UKAR Annual Report & Accounts 2015

16 Jun 2015

View the full press release [PDF size 108KB].

UKAR report Bradford and Bingley report NRAM report



As announced in the 2012 full year results UKAR has changed the Group's accounting reference date from 31 December to 31 March in order to align the year end with HM Treasury.  These results are for the 12 month reporting period to 31 March 2015.  Where appropriate to show full year comparisons, the unaudited 12 month figures for the period to 31 March 2014 (‘2013/14’) are used in this announcement.

UK Asset Resolution Limited ('UKAR') which incorporates Bradford & Bingley plc ('B&B') and NRAM plc ('NRAM') today issues its results for the year ended 31 March 2015 ('2014/15').  UKAR's mission is to maximise value for the taxpayer, whilst serving our customers well and treating all our stakeholders fairly.

Key highlights

  • Balance sheet reduced by a further £8.8bn bringing the total reduction to £49.7bn, down almost 43% since formation of UKAR in 2010.
  • Government loan repayments of £3.7bn, bringing total repayments to £14.1bn since UKAR was formed.  Almost 30% of the government loans have now been repaid.
  • Mortgage accounts three or more months in arrears, including possessions, have reduced by 23% during the year to 11,976 (70% since formation).
  • Underlying profit before tax of £1,398.1m, 11% higher than the comparable period in 2013/14.
  • Costs down 7% compared to the year to March 2014.
  • Sale of a portfolio of performing mortgages for £2.7bn, at a premium of around £55m over book value.
  • Further remediation provisions of £295m, mainly for the potential redress of historic issues relating to unsecured loans greater than £25k.

Strategic Update

Following the success of recent asset sales and in light of positive market conditions and healthy investor interest, in April 2015 UKAR began the process of seeking expressions of interest in respect of two potential transactions:

  • Sale of mortgage assets of circa £13bn
  • Sale or outsourcing of our mortgage servicing operations

These transactions are contingent on achieving value for money for the taxpayer and will accelerate repayment of the government loans whilst ensuring the stability and continuity of service to customers.

Richard Banks, UKAR Chief Executive, commented:

"Over the past four and half years we have achieved excellent results, reducing the balance sheet by nearly £50bn and overseeing a 70% fall in the number of mortgage accounts three or more months in arrears. To build on our success we are now progressing two ambitious divestment projects which, if successful, will accelerate repayment of the government loans and ensure the stability of service to customers."

Media Contact: Investor Relations Contact:
Brunswick UKAR
Nick Cosgrove / Jonathan Glass
Tel: +44 20 7404 5959
Neil Vanham
Tel: +44 1274 806341


1. Financial Information

Underlying profit before tax for the year is £1,398.1m, an increase of £139.0m from March 2014 (2013/14: £1,259.1m).  Although net interest income has reduced due to the shrinking Balance Sheet, this has been more than offset by a lower impairment charge.

Since formation in October 2010, the UKAR Balance Sheet has reduced by £49.7bn, including a decrease of £34.5bn in wholesale funding and £14.1bn of government funding. Whilst the primary focus is on reducing the Balance Sheet and government debt, we continue to look for opportunities to optimise our funding structure by repurchasing debt where this generates value for the taxpayer.  In the year to 31 March 2015, UKAR bought back £709m of B&B Covered Bonds, NRAM asset backed securities and subordinated debt issued by both B&B and NRAM. These transactions reduced the ongoing funding cost to UKAR and simplified the Balance Sheets. On 30 March 2015 NRAM announced a tender for EUR2bn of Covered Bonds and this was successfully completed on 8 May 2015 with the repurchase and cancellation of the Bonds in full.

In the year to 31 March 2015 the Balance Sheet reduced by a further £8.8bn (2013/14: £10.3bn) including the repayment of £3.7bn of government funding (2013/14: £4.6bn).  Repayments have been funded largely from a 14% reduction in lending balances (£8.5bn) reflecting £5.3bn of residential mortgage redemptions, £2.7bn of asset sales, £0.1bn of commercial redemptions, £0.1bn of unsecured redemptions and £0.3bn of regular other repayments.  As at 31 March 2015 lending balances stand at £52.7bn (2013/14: £61.2bn).

Other cashflows were generated for the government in the year in the form of interest, taxes and guarantee fees totalling £0.7bn (2013/14: £1.0bn) bringing total payments to the taxpayer in the period to £4.4bn (2013/14: £5.6bn).

