Regulation & Inspection
LOAN PORTFOLIO BULLETIN To 30 September 2001
SUMMARY
❑ Total private loan approvals to registered social landlords now amount to £1.221bn;
❑ New loans approved in the six months to 30 September 2001 amount to 72, with a total
value of £54m;
❑ Scottish institutions remain the top lenders to RSLs with the Royal Bank of Scotland
in first position with a portfolio of £320m;
❑ Three stock transfers took place in the six months to 30 September 2001, raising a total
of £8m;
❑ New build remains the principal purpose of new loan finance – 41 new loans were approved in the
six-month period;
❑ 28 loans totalling £15m have been repaid.
INTRODUCTION was issued to all RSLs, internal Communities
Scotland colleagues who usually receive the
Bulletin, and to external stakeholders and
THIS Loan Portfolio Bulletin reports changes in interested parties.
private lending to Scottish Registered Social The aim of the questionnaire was to examine
Landlords (RSLs) for the six months to 30 the current and future reporting in the Loan
September 2001. RSLs provide information on Portfolio Bulletin and the collection of data. The
their loans twice a year to Communities Scotland. results of this questionnaire are provided in
From the information provided, Communities Annex A and will inform development of loan
Scotland is then able to report on the pattern of portfolio reporting in the future.
lending and provide a snapshot of private finance The information contained in this Bulletin
in the social housing market. (as at 30 September 2001) is drawn from
Over July and August 2001 a questionnaire returns submitted by 178 RSLs.
Total loan approvals of £185m (18 per cent). significantly over the coming
Although there has been a 12-18 months.
AS at 30 September 2001, RSLs consistent rise in total private loan The top 10 lenders to RSLs are
have secured a total of £1.221bn approvals, the latest results reflect shown in Figure 2 overleaf. A full
(see Figure 1) in total private loan a slowing down in the value of analysis by lender is provided in
approvals. The increase in the six new approvals. However, with the Annex B.
months from 1 March 2001 was planned local authority transfers Overall, this is a similar position
£54m (4 per cent). For the year to community ownership in the as in previous periods with the
since September 2000 there has pipeline, we expect new loan
been an increase in loan approvals approvals to RSLs to rise continued on page 2
Figure 1: Total loan approvals
31 Mar 99 30 Sept 99 31 Mar 00 30 Sept 00 31 Mar 01 30 Sept 01
£m £m £m £m £m £m
Total advances 813 852 907 1,036 1,167 1,221
Movement: £m 61 39 54 129 131 54
Movement: % 8% 5% 6% 14% 11% 4%
Total loan approvals (continued from page 1) These new loans were secured from eight institutions,
Royal Bank of Scotland and the Bank of Scotland retaining which comprise four banks and four building societies (see
first and second places. The only change since March 2001 Figure 4 below).
is that Lloyds TSB has improved its position from eighth to Of these new approvals, 74 per cent have been secured
seventh place. from Scottish institutions. The Bank of Scotland has the
highest value of new approvals at £16.6m and has
Figure 2 consistently been in the ‘top 3’ for value of new loan
approvals in the past two years. In the six months to 31
1 Royal Bank of Scotland 6 Britannia Building Society
March 2001 the Abbey National was top lender; however in
2 Bank of Scotland 7 Lloyds TSB
the last six months the Abbey National has made no new
3 Abbey National plc 8 Nationwide Building Society
loan approvals to RSLs. The Clydesdale Bank and the
4 Clydesdale Bank plc 9 Bradford & Bingley
Dunfermline Building Society show new approvals of
5 Dunfermline Building Society 10 Halifax Bank
£11.3m and £9.3m respectively in the current six months
reflecting their continued, steady approach to lending in the
The top four Scottish lenders remain the Royal Bank of sector.
Scotland; Bank of Scotland; the Clydesdale Bank and the As regards volume of transactions, the Clydesdale Bank
Dunfermline Building Society (see Figure 3 below). They is top with 27 new loans approved in the six months to 30
have combined approvals of £771m. This position has September 2001. This is followed by the Bank of Scotland
remained largely static over the past year. The share of and the Dunfermline Building Society with 19 and 14
lending by Scottish institutions, however, is being slowly transactions respectively. We can conclude from this that,
eroded. In September 2000 they had 67 per cent of the although the Royal Bank retains its number one position as
market. Now their share represents 63 per cent of the regards total portfolio, other principal Scottish institutions
market. This is due to other providers such as the are more active in the sector.
