More on Bradford & Bingley
Bradford & Bingley: FY05 results
Bradford & Bingley reported that pre-tax profits for the year to December 2005(before loss on sale of discontinued operations) rose to £263.5m from £228.7m last year.
There has been a noticeable improvement in H2 with net interest margins widening (H2: 1.24% v H1: 1.19%) although the full year margin (at 1.21%) was slightly weaker than last year (2004: 1.25%). Lending volumes improved substantially in H2 to reach £4.7bn compared to £2.5bn the previous year.
Net interest income increased by £23m to £469.3m due to loan growth (+10%)and the recovery of net interest margins in H2. Non interest income fell by 12% to £111.3m due to lower sales in the Retail business as the bank focused on increasing profits by removing loss making activities.
Residential lending (84% of the company’s portfolio) rose 10% but commercial/housing association lending slipped slightly to £5bn (2004: £5.3bn) due to more competitive markets.
Cost saving measures undertaken last year have delivered results with underlying costs in the continuing business down 7% to £264.8m resulting in the cost:income ratio improving to 45.6% (2004: 49.8%).
Arrears rates have increased modestly, the capital position has increased slightly with a total capital ratio of 13.5% (2004: 13.2%) and a tier 1 ratio of 7.9% (2004: 7.5%), just below the norm of 8%.
On the whole, the results are respectable. The stock offers direct exposure to house building lending and is thus very similar to HBOS. Growth will depend on the continued strength of the housing market, something that is showing signs of weakness, although a good pipeline of lending should ensure reasonable short-term performance.
Trading at 450.254p, the share is on a prospective PE (2006 earnings) of 12.9x, within the sector range, with a yield of 4%.
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