LBS.L Regulatory News (LBS)

25 Feb 2008 12:08

Leeds Building Society25 February 2008 25th February 2008 For immediate release Record savings inflow as investors seek security and value Leeds Building Society, the UK's seventh largest building society, todayannounced record results for 2007 against a background of unprecedentedturbulence in the financial services sector. 2007 Highlights •Savings balances rise by above market share to a record £757m, providing the funding for 94% of all the Society's net lending in 2007. •Net lending up by 16% to a record £807m with much lower redemptions than market share. •Quality of lending remains very good with the average loan to value (LTV) on 2007 advances being just 53%. Arrears (3 months or more) remain very low at 0.7%, a rise of only 0.1% during the year. •Efficiency improves even further with cost asset ratio reducing to 53p per £100 of assets from 58p during 2006 and the cost income ratio improving to 40% (41% in 2006, the most favourable level of any building society). €60,000 new members attracted during the year (50,000 in 2006). •Assets rise by over £1bn to £9.2bn (£8.1bn in 2006). •Pre-tax profits rise by 10% to a new record of £63.2m (£57.2m in 2006) thereby providing financial security and strength for members with reserves increasing to £446m •No exposure to US sub-prime assets or any investments in CDOs or SIVs Chief Executive, Ian Ward, said: "The uncertainty in the markets underlines whybuilding societies are so important. Our sustainable, successful business modelproduced a 10% increase in pre-tax profits, a 13% rise in assets and our strongbalance sheet was underpinned by record levels of savings inflows. The majorityof our net lending in 2007 came from our members savings and, as a result, weare much less exposed to the liquidity issues in the market than many banks andother financial organisations. "Savings balances rose by a record £757m to our highest ever level of £6bn withour net receipts increasing by 46% to £530m. This inflow represented £95m aboveour natural market share and over 60,000 new members were attracted by thesecurity and value we provide. Our increased presence on the high street, withthe acquisition of 12 established branches in the north east following ourmerger with Mercantile Building Society in 2006, has contributed to savingstrebling through our branch network. "Our long standing prudent approach to underwriting combined with our welldeveloped product pricing delivered record net lending of £807m, a rise of 16%on the previous year. A lower level of redemptions was a key contributor and ourability to retain a greater percentage of existing borrowers is furthertestimony to our products and exceptional service. "Over 94% of our residential mortgage book is funded by our own members' savingsand this approach has kept us well insulated from the difficulties experiencedby many of our competitors. Our mortgage book is of outstanding quality, withvery low levels of arrears that are less than half of the industry benchmark.The average loan to value on new lending was only 53% in 2007 and is just 38% ofcurrent values on all our residential lending. "We attach great importance to our superior efficiency, as demonstrated by ourvery favourable cost ratios that are essential in maintaining our keen productpricing. Our cost income ratio, the lowest of any Society at 41% in 2006,improved even further to 40% in 2007. The cost asset ratio reduced by 9% to 53pence per £100 of assets compared to 58 pence a year earlier. "The security of our members' savings was further strengthened by an increase inour reserves of £39m to £446m. Liquid assets increased to £1.9bn from £1.7bn at31st December 2007, representing 22% of total funds. We have absolutely noexposure to US sub-prime lending or any Collateralised Debt Obligations (CDO) orStructured Investment Vehicle (SIV) investments. We received our annual independent credit assessment from Moody's in Novemberand this confirmed the upgrade in our rating which we had achieved in 2006.Moody's cited good financial performance, stronger profitability than ourbuilding society peers, effective control of costs, excellent asset quality anda solid funding structure. We have recently received a second rating, fromFitch, which