Nationwide and Britannia lending to Scottish RSLs.
New loans Purpose of loans
THERE have been 72 new loans approved in the six months ANALYSIS of the 72 new loans in this period indicates that,
to 30 September 2001, amounting to a total of £54m. This on the basis of both volume and value (see Figures 5, below
shows a similar number of approvals as at September 2000 and 6, opposite), the overwhelming majority were taken
(68) and March 2001 (79). out for the purpose of financing new-build projects.
Figure 3: ‘Top four’ Scottish lenders
1,400
1,200
Royal Bank of Scotland
Bank of Scotland
1,000
Clydesdale Bank
800 Dunfermline Building Society
Lending by ‘top four’
600 Total lending
400
200
0
£m £m £m
30 Sept ‘00 31 Mar ‘01 30 Sept ‘01
Figure 4: New lending
18
in the six months to
30 September 2001 16
Figure 5: Value and purpose of loans 14
Dunfermline Building Society
Nationwide Building Society
Purpose of loan No. of Value 12
Royal Bank of Scotland plc
Britannia Building Society
Scottish Building Society
new loans (£m) 10
£m
Clydesdale Bank plc
New build 41 25 8
Bank of Scotland
Stock transfer 4 8 6
Refurbishment 5 4
Lloyds TSB
4
Re-financing 4 11
Other* 18 6 2
* Other includes 10 loans for other property purchases
amounting to just over £1m in total.
Regulation & Inspection: Loan Portfolio
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Figure 6: Volume and purpose of loans Loans drawn down
DURING the six months to 30 September 2001 loans drawn
down amounted to £41m. Comparing this with the overall
amount approved in the period, 76 per cent of new
approvals have been utilised by RSLs. This is an
improvement from March 2001, when only 60 per cent of
new loan approvals were drawn down.
Interest rates and current markets
OF the £41m drawn down in the period, only £7.4m (18 per
cent: 12 transactions) was at fixed rates with the remaining
£33.7m (82 per cent: 56 transactions) at variable rates, as
illustrated in Figure 8.
Over the past year the proportion of loans drawn down
which are at fixed rates have shown a falling trend. The
split between fixed and variable rates in this six-month
New build (46%) LSVT (15%) Other (11%) period is entirely consistent with the last period, and is
expected since interest rates are at an historic low.
Debt re-financing (20%) Refurbishment (7%)
The fixed rate loans are all at interest rates ranging from
6.4 per cent to 9.2 per cent. This compares with the reported
Fees payable variable rates, which have been around 4.75 per cent,
and are close to LIBOR and base lending rates over the
AS with previous periods, the range of fees charged for six-month period.
different loan purposes is fairly wide. Aside from loans for Given the size and value of local authority transfers to
new build, the volume of transactions under the other community ownership in the pipeline, we will be tracking
headings is too low to discern any statistically significant the split of interest rates over the coming 12–18 months.
trend. This is summarised in Figure 7.
A large proportion of new loans (70 per cent) have not
attracted fees. This is an increase on the previous three Derivatives
periods (40 per cent March 2001; 57 per cent September
2000; 59 per cent March 2000). THERE was one new stand-alone derivative contract
Where fees are charged, the maximum fee is under 0.5 reported in the six months to 30 September 2001, bringing
per cent except for refurbishment loans which attracted a the total number of stand-alone derivatives held by RSLs
maximum fee of 0.53 per cent. This compares well with to 18.
previous periods where maximum fees have been as high RSLs are able to benefit from hedging arrangements if
as 1–1.22 per cent for new build loans. Overall, the level of they are embedded within their loan documentation. At
minimum fees have also fallen sharply over the past year. present we do not track whether RSLs’ new loan
The fall in number of new loans which attract fees, and agreements include this facility, and only request
the reduction in actual fees charged, would seem to reflect information on stand-alone facilities. We believe that a
the very competitive nature of lending within the social significant proportion of RSLs do in fact have hedging
housing sector at present. As interest rates remain at facilities included in new loan arrangements and therefore
historic low levels it will be useful to track whether this we are under-reporting the use of hedging instruments by
trend continues over the next 12–18 months. RSLs.
