close at £220.4 million, as the Group continues to profit from the synergistic benefits of aligning its
Retail Finance businesses under the V12 brand. Motor Finance increased its portfolio size by 20% to £165.7 million through
continued growth in the number of dealer relationships and through developing its prime lending offering. Everyday Lending
Group personal lending balances increased by 22% during the year prior to its divestment (subject to FCA approval) from the
group.
Customer deposits grew by 70% during the year to close at £1,033.1 million, to fund the increased lending balances. The
Group also held £35.0 million of wholesale deposits at the year-end, following the sale and repurchase of FLS Treasury
Bills.
Funding for Lending Scheme
In 2013 the Bank was admitted to the Funding for Lending Scheme (FLS). The FLS is a scheme launched by the Bank of England
and HM Treasury, designed initially to incentivise banks and building societies to boost their lending to UK households and
SME's. The FLS does this by facilitating funding to banks and building societies for an extended period, at below current
market rates, with both the price and quantity of funding provided linked to the institution's performance in lending to
the SME sector.
Strategic report Principal risks and uncertainties
The monitoring and control of risks is a fundamental part of the management process. The Board considers that the principal
risks inherent in the Group's business are credit, market, liquidity, operational, capital, conduct and regulatory risks. A
description of the risk management policies in these areas is set out in Note 5 to the financial statements.
A short description of the principal risks, the ways in which the Group's management seek to manage these risks and some
examples of developments that took place in 2015 are set out below.
Risk appetite
The risk appetite statements below have been approved by the Board:
Profitability
We are profit and growth oriented whilst seeking to maintain a conservative and controlled risk profile. The Bank manages
credit risk through a pricing for risk model which drives a potential return on equity in excess of 20% on aggregate.
Financial Strength
Our financial strength is safeguarded by a strong capital base and a prudent approach to liquidity management. Capital
levels will not fall below the Individual Capital Guidance ("ICG") requirements.
Liquidity is maintained at a level above the Overall Liquidity Adequacy Requirement (see 'Liquidity risk' below) with all
loans funded typically by retail deposits.
Conduct with Customers & Reputation
As a result of the way we conduct our business we seek to avoid negative outcomes by consistently treating our customers
fairly.
We are straightforward and fair with our customers and seek to achieve excellent customer service standards. Our aim is to
be seen as a sound and professional business in the marketplace. We have no appetite for reputational risk arising from the
way in which we or our partners behave.
We seek to remain compliant with all relevant regulatory requirements.
Business Processes and Our People
Our appetite for operational risk is to have well defined, scalable and controlled processes, running on robust and
resilient systems, effective delivery of change and business continuity management.
We do not tolerate operational losses above our pillar 1 capital requirement.
Risk appetite measures
The Board Risk Committee uses a set of measures to assess the Group's position against its risk appetite. These measures
are also cascaded to individual business units for monitoring and reporting purposes. The key measures are set out in the
relevant sections below.
Credit risk
Credit risk is the risk that a counterparty will be unable to pay amounts in full, when due. Counterparties include the
consumers to whom the Group lends unsecured and the small and medium sized enterprises to whom the Group lends secured as
well as the market counterparties with whom the Group deals.
This risk is managed through the Group's internal controls and credit risk policies. The risk is monitored by the Credit
Risk Committee, with oversight provided by the Board Risk Committee. Larger exposures are also approved by the Arbuthnot
Banking Group Risk Committee.
For STB, credit risk arises principally from its lending activities. Details of exposures, concentration risk, allowances
for impairment and arrears are given in Notes 5, 13 and 14. At the year-end, 94% of loans and advances to customers by
value were neither past due nor impaired, compared with 89% at 31 December 2014.
Credit risk also arises in respect of the Group's loans and advances to banks, and counterparty risk is monitored using the
ratings of the respective counterparties. Further details are given in Notes 5 and 12.
Across the different product markets in which the Group operates, credit risk management oversee the application of the
Group's risk related policies and consider the impact of market changes and business opportunities. At the end of the
financial year the Group was within risk appetite across a range of measures covering bad debt rates, concentration risk
and automated credit decisioning.
