West Bromwich BS

As per my Manchester BS post I am feeling adventurous today so I bought a few more of these.

I noticed that interims were published last week and they look pretty good to me - they are on the right track. I calculate that resumption of some sort of payment could be as short as three years away i.e. not long really in the scheme of things.

Resumption may not be to the full amount but something. I'm hoping that when interest does resume I will be on a high return. Anyway, that's my take. Here's hoping!

Comments

  • Dandigirl, You may have a very very long wait, with the coupon reduced & linked to the PPDS.
    I’m not a professional
    However the:-
    Total PPDS = £176.1m
    Total PIBS = 75.0m
    Total capital that could earn a Dividend = £251.1m
    Only 25% of pre-tax profits max payable as dividend to PPDS
    To provide a yield of say 4% = total cost of £12.5m
    Therefore required to make pre-tax profit of £50m (no chance!)
    Profit for the half year was only £4.2m

    Perhaps I am wrong in my calculation?

    But my guess is that any dividend will be very small
    Manchester BS looks the better option
  • Hello shaunm - Pretty much go with most of what you say.

    However by way of clarification - there can be no interest payments while the cumulative reserves are in deficit. My thinking is that it will take around 3 years to clear the deficit at the current rate of reduction.

    Then interest payments on the PIBs can be no more than the interest paid of the PPDS, max. 6.15%.

    So I agree with pretty much the first part of what you say. But your calculation above has been done at par, I believe. Purchases today are around say one-third of par which means any interest based on par can be tripled when calculated on today's purchase price. I'm coming at it from the other direction i.e. anything that is paid might be say 1% calculated at par which would equate to 3% for me.

    So my thinking is to allow three years to move into a position when interest can be paid. During that time with the prospect of interest being resumed at some level then the price will improve as those prospects improve and as and when interest is resumed it will be worth around three times more to me, maximum 18.45%.

    The Society is moving in the right direction - lending is increasing and the margin has virtually doubled.

    Finally the holders of the PPDS, thought to be mainly other societies, will be wanting a return on their investment and IMV will be pushing for a payout as soon as it can be done.

    Probably my logic is full of holes but there you go!

    Thanks!
  • Dandigirl,
    Agree with your comment concerning purchased value compared to the par price.

    The main point I was trying to indicate is that the capital base entitled to future dividends is so vast, and that any future profit is likely to be small in comparison-
    Total Income (Interest) in yr ending 31/3/13 was only £161.1m
    31/3/08 was £538.6m (profit = £47.8m)
    Best I guess they could make in a good year is £15 million, of which 25% can be paid as Div
    This would give a 1.5% at par (or in your case if purchased at 33p in the £ = 4.5%
    However this may be in 3 or 4 years time when reserves are sufficient?
    By this time the bond bubble may have burst?

    Interesting times lay ahead
    ps my gut feeling is that you may however make a "capital gain" on a 2 year hold.
  • Anybody been following the WBBS rate hikes saga? Well WBBS won the case today - see below. Good news for the Society and good news for PIB holders as this is great for the P&L. Some have already bought on the news hence today's price hike.

    """Buy-to-let landlords fighting a sharp increase in the cost of their tracker mortgages have lost their High Court battle against West Bromwich Building Society, which was ruled to be was within its rights to hike rates by 2 per cent as a result of “changing market conditions”."""
  • Hmmm ... still a chance that some miss-selling went on here. I don't expect many advisors pointed out the fact that these are/were subject to rate hikes. Although I hold PIBs/PSBs in many societies (but not WBBS) I do have some sympathy with those who took out these mortgages.

    But who am I to question this - the banks continue to do as they want - just look at lloyds and the ECN saga (and yes I know its different, but its another in the long line of banks just thinking they are above any legal or moral code)
  • As before, could some time before they start to pay interest, and even if they did, could be reduced? section in prospectus as per below
    "Passes a resolution cancelling or, as the case may require, reducing the interest to
    such extent as may be necessary to secure that, in the opinion of the Board (after
    consultation with the Supervisory Authority and having taken appropriate legal
    advice), such payment would not cause or contribute to such non-compliance"
  • @ shaunm: Pretty unspectacular interims just published which would explain the drop in price. Only a modest reduction in the Cumulative Reserve Deficit from £7.0 down to £5.8. At this rate it would be at least another 2 years before any interest can be paid. I am keeping my modest holding. Happy days.
  • Dandigirl, it's holding your nerve sometimes can pay off, however I don't think many bond holders (readers of this forum) have had a "good investment" year so far!
    I've exited from Enquest with a loss as I reckon further bad news will trickle in during early 2016, however could be worth having a punt later in 2016!
    Not a good investment climate
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