2019 Annual Report-FCE’S Consolidated Annual Financial Statements As at and for the Year Ended 31 December 2019
Total Page:16
File Type:pdf, Size:1020Kb
Contents Strategic Report Company Information ................................................................................................................................................................ 3 Business Model ......................................................................................................................................................................... 4 Highlights ................................................................................................................................................................................... 5 Business Performance .............................................................................................................................................................. 6 Business Environment ............................................................................................................................................................ 11 Non-Financial Statement ......................................................................................................................................................... 19 Section 172 Report .................................................................................................................................................................. 23 Governance .............................................................................................................................................................................. 25 Audit Committee Audit Committee Report.......................................................................................................................................................... 33 Directors' Report Directors’ Report ..................................................................................................................................................................... 35 Financial Statements Independent Auditors' Report to the Members of FCE Bank plc ......................................................................................... 37 Consolidated Statement of Profit or Loss and other Comprehensive Income ................................................................... 44 Statements of Financial Position ........................................................................................................................................... 45 Statements of Cash Flows ...................................................................................................................................................... 46 Statements of Changes in Equity ........................................................................................................................................... 47 Index to the Notes to the Financial Statements .................................................................................................................... 49 Notes to the Consolidated Financial Statements .................................................................................................................. 50 European Operating Locations ............................................................................................................................................ 130 Country by Country Reporting ............................................................................................................................................. 131 Independent Auditors’ Report to the Members of FCE Bank plc – Country by Country ................................................. 132 Pillar 3 Disclosures Pillar 3 Disclosures ................................................................................................................................................................ 134 Other Information Glossary of Defined Terms ................................................................................................................................................... 164 Website Addresses ................................................................................................................................................................ 167 Approval of the 2019 Strategic Report The Strategic Report for the year ended 31 December 2019 as set out on pages 3 to 32 was approved by the Board on 18 March 2020. ON BEHALF OF THE BOARD Charles Bilyeu Chief Executive Officer 18 March 2020 2019 Strategic Report Company Information Registered Name: FCE Bank plc Directors: Tom Schneider Chair Narpal Ahluwalia Non-Executive Director (appointed 24th May 2019) Charles Bilyeu Chief Executive Officer John Callender Senior Independent Director Natalie Ceeney Non-Executive Director (appointed 17th October 2019) John Coffey Executive Director, Chief Risk Officer Talita Ferreira Non-Executive Director (appointed 8th February 2019) Paul Kiernan Executive Director, Finance John Reed Non-Executive Director Suzanna Taverne Non-Executive Director (resigned 16th October 2019) Company Secretary: Michael Lavender Registered Office: Arterial Road Laindon Essex SS15 6EE United Kingdom Registered Number: 00772784 Independent PricewaterhouseCoopers LLP Auditors: 7 More London Riverside London SE1 2RT United Kingdom Website: www.fcebank.com FCE Bank plc – ANNUAL REPORT 2019 3 2019 Strategic Report Business Model Organisational Structure FCE Bank plc (FCE) is a United Kingdom (UK) registered bank authorised by the Prudential Regulation Authority (PRA). FCE is wholly owned by FCSH GmbH (FCSH), which, in turn, is wholly owned by Ford Credit International (FCI). FCI is wholly owned by Ford Motor Credit Company LLC (Ford Credit) which, in turn, is wholly owned by Ford Motor Company (Ford). FCE now operates in 11 European countries through a branch and subsidiary network providing branded financial services for Ford. As a result of FCE’s continuous efforts to improve efficiency, reduce complexity and respond to Brexit, its operational footprint is in the process of being restructured to focus on its largest markets - the UK, Germany, Italy, France and Spain. As a consequence of this strategy, its businesses in a number of small countries were either transferred to FCSH or Third Parties. FCE expects this process to continue in 2020. The Company also has a Worldwide Trade Finance (WWTF) division, which provides finance to distributors and importers in about 60 countries where Ford has no National Sales Company presence. FCE provides loans to approximately 1,019,000 retail customers across Europe and provides wholesale financing to around 991 dealer Groups. FCE’s largest markets are the UK and Germany, with the UK market representing 35% of the total FCE portfolio and Germany representing 31%, as shown in the chart on page 8. Customers and Products FCE is integrally tied to Ford and its primary focus is to profitably support the sale of Ford vehicles. It drives value through a focus on: • A competitive funding structure • A cost effective and efficient operating structure • Strong risk management FCE’s business is best described in the context of its four main customer Groups: FCE supports Ford's automotive operations through: • A pan-European branded finance network dedicated to supporting the sale of Ford products • High quality customer service that has been proven to increase customer loyalty to the Ford brand • Financial risk management support to ensure continuity and viability of the Ford dealer distribution network • Specialist support for key businesses and new markets FCE supports Ford customers to acquire Ford vehicles by providing: • Lending to retail customers to purchase or lease vehicles • Access to insurance products to protect customers • Finance products for fleet or business customers FCE supports Ford dealers to sell Ford vehicles by: • Financing new and used vehicle inventory • Providing an understanding of the automotive dealer business and the financing required to optimise their business model through all economic cycles FCE supports savings customers by offering: • A range of savings products and ISAs that are easy to open, easy to manage and highly secure • Competitive rates compared to the high street banks and an attentive, personal service • A promise for existing customers to enjoy the same rate as new customers FCE’s delivery of high quality service, treating customers fairly, combined with the right finance product for the customer, drives greater loyalty to Ford and the dealer. This generates shorter replacement cycles and incremental vehicle sales and means FCE can pass greater profits back to Ford. Ford is then able to reinvest in better products, creating a “Virtuous Circle” for FCE and for Ford overall. 4 FCE Bank plc – ANNUAL REPORT 2019 2019 Strategic Report Highlights Profit before tax, PBT (Mils) Total capital *Total capital / Risk exposure amount £297 Tier 2 Capital (Bils) £283 £281 Tier 1 Capital (Bils) Total capital ratio* £217 18.6% £178 17.3% 16.9% 17.0% 16.7% £0.3 £0.4 £0.3 £0.3 £0.3 £2.4 £2.6 £2.7 £1.9 £2.1 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Number of retail/finance lease contracts Penetration originated in year (Thousands) FCE new contracts / Ford sales 42.9% 599 613 604 42.1% 39.5% 40.5% 570 551 39.2% 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Total net loans and advances (Mils) Credit loss ratio Net credit losses / average net loans and advances Retail £18,526 0.13% £17,866 0.12% 0.12% Wholesale £16,798 0.11% £14,800 0.09% £12,439 £11,247 £10,237 £11,048 £8,817 £6,908 £7,279 £6,818 £5,531 £5,983 £6,561 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019