|2012 Business Highlights:|
|• New mortgage lending increased by 35% to £1.65bn (£1.23bn 2011) which is significantly above our
• market share.
|• Net residential lending of £737m (£300m 2011) is our best ever performance.|
|• Savings balances grew by £384m (£329m 2011) to £7.74bn, the highest level in our history.|
|• Assets increased by 5% to a record £10.32bn (£9.86bn 2011).|
|• 61,000 new members were attracted, taking total membership to a record 696,000.|
|• Pre-tax profit rose by 4% to £52.4m (£50.2m 2011).|
|• Capital and reserves increased by 7% to a record £614m (£572m 2011).|
Leeds Building Society has performed very strongly in 2012 and delivered a record performance in both our mortgage and savings markets. Residential mortgage completions increased by 35% to £1.65bn, net lending was almost two and half times higher than 2011, at £737m, and retail savings balances grew by £384m, a rise of 5%. I am also delighted that assets and membership numbers are the highest in our history and capital and reserves are at record levels. This has been achieved in the context of continuing challenges for the financial services sector and the UK economy as a whole, combined with a mortgage market that has seen very little growth in recent years.
I am particularly pleased that we achieved a record operating profit, with our membership and savings balances reaching their highest ever levels. We also saw new residential mortgage lending increase by 25%. In challenging trading conditions, we grew our market share in both mortgages and savings. This performance would not have been possible without our loyal and professional staff working hard to serve the needs of all our members.
Following my appointment as Chief Executive, I stated that my approach would be evolutionary, not revolutionary. Building on solid foundations, we have now developed a strategy to deliver the Society's vision, "to be Britain's most successful building society", outlined by the Chairman, Robin Smith. The strategy is built on four pillars:
In addition to developing the vision, your Society has made excellent progress in 2012 to implement the strategy.
Retail savings continue to play an important role in our funding strategy. The Society attracted over £2.4bn of deposits in 2012, and total balances increased to a record £7.74bn. Our net savings grew by £212m (excluding capitalised interest) in a market that contracted for building societies and 39,000 new savings members were attracted by the security and value we provide.
The Member Loyalty Bond was once again very popular and I am pleased that we are offering another exclusive product this year. Our branches play an important role in serving our members and this was endorsed when we won in the 'Best Regional Branch Network' category at the 2012 Your Money Direct Awards.
The Retail Distribution Review (RDR) represents a fundamental change from the current position on the high street. The Board held the view that, at a time when many other high street institutions are turning their backs on this type of service, with some focusing solely on high net worth customers, Leeds Building Society should continue to offer an advice service that complements our traditional building society savings accounts. We considered a range of possible partners, and decided to work with Legal & General, who have become the Society's main provider of advice to our members on investment and protection products.
Our ability to attract both retail and wholesale funding has enabled us to grow our lending further in 2012. New residential loans increased by 35% to £1.65bn, compared to £1.23bn a year earlier, and this represents almost double our market share. We have particular expertise in the Shared Ownership market, which is very popular with first time buyers, and we have also developed a number of Local Authority Mortgage Schemes (LAMS). These provide 95% loan-to-value loans to people who can afford the mortgage repayments, but are unable to provide a large deposit.
We believe that providing mortgages designed specifically for first time buyers plays an important role in supporting home ownership, the housing market and the wider economy and I am delighted that £497m of our new lending, almost 30%, has helped 5,700 first-time-buyers onto the housing ladder. Including these mortgages, the average loan-to-value on all new lending in 2012 was still only 56% (51% 2011).
A large proportion of our new mortgages came through intermediaries and our strong market proposition was recognised at the Legal & General Mortgage Club Awards, where we won the title of 'Best Regional Lender'. We also work hard to ensure that our processes are efficient and this was acknowledged when we won the Mortgage Finance Gazette 'Best Use of Technology Award for Lenders'. Through the capability of our colleagues, we were able to reduce costs, enhance communication and improve the efficiency of our mortgage offer process, resulting in all documentation being sent to solicitors by secure e-mail and instant delivery, rather than by post.
