Bristol & West increases its debt provisions

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The Independent Online
BRISTOL & West, Britain's 10th-largest building society, reported a sharp decline in half-year profits yesterday. As revealed in the Independent last Friday, heavy provisions against bad home loans have prompted the profits slump.

The West Country society's pre-tax profits were 13.1m for the six months to 30 June 1992, two-thirds lower than last year. Provisions against loans that go sour were pounds 29.7m, more than four times the figure last time.

Sir John Wills, Bristol & West's chairman, said yesterday: 'In the light of a continuing high level of mortgage arrears, a sharp reduction in the value of repossessed houses and future market uncertainties, provisions have been substantially increased.'

He added that the provision policy was 'in accordance with current and emerging best industry practice'.

Despite reports last week that at least one large depositor had withdrawn funds, Sir John said the society had generated a net inflow of retail funds, those generated from high street savers, in the half.

Sir John said the net inflow had continued since June 'in contrast to the general trend within the industry'.

Tony FitzSimons, chief executive, said he expected the provisions announced for the half-year would be the bulk of those required in Bristol & West's full year. 'I hope that we have seen the bottom,' he said.

John Wriglesworth, building societies analyst at the securities house UBS Phillips & Drew, said Bristol & West had tightened up its provisioning policy: 'No one can accuse Bristol & West of being under-provided any more.

'Its profits fall should be a one-off.'

Bristol & West's management expenses also drifted higher, by pounds 5m to pounds 55m, as it expanded its financial services network, causing its operating profit - profit before provisions - to fall.

Despite the poor interim figures, Sir John stressed that Bristol & West's balance sheet was healthy. 'It is expected that the group will achieve a stronger performance in the second half of the year to maintain its strong capital position,' he said.

The society also called on the Government to act to reinvigorate the housing market. Mr FitzSimons said that a central agency should be formed to co-ordinate the sale of all repossessed houses, tax relief on mortgage interest should be extended, and stamp duty abolished.