Financial results 2007


Kent Reliance Building Society is pleased to announce record results for the year ended September 2007. Building on previous successful years, the Society is again outpacing the industry in terms of growth, quality of loan book and retail deposits. The Society management expense ratio, a key indicator of efficiency has reduced to a market leading 44p. The headline results are as follows:-

Financial highlights

Business Summary

Total assets grew by £516m (32%) in difficult trading conditions and liquidity increased to nearly 28%. The mortgage book is totally funded from retail deposits thereby mitigating any potential implications of the present credit crunch. Wholesale borrowing has reduced from over 36% last year to below 20% at the current year end. The Management Expense ratio at 44p is the lowest published ratio in the industry.

New mortgage advances were £526m, an increase of 25% over last year and mortgage balances increased by £270m net. This growth was not achieved at the expense of quality as the arrears profile at Kent Reliance remains one of the lowest in the industry and with loss provisions being reduced for the fourth consecutive year to a negligible level.

The Society has generated substantial retail funds by offering consistently competitive investment products and continues to win awards and recognition for the quality of its service and products. During the year gross receipts from members and depositors (retail investments) were £786m – more than twice the record level achieved last year - and investing members’ balances increased by 58% to £1.65bn. During the year the Society also significantly enhanced its capital position to support further growth with subordinated debt issues totalling £44m. At the same time that Kent Reliance has improved efficiency and reduced relative costs, margin has reduced. This is good news for members as the Society gives more back to members than most of the industry as profit has remained consistent with last year despite the margin reduction.

The Society’s offshore subsidiary, Easiprocess, continues to perform well and offers a robust, ISO27001 accredited back office processing and support service for the Group as well as third party services. The Jersey and Guernsey mortgage subsidiaries have performed outstandingly well such that both are substantially the fastest growing lenders in their markets with combined mortgage assets now in excess of £700m – an increase of 41% over last year.

The branch network, which was franchised several years ago, has contributed a strong performance under the direction of a small number of agents who continue to offer the choice of a high street presence to those members that wish to do business in that way, whilst not being subsidised by members who prefer to transact their business direct.

In response to member concerns about the environment the Society has adopted a carbon neutral stance. The Society was the first building society to offset carbon emissions as far back as 2001.

KENT RELIANCE BUILDING SOCIETY
GROUP FINANCIAL RESULTS
FOR THE YEAR ENDED 30 SEPTEMBER 2007
SUMMARY

Notes:

International Financial Reporting Standards (IFRS)
1. These results are our second to be published under IFRS and the accounting policies are in accordance with all standards and related interpretations that have been adopted by the European Union as at 30 Sept 2007. While profits under IFRS are expected to be more volatile, the net impact on this year's result has not been material.

Kent Reliance Group
2. The Kent Reliance Group is made up of Kent Reliance Building Society, Jersey Home Loans Limited, Guernsey Homeloans Limited, Easiprocess Private Limited and Reliance Property Loans Limited.

Capital Position
3. During the year the Society successfully issued £35m of perpetual subordinated debt at 7.25% and £8.65m of ten year subordinated debt. Even after taking account of the £5m perpetual subordinated debt repaid on 16 November 2007, this significantly enhances the capital position which, together with the strong retail funding position and relatively low level of wholesale funding, will support the Group’s planned future growth.

Easiprocess
4. Kent Reliance is the only society to have an offshore outsource operation – Easiprocess - based in Bangalore.

Distribution
5. The Society has pursued a branch to agent franchise programme such that it now has only one branch remaining.

Channel Islands mortgage lending
6. Kent Reliance is the only Building Society to have a Jersey registered mortgage business – Jersey Homeloans Limited – which is also the fastest growing lender on the island having increased assets by 33% in the year to September 2007.

7. Guernsey Homeloans Limited is the fastest growing lender on Guernsey with an increase in assets of 99% in the year to 30 September 2007.



29 November 2007