further underlines the Society's strong position. "We have grown the Society in a prudent manner to £9.2bn of assets,concentrating on good quality business. Our very strong financial results in2007 maintain our unbroken trend, for more than a decade, of year-on-yearincreases in pre-tax profit, which now exceed £63m. The very high levels of retail savings flows from our members have ensured thatwe have a solid and sustainable funding base. This, combined with increasedreserves and liquidity, means that we are well placed to compete successfully inthe short, medium and long-term." ENDS Note to Editors A copy of the Society's results for 2007 is attached. The Society's press office would be happy to arrange interviews with theSociety's Chief Executive, Ian Ward or Deputy Chief Executive & FinanceDirector, David Pickersgill. For further information please contact: Karen Wint (General Manager Marketing &Customers Services) 0113 225 7731 or 07989 386772 (out of office hours) kwint@leedsbuildingsociety.co.uk Gary Brook (PR Manager) 0113 225 7606 or 07866 455111 (out of office hours) gbrook@leedsbuildingsociety.co.uk For further comment on the results please contact: Ian Ward (Chief Executive) - 0113 225 7501 (direct line) David Pickersgill (Deputy Chief Executive & Finance Director) - 0113 225 7502(direct line) GROUP RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007 Summary Consolidated IncomeStatement Audited Audited Year to Year to 31 December 31 December 2007 2006 ---------------- ---------------- £M £M Interest receivable and similarincome 538.9 407.8 Interest payable and similar (445.0) (322.0)charges ---------------- ---------------- Net interest receivable 93.9 85.8 Other income and charges 22.1 21.5 Fair value gains less lossesfrom (0.4) (1.0)derivative financial instruments ---------------- ---------------- Total income 115.6 106.3 Administrative expenses (46.2) (44.0) Impairment losses and otherprovisions (6.2) (5.1) ---------------- ---------------- Profit before tax 63.2 57.2 Tax expense (19.4) (17.4) ---------------- ----------------Profit for the year 43.8 39.8 ================ ================ Summary Consolidated BalanceSheet 31 December 31 December 2007 2006 ---------------- ---------------- £M £M Assets Liquid assets 1,885.6 1,708.1 Derivative financial instruments 59.4 43.9 Loans and advances to customers 7,193.6 6,328.0 Other investments 0.1 0.1 Property, plant and equipment 32.0 33.3 Deferred income tax assets 4.9 7.6 Prepayments, accrued income andother assets 5.2 3.3 ---------------- ----------------Total assets 9,180.8 8,124.3 ================ ================ Liabilities Shares 6,026.1 5,269.5 Derivative financial instruments 40.4 47.9 Deposits and securities 2,548.4 2,277.3 Current income tax liabilities 5.9 6.9 Deferred income tax liabilities 3.6 4.6 Provision for liabilities,accruals and deferred income 44.3 40.8 Retirement benefit obligations 1.5 5.6 Subordinated liabilities 39.8 39.4 Subscribed capital 25.0 25.0 Revaluation reserve 16.9 18.2 General reserve 422.4 377.7 Other reserves 6.5 11.4 ---------------- ----------------Total reserves and liabilities 9,180.8 8,124.3 ================ ================ Summary Consolidated Cash Flow 31 December 31 December 2007 2006 ---------------- ---------------- £M £M Net cash flows from operatingactivities 114.8 185.9 Net cash flows from investingactivities 88.5 (455.6) ---------------- ---------------- 203.3 (269.7) ---------------- ---------------- Cash and cash equivalents at thebeginning of the year 301.2 570.9 ---------------- ---------------- Cash and cash equivalents at theend of the year 504.5 301.2 ---------------- ---------------- Summary of key ratios Gross capital as a percentage ofshares and borrowings 6.0% 6.3% Liquid assets as a percentage ofshares and borrowings 22.0% 22.6% Profit for the financial year asa percentage of mean total assets 0.51% 0.52% Management expenses as a percentage 0.53% 0.58%of mean total assets Notes to the Financial Information 1. The financial information set out above, which was approved by the Board of directors on 25 February 2008, does not constitute accounts within the meaning of the Building Societies Act 1986. This information is provided by RNS The company news service from the London Stock Exchange