We continue to reinvest in the long-term prosperity of the Society as we develop a solid platform for growth, and I am delighted that we have been able to create over 30 new roles in 2012. As a result, our cost income ratio increased slightly to 33%, from 31% a year earlier, as did our cost asset ratio, from 48p per £100 of assets to 49p as at 31 December 2012. These ratios remain amongst the best in the building society sector.
Economic conditions remain challenging, maintaining the pressure on household budgets. We work closely with those borrowers experiencing financial difficulty and offer a range of forbearance options. Despite these headwinds, residential arrears (1.5% or more of outstanding mortgage balances) reduced from 3.23% in 2011 to 2.89%. The charge for impairment losses reduced by £6.6m, to £41.9m, in 2012. As a result, the total residential and commercial balance sheet provisions are £80m (£85m 2011), leaving the Society well covered for losses.
We no longer have any Treasury or Sovereign debt exposure to the so-called 'peripheral' Eurozone countries of Portugal, Italy, Ireland, Greece or Spain.
We have again delivered a strong pre-tax profit performance of £52.4m (£50.2m 2011), which has enabled us to further increase the security of our members' savings as capital and reserves increased by 7%, to £614m (£572m 2011). Only 4.2% of this is in the form of borrowed capital, the lowest ratio of the larger building societies. Our Core Tier 1 capital ratio strengthened to 14.3% from 13.8% in 2011, and total assets rose to £10.32bn (£9.86bn 2011), including liquid assets of £1.75bn, representing 18.5% of total funds.
Whilst there are many aspects to delivering a performance that is 'Best for Business' and 'Best for Members', I believe that our ability to provide competitive savings accounts, help people onto the housing ladder, and deliver sector leading efficiency are the key components of our success in 2012.
As an independent mutual owned by our members, I am particularly pleased that, during my first full year as Chief Executive, we have attracted 61,000 new members, and total membership is at a record high of 696,000.
We carry out regular independent member surveys and satisfaction scores remain consistently high, at an average of 95% in 2012. It is also pleasing to know that 93% of those surveyed would recommend Leeds Building Society to their family and friends. We also use the industry standard metric of Net Promoter Score (NPS), which measures the likelihood of a customer recommending a product or service. Our NPS of +54 benchmarks very well against the industry.
This research provides insight into how we are perceived as an organisation. However, we are not complacent and encourage feedback from all of our key stakeholders, and especially our members, on both positive and negative experiences. Our success has been built on listening and adapting quickly, we take corrective action where necessary, ensuring that any issues are eradicated and enhancements made where possible.
Our 'Nominate a Star' scheme encourages customers to recommend a colleague or a team that has delivered outstanding customer service. I am very proud to report that there has been a superb response in 2012 and we received 460 nominations from members providing excellent feedback about colleagues across the business.
All of the Society's members also have an opportunity to comment and have their say on the Society's performance and direction at our Annual General Meeting (AGM). As a mutual, we operate a 'one member, one vote' system and members can cast their vote in a variety of ways, including at their local branch, online or by post. We encourage all our members to use their vote and I would urge you to do so at this year's AGM.
Our colleagues play a vital role in our success and I am, therefore, delighted that our status as an 'Investor in People' was re-affirmed last year. There were many highlights in the report. Colleagues have a high degree of understanding around our vision, feel truly engaged and proud to be working for the Society, and welcome our very open and honest approach to leadership and management.
Each year we seek feedback from all our colleagues and the 2012 survey maintained high engagement levels, which benchmark well against the average for our industry. The average length of service for our colleagues is almost eight years. Over half have been with the Society for more than five years. Indeed, we have 100 colleagues with over 20 years' service and a further nine with over 40.
All of our colleagues benefit from a structured personal development plan and regular training to support career progression. As part of the work undertaken to deliver our ten-year vision, we will focus on recruiting and retaining the best talent and being 'Best for Colleagues'.
It is important that we take a responsible approach to everything we do and deliver value, security and sustainability to all our current and future stakeholders. We conduct our business in an ethical way, balance the interests of all our key stakeholders, including the wider community, and are a responsible corporate citizen. We published our first Corporate Responsibility report in January last year and have continued to develop our approach. We focus on four main areas of impact; community, members, colleagues and the environment.
