West Bromwich BS shares dive after profit warning, court ruling

West Bromwich Building Society (WBBS) has today warned of a full-year loss after the UK Court of Appeal overturned an earlier High Court order in relation to interest-rate margin charges.

WBBS' permanent interest paying shares, which were temporarily suspended until 10:30 BST today, were down more than 19%.

The overturn related to the case of Mark Robert Alexander, as a representative of the Property 118 Action Group, and West Bromwich Mortgage Company Ltd, a subsidiary of the building society.

"This judgement relates to the decision taken in 2013 by the West Bromwich Mortgage Company to vary the interest rate margin charged for certain multi-property landlords in line with the terms and conditions of their buy-to-let mortgages," WBB said.

It affected landlords who took out a mortgage up to 2008. These mortgages held a clause that, in certain circumstance, enabled the lender to change the interest rate to something more in line with the current market norm.

"Savers, who represent the vast majority of the society's members, have suffered a dramatic fall in income due to lower interest rates," WBBS said in a statement.

"After careful consideration and in response to the unprecedented reduction in interest rates over recent years and the increased relative cost in providing these loans, the Society could not, in order to protect the best interests of members, ignore this clause," it said.

The Court of Appeal ruled today that the relevant clause was inapplicable in these cases.

"While we are disappointed, we accept the Court of Appeal's decision and so will be contacting all affected borrowers, including those who were not part of this action, to advise them of the outcome and that we will be reimbursing them any additional interest charged."

It said the one-off cost of this would be about £27.5m, said WBBS, adding this would see it book a loss for the year to March 2017. However, it said, underlying profitability was expected to be maintained.