The number of mortgage accounts three or more months in arrears, including those in possession, reduced by 23% to 11,976 as at 31 March 2015.  The total value of arrears owed by customers has fallen by £30.6m to £90.6m, a reduction of 25%.  This reduction is a direct consequence of proactive arrears management coupled with the continued low interest rate environment.

Ongoing administrative expenses for the year were 7% lower than the equivalent period in 2013/14 at £174.2m (2013/14: £188.0m).

2. Customers and Conduct

The total number of customers continues to fall in line with our objective to reduce our Balance Sheet.  In total UKAR has almost 389,000 customers (2013/14: 467,000), with 455,000 mortgage accounts (2013/14: 529,000) and 106,000 unsecured personal loan accounts (2013/14: 119,000).  The majority of these loans continue to perform well with more than 94% of mortgage customers up to date with their monthly payments.

Although levels of arrears are reducing we continue to see a number of customers facing financial difficulty including some entering arrears for the first time.  We endeavour to contact all customers following a missed payment to understand their specific situation and find solutions to help them manage their mortgage.  Where appropriate we actively encourage customers to seek help from non-fee charging debt advice agencies.  Repossession is always viewed as a last resort but unfortunately in some situations this is inevitable and the best course of action to prevent further indebtedness for the customer.  Repossessions continue to decrease and totalled 2,856 in the year (2013/14: 5,046).

In addition to our contact strategies for customers in arrears, we also engage proactively with other groups of vulnerable customers who may need to consider their financial situation now to ensure they are ready for the future, such as those coming to the end of an interest only mortgage term.  Our aim is to remind customers of their obligations, provide a range of useful information and help them plan ahead.  It is encouraging that about a half of all the interest only customers we contact engage with us.

In December the High Court ruled that customers with loans over £25,000, who had historically been sent incorrect documentation stating that their loans were regulated under the Consumer Credit Act ('CCA'), should receive remediation in line with that provided in 2012 on CCA loans of less than £25,000.  Therefore, a charge of £268m has been recognised in the year.  However, NRAM has sought clarification of this decision through the Court of Appeal and we are waiting for the outcome to be announced.  Should this appeal be successful, this charge will be reversed.

UKAR remain committed to doing the right thing for our customers and where we identify issues that have caused customer detriment, we will ensure that they are fully remediated.  Apart from the charge relating to unsecured loans over £25,000, noted above, a further charge of £26.8m for customer redress has been made during the year to address inherited issues.  We continue to receive PPI complaints although the flow has reduced considerably and a further £33m has been allocated to this provision to meet anticipated claims over the next three years, however, this has been partly offset by the release of provisions for other previously identified issues that had been over-estimated.

3. Building on our Success

This is a unique business, born out of the credit crisis.  The legacy banks of Northern Rock and B&B were nationalised in 2008. In 2009 the Financial Services Authority (‘FSA’) were required to provide a capital waiver for Northern Rock.  Similarly, if B&B had not received the interest free funding provided on nationalisation it would have seen an erosion of its capital base from 2009 onwards.  With the government support we have consistently achieved excellent results in building a fit for purpose mortgage servicing business and the time has now arrived for us to build on our success.

Our focus on customers together with the improving UK economy has delivered excellent results since UKAR was formed in 2010.  Three month arrears have fallen 70% and the Balance Sheet has reduced by 43% as customers remortgage elsewhere and assets are sold at prices that deliver taxpayer value.  Most recently UKAR sold a portfolio of performing mortgages for £2.7bn with settlement proceeds received in October 2014.  The book was sold through a competitive sales process which saw a high level of interest and resulted in a sale price in excess of par.  The proceeds included a premium of around £55m over the book value, representing good value for the taxpayer.

We have now begun a process to sell a further significant portion of the mortgage book, five times greater than the sale achieved in 2014.  In addition, we are seeking to sell or outsource our operational capability to maximise the benefit of the investment we have made to date and the expertise we have built in mortgage servicing. Having brought together two organisations, migrated the NRAM mortgage book of 450,000 accounts onto UKAR systems and started a programme of asset sales, these two programmes are our most ambitious initiatives to date and the work on these over the next twelve months will determine the next stage in our future.


Press releases

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Bradford & Bingley plc (B&B), part of UK Asset Resolution (UKAR), today confirms that following an open and competitive process it has agreed to sell two separate asset portfolios comprising performing buy to let loans for a total of £11.8bn to Prudential plc and to funds managed by Blackstone.
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