4 Aug 2017 07:00
4th August 2017
Record start to 2017 as Leeds Building Society reports H1 results
Leeds Building Society's sustained focus on delivering value, security and service to its members has enabled it to achieve record results for the first half of 2017.
Savings balances and mortgage lending grew further as the Society helped more members than ever to save and have the home they want.
Strong mortgage growth drove a 9% increase in profit before tax to £63.2m (£58.0m to June 2016), giving the Society additional capital to maintain its financial security and continue to invest in the business for the benefit of members.
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 22,410 more people have the home they want with record new residential mortgage lending of £2.1bn, up by 10% (£1.9bn to June 2016)
· Grew net mortgage lending by over £1.0bn (£0.9bn to June 2016), taking total mortgage balances to £14.2bn (December 2016: £13.2bn)
· Helped over 41,000 more people to save, increasing total savings balances by a record £1.3bn to £12.5bn (December 2016: £11.2bn)
· Increased total membership to 778,000 (December 2016: 756,000), the highest in our history
Continuing financial security:
· Record profit before tax of £63.2m (£58.0m to June 2016)
· Maintained a strong unencumbered liquidity ratio of 14.5% (December 2016: 14.0%)
· Common Equity Tier 1 and Leverage Ratios of 14.6% and 5.1% respectively (December 2016: 15.2% and 5.2%) on a standardised basis, well above regulatory requirements
Delivering outstanding personal service:
· Overall customer satisfaction remained high at 91%1(December 2016: 92%)
· 87% of customer administration processing completed on the same day (82% to June 2016)
· Colleague engagement index rose to 80% (December 2016: 78%)
Investing in the Society:
· Refurbished our branch network to provide members with greater comfort and privacy in a more modern environment, and relocated our London branch
· Strengthened our intermediary Business Development team to give individual service and support to more brokers
· Introduced new "Project Me" programme to complement existing personal and career development opportunities for colleagues, to retain and reward the best talent
Highlights
Peter said: "I'm proud to report another strong performance for the first half of 2017, in a climate of political and economic uncertainty.
"We make our business decisions in the best interests of all our members, whether they're savers or borrowers. Because we're a mutual we are able to take a longer-term view so we can grow in a responsible and sustainable way and help as many people as possible to save and have the home they want.
Supporting the aspirations of borrowers and savers
"That's enabled us to increase our mortgage lending across a balanced product range while supporting borrowers who aren't well served by the wider market. Alongside mainstream lending, we're well-known for our expertise in sectors including Interest Only, Affordable Housing and Shared Ownership - What Mortgage magazine named us best Shared Ownership Lender for the second year running.
"To support borrowers and our intermediary partners we're constantly reviewing and refining our lending criteria to improve their experience during application and provide the best possible service.
"In the first half of 2017 we helped 22,410 more people to have the home they want, many of whom would not have been able to take this step without us. Of these, 5,922 were first time buyers.
"While Bank Base Rate remains at an historic low, we've worked hard to balance the needs of borrowers and savers and continue to pay above average returns. We added over 41,000 new savings members thanks to our efforts to improve our service and offer long-term good value products despite the challenging market.
"We paid on average 1.52% to our savers, compared to the rest of the market average of 0.85%2 equating to an annual benefit to our savers of over £70.8m.
"Our consistent approach was recognised with the 'Best Building Society Savings Provider' award from independent comparison site Moneyfacts, for the second consecutive year.
"In the first half of 2017, we increased savings market share3 and deposits by over £1.3bn, a new record for a half-year period, taking total savings balances to £12.5bn.
Continuing financial security
"We achieved record profits of £63.2m, up 9% on the same period in 2016. This allows us to maintain financial security for our members, continue to grow sustainably and increase regulatory capital and reserves to a record £952m.
"Our strong lending growth was not at the expense of quality as the average loan to value on new lending reduced to 64% (June 2016: 66%).
"Residential arrears4on the book reduced to 0.84% in June 2017 (June 2016: 1.24%) and we further reduced our commercial lending portfolio, which now represents only 0.5% of total loans.
Following recent ratings actions we continue to retain strong investment grade long-term credit ratings from Moody's, adjusted from A2 (negative watch) to A3 (stable) and Fitch, reaffirmed at A- (stable).
Delivering outstanding personal service
"We've continued to invest in our customer insight capability to better engage with members across a range of channels, including our online forum TalkingPoint, which now has more than 3,000 active participants.
"These steps mean we can gain a deeper understanding of our customers and the needs of current and future members, to drive service improvements and shape new product development.
"We've added new tools to our intermediary site to help with interest only cases and lending into retirement, as well as improvements to mortgage lending criteria.
"We made the application process more efficient so borrowers and brokers receive a mortgage offer more quickly and 87% of customer administration processing is completed on the same day. We cut the time we take to process ISA transfers from 15 days to three, and significantly improved our online account opening process.
Investing in the business
"Our branches are an integral part of our business, not least by attracting retail savings that we're able to lend. We completed a full refurbishment of our national network in the first half of this year, ahead of schedule and under budget.
"We also reviewed our branch network structure to ensure it remains relevant and in appropriate locations to meet the ever-changing needs of our members. This included the relocation of our London branch and a small number of closures.
"As we've done for more than 140 years, we'll keep adapting how we serve our members with the aim of providing them with a consistent, excellent service across all channels. We're continuing to develop our online functionality so members can contact us how and when they choose.
"Our continued investment in the business slightly increased our cost to income ratio to 44% (43% to June 2016), although our cost to mean asset ratio reduced from 0.63% to 0.56%. Our focus on efficiency means we'd expect these ratios to remain among the best of the established players in our markets.
