Manchester pibs

Oliver , you can take it someone is reading your article.


  • Thank you to Oliver. Within about 10 minutes of reading your article, I sold my small holding at 101. Now it's down to 77. Yikes!
  • Oliver, do you have any more shocking revelations? I'm concerned, however, that finance directors might not want to give you interviews!
  • Thanks Oliver, you have created a buying opportunity here. :)
  • Oliver,
    Great article and it left me wondering what the state of the other building societies are; is there a central place to view their annual reports?
  • I bought some of both MBBS PIBs towards the end of last October. IMV a change in the standing of MBS had already taken place by then. The new capital had been issued, the Board had been beefed up with the appointment of a new Chairman with a building society background and two new NEDs of stature, a restructuring had taken place resulting in reduced costs on-going and it was clear that the October interest was to be paid on both PIBs: All this against an improvement in profitability at the half-year.

    I also reasoned that the amount of the PIBs was relatively small at £15m on balance sheet footings of around £700m, the cost of servicing [£1.1m] also relatively small and why would a new Board besmirch their and the Society’s reputation for want of servicing the PIBs and thereby taint the possibility of other fund raising?

    Since then the year-end 2013 financials show further progress and the benefits of the Board’s strategy should bear fruit this year and beyond. The Chairman stated: “We have taken a prudent decision to increase impairment provisions in respect of certain mortgage assets which has resulted in a loss for the year. We have undertaken a thorough review to ensure that all legacy issues have been addressed, so that we can focus on the future development of the Society”.

    More recently the interest due in April on both PIBs was paid on time.

    The Spanish situation does not look good but appears to me to be manageable. OB informs that the Spanish book is £40m. There is no doubting that the property situation in Spain is dire, being made worse by the behaviour of the Spanish authorities and IMV unlikely to improve significantly for a while yet. However at least £7m has been provisioned and while I note the Chairman’s comment that “all legacy issues have been addressed” there is scope for more provisions this year, if considered appropriate. There are other one-offs which by their nature will disappear and could be used for provisioning.

    IMV the Chairman and his Board are to be commended for reshaping the business and cleaning up the balance sheet. There are many plus points that should be taken into account. They are all there in the Summary Financial Report 2013; it would tedious to highlight them all. But the business does seem to have been turned around.

    Well done Mr. Harding, Mr Hodges, Mr Gee and the rest of the Board plus the Executive team.

    If the article had been written in March/April 2013, it would have been more pertinent. However I think it is about a year out of date.

    Anyway, enough, I put my money where my mouth is and doubled up my holdings directly after the falls following the Bond of the Week, 14th May article. I shall be watching for the interims and if they are acceptable I will consider buying some more.

    As an aside and indicative of my attitude to risk, I also bought recently some WBBS PIBs. A bit of a long-term punt but they too may have turned a corner.

    Been meaning to write for a while now but life got in the way …

  • Agree with Dandigirl,
    Having a good diversified portfolio is of great importance to me; therefore having few Manchester PIBSs makes sense; a good buying opportunity!
  • Just to mention that October interest on both Manchester pibs has been paid. There was nothing out of the ordinary that caught my eye in the interims. Decided to pass for now on buying more because of the level of current prices. Am happy to continue to hold what I have.
  • Feeling adventurous so bought some more of the 6.75% PIB today.
  • Dandigirl, thanks for the May 15 comment "Thanks Oliver, you have created a buying opportunity here. :)"
    Purchased in June, very good capital gain so far, Thank you

    Perhaps we should have a thread called "Possible opportunities"
  • An article on the front page of the Sunday Times Business section 11/01/2015 headed "Backers call for health check of Manchester building society" probably didn't help. It doesn't quote any new news, and is not attributed by anyone in particular. The 3 firms of Rothschild, MBS and Nationwide that are mentioned in the article all did not comment, so bit of a non-story really?
  • Just when you thought it was safe to go back in the water....
  • Rick24, Any further news?
    The Sunday Times article is I feel "useless information"
    The chances are that the management of MBS have asked the holders of PPDS (Nationwide & others) whether they are interested is subscribing further capital (PPDS) in order for the MBS to be allowed to issue further mortgages to the UK market.
    The holders of the PPDS have I suspected, therefore used a 3rd party to inspect MBS books to ensure no further "black holes" exist, before coming to a decision.
    I am thinking positively on this matter. My only concerning on the half yearly figures was that they were not currently providing new mortgages.
    Could therefore be good new for PIBS holders?
  • Reading between the lines, this has been brewing for a while. Not bad news for MBS PIBS holders.
  • Very tempted to buy some 6.75% PIBs - yield still looks reasonable, they are under par and with the Nationwide 7.971% PIB maturity cheque being cleared as I type , it looks these might be where to put that money.

    Anyone out there want to put me off ?

    James B

  • Bond007: Respectfully suggest that a little research into both PIBs should be undertaken. There is one major difference which is made clear by MBS in their accounts/on their website. I have enough of both but went into the purchases with my eyes open. Whatever you decide I think MBS is improving and any payment from GT can only improve their finances. I expect them to receive something reasonably significant from this action.
  • More of a war of words - No legal action yet!
    In a statement, Manchester Building Society said: “The claim primarily covers Grant Thornton’s advice and audit services relating to the implementation and application of hedge accounting by the society. If the society is unable to reach satisfactory agreement with Grant Thornton the matter will progress to a court hearing.”