As the UK's 5th largest building society, we have a national presence and our network of branches, and processing centres, play an important role in their local community. Therefore, we have developed our charity and community giving to provide a sustainable contribution to large national charities and local community causes.
Our partner charities are Age UK, Marie Curie Cancer Care, Variety – the Children's Charity and Leeds Building Society Charitable Foundation. They benefit from our Caring Saver Account, which pays 1% of the average balances held over the year, and our 'Your interest... in theirs' scheme, where members donate the pence amount of any interest they earn on their savings. We also make a donation for each vote cast at our AGM, and you can choose from the British Heart Foundation, WWF-UK (World Wide Fund for Nature), Help for Heroes, St. George's Crypt and our own Foundation, to receive the funds from your vote.
Our Heads of Department once again undertook a number of fund raising activities throughout 2012 for St. Gemma's Hospice, Tiny Lives and Martin House Children's Hospice. Our 'Matched Funding' scheme, which looks to support everyone at the Society with their charitable fundraising, has also been very successful. Through all of these initiatives, worthy causes have received £133,000 during the year, of which we are very proud.
We are aware that we can always do more to help and have launched the 'Lending a Hand' scheme, which enables all of our colleagues to spend a day volunteering in the community. The first to benefit from this was St. George's Crypt, when we held a food collection day in December. Over 1,500 tins and packets of dried food were donated and these were distributed to people in Leeds who desperately needed it.
Since its inception, the Leeds Building Society Charitable Foundation has donated almost £1.25m to charities located within fifteen miles of our branches and offices. Each donation looks to support community based projects which aim to provide relief from suffering, hardship or poverty, or their direct consequences.
We continue to focus on minimising our impact on the environment. During the branch refurbishments and upgrades carried out this year we have, wherever possible, incorporated energy efficient technologies. We have an active recycling and waste management policy, which has enabled us to recycle more than ever and reduce landfill, and we work in partnership with our suppliers to minimise carbon emissions.
We have also maintained our sporting affinities and agreed a new three-year sponsorship of Leeds Rhinos for the 2013, 2014 and 2015 seasons, as this is a very effective way of raising awareness of the Society. The new deal is the third successive three-year sponsorship agreed between us and, during the first six years, Leeds Rhinos have won eight major trophies, which is an outstanding achievement.
The challenging economic environment looks set to remain, with most forecasters predicting little or no improvement in the economy. This means the mortgage and savings markets are unlikely to improve materially in 2013, and the Bank of England Base Rate is likely to remain at its historic low for the foreseeable future.
Uncertainty continues in the eurozone, as the UK struggles to rebalance the economy and bring the deficit under control. Inflation looks set to continue to fall slowly and is likely to remain above wage growth. Household budgets will continue to experience pressures as the austerity measures look likely to continue for longer.
The regulatory environment continues to change. We have already successfully implemented our Retail Distribution Review strategy and look forward to working with the Financial Conduct Authority and Prudential Regulation Authority when they come into effect on 1 April this year. The new rules from the Mortgage Market Review will also be effective from April 2014.
Notwithstanding this, we are extremely well placed to continue our outstanding performance, providing our members with good value for money savings products and helping people to buy their own homes. Leeds Building Society is a profitable, well capitalised business and this gives us the opportunity to achieve our growth aspirations in 2013 and beyond.
It has been a pleasure to present my first full year's results which have been achieved in difficult economic conditions, and I would like to thank the Board of Directors and my dedicated and talented colleagues for their contribution.
We are committed to remaining independent and you, our members, remain at the heart of everything we do. I would like to thank you for your continued support as we look forward to further success together in 2013.
18 February 2013
Leeds Building Society is authorised and regulated by the Financial Services Authority and our registration number is 164992. The Society's Head Office address is 105 Albion Street, Leeds LS1 5AS.
The Society's permitted business is arranging and advising on Mortgages and General Insurance. You can check this by visiting the FSA website at www.fsa.gov.uk or by contacting the FSA on 0845 606 1234.