Key developments during 2015 in the credit risk management of the consumer and commercial business areas of the Group are
described below.
Consumer credit risk
In 2015, the Group commissioned a market leading risk consultancy to review its near prime Motor Finance credit risk
management. This work will result in more appropriate risk based pricing.
The Group has also developed its methodology for its unsecured personal loan businesses. These changes are expected to
deliver more accurate credit risk assessment and improved risk based pricing, whilst maintaining credit quality.
Retail Finance has seen considerable growth from both existing retailers and new additions to the retail panel. The
addition of new retailers, coupled with significant growth from existing introducers and buoyant consumer confidence
resulted in significant year on year growth. This growth has been managed through the existing scorecard and rule set
without compromising credit quality. The performance of all the consumer portfolios continue to be monitored closely
through monthly Credit Committee governance meetings which review scorecard and rule performance and new application
quality and delinquency trends.
Commercial credit risk
The growth in lending to the SME sector has been built around strong risk management practices. The Group has employed
experienced bankers who have operated through both positive and challenging economic cycles, and have brought their
experience to bear alongside the application of robust risk governance, credit appetite and lending policies.
For Real Estate Finance and Commercial Finance, lending decisions are made on an individual transaction basis, using expert
judgement and assessment against criteria set out in the lending policies. Asset Finance lending is outsourced to Haydock
Finance, who operate in line with the Group's credit policies and risk appetite. Secure Trust Bank employees based in
Haydock's premises assess this lending for compliance with policy. A programme to develop probability of default (PD)
modelling for each of the SME businesses commenced in 2015 and is expected to be delivered in the second half of 2016.
These models will be IFRS 9 compliant.
With the SME businesses in the early stage of their growth, impairments and arrears have been minimal to date. Of
particular note is the positive performance of the Real Estate Finance book, where property developments financed have seen
repayments achieved both ahead of time and above expected valuations, in part assisted by the positive housing market
throughout 2015. Management continue to closely monitor the SME portfolios and the external events and environment that
could impact on each of them.
Future development - implementation of IFRS 9
The new accounting standard governing the impairment of financial assets, IFRS 9, is effective for annual reporting periods
beginning on or after 1 January 2018. The standard fundamentally changes the calculation and recognition of credit losses,
by introducing the requirement to base impairment provisions on expected credit losses over the life of the financial
asset. It also requires credit losses to be recognised for all loans, in contrast to the current standard (IAS 39) which
requires recognition of losses only when there is evidence of impairment. The models used to calculate expected credit
losses need to include forward looking factors including macro-economic variables.
The key differences between the two approaches are:
Status of loan Current standard (IAS 39) New standard (IFRS 9, effective from 1 January 2018)
No evidence of specific impairment No specific impairment charge, but assessed at portfolio level for collective impairment Charge for expected credit loss applied for all loans, based on probability of default over a 12 month period
Evidence of significant increase in credit risk, but not impaired No specific impairment charge, but assessed at portfolio level for collective impairment Charge for expected credit loss applied, based on lifetime probability of default
Impaired Specific impairment charge applied, equating to lifetime credit losses Charge for expected credit loss applied, based on lifetime probability of default
The Group has initiated a project to develop and implement the modelling, data, processes, systems and disclosures required
to comply with IFRS 9. The Group intends to run the provision modelling and accounting processes over the course of 2017 to
assess the impact of the standard.
Market risk
Market risk is the risk that the value of, or revenue generated from, the Group's assets and liabilities is impacted as a
result of market movements. For Secure Trust Bank Group this is primarily limited to interest rate risk.
This is managed by the STB treasury function and overseen by the Board Assets and Liabilities Committee (ALCO). The policy
is not to take significant unmatched own account positions in any market. The key measure used to monitor the risk is the
Interest Rate Risk Sensitivity Gap, information about which is provided in Note 5. The Group was within its appetite for
this risk at the year-end.
The principal currency in which the Bank operates is Sterling, although a small number of transactions are completed in US
Dollars and Euro in the Commercial Finance business. All such currency exposures are fully hedged using short term swaps of
no more than 30 days in length, which ensures that the Group and the Bank have no exposures to currency fluctuations.
