LBS.L Regulatory News (LBS)

25th February 2015

For Immediate Release

Mortgage lending growth boosts profits as Leeds Building Society reports another set of record results

Leeds Building Society has continued to build on its growing membership, mortgage lending and savings balances as it reports another record year in 2014.

Chief Executive Peter Hill said a strong profit performance driven by the growth in lending has enabled ongoing investment in the business to further develop the service proposition and provide long-term value to a growing membership.

2014 highlights:

· New residential mortgage lending increased by 24% to £2.7bn (£2.2bn 2013), significantly above our market share

· Net residential lending of £1.1bn (£1.0bn 2013), our best ever performance

· Operating profit before exceptional item rose by 26% to a record £80.9m (£64.2m 2013)

· Savings balances grew by £560m (£884m 2013) to £9.2bn, the highest level in our history

· 69,000 new members were attracted, taking total membership to a record 721,000 (714,000 2013)

· Capital and reserves increased to £731m (£661m 2013)

Leeds Building Society Chief Executive Peter Hill said: "I am proud to report this excellent performance, which builds on similarly successful results we've delivered over the past three years.

"These achievements illustrate how our growth strategy - including investing in the best talent and modernising our brand and the ways in which we can meet our members' needs - is enabling us to compete with larger rivals to attract more savers and borrowers in a challenging marketplace.

"Our focus on our members remains the same as when we were founded 140 years ago - to offer them a secure place to invest their savings and help them to buy homes, to build their futures together with us.

"We have developed our brand proposition, following extensive member research, and plan further improvements to our digital capability to make it easier to access the information and services our members want, as and when they choose.

Mortgage lending

"Our rise in profit has been driven by growth in mortgage lending across a balanced product range, and lower impairment provisions.

"I am pleased to report that we continue to attract mortgage business well above our market share1 and in 2014 we helped more than 7,800 First Time Buyers to step onto the property ladder, accounting for over a third of our total lending by value.

"Our innovation in the mortgage market has won further awards and industry recognition, with a positive reception from borrowers, intermediaries and sector experts. This includes significant progress on lending on new build homes and our support for the Government's Help to Buy equity scheme. The latter are both examples of our efforts to support borrowers who are not well-served by the wider market.

Savings and members

"The continuing low interest rate environment has proved challenging for savers and we have worked hard to offer our members good value and to keep interest rates as high as possible for as long as possible. We saw strong demand in 2014 for our range of competitive ISAs and 10 Year Fixed Rate Bond.

"We have amended our legacy savings products to align them to prevailing market rates and have simplified the range from 260 to fewer than 50, whilst also improving access terms. As a result, all our savers receive an interest rate of at least 0.5%, which is equivalent to the current Bank Base Rate.

"As a consequence of the market rate environment, and in common with other providers, we have reduced rates on some of our accounts but delayed taking this action for as long as we could in order to maintain higher rates for as long as possible. Based on the latest information, we continue to pay 0.81% more to savers than the market average.

Financial performance

"Achieving good levels of profit enables us to build our financial strength and invest in the business. Operating profit increased by 26% to £80.9m as a result of record mortgage lending and a reduction in impairment losses, and we continued to reduce our commercial exposure, which now stands at less than 3% of total mortgage balances. Closure of our defined benefit pension scheme to future accrual also resulted in an accounting adjustment and took total pre-tax profit to £87.9m.

"Capital and reserves stood at a record £731m and our total assets rose to £12.1bn, so we are well-placed to support further lending growth. At the start of last year, a package of reforms to EU legislation, known as CRD IV, came into effect. A key requirement is that financial institutions have a minimum Total Solvency Ratio of 8%, and a Leverage Ratio of 3%. The Society's ratios are well above those figures, at 16.4% and 5.6% respectively.

"The credit ratings agencies, Moody's and Fitch, both continue to assign long-term 'A' ratings to the Society as a result of our continuing strong financial performance.

Investing in the future

"Our excellent profitability and sustainable business model mean we can look ahead to the future with confidence as we plan further enhancements to our service to members, including through digital channels, following the successful implementation of the initial phases of our new brand and technological improvements during 2014.

"Our colleagues are vital to our success and their professional service and high motivation ensure overall customer satisfaction remains high at 92%. The Society was the first financial services organisation to secure the new Service Excellence accreditation launched by the independent National Skills Academy and good quality training and career development opportunities help us to recruit and retain high-calibre colleagues.

"We created more than 100 new jobs in 2014, as we did in 2013, to support the growing business, with a similar number planned for the coming 12 months, and our newest colleagues include the first graduates of our Apprenticeship scheme, which is now in its third year."

Ends

Notes to Editors

A copy of the Society's results for 2014 is attached.

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

Leeds Building Society has won four awards for innovation in the past 12 months, including being named 'Innovator of the Year' at the Moneywise Magazine Mortgage Awards 2014 for its Welcome Mortgage. This allows borrowers to pay 0% interest for the first few months of their term so they can free up cash to help them settle into their new home.

The Society scooped the 'Mortgage Innovation Award' and was named 'Most Innovative Personal Finance Provider' at the Moneynet Personal Finance Awards 2014, and also received the 'Innovation Award (Lenders)' at the Mortgage Finance Gazette Awards 2015, in addition to being named 'Best Intermediary Lender', both for the second consecutive year, and winning the award for 'Best Use of Technology (Lenders)'.

Leeds Building Society has 67 branches throughout the UK, Gibraltar and Ireland and assets of £12.1bn (as at 31st December 2014). The Society has operated from the centre of Leeds since 1886.