Page 26 - CCB_Full-Annual-Report-2021

26 Strategic Report 27

Contents
Contents

LIBOR The Bank’s asset quality remains strong, with Taxation
The LIBOR interest rate ceased to exist from 2021 no meaningful increase in loans in arrears or The taxation charge of £3.0m (2020:
default. The Bank continued to successfully
the end of 2021. The Bank's AT1 capital Operating manage its defaulted loan cases throughout £1.8m), reflects an effective corporation Strategic Report
Instrument interest rate was previously 2021, despite the uncertain economic and tax rate of 19% (2020: 19%). The taxation
linked to 6 month LIBOR and was realigned income up market environment. charge includes a £140k debit (2020: £2k
to bank base rate during 2021. debit) in respect of deferred tax, and a
£6.8m We have not yet experienced any credit of £244k in respect of the Bank’s
Operating income meaningful crystallisation of credit losses convertible loan note interest payment
Total operating income for the year was to as a result of Covid 19. The Bank’s cautious (2020: £274k).
£44.9m (2020 £38.1m). and conservative outlook is reflected in its Dividends and convertible loan
£44.9m balance sheet impairment provision which note payments
Interest income increased by £4.4m increased from £12.5m to £14.8m in 2021.
driven by the growth in lending balances. The Bank’s loan loss provision coverage The Bank paid a £1.3m coupon on 30 Corporate Governance Statement
The increase in bank base rate in December ratio was maintained during the year at 1.5%. September 2021 (2020 £1.4m) in interest
2021 was passed on in full to all customers payments on the convertible loan notes to
with a variable rate loan. The IFRS 9 calculated income statement Cambridgeshire County Council Pension
impairment charge was £3.5m in 2021, a Fund, the holder of the loan notes.
Interest payable reduced by £2.4m as a reduction of £2.3m compared to 2020.
result of a reduction in the interest rates The impairment charge is calculated using The Board did not pay an ordinary share
paid on the Bank’s deposit accounts. the Bank’s granular credit grading and IFRS9 dividend in 2021 and does not propose
impairment models. The models include an ordinary share dividend in 2022 as
The Bank continues to generate a strong forward looking economic scenarios. it continues to focus on maintaining a
asset yield of 4.7% (2020: 4.9%) with The scenarios, together with the related strong, well-capitalised balance sheet.
the reduction being a combination of weightings, are provided in Note 28. The
competition in the market driving lower Bank continues to review all its IFRS 9 model Shareholders’ funds
lending rates, as well as a lower return on assumptions on a regular basis to ensure
the Bank’s liquid assets. they reflect actual performance as well as £’000 2021 2020 Change % Independent Auditor’s Report
management’s future expectations. The
The Bank’s liability yield was 0.91%, a Bank does not have any material Post Model Share capital 44,955 44,955 –
reduction of 0.37% compared to 2020, The Bank continued its investment in its Adjustment overlays. The reduction in the Convertible loan notes 22,900 22,900 –
reflecting a reduction in deposit rates IT systems, increasing its resilience and loan impairment charge combined with the
across the market. The cost of the Bank's security as well as implementing a new growth in total loan balances results in an Reserves 95,962 82,280 17%
deposit balances reduced from 1.43% in portal enabling on-line deposit account annual cost of risk of 38bps (2020: 72bps). Total Shareholder Funds 163,817 150,135 17%
2020 to 1.06%. application, and continued to develop
its data warehouse. In 2022 the Bank is Following the implementation of the
In total, the Bank’s net interest margin planning to further enhance its online first UK lockdown in March 2020, the The Bank has a strong, high quality
increased from 3.7% to 3.8% in 2021, deposit services as well as enhance its real Bank saw an unprecedented number of capital base. All the Bank’s shareholder
principally as a result of the lower cost estate finance application and account customers requesting payment holidays or funds qualify as Tier 1 capital, with its Financial Statements
of funds. servicing processes. partial reductions in monthly repayments. share capital and reserves qualifying as
At its peak over 37% of the Bank’s real
Expenditure The Bank’s cost:income ratio reduced from estate and asset finance customers were Common Equity Tier capital.
55.5% to 51% in 2021 with the increase in forbearance. The Covid 19 support
We continue to invest in the business, in costs more than offset by the strong initiatives provided by the UK Government Total shareholders’ funds increased
with total operating expenses (including growth in income. in 2020 together with the Bank’s individual during the year from £150.1m to £163.8m
depreciation) increasing from £21.2m in approach to customer management has as a result of the growth in the Bank’s
2020 to £22.9m. The key driver of the Impairment to date enabled all the Bank’s customers retained earnings.
increase in costs was the increase in the to resume monthly loan payments. At the
Bank’s staff costs. Average staff numbers end of the year the Bank had forbearance The Bank elected to adopt the original
increased from 165 in 2020 to 183 in 2021 £’000 2021 2020 arrangements in place for 6 customers IFRS 9 capital transitional arrangements
which together with an increased variable (£12m total exposure). from 1 January 2018, and during 2020
pay award in 2021 increased staff costs Value of loans past due – 11,947 5,533 elected to adopt the extension to these Notes to the Financial Statements
from £12.9m to £14.9m. The increase in up to 3 payments missed arrangements announced within the CRR
staff costs was partially offset by lower Value of loans in default – 28,575 32,572 Quick Fix regulations in June 2020.
contractor expenditure in 2021 as the inc. credit impaired and IFRS Stage 3 loans
Bank focused on investing in its own In total the Bank’s IFRS 9 transitional relief
full-time employees. Impairment loan provisions 14,766 12,451 was £5.6m in 2021 reflecting both the