Liquidity risk
Liquidity risk is the risk that the Group cannot meet its liabilities as they fall due, due to insufficient liquid assets.
The Group takes a conservative approach to managing its liquidity profile, by closely monitoring and remaining within risk
appetite limits, and holding high quality liquid assets; primarily UK Treasury Bills and the Bank of England Reserve
Account. The Group is primarily funded by retail customer deposits, having limited exposure to the wholesale lending
markets. ALCO oversees liquidity risk and monitors the activities of management in managing liquidity risk. ALCO meets
monthly to review liquidity risk against set thresholds and risk indicators including early warning indicators, liquidity
risk tolerance levels and Individual Liquidity Adequacy Assessment Process (ILAAP) metrics as described below.
The primary measures used by management to assess the adequacy of liquidity are the Overall Liquidity Adequacy Requirement
(OLAR), which is the Board's own view of the Group's liquidity needs as set out in the ILAAP, and the regulatory
requirement to meet the Liquidity Coverage Ratio (LCR). The Group has maintained liquidity in excess of the OLAR throughout
2015.
The LCR regime has applied to the Group from 1 October 2015, requiring management of net 30 day cash outflows as a
proportion of high quality liquid assets. STB has set a more prudent internal limit. The actual LCR has significantly
exceeded both limits throughout the year.
ALCO also uses the funding to loan ratio to assess liquidity adequacy, against a minimum target. The ratio exceeded this
minimum target throughout the year.
Operational risk
Operational risk is the risk that the Group may be exposed to financial losses from inadequate or failed internal
processes, people and systems or from external events.
The Group has a defined set of Operational Risk Appetite measures covering such matters as operational losses, IT
resilience, information security, complaints and more generally the level of operational risks the Group is prepared to
accept. These appetite measures are cascaded to individual business units which monitor and track their level of risks
within their local governance forums.
In 2015, the Group invested in resource, expertise and systems to support the development of its operational risk
capabilities. A formal Operational Risk Management System is being introduced along with an enhanced Operational Risk
Framework covering all the key principles for the sound management of Operational Risk as defined by the Basel Committee.
Key areas of focus in 2015 have been:
· Developing and clearly defining the governance structure and procedures over how key business decisions are made
and operational risks are managed, controlled and escalated within the business;
· Developing our systems and controls over the management of our third party suppliers and how the services they
support are maintained, secured and improved;
· Enhancing our IT systems so that they are resilient in order to continue to provide the service expectations of
our customers;
· Developing our Business Continuity Plans so that they are robust and responsive to a range of potential internal
and external issues the Group could face;
· Managing change effectively and ensuring any new developments meet the high standards set for our customers and
the services we provide.
In 2016 we will continue to monitor the effectiveness of our controls and respond to new and emerging threats to the
business.
Cyber risk
There is an increased risk that the Group is subject to cyber risk within its operational processes. This is the risk that
the businesses within the Group are subject to some form of disruption arising from an interruption to its IT and data
infrastructure. The Group continues to improve its defences against cyber risk through the use of enhanced monitoring and
response tools and procedures.
Capital risk
Capital risk is the risk that the Group will have insufficient capital resources to support the business.
The Group adopts a conservative approach to managing its capital and at least annually assesses the robustness of the
capital requirements as part of the Group's Individual Capital Adequacy Process (ICAAP), which is then aggregated into the
Arbuthnot Banking Group's ICAAP. Stringent stress tests are performed to ensure that capital resources are adequate over a
future three year horizon.
At the year-end, the Common Equity Tier 1 (CET1) Ratio was 13.6% (2014: 18.7%) and the Leverage Ratio was 10.4% (2014:
14.7%) on a solo-consolidated basis. Both ratios are significantly higher than regulatory requirements. The decreases in
the ratios are driven by the growth in assets, and therefore total risk exposure, over the year. The solo-consolidated
capital resources increased slightly to £138.9m at 31 December 2015 (31 December 2014: £123.4m).