Figure 7: Fees No. of No. of
payable on new loans loans Fees as percentage of total loan
loans approved without with Median Minimum Maximum
in the period fees fees % % %
New build 30 11 0.28% 0.05% 0.50%
Refurbishment 3 2 0.28% 0.02% 0.53%
Stock transfer 2 2 0.38% 0.30% 0.45%
Property purchase 8 2 0.50% 0.50% 0.50%
Debt re-financing 3 1 0.03% 0.00% 0.05%
Major repairs 1 0 0.00% 0.00% 0.00%
Other 4 3 0.14% 0.03% 0.25%
TOTALS 51 21
Regulation & Inspection: Loan Portfolio
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Figure 8: Proportion of fixed to variable rate loans drawn down
Sept ’01
Fixed
Variable
Mar ’01
Sep ’00
Mar ’00
0% 20% 40% 60% 80% 100%
Repayments and maturity profiles Future of the Loan Portfolio Bulletin and
LOAN redemptions in the six months to 30 September 2001
results of the questionnaire
amounted to £15m, which was made up of 28 separate
IN the last issue of the Loan Portfolio Bulletin, we included a
loans. Analysis of redemption periods for the total £1.221bn
questionnaire, which was designed to help us assess your
RSL loan portfolio shows the peak repayment and maturity
views on the publication. The results are shown on page 5
period falls between years 2020 and 2030, when £901m (or
and we would like to thank everyone who sent back their
74 per cent) of reported loan facilities will mature. This is
questionnaire.
illustrated in Figure 9, below.
Figure 9: Repayment profile – RSL private loans
1,000
800
600
£m
400
200
0
up to 2010 from 2010 from 2020 from 2030
up to 2020 Years up to 2030
For further information contact:
The Financial Performance Team
Regulation & Inspection
Communities Scotland
Thistle House
91 Haymarket Terrace
Edinburgh
EH12 5HE
Produced by the Communications Department,
Tel: 0131 479 5286 Communities Scotland, Thistle House,
Fax: 0131 479 5270 91 Haymarket Terrace, Edinburgh EH12 5HE
Email: lewisj@communitiesscotland.gov.uk www.communitiesscotland.gov.uk
Regulation & Inspection: Loan Portfolio
4
Annex A:
Results of the Loan Portfolio questionnaire
A total of 409 questionnaires
on the Loan Portfolio Bulletin Recipients of the Loan Portfolio Bulletin Questionnaires Hit
were sent out, and we rate
sent received
received back 116 completed
questionnaires – a hit rate of Mainstream RSLs 186 89 48%
28 per cent.
The results for each question, Internal Scottish Homes colleagues 95 11 12%
and the action we intend to Other recipients (lenders, advisers, local authorities) 128 16 13%
take as a consequence, are set Totals 409 116 28%
out below.
Q: Which of the following statements best Q: Would you trade the current twice-yearly
describes your organisation’s use of the Loan publication for an annual publication which
Portfolio Bulletin? has more depth and analysis?
The majority of those who returned the questionnaire said There was overwhelming support (74 per cent) for the Loan
they make some use of the Bulletin and find the publication Portfolio Bulletin to be issued once rather than twice a year,
to be of reasonable interest. particularly if it is a more in-depth publication.
Q: Which of the following aspects of the Loan Q: Completing Loan Portfolio returns and
Portfolio Bulletin most interest you? checking statements.
Loan interest rates and margins were the most popular
The rest of the questions were for RSLs only. The majority
areas for all respondents (84 per cent). This was closely
of RSLs responded that their returns and the checking of
followed by a profile of who is actually lending money
statements are completed by their finance staff or agents
(72 per cent) and arrangement fees charged in the previous
(95 per cent), although some still use other staff to carry
six months (66 per cent).
out these tasks. Two thirds of RSLs (61 per cent) advised
that they found returns simple and easy to complete. There
Q: Which of the following would you like to was a significant minority which indicated that the form
and/or accompanying guidance might be improved.
see better covered?
