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Julian Hodge Bank enjoys another record year

Julian Hodge Bank has reported record pre-tax profits up 27 per cent to £20.4 million, for the year ended 31st October 2007. Also, by stripping out the results of businesses disposed of, profit on continuing activities rose by 3% to £16.9 million.

Presenting his fourth annual review, the Bank’s Chairman, John Mitchell says: “Our core businesses, Commercial Lending and Hodge Equity Release performed well ahead of expectations with loans and advances to customers growing by 20% to £366 million, even allowing for the sale of £40 million of mortgage assets to other financial institutions.”

Mr Mitchell reports that Commercial Lending enjoyed record profitability and ended the year with lending balances having increased by 9% to £219 million. “The Bank continued to benefit from its diversification into joint venture and profit-sharing arrangements with selected developers and the low bad debt charge is indicative of the quality of our lending book and our credit risk management.”

Hodge Equity Release continued to earn industry accolades, being named Equity Release Lender of the Year by the readers of Mortgage Adviser and also Best Service Provider by the publication Mortgage Solutions. Its equity release products generated sales of £89m and it achieved particular success with its flexible mortgage product, where sales amounted to £45 million and represented a 44% increase over the previous year. The Chairman reported that, “Hodge Equity Release concluded its first sale of £30 million of flexible mortgage assets in July 2007 and at the end of the financial year had £101 million of mortgage assets under management for other financial institutions and a further £155 million remaining on balance sheet.”

Hodge Insurance Brokers, the Bank’s insurance broking subsidiary was sold during the year, realising a profit of £3.5 million. Mr. Mitchell commented, “In June 2007, the Bank received an approach from ProtectaGroup Holdings Limited to acquire the Company which it saw as a key plank in the development of its commercial insurance business. Acknowledging our responsibility to our shareholder and, taking account of the best interests of Hodge Insurance Brokers and its clients, the Board agreed a sale on 31st August 2007.”

The Chairman noted that it was impossible to look to the future without considering the extraordinary economic events that had occurred in the second half of 2007. He commented, “The sub-prime mortgage crisis, which originated in the USA, has cast a large shadow over the world’s financial markets, causing a “credit crunch”, from which the U.K.’s financial system has not been immune, giving rise to liquidity problems for those institutions with a heavy reliance on wholesale funding. 2008 is likely to be a year characterised by uncertainty. The “credit crunch” will almost certainly remain with us for a significant part of the year, meaning that consumers’ access to credit will be restricted and this should curtail economic growth. At the same time residential and commercial property prices will, at best, mark time and possibly fall. On the other hand the spectre of inflation may persist and this will create a dilemma for the Bank of England’s Monetary Policy Committee, since it is primarily charged with controlling inflation.”

Mr Mitchell concludes, “The Bank is fortunate in having no exposure to sub-prime markets; its funding is largely based on retail deposits and whilst we have an exposure to both the residential and commercial property markets, our conservative approach to underwriting coupled with prudent accounting policies means that, although profits would be adversely affected if significant price falls occur, the Bank’s balance sheet has the inherent strength to withstand such a scenario. Accordingly, we are well placed to build on our success of this year by benefiting from a strong balance sheet, a high quality asset portfolio and an enviable liquidity position.”

Click here to read the Chairman's Statement in full

Click here to view the Group Accounts

Pictured (from left): Hodge Equity Release Managing Director Jon King, Julian Hodge Bank Chairman John Mitchell, with Commercial Director Peter Stoneman

Hodge Insurance Brokers Acquired By ProtectaGroup

On 31 August 2007, Julian Hodge Bank completed the sale of Hodge Insurance Brokers Limited (“HIB”) to ProtectaGroup Holdings Limited (“Protectagroup”).

Following a strategic review of its core operations in 2006 the Board decided upon a course of action that would allow the Group to expand its activities in those areas where it was best able to exploit its potential for profitable growth. The Board determined that, given the relative stability offered by property-based assets and the growth opportunities afforded by the commercial and residential investment markets, property was the appropriate sector on which the Group should focus its future development. The Group would also continue to grow its insurance broking activities with particular emphasis on increasing property-related business.

This is the strategy that has been pursued successfully over the past year. However in June the Bank was approached by ProtectaGroup with a view to that company acquiring HIB. ProtectaGroup saw HIB as a key plank in the development of their commercial general insurance broking arm, largely because of its enviable reputation in the insurance market, particularly in the property arena.

Accordingly, given its responsibility to its shareholder and taking account of the best interests of HIB and its clients, the Board agreed a sale to ProtectaGroup. HIB will continue to operate from Summit House, Cardiff and all HIB Directors and staff are to be retained. Consequently, all client relationships with HIB will remain unchanged.

As part of the sale, Julian Hodge Bank will continue to work with HIB and ProtectaGroup to ensure that the insurance needs of its clients are catered for. Further details of ProtectaGroup and HIB’s product offerings can be found at www.protectagrp.co.uk.

We extend our best wishes to ProtectaGroup and HIB in pursuing their ambitious business targets, and look forward to working with them in the future.