| Notes to the financial statements |
notes 1 - 9 |
The movement in mortgage incentives is as follows:
The above table includes mortgage incentives both from prepayments and accrued
income and other liabilities.
25. Accruals and deferred
income 
26. Provisions for liabilities
and charges 
The empty leasehold premises provision relates to properties which are no longer used for trading. The pension review provision has been
established to cover compensation payable in connection with phases one and two of the pension review and also a review of free-standing
additional voluntary contributions.
27. Subordinated liabilities
The sterling subordinated notes due 2010 pay interest at a rate of 7.625% per annum until their maturity.The step-up sterling subordinated notes
due 2011 pay interest at a rate of 8.375% per annum until 26 December 2006 when the Company may either redeem them (with the prior
consent of the Financial Services Authority) or pay a rate of interest fixed at 1.85% above the relevant five year gilt.The sterling fixed rate step-up
subordinated notes due 2022 pay interest at a rate of 5.75% per annum until 12 December 2017 when the Company may either redeem them,
as above, or pay a rate of interest 2% above the relevant five year gilt.The sterling subordinated notes due 2023 pay interest at a rate of 6.625%
until their maturity.The sterling perpetual subordinated notes due 2032 pay interest at a rate of 6.462% until 2 June 2032 when the Company
may redeem them, as above, or pay a rate of interest 2.3% above the relevant five year gilt.The rights of repayment of the holders of
subordinated debt, including Perpetual Subordinated Bonds, are subordinated to the claims of all depositors and creditors as regards the principal
and interest thereon. Interest on both issues of Perpetual Subordinated Bonds, which have no maturity date, is payable half-yearly in arrears. None
of the subordinated liabilities can be repaid at the borrower's option, except as stated above. Interest incurred in the year with respect to
subordinated liabilities was £63.0m (2002: £45.3m).
On 29 April 2003 the Company issued £250m of perpetual subordinated notes (£246.0m net of expenses).These securities pay interest at a rate of 5.625% and are redeemable by the issuer at its option on 20 December 2013 and on each fifth anniversary thereafter. On 10 December 2003 the Company issued £200m of perpetual subordinated notes (£198.2m net of expenses).These securities pay interest at a rate of 6% and are redeemable by the issuer at its option on 10 December 2019 and on each fifth anniversary thereafter.
28. Called up share capital
The issued share capital has reduced as a result of a share buy back programme, approved by shareholders at the Annual General Meetings in
2001, 2002 and 2003. During 2003, 19.7 million shares were purchased for cancellation at a cost of £61.6m (excluding commissions and Stamp
Duty). In total 47.9 million shares have been purchased for cancellation at a total cost of £150m under the programme which commenced in
February 2002.
The Group and Company hold on their Balance Sheets own shares of £33.0m (2002: £20.8m) which represent shares held by share trusts for the purposes of executive and employee share awards/savings schemes. Own shares are carried at cost less any provision for permanent diminution in value.The movement in own shares in 2003 represents £14.3m of additional share purchases, less £1.0m of options exercised by individuals and a charge of £1.1m in respect of the discount on shares acquired for the Sharesave Scheme.
Bradford & Bingley Profit Sharing Scheme
In March 2001 and March 2002, employees entitled to the Group bonus could elect to receive shares under the rules of the Bradford & Bingley
Profit Sharing Scheme.This scheme operates a trust fund, known as the Bradford & Bingley Share Ownership Trust, which is under the control of
independent trustees, Computershare Trustees Limited. By leaving the shares in the Bradford & Bingley Share Ownership Trust for three years,
employees will not have to pay income tax and national insurance contributions on receipt of those shares. At 31 December 2003 the trustees of
the Bradford & Bingley Share Ownership Trust held 1,357,090 shares (2002: 2,422,919) on behalf of 2,604 employees (2002: 4,607).
