Back to February 2018

Leeds Building Society delivers record profits and strong asset growth - Hundreds more savers and borrowers helped every day

Hundreds of new savers and borrowers joined Leeds Building Society every day last year, leading to strong asset growth which drove record profits.

“Savings and mortgage balances, membership numbers and assets are all at record levels as we continue to grow sustainably and invest for the long-term benefit of the Society,” said Chief Executive Officer Peter Hill.

Peter welcomed the annual results as evidence of how the Society is delivering on its mission to help people save and have the homes they want, as he reported key successes against the Society’s four strategic aims:

Supporting the aspirations of savers and borrowers:

  • Helped a record 71,000 more people save for their future
  • Helped over 50,000 more people have the home they want, including 13,000 first time buyers
  • Strong membership growth, taking the total above 796,000, the highest in our history

Continuing financial security:

  • Savings balances increased by a record £1.9bn and now exceed £13bn (£11.2bn 2016)
  • Strong net mortgage lending of £1.8bn, with total mortgage balances reaching £15.2bn (£13.4bn 2016), an increase of 13%
  • Record profit before tax of £120.9m (£116.6m 2016)

Delivering outstanding personal service:

  • Overall customer satisfaction remained high at 91%[i]
  • Colleague engagement increased to 80% in 2017[ii] (78% 2016)
  • Retained our 1* Best Companies[iii] rating, highlighting the Society as an ‘employer of choice’

Investing in the Society:

  • Completed branch network refurbishment and secured new Head Office building keeping us in the heart of Leeds
  • Achieved the Carbon Trust Standard for Carbon for our ongoing commitment to environmental improvements and reduced our carbon footprint by 91%[iv]
  • New partnerships with parkrun and Samaritans to bring communities together and support those who may be struggling to cope.

 

Supporting the aspirations of borrowers and savers

Peter said: “As a member-owned building society, we work hard to balance the needs of savers and borrowers.

“In October last year we bucked the trend by increasing the current minimum rate paid to all our savings members[v] to 0.50%, when many of our competitors were cutting rates.

“We became the first high street financial services provider to pay this minimum rate across both ISAs and non-ISAs, a step we took before the Bank of England increased Base Rate for the first time in more than a decade.

“As a result, we paid an average 1.33% to our savers compared to the rest of market average of 0.70%[vi], which equates to an annual benefit to our savers of £75million. Our support for savers was recognised by independent comparison site Moneyfacts with the ‘Best Building Society Savings Provider’ award for the second year running.

“Our strong savings performance enabled us to keep growing our lending and focus on mainstream borrowers as well as key segments including Shared Ownership, Affordable Housing, Help to Buy and Interest Only.

“We helped a record 13,000 people buy their first home and our consistent approach to supporting borrowers less well-served by the wider market led to the accolade of ‘Best Shared Ownership Lender’ for the second consecutive year from What Mortgage Magazine.

 

Continuing financial security

“Our successful mortgage strategy and improved underwriting processes have supported sustained lending growth in recent years which, combined with a further reduction in loss charges, helped us achieve a record profit before tax of £120.9m.

“The right level of profit is essential to the success of a mutual and our profit in 2017 enabled us to increase our capital to £988m and maintain strong levels of Common Equity Tier 1 and Leverage ratios, well above the regulatory minimum requirements.

“Uncertainty around the UK’s exit from the EU remains. We also expect 2017’s tough competition, particularly in the mortgage market, to continue and this is likely to put downward pressure on our net interest margin during this year and into 2019.

“However our robust 2017 performance means we’re well-placed to withstand economic uncertainty, protect our members' money and keep growing sustainably.

 

Delivering outstanding personal service

“We’ve made purposeful progress in improving customer experience and saw high satisfaction scores in 2017, as well as receiving the ‘Best Building Society – Customer Service’ award at the 20th Annual Personal Finance Awards.

“Service enhancements including a new automated eISA process, cutting the average time to transfer tax-free funds into the Society to only three days, faster than the industry average[vii] and ensuring members earned interest with the Society sooner.

