Annual Report and Accounts

Coventry Building Society 
24 February 2004


Record results from Coventry Building Society

Coventry Building Society has today announced its results for the year ended 31
December 2003, which reflect another excellent year.

Highlights of the year

   •  Record gross lending of almost £2.5 billion, up 32% on 2002

   •  Record net lending of £863 million, up 27% on 2002

   •  Increase in mortgage assets of 13.3%

   •  Net savings receipts of £244 million

   •  Total assets increased to almost £9 billion

   •  Interest margin narrowed to 1.03% of average assets, giving
      increased member benefits

   •  Administrative expenses ratio reduced to 0.63% of average
      assets

   •  Profit before tax increased by 4.4% to £47.3 million

   •  Mortgage arrears less than half industry average


Commenting on the results, Martin Ritchley, Chief Executive said:

'Our results for 2003 represent another success story for Coventry Building
Society. We achieved record levels of gross mortgage lending of almost £2.5
billion, as well as record net lending of £863 million. For the eighth
successive year, we have improved our cost ratio, maintaining our position as
the most cost efficient major building society in the UK. These results
reinforce the Coventry's position as one of the country's most successful
building societies.'

Reviewing 2003, Martin Ritchley continues:

'The Society's mortgage assets grew by 13.3%, enabling total assets to reach
almost £9 billion by the year end. Savings balances grew by £244 million to a
record £6,457 million.

'Over the past few years, we have consistently narrowed our interest margin
(principally the difference between the interest we earn from borrowers and the
interest we pay to savers) for the benefit of our members. Last year was no
exception and the Society's net interest margin narrowed in 2003 from 1.05% to
1.03% of average assets. This has enabled us to offer even more competitive
mortgage and savings products.

'The Coventry's net interest margin is still one of the narrowest in the
industry and the fact that the Society can operate so effectively at this level,
underlines not only the success we have achieved in managing our cost base, but
also the significant competitive advantage which we derive from our building
society status. Quite simply, we have no dividends to pay to external
shareholders, which means we can offer more competitive rates to borrowers and
savers alike.

'I have repeatedly emphasised the advantage we derive from our low cost base.
Despite additional expenditure invested in our distribution channels and the
construction of a further administrative building, I am pleased to report a
further reduction in our ratio of administrative expenses from 0.65% to 0.63% of
average assets - the eighth successive year of improvement.

'Although profit maximisation is not the ambition of a building society
committed to delivering member value, our pre tax profit increased by 4.4% to
£47.3 million. This contributed to the Society maintaining its strong capital
position; at the year end total capital exceeded £478 million representing 5.67%
of share and deposit balances.

'A key feature of our success over the years has been the quality of our
mortgage book. Despite the recent increases in Bank of England base rate, the
level of interest rates still remains historically low, underpinning the
affordability of mortgage repayments.

'Consequently, our arrears' performance has improved still further during the
year, so that arrears at the year end are well under half the industry average
and there were just six properties in possession.

'By any standards, our results are impressive. They demonstrate that, as a
building society committed to putting its members first, we have a winning
formula which year after year is delivering commercial success. Our achievements
in 2003 provide the firm foundation upon which to grow our business, for the
benefit of our saving and borrowing members.'



• A summary of the results for the year is attached.


                           Coventry Building Society

                 Results for the year ended 31st December 2003


Key Results                                          Year Ended           Year
                                                       31.12.03          Ended
                                                             £m       31.12.02
                                                                            £m
Pre tax profits                                            47.3           45.3
Mortgage provisioning                                       5.0            2.9
Gross lending                                             2,464          1,865
Net lending                                                 863            677
Net receipts from shares (2)                                244          1,035
Total assets                                              8,937          8,058

Key Ratios                                           Year Ended           Year
                                                       31.12.03          Ended
                                                              %       31.12.02
                                                                             %
Asset growth                                              10.90          12.30
Commercial asset growth                                   13.31          11.66
Gross capital                                              5.67           5.87
Free capital                                               5.67           5.81
Net interest margin (3)                                    1.03           1.05
Management expenses to average assets (3)                  0.63           0.65
Profit before tax to average assets (3)                    0.56           0.59


Income and Expenditure Account                       Year Ended           Year
                                                       31.12.03          Ended
                                                             £m       31.12.02
                                                                            £m
Net interest receivable                                    87.6           80.0
Other income and charges                                   18.6           18.0
Total income                                              106.2           98.0
Management expenses                                      (53.9)         (49.8)
Provisions for bad and doubtful debts                     (5.0)          (2.9)
Profit before tax                                          47.3           45.3
Tax                                                      (14.1)         (14.2)
Profit after tax                                           33.2           31.1


Statement of total recognised gains and losses       Year Ended           Year
                                                       31.12.03          Ended
                                                             £m       31.12.02
                                                                            £m
Profit for the financial period                            33.2           31.1
Prior year adjustment (1)                                                  2.4
Total gains and losses recognised since last annual        33.2           33.5
report


Balance Sheet                                    As at 31.12.03 As at 31.12.02
                                                             £m             £m
Assets                                         
Liquid assets                                           1,534.5        1,521.2 
Commercial assets                                       7,344.6        6,481.6   
Fixed assets                                               29.0           28.6 
Other assets                                               28.4           26.5
Total assets                                            8,936.5        8,057.9

Liabilities                                    
Shares                                                  6,457.0        6,213.2 
Borrowings                                              1,978.8        1,368.9   
Other liabilities                                          22.3           30.6 
Subordinated liabilities                                   35.0           35.0 
Subscribed capital                                         40.0           40.0 
Reserves                                                  403.4          370.2

Total liabilities                                       8,936.5        8,057.9


Cash Flow Statement                                  Year Ended           Year
                                                       31.12.03          Ended
                                                             £m       31.12.02
                                                                            £m
Net cash inflow from operating activities                 184.1          194.8
Returns on investments and servicing of                   (6.8)          (6.4)
finance
Taxation                                                 (16.0)         (17.7)
Capital expenditure and financial investment:      
Purchase of investment securities                     (3,467.7)      (2,549.0)
Sale and maturity of investment securities              3,266.8        2,397.0   
Purchase of fixed assets                                  (8.1)          (5.7) 
Finance lease payments                                    (0.2)          (0.4)   
Financing
Issue of subordinated liabilities                            -            15.0

(Decrease)/Increase in cash                              (47.9)           27.6


Notes to the accounts.

(1) Prior year adjustment in 2002 reflects a change in accounting policy on
    adoption of FRS19 Deferred Tax.

(2) Includes interest added to the accounts.

(3) Net interest margin, management expenses as a percentage of average assets
    and profit before tax as a percentage of average assets have been calculated on
    the basis of the average of the 2003 and 2002 total assets.

This announcement will be sent to holders of the Society's Permanent Interest
Bearing Shares.
Copies are available from the Society's Head Office:
Coventry Building Society, Economic House, PO Box 9, High Street, 
Coventry. CV1 5QN.
Contact : John Thomson FCMA, Deputy Chief Executive
Telephone [phone] www.coventrybuildingsociety.co.uk

The Society is authorised and regulated by the Financial Services Authority.
The Society introduces only to Norwich Union Marketing Group, members of which
are authorised and regulated by the Financial Services Authority for life
assurance, pensions and investment.

Member of the Building Societies Association. Shares and Deposits are Trustee
investments.



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