Bradford & Bingley Employees' Share Trust
On 3 October 2000 the Company established an offshore employee share trust, the Bradford & Bingley Employees' Share Trust, for the purpose of
receiving monies and acquiring shares to be used in conjunction with any employee share schemes established by the Company. At 31 December 2003
the trustees of this trust, Mourant & Co.Trustees Limited, held 6,346,112 (2002: 4,265,769) shares to satisfy share awards and options which have been
made or are to be made in accordance with the rules of the employee share schemes established by the Company.The market value of shares held at
31 December 2003 was £19,355,641 (2002: £12,370,730). During 2003 the Company provided £6.4m (2002: £7.4m) for share purchases.The trust
has waived in full its rights to receive dividends on the shares held.This trust currently holds shares relating to the Long Term Incentive Plan, Executive
Share Option Scheme, Performance Share Plan and the Employees' Restricted Share Bonus Plan which are detailed below.
Long Term Incentive Plan
Under the rules of the 1998 Long Term Incentive Plan it was possible for the participants to elect to take share options rather than the cash
entitlements.Awards were made under this plan on 12 December 2000 and 50 participants elected to take options over 353,744 shares exercisable
at the same time as the cash payments (40% immediately and two further equal tranches on the first and second anniversaries).The options over
shares remain exercisable during the first five years following the award date. At the year end 126,795 (2002: 149,218) shares remained under option.
Executive Share Option Scheme
Grants of approved and unapproved share options were made under the rules of the Bradford & Bingley 2000 Share Option Scheme as detailed
below.The shares are exercisable subject to the achievement of a performance target linked to an increase in the Company's earnings per share.
The options over shares are exercisable over the period of three to ten years after the date of the grant.
At 31 December 2003 the market price of Bradford & Bingley shares was 305p.
Performance Share Plan
Shares were awarded under the rules of the Bradford & Bingley 2000 Performance
Share Plan as detailed below.The shares will be released to the individuals
after the end of the performance period subject to the achievement of
performance criterion which measures the performance of the Company against
a peer group of companies.
Sharesave Scheme
The Company operates an Inland Revenue approved, all employee Save As You Earn share option scheme, the Bradford & Bingley 2000 Sharesave
Scheme. Grants of share options under this scheme were made in 2001, 2002 and 2003 (details are shown below).The option prices represent a
20% discount to the market price on the date of the grant.There were 3,944 three-year and 1,241 five-year savings contracts in place at the end
of 2003. A further invitation to participate in the scheme will be issued in February 2004.
On 8 December 2000 the Bradford & Bingley Qualifying Employee Share Ownership Trust was established to acquire shares for employees, including Directors, to satisfy options exercised under the Sharesave Scheme. During 2003 the Trust acquired 2,626,199 shares.The Company provided £7.9m (2002: £4.1m) for this purpose. At 31 December 2003 the Trust held a total of 6,324,628 shares (2002: 3,855,268) to satisfy options which are expected to be exercised under the Sharesave Scheme. In respect of dividends arising from the shares held, the Trust has waived its rights to all but 0.0001 pence per share.
At 31 December 2003 the market price of Bradford & Bingley shares was 305p.
Employees' Restricted Share Bonus Plan
In April 2002 the Employees' Restricted Share Bonus Plan was established to allocate shares to employees following the achievement of specified
performance measures.The shares will be released to the individuals in tranches annually in the three years following the allocation subject to
them remaining employed by the Company on the anniversary dates.
29. Minority interests
(non-equity) 
On 29 May 2002, £150m, 6.462% guaranteed, non-voting, non-cumulative,
perpetual preferred securities, Series A were issued through Bradford
& Bingley Capital Funding L.P. (£148.5m net of expenses), a Jersey based
Limited Partnership.These securities are not subject to any mandatory
redemption provisions and qualify as Tier 1 regulatory capital; they are
redeemable by the issuer at its option on 2 June 2032 and on each fifth
anniversary thereafter.They have a fixed coupon and, if not redeemed in
2032, the coupon will be reset at a rate equal to the sum of the relevant
five year benchmark gilt rate plus a margin of 2.30% per annum.
The Group is not obliged and will not make any payments to the holders of the preferred securities other than those to which the holders of these securities are entitled under the terms of the preferred securities.