The conditional sale of ELG is expected to significantly increase the Group's capital ratios, providing a very strong
capital base and enabling further growth of lending portfolios. In assessing the Group's future capital position,
management is mindful of the Basel Committee proposals relating to standardised risk weighting and is watching developments
closely. Further details of the Group's capital position are provided in the capital, leverage and liquidity section of the
Strategic Report.
Conduct risk
Conduct risk reflects the potential for customers (and the business) to suffer financial loss or other detriment through
the actions and decisions made by the business and its staff.
We define conduct risk as the risk that STB's products / services, and the way they are delivered, result in poor outcomes
for customers or markets in which we operate, or harm to STB. This could be as a direct result of poor or inappropriate
execution of our business activities or behaviour from our staff.
The Group takes a principles based approach and includes retail and commercial customers in its definition of 'customer',
which covers all business units and both regulated and unregulated activities.
In 2015, management embedded a Conduct Risk Management Framework in the business. This is a set of activities establishing
the governance and oversight protocols, providing training and awareness on the Conduct Risk Policy, and enhancing and
developing relevant key risk indicators (KRIs). Conduct risk exposure is managed via monthly review and challenge of KRIs
at the Customer Focus Committee, which was set up to oversee complaints, FEEFO and Customer Service Excellence (CSE) as
well as conduct risk. Conduct risk management information is also reviewed at Executive Committee meetings at product
level, at STB ExCo and STB Board. The KRIs vary across the business units to reflect the relevant conduct risks. The
business units' KRIs are aggregated for measurement against the Group's risk appetite.
Senior Managers Regime
A new regime, to enhance the accountability of individuals operating in banks, insurers and PRA-authorised investment
firms, was implemented in the Financial Services (Banking Reform) Act 2013 and commenced from 7 March 2016. This regime was
proposed in the Parliamentary Commission on Banking Standards Report (June 2013) and replaced the Approved Persons regime.
The new requirements introduce conduct rules which apply to all bank employees and additional rules for senior management.
A specific Senior Manager Regime applies to the Bank's Board members and certain executive and senior managers, requiring
these individuals to have regulatory approval, specific prescribed responsibilities and ongoing assessment by the Bank to
ensure these persons remain "fit and proper". A further Certification Regime applies to other employees who pose a "risk of
significant harm" to the firm, requiring the fit and proper test to be applied before the individual commences the role and
then on an ongoing basis.
The Bank has embraced the new regime and made the changes required to comply. Senior Manager functions have been mapped
across, responsibilities allocated and job descriptions amended where required. Training has been delivered across the Bank
and an annual certification framework put in place. Changes to governance arrangements that have resulted from the change
in regime are set out in the Corporate Governance statement. Secure Trust Bank submitted its application for the
"grandfathering application" on 2 February 2016, setting out responsibilities for existing Approved Persons who migrated to
their equivalent Senior Management Functions on 7 March 2016.
Regulatory Risk
Regulatory risk is the risk that the Group fails to be compliant with all relevant regulatory requirements. This could
occur if the Group failed to interpret, implement and embed processes and systems to address regulatory requirements,
emerging risks, key focus areas and initiatives or deal properly with new laws and regulations.
The Group seeks to manage regulatory risks through the following elements of the Group wide risk management framework:
· Governance and control processes for new products and services;
· Advice and guidance on the application and interpretation of laws and regulations applicable to the Group's
products, new initiatives and projects;
· Investment in the infrastructure and ongoing enhancement of the regulatory training programme.
Additional training has been delivered for key focus areas in 2015 including:
· Vulnerable customers and complaints handling;
· Horizon scanning to identify regulatory developments which are managed through impact assessment and
implementation programmes;
· Liaison with regulatory bodies regarding authorisations and permissions;
· Information requests and reporting requirements;
· Consumer Rights Act implementation;
· Risk based monitoring and assurance programmes to ensure the Group remains compliant with regulatory
requirements.
Strategic report Capital, leverage and liquidity
Capital
The Group's capital management policy is focused on optimising shareholder value over the long-term. Processes exist to
ensure that capital is allocated to achieve targeted risk adjusted returns whilst ensuring appropriate surpluses are held
above the minimum regulatory requirements. The Board reviews the capital position at every Board meeting.
