LBS.L Regulatory News (LBS)

22nd February 2017

Leeds Building Society reports record-breaking results for 2016

Value, security and service attract more members than ever

Leeds Building Society has delivered record profits before tax for the fourth consecutive year as it helped more people than ever to save and have the home they want during 2016.

Chief Executive Officer Peter Hill reported key successes against the Society's four strategic aims:

Supporting the aspirations of borrowers and savers:

· Helped a record 53,700 more people have the home they want - record net mortgage lending of £1.9bn (£1.4bn 2015) took total mortgage balances above £13.2bn

· Helped over 57,700 more people save, increasing savings balances by a record £1.3bn (£751m 2015) and taking total balances above £11.2bn

· Increased total membership to over 756,000 (up from 719,000 2015), the highest in our history

Continuing financial security:

· Record profit before tax of £116.6m (£108.5m 2015)

· Gross lending exceeded £4bn, up by 28% (£3.1bn 2015)

· Increased capital and reserves to a record £914m (£830m 2015)

· Common Equity Tier 1 capital ratio of 15.2%

Delivering outstanding personal service:

· Overall customer satisfaction improved to 92%1

· Colleague engagement index increased to 78% in 2016

· Retained our 1* Best Companies2 rating for a second year

Investing in the Society:

· Created 120 more high quality roles in 2016, taking the total workforce to over 1,400

· Launched Corporate Responsibility Framework and targets

· Refurbished 24 branches as part of ongoing modernisation of our branch network

Highlights

Peter said: "I'm proud to report we delivered on our mission as a member owned building society and helped more people than ever save and have the home they want.

"During 2016, we consistently provided security and value through attractive products and excellent service to meet the needs of our growing membership.

"As a result, the Society has more savers and borrowers than ever before, achieved record profits and our total assets now exceed £15.9bn (£13.5bn 2015).

Supporting the aspirations of borrowers and savers

"We have to balance the needs of all our members and, while the prevailing interest rate environment has benefitted borrowers, we've worked hard to help savers.

"We paid an average of 1.66% to savers, compared to the rest of market average of 0.97%3, equating to an annual benefit to our savers of over £69m. Furthermore, we pay a minimum of 0.4% to all saving members4.

"Our consistent approach was recognised with the 'Best Building Society Savings Provider' award from independent comparison site Moneyfacts. In addition, we were named 'Best Regular Savings Account Provider 2016' for the second consecutive year by independent consumer advice website Savings Champion.

"In 2016, we increased savings market share5 and grew deposits by over £1bn for the first time. Our success in attracting funds meant we could keep growing our lending and we increased mortgage market share for the sixth consecutive year.

"This was achieved across a balanced product range. Alongside mainstream and Buy to Let lending, we remain focused on helping borrowers who are not well served by the wider market - first time buyers, Shared Ownership, Affordable Housing, Help to Buy and Interest Only.

"During the year, we lent more than £1.42bn in these key segments and helped over 17,500 people, including 12,500 first time buyers, who might otherwise have found it more difficult to have the home they want.

"Our support for borrowers was acknowledged with awards for 'Innovation in Personal Finance' from Moneyfacts, for our Interest Only proposition, and 'Best Shared Ownership Mortgage Lender' from What Mortgage magazine.

Continuing financial security

"Our strong mortgage growth over the past five years, combined with a reduction in impairment provisions, led to record profits of £116.6m, up more than 7% on 2015, which enabled us to maintain strong Common Equity Tier 1 and Leverage Ratios of 15.2% and 5.2% respectively and increase capital and reserves to a record £914m.

"Residential arrears6 reduced to 1.02% in 2016 (from 1.43% in 2015) and we continued to manage down our commercial lending portfolio, with losses and charges reduced by £27.2m to £3.5m.

"Thanks to our strong financial performance the Society retained long term 'A' ratings from Moody's and Fitch.

Delivering outstanding personal service

"Listening to and understanding our customers ensures we make the right decisions in the long-term best interests of current and future members.

"This includes more than 1,900 members actively participating in research and discussions on our online forum, TalkingPoint.

"Member feedback helped us redesign our emails and letters to be more straightforward and jargon-free and simplify the process to change account details.

"We've reduced the time between receipt of mortgage application and offer, so people can be in their home sooner, and 92% of customer instructions are processed the day they're received.

"Great service comes from engaged colleagues - for the second year running we achieved accreditation from Best Companies, and were the first financial services organisation to secure Investors in Diversity7 status, further promoting the Society as an 'employer of choice'.

Investing in the business

"To support our record growth we've continued to invest in talent, skills and infrastructure.

"During 2016, we created 120 new roles and now employ over 1,400 colleagues. We moved our North East operating centre to a new, energy-efficient building, with more room for our larger workforce.

"Branches are important in attracting the retail savings we need to grow. Our carefully considered and cost-effective network refurbishment programme will complete this year, creating a more comfortable environment for members. Incorporating more energy-efficient technology will significantly reduce our environmental impact too.

"We'll continue to adapt so the way we serve our customers remains relevant and appropriate to meet their needs. We're further developing our online functionality to ensure members can contact us how and when they want - whether in branch, online, by email, phone, or post.

"These investments increased our cost to income ratio to 43% (from 36% in 2015) but we maintained our cost to mean asset ratio at 0.62%. With our keen focus on cost control, we expect these ratios to remain among the best of the established players in our markets.

Outlook

"Competition among mortgage lenders remained strong in 2016, resulting in downward pressure on our net interest margin, and we expect this to continue in 2017.

"Combined with Bank Base Rate at an historic low and uncertainty linked to the UK's exit from the EU, these factors are likely to prove testing this year, both to us and the wider financial services sector.

"Despite this, our successful sustainable business model means we're well-placed to withstand the challenges that may arise in 2017 and beyond."

Ends

Notes to Editors

A copy of the Society's Group Results for the year ended 31st December 2016 is attached.

To arrange an interview with Leeds Building Society Chief Executive Officer Peter Hill, please contact the press office on 0113 225 7606.

Peter Hill is currently Chairman of the Council of Mortgage Lenders.

Leeds Building Society won the awards for Best Building Society Savings Provider and Innovation in Personal Finance (Part and part mortgages) at the 2016 Moneyfacts Awards.

Leeds Building Society operates throughout the UK, Gibraltar and Ireland and has assets of £15.9bn (at 31st December 2016). The Society's head office has been based in the centre of Leeds since 1886.

1 Customer Satisfaction rating based on the views of 4,649 customers

2 Best Companies measures employee engagement levels, through extensive research into employee opinions and workplace concerns

3 CACI's CSDB. Stock, January-November 2016. CACI is an independent company that provides financial services benchmarking data and covers 85% of the high street cash savings market

4 As long as the account is operated in line with the Terms and Conditions

5 Leeds Building Society defines market share as follows:Mortgages - Council of Mortgage Lenders market share statisticsSavings - Mutual sector net retail savings as published by the Building Societies Association

6 1.5% or more of outstanding mortgage balances

7 Awarded by the National Centre for Diversity