A large majority of RSLs (84 per cent) said they would
Interest rates and fees and margins were most popular prefer to complete Loan Portfolio returns once rather than
(62 per cent), followed by more information on loan twice a year.
security and the structure of loans (49 per cent).
Q: Which of the following would you like to
see included in the Loan Portfolio Bulletin? THANK YOU!
A very big thank you to everyone who took the time to return
There was a strong preference for inclusion of good practice one of our questionnaires. Your views will help us develop
examples (72 per cent), followed by case studies and one- and improve the Loan Portfolio Bulletin for the future.
off articles (63 per cent and 62 per cent respectively).
Changes in the collection and reporting of loan information
As a result of the views expressed in the questionnaire there will be changes
in the collection and reporting of loan information. We are going to:
collect loan data and produce a Bulletin once
✔ rather than twice a year from March 2002 work towards including individual case
✔ studies and good practice examples to add
depth to reporting of new loan information
improve our existing coverage of interest
✔ rates, margins, fees and purpose of loans
review Loan Portfolio returns and
✔ accompanying guidance on completing
returns
Regulation & Inspection: Loan Portfolio
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Annex B: Private loan approvals
Total loan approvals Movement
30 Sept ’00 31 Mar ’01 30 Sept ’o1 6 months 6 months Total
Mar ’o1 Sept ’o1
£ ’000 £ ’000 £ ’000 £ ’000 £ ’000 £ ’000
Abbey National 79,250 143,100 144,900 63,850 1,800 65,650
Allied Irish Bank 210 210 210 0 0 0
Bank of Scotland 147,970 161,562 179,293 13,592 17,731 31,323
Bank of Ireland 3,889 3,889 3,889 0 0 0
Bradford & Bingley Building Society 20,140 20,140 20,140 0 0 0
Britannia Building Society 71,310 74,912 80,012 3,602 5,100 8,702
Clydesdale Bank plc 126,770 130,249 140,138 3,479 9,889 13,368
Co-operative Bank plc 6,700 7,945 6,700 1,245 (1,245) 0
Depfa Bank 5,520 5,520 5,520 0 0 0
Dexia Municipal Bank plc 10,300 10,300 10,300 0 0 0
Dunfermline Building Society 115,330 120,369 132,512 5,039 12,143 17,182
European Investment Bank 0 2,900 2,900 2,900 0 2,900
Halifax 18,570 18,570 18,570 0 0 0
Housing Finance Corp Ltd 5,260 5,260 5,260 0 0 0
Lloyds TSB 57,440 58,209 64,412 769 6,203 6,972
Nationwide Building Society 55,730 75,327 76,576 19,597 1,249 20,846
Newcastle Building Society 3,160 3,160 3,160 0 0 0
Northern Rock Building Society 2,580 2,580 2,580 0 0 0
Royal Bank of Scotland plc 302,080 319,393 320,270 17,313 877 18,190
Scottish Building Society 3,150 3,465 3,597 315 132 447
Skipton Mortgages Ltd 150 150 150 0 0 0
Woolwich Homes 320 320 320 0 0 0
1,035,829 1,167,530 1,221,409 131,701 53,879 185,580
Total loans 350
approved and
amounts drawn 300
down, by lender
250
£m
200
150
100
50
Outstanding approvals
Amount drawn down
Royal B
Bank o
Abbey
Clydesd
Dunferm
Britann
Nation
Lloyds T
Bradford
Halifax
Dexia M
Co-ope
Depfa B
Housin
Allied Ir
Bank o
Scottis
Newca
Europe
Northe
Woolw
Skipton
h Build
f Scotla
f Irelan
Nation
wide B
stle Bu
an Inve
rative B
ich Hom
g Finan
rn Rock
ank
ia Build
ish Ban
ale Ban
SB
ank
Mortga
unicipa
& Bing
line Bu
of Scotl
uilding
ilding S
al plc
ing Soc
d
nd
stment
ce Corp
ank plc
ing Soc
k
Buildin
k plc
es plc
l Bank
ges Ltd
ley Buil
ilding S
and plc
iety
ociety
Society
Bank
g Socie
iety
plc
Ltd
ding So
ociety
ty
ciety
Regulation & Inspection: Loan Portfolio
6