In accordance with the EU's Capital Requirements Directive (CRD) and the required parameters set out in the EU's Capital
Requirements Regulation (CRR), the Group's Internal Capital Adequacy Assessment Process (ICAAP), which is aggregated into
the Arbuthnot Banking Group's ICAAP, is embedded in the risk management framework of the Group. It is subject to ongoing
updates and revisions where necessary, but as a minimum an annual review is undertaken as part of the business planning
process. The ICAAP brings together the risk management framework, including stress testing using a range of scenarios, and
the financial disciplines of business planning and capital management.
Not all material risks can be mitigated by capital, but where capital is appropriate the Board has adopted a 'Pillar I
plus' approach to determine the level of capital the Group needs to hold. This method takes the Pillar I capital formula
calculations as a starting point, and then considers whether each of the calculations delivers a sufficient capital sum
adequate to cover anticipated risks. Where it is considered that the Pillar I calculations do not reflect the risk, an
additional capital add-on in Pillar 2 is applied, as per the Individual Capital Guidance (ICG) issued to the Bank by the
PRA.
The Group's regulatory capital is divided into:
· Common Equity Tier 1 which comprises shareholders' funds, after deducting intangible assets and deferred tax
assets which have arisen due to losses.
· Tier 2 which comprises the collective allowance for impairment.
The ICAAP includes a summary of the capital required to mitigate the identified risks in its regulated entities and the
amount of capital that the Group has available. All regulated entities within the Group have complied during the financial
year with all of the externally imposed capital requirements to which they are subject.
The Group operates the standardised approach to credit risk, whereby risk weightings are applied to the Group's on and off
balance sheet exposures. The weightings applied are those stipulated in the CRR.
The Group is required by the PRA to report its capital on a solo consolidated basis. The solo-consolidated group includes
all entities where a solo consolidation waiver has been received from the PRA; this excludes the V12 Finance Group and the
Debt Managers Group. At the year end the solo-consolidated group had the following capital resources and Total Risk
Exposure (TRE). In accordance with CRR, the TRE reflects both credit risks and operational risks.
2015 2014
£m £m
Capital
Common Equity Tier 1 (CET1) capital 135.8 121.4
Total Tier 2 capital 3.1 2.0
Total capital 138.9 123.4
Total Risk Exposure (TRE) 998.6 649.2
2015 2014
% %
CRD IV ratios
Common Equity Tier 1 (CET1) capital (solo consolidated) 13.6 18.7
Leverage ratio 10.4 14.7
The increase in CET1 capital has been driven by retained profit marginally offset by an increase in intangibles. An
analysis of CET1 capital can be found in Note 6 to the financial statements.
Total Risk Exposure has increased by 54% to £998.6 million reflecting the significant growth in both Business Finance and
Consumer Lending.
The CET1 capital ratio is the ratio of CET1 divided by the TRE and was 13.6% at the year end. This compares to 18.7% at the
end of 2014 again reflecting the growth in lending resulting in an increase in TRE during 2015. The conditional sale of ELG
is expected to increase the CET1 capital ratio and provide additional capital for future planned growth.
Leverage
The Basel III framework introduced a relatively simple, transparent, non-risk based leverage ratio to act as a
supplementary measure to the risk-based capital requirements. The leverage ratio is intended to restrict the build-up of
leverage in the banking sector to avoid destabilising deleveraging processes that can damage the broader financial system
and the economy, whilst reinforcing the risk-based requirements with a complementary simple, non-risk based 'backstop'
measure.
The Basel III leverage ratio is defined by the CRR as Tier 1 capital divided by on and off sheet asset exposure values,
expressed as a percentage. The minimum leverage ratio requirement of 4% will be imposed on the Bank from 2018, subject to a
review in 2017.
As shown in the table above, the Bank has a leverage ratio at 31 December 2015 of 10.4%, comfortably ahead of the minimum
requirement.
Liquidity
The Group continues to manage its liquidity on a conservative basis by holding high quality liquid assets (HQLA) and
utilising predominantly retail funding from customer deposits, with only limited funding coming from the wholesale markets.