Outlook
"The repercussions of last year's EU Referendum vote are likely to be felt for some time to come, compounded by the UK General Election result in June.
"House price growth has softened and the number of mortgage approvals in the market has remained relatively flat, at a time when lenders are also working through the detail of extensive regulatory change.
"Despite this outlook, the Society's strong foundations ensure it remains financially stable and secure, and well-placed to meet any challenges that may arise in the remainder of 2017 and beyond."
Ends
Notes to Editors
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 a board member of UK Finance, having previously served as Chairman of the Council of Mortgage Lenders.
Leeds Building Society operates throughout the UK, Gibraltar and Ireland and has assets of £17.3bn at 30th June 2017 (£14.9bn at 30th June 2016). The Society's head office has been based in the centre of Leeds since 1886.
GROUP RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2017 | |||||
Summary Condensed Consolidated Income Statement | |||||
Six months to 30 June2017 (Unaudited) | Six months to 30 June2016 (Unaudited) | Year to31 December 2016(Audited) | |||
£M | £M | £M | |||
Interest receivable and similar income | 199.7 | 203.5 | 406.3 | ||
Interest payable and similar charges | (96.9) | (106.1) | (204.5) | ||
Net Interest receivable | 102.8 | 97.4 | 201.8 | ||
Fees and commissions receivable | 4.2 | 5.8 | 10.4 | ||
Fees and commissions payable | (0.3) | (0.4) | (0.8) | ||
Fair value gains less losses from derivative financial instruments | (0.5) | (0.6) | (1.3) | ||
Other operating income | 0.6 | 1.2 | 1.9 | ||
Total income | 106.8 | 103.4 | 212.0 | ||
Administrative expenses | (45.0) | (42.8) | (88.7) | ||
Depreciation and amortisation | (1.5) | (1.8) | (3.2) | ||
Impairment of loans and advances to customers | 4.0 | 1.0 | 0.9 | ||
Provisions charge | (1.1) | (1.5) | (3.9) | ||
Impairment losses on land and buildings | 0.0 | (0.3) | (0.5) | ||
Investment property fair value movement | 0.0 | 0.0 | 0.0 | ||
Operating profit and profit before tax | 63.2 | 58.0 | 116.6 | ||
Tax expense | (16.1) | (15.0) | (30.6) | ||
Profit for the financial year | 47.1 | 43.0 | 86.0 | ||
Summary Condensed Statement of Financial Position | |||||
30 June2017 (Unaudited) | 30 June2016 (Unaudited) | 31 December 2016(Audited) | |||
£M | £M | £M | |||
Assets | |||||
Liquid assets | 2,250.0 | 1,723.6 | 1,904.0 | ||
Derivative financial instruments | 271.1 | 267.4 | 263.1 | ||
Loans and advances to customers | 14,495.1 | 12,575.6 | 13,477.7 | ||
Intangible assets | 5.6 | 3.1 | 3.0 | ||
Property, plant and equipment | 31.4 | 33.1 | 30.1 | ||
Deferred income tax assets | 2.1 | 0.0 | 2.6 | ||
Retirement benefit surplus | 0.0 | 0.6 | 0.0 | ||
Prepayments, accrued income and other assets | 229.6 | 281.4 | 249.2 | ||
Total assets | 17,284.9 | 14,884.8 | 15,929.7 | ||
Liabilities | |||||
Shares | 12,457.7 | 10,569.3 | 11,233.2 | ||
Derivative financial instruments | 184.5 | 273.5 | 214.4 | ||
Deposits and securities | 3,503.7 | 2,997.1 | 3,400.8 | ||
Current income tax liabilities | 15.9 | 15.7 | 14.1 | ||
Deferred income tax liabilities | 1.7 | 2.4 | 2.7 | ||
Provision for liabilities, accruals and deferred income | 175.1 | 167.0 | 162.6 | ||
Retirement benefit obligations | 1.2 | 0.0 | 2.6 | ||
Subscribed capital | 25.0 | 25.0 | 25.0 | ||
Total equity attributable to members | 920.1 | 834.8 | 874.3 | ||
Total liabilities and equity | 17,284.9 | 14,884.8 | 15,929.7 | ||
Condensed Statement of Comprehensive Income | Six months to 30 June2017 (Unaudited) | Six months to 30 June2016 (Unaudited) | Year to31 December 2016(Audited) | ||
£M | £M | £M | |||
Available for sale investment securities gain/(loss) | (2.1) | 6.7 | 7.8 | ||
Actuarial (loss)/gain on retirement benefit obligations | 0.5 | (5.3) | (9.5) | ||
Revaluation loss on properties revalued | 0.0 | 0.0 | (1.8) | ||
Tax on items taken directly to equity | 0.3 | (0.2) | 1.2 | ||
Other comprehensive income net of tax | (1.3) | 1.2 | (2.3) | ||
Profit for the year | 47.1 | 43.0 | 86.0 | ||
Total comprehensive income for the year | 45.8 | 44.2 | 83.7 | ||
Summary Condensed Consolidated Cash Flow | Six months to 30 June2017 (Unaudited) | Six months to 30 June2016 (Unaudited) | Year to31 December 2016(Audited) | ||
£M | £M | ||||
Net cash flows from operating activities | 316.6 | (486.9) | (189.1) | ||
Net cash flows from investing activities | (80.8) | 112.3 | 73.5 | ||
Net cash flows from financing activities | 36.5 | 538.0 | 414.4 | ||
272.3 | 163.4 | 298.8 | |||
Cash and cash equivalents at the beginning of the year | 1,126.2 | 827.4 | 827.4 | ||
Cash and cash equivalents at the end of the year | 1,398.5 | 990.8 | 1,126.2 | ||