Friday, 1 March 2013

Coventry BS PIBS

I like this mutual building society and have been a saver with them for many years. They are the third largest BS in the UK and have assets of £27 billion.

Some 5 years back when deposit account interest rates started their journey on the steep downward slope, I started to look around for alternative options for income. I looked at some of the permanent interest bearing shares (PIBS) offered by the likes of the Coventry and Nationwide and liked what I saw and so bought some to add to my fixed interest portfolio.

The reputation of PIBS was damaged when the likes of Northern Rock and Bradford & Bingley had to be bailed out. The financial crisis exposed the debt problems of these former mutuals and many holder realised they were not as safe as many had previously thought.

Of course, not all financial institutions are the same and the likes of the Coventry appear to have ridden the storm of the past 5 years better then most.

They have issued their full year results today - here’s a link  
Coventry final results 2012
Profits are up once again by 49% to £88.5m. As a holder of their PIBS, the item I always look for is their core tier 1 ratio which is an indicator of the strength of the company. In 2011, it was the highest reported of any building society or bank at 22.8% - in 2012, it improved further to 23.2%. They have maintained their high credit rating throughout the financial crisis and are the only major high street bank or building society not to have been downgraded over the past three years.

The results and figures are very reassuring and give me confidence to continue holding until redemption. The PIBS are currently priced around the 97p mark and current yield is 6.25% - paid gross every June and December. They are due to be called (redeemed) at 100p in June 2016.

I hope to cover PIBS and fixed interest income investing in more detail in future articles.

For anyone from Wales, Happy St David’s day!

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