In December 2012, Secure Trust Bank was admitted as a participant in the Bank of England's Sterling Money Market Operations
under the Sterling Monetary Framework, to participate in the Discount Window Facility. From July 2013, the Group was
permitted to draw down facilities under the Funding for Lending Scheme (FLS). FLS monies are maintained as a liquidity
buffer, above that required to support lending.
At 31 December 2015 and throughout the year, the Group had significant surplus liquidity over the minimum requirements due
to its stock of HQLA, in the form of the Bank of England Reserve Account and Bank of England Treasury Bills. As shown in
the table below, total liquid assets increased by 20% to £147.1 million, with the HQLA balance of £135.6m representing a
proportional increase from 67% to 92% of total liquid assets.
2015 2014
£m £m
Liquid assets
Aaa - Aa3 135.6 82.5
A1 - A3 6.2 19.8
Unrated 5.3 20.0
147.1 122.3
Less assets held for sale (1.7) -
Statutory balance sheet total 145.4 122.3
The Group has no liquid asset exposures outside of the United Kingdom and no amounts that are either past due or impaired.
The Liquidity Coverage Ratio (LCR), introduced by the Basel Committee on Banking Supervision in 2013, applied to the Group
from 1 October 2015. The objective of the LCR is to promote the short term resilience of the liquidity risk profile of
banks, by ensuring that they have an adequate stock of unencumbered high-quality liquid assets that can be converted easily
and immediately in private markets into cash to meet their liquidity needs for a 30 calendar day liquidity stress
scenario.
The PRA completed its consultation on the minimum LCR requirements to apply in the United Kingdom in 2015, and set levels
marginally higher than those prescribed in the CRR during the transition period. The PRA have set the minimum at 80% from 1
October 2015, 90% from 1 January 2017 and 100% from 1 January 2018, coming into line with the CRR at this point.
The Group's LCR, and other measures used by management to manage liquidity risk, are described in the Principal Risks and
Uncertainties section of the Strategic Report.
Consolidated statement of comprehensive income
Year ended 31 December Year ended 31 December
2015 2014
Note £million £million
Interest receivable and similar income 100.5 63.4
Interest expense and similar charges (21.6) (14.2)
Net interest income 7 78.9 49.2
Fee and commission income 16.9 16.1
Fee and commission expense (3.7) (1.6)
Net fee and commission income 13.2 14.5
Operating income 92.1 63.7
Net impairment losses on loans and advances to customers (16.8) (8.7)
Operating expenses 8 (50.5) (37.5)
Profit before income tax 24.8 17.5
Income tax expense 10 (5.5) (3.6)
Profit for the period - Continuing operations 19.3 13.9
Profit for the period - Discontinued operations 33 9.4 6.6
Profit for the period 28.7 20.5
Other comprehensive income, net of income tax:
Cash flow hedging reserve
- Net amount transferred to profit or loss - 0.4
Other comprehensive income for the period, net of income tax - 0.4
Total comprehensive income for the period 28.7 20.9
Profit attributable to:
Equity holders of the Company 28.7 20.5
Total comprehensive income attributable to:
Equity holders of the Company 28.7 20.9
Earnings per share for profit attributable to the equity holders of the Company during the period
(expressed in pence per share):
Basic earnings per share - Continuing operations 106.1 82.8
Basic earnings per share - Discontinued operations 51.7 39.5
Basic earnings per share 11 157.8 122.3
Diluted earnings per share - Continuing operations 104.1 81.2
Diluted earnings per share - Discontinued operations 50.7 38.7
Diluted earnings per share 11 154.8 119.9
Consolidated statement of financial position
At 31 December
2015 2014
Note £million £million
ASSETS
Cash and balances at central banks 131.8 81.2
Loans and advances to banks 12 9.8 39.8
Loans and advances to customers 13 960.6 622.5
Debt securities held-to-maturity 15 3.8 16.3