    As with any "insurance policy" (Interest credit swaps), the MBS management team should have known what they were doing, in particular their financial reporting section!
    The number of times auditors have made suggestions (or missed matters) within their "management letters" has been fairly frequent over my career as a company accountant.
    Be interesting to know how the £49million is made up!

    Don't bank on MBS winning, only solicitors tend to win these cases (with large fees)
  • Oh! shaunm: I think they will get something worthwhile out of this. Let's watch and see. :smile:
  • Dandigirl, Nice to see you being optimistic on this matter, hope your views are correct.
    Good that 2014 results provided a reasonable surplus after tax of £4.5m, a step in the right direction. Hopefully they will start lending again (no report to indicate as such)!
    Perhaps one day we may meet at a MBS agm! (but then perhaps it may be an non-event?)

    Bond007, yield may be good, however the investment is still high risk. Any investment should be part of a well diversified portfolio, ideally over 20, perhaps 40 (with a maximum of 5% limit on each, in particular, if it is your main SIPP portfolio. For this type of investment 2.5% would be my very maximum. The spread on PIBS is large, therefore any holding may be for life, or to the moment one thinks "interest rates" will be subject to significant rises.
    A good spread of PIBS is better than a single BS.
    Hope this helps (just an amateur investor!)
  • Dandigirl - thanks for your comments. I had only considered the 6.75% PIBs - I somehow feel a little more comfortable with those priced nearer par.

    However, I'll follow your suggestion and take a look at both. I spoke with the Manchester today and they have emailed the prospectus for the 8% to me ( I have the 6.75% one), which I will look through over next day or so.

    Shaunm - thanks to you as well. I am retired and have been using mostly PIBs/PSBs/Prefs and Corporate Bonds to supplement my pension, and have been following very similar "rules" as you seem to follow ie relatively small investments spread over a large number of companies (unfortunately most, but not all, in the finance sector). Even then there have been some uncomfortable moments which made even that cautious approach seem reckless ( Bank of Ireland, Bradford & Bingley, the Co-op .... luckily I sold my Lloyd ECNs soon after acquring them) *

    I was looking at the Manchester as part of the diversification as over the years several Building Societies/Banks have merged, failed or nearly failed ( Scarborough with Skipton, Britannia taken over by Co-op, which meant I had PSBs and Prefs with same company and now all FRNs, Bradford & Bingley going under , Portman merging with Nationwide etc etc)

    * I am , like a lot of us, indebted to Mark Taber for all he did to make the best of these situations
  • Bond007: Forgive me I have been a little cryptic. Let me point you to what I think you should consider before you buy for I think you should read not also the prospectuses but also the 2013 Accounts available on the MBS web site. See Note 25 on page 42. In particular:

    """Under the terms of offer, the Board may at its sole discretion, subject to a resolution, cancel in whole or in part any scheduled interest payment due to holders of the 6.75% PIBS. Whilstthe Board does not intend to avail itself of this discretion, the facility to do so results in the assertion that the PIBS should be considered not to confer a contractual obligation on the Society to deliver cash in the form of interest payments. As such, the 6.75% PIBS are treated as forming a part of the Society’s equity."""

    See also Oliver Butt's Bond of the Week review -14 May 2014 on this site. He says ""The 6.75% PIB gives less protection and states that the coupon is not payable if the Society is not in compliance with capital adequacy requirements or if the Society just decides not to pay the coupon (ie carte blanche). However, Manchester does say they do not intend to avail themselves of this second ption and this clause is only in there to comply with current regulatory requirements (in 2005)."""

    I think that MBS has paid interest on both PIBs throughout but nevertheless there is a great risk of non-payment on the 6.75% which ought to be evaluated and judged ahead of purchase. This, I think, is the reason for the difference in return. I also think I have a greater tolerance to risk than some posters here. Overall it has served me well so far - but I do have the risks on-going. Can you live with them?

    Good luck whatever you decide - but do go in with your eyes wide open.

    shaunm is of course is right to point out 'spread of risk' and that is what I have. Not too many eggs in one basket. Seems you have too.

    As you have mentioned Mark Taber .. he is doing a fabulous job. Man is a star but just why does he have to do what the FCA should be doing - holding Lloyds Bank to account. If Horta-Osario gets away with a RCP of Lloyds ECNs, what's next?

  • Dandigirl - thanks again, a useful, insightful and very well written post.

    I have been going through the documentation, including the most recent accounts (half year for 2014) and read again Oliver Butt's excellent article.

    I had assumed that the rise in price had meant that something had changed fairly significantly over the past few months (thereby breaking one of my own rules about never assuming anything !!)

    I am still mulling it over, but am homing in on the conclusion I have missed the boat here - I should have bought earlier when the prospective returns were much higher.

    In which case I still need to diversify - perhaps I should take a look at the Newcastle ....


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