Property, plant and equipment 18 8.5 8.1
Intangible assets 16 7.0 8.2
Deferred tax assets 24 0.3 1.0
Other assets 20 7.1 5.2
Assets held for sale 33 118.5 -
Total assets 1,247.4 782.3
LIABILITIES AND EQUITY
Liabilities
Due to banks 21 35.0 15.9
Deposits from customers 22 1,033.1 608.4
Current tax liabilities 3.2 3.6
Other liabilities 23 26.2 29.5
Liabilities held for sale 33 8.7 -
Total liabilities 1,106.2 657.4
Equity attributable to owners of the parent
Share capital 26 7.3 7.3
Share premium 79.3 79.3
Retained earnings 54.4 38.1
Revaluation reserve 0.2 0.2
Total equity 141.2 124.9
Total liabilities and equity 1,247.4 782.3
Company statement of financial position
At 31 December
2015 2014
Note £million £million
ASSETS
Cash and balances at central banks 131.8 81.2
Loans and advances to banks 12 9.2 37.9
Loans and advances to customers 13 932.7 500.1
Debt securities held-to-maturity 15 3.8 16.3
Property, plant and equipment 18 4.2 3.7
Intangible assets 16 3.2 1.3
Investments 17 3.7 3.7
Deferred tax assets 24 0.6 0.3
Other assets 20 146.0 116.2
Total assets 1,235.2 760.7
LIABILITIES AND EQUITY
Liabilities
Due to banks 21 36.4 15.9
Deposits from customers 22 1,033.1 608.4
Current tax liabilities 0.3 1.5
Other liabilities 23 30.2 22.2
Total liabilities 1,100.0 648.0
Equity attributable to owners of the parent
Share capital 26 7.3 7.3
Share premium 79.3 79.3
Retained earnings 48.6 26.1
Total equity 135.2 112.7
Total liabilities and equity 1,235.2 760.7
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent company profit and loss account. The profit for the parent company for the year is presented in the Company Statement of Changes in Equity.
Consolidated statement of changes in equity
Share capital Share premium Revaluation reserve Cash flow hedging reserve Retained earnings Total
£million £million £million £million £million £million
Balance at 1 January 2014 6.3 28.2 0.2 (0.4) 27.3 61.6
Total comprehensive income for the period
Profit for 2014 - - - - 20.5 20.5
Other comprehensive income, net of income tax
Cash flow hedging reserve
- Net amount transferred to profit and loss - - - 0.4 - 0.4
Total other comprehensive income - - - 0.4 - 0.4
Total comprehensive income for the period - - - 0.4 20.5 20.9
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Dividends - - - - (10.2) (10.2)
Charge for share based payments - - - - 0.5 0.5
Issue of ordinary shares 1.0 52.3 - - - 53.3
Transaction costs on issue of shares - (1.2) - - - (1.2)
Total contributions by and distributions to owners 1.0 51.1 - - (9.7) 42.4
Balance at 31 December 2014 7.3 79.3 0.2 - 38.1 124.9
Total comprehensive income for the period
Profit for 2015 - - - - 28.7 28.7
Other comprehensive income, net of income tax
Total comprehensive income for the period - - - - 28.7 28.7
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Dividends - - - - (12.6) (12.6)
Charge for share based payments - - - - 0.2 0.2
Total contributions by and distributions to owners - - - - (12.4) (12.4)
Balance at 31 December 2015 7.3 79.3 0.2 - 54.4 141.2
Company statement of changes in equity
Share capital Share premium Cash flow hedging reserve Retained earnings Total
£million £million £million £million £million
Balance at 1 January 2014 6.3 28.2 (0.4) 12.8 46.9
Total comprehensive income for the period
Profit for 2014 - - - 23.0 23.0
Cash flow hedging reserve
- Net amount transferred to profit or loss - - 0.4 - 0.4
Total other comprehensive income - - 0.4 - 0.4
Total comprehensive income for the period - - 0.4 23.0 23.4
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Dividends - - - (10.2) (10.2)
Charge for share based payments - - - 0.5 0.5
Issue of ordinary shares 1.0 52.3 - - 53.3
Transaction costs on issue of shares - (1.2) - - (1.2)
Total contributions by and distributions to owners 1.0 51.1 - (9.7) 42.4
Balance at 31 December 2014 7.3 79.3 - 26.1 112.7
Total comprehensive income for the period
Profit for 2015 - -
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