“We also improved our online lending affordability and monthly repayment calculators, and launched a new online switching service making it easier for existing borrowers to take a new deal with the Society.

“Our focus on making things simpler has further reduced the time taken between mortgage application and offer, helping borrowers into the home they want sooner.

 

Investing in the business

“Branches continue to play an important role in attracting retail savings we need to grow mortgage lending and our cost-effective refurbishment of all branches created a more modern environment for members and reduced our impact on the environment through energy-efficient technology.

“This, combined with purchasing renewable electricity, was instrumental in the Society achieving the Carbon Trust Standard for our ongoing commitment to reducing our carbon footprint.

“We reviewed our network to ensure branches are in areas where there’s sufficient demand, relocating our London branch and successfully opening a new branch in Bournemouth. We’ll continue to consider other new sites where appropriate.

“However, in line with other banks and building societies, our members are increasingly using multiple branches, telephone and the internet to access our products and services. Use of some locations had declined to an unsustainable level and we took the difficult decision to close a small number of branches.

“Our focused growth and the number of jobs created in the past five years means we’ve outgrown our Head Office in Leeds and we currently operate across three sites in the city centre. We’ve now secured a building that keeps us in the heart of Leeds, provides sufficient accommodation for our colleagues in the city and is close to existing transport links. This will make us even more efficient by bringing together operations on one site and further reduce our impact on the environment.

“We’re also continuing to invest in flexible and resilient technology as we strive to meet the changing needs of our members, and further developing our digital and online capability.

“We’ll continue to balance the need to invest in the Society while maintaining a sustainable, low-cost base and we expect our cost to income and cost to mean asset ratios to remain among the best in the building society sector.

“In 2017, I’m also pleased to report we’ve made excellent progress against our Corporate Responsibility targets which were first published in December 2016, and we’ll continue to focus on doing the right thing. More than half of all colleagues volunteered in the community and I commend them for their efforts.

“I’m also very proud that we’re partnering with parkrun, a not-for-profit organisation providing over 650 free weekly running events in communities throughout the UK, and Samaritans, as we aim to raise £250,000 over the next two years to support those who are struggling to cope.

 

Outlook

“Central to our successful performance in 2017 has been our commitment to doing the right thing for our members, colleagues and communities, and our strong profit has resulted in record retained capital and reserves and further consolidated our financial strength.

“Looking forward, we’ll continue to monitor the implications of the UK’s exit from the EU. We expect competition in our core markets to remain high but our focus on efficiency and growth will offset some of the downward pressure on margin.

“We remain committed to delivering our strategy of investing in the long-term interests of the Society and sustainable growth for the benefit of our growing membership, whether savers or borrowers.”

 

[i] Overall customer satisfaction is 91% in a survey of 7,288 members from January to December 2017.

[ii] According to the Your Voice survey completed by colleagues in May 2017.

[iii] Best Companies is a recognised accreditation provider for workplace engagement, helping us deliver our strategy to attract and retain talented colleagues.

[iv] The Society reduced its carbon footprint by 91% or 1,130 tonnes in 2017 compared to a 2016 baseline, as a result of energy efficiency measures, including branch refurbishment, moving our North East contact centre to a more energy-efficient building and switching to renewable electricity.

We used a ‘market based’ methodology that takes into account both the energy efficiency measures we’ve introduced and the procurement of renewable electricity.

[v] As long as the account is operated in line with the Terms and Conditions.

[vi] CACI CSDB, Stock,  data, January 2017 to December 2017, latest data available - CACI is an independent company that provides financial services benchmarking data and covers 86% of the high street cash savings market.

[vii] Cash ISA Transfer Service – BACS Cash ISA Participation Performance Report.

 

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.

Leeds Building Society was named Best Building Society Savings Provider in the Moneyfacts Awards 2017, having also won this title in 2016.

Leeds Building Society won the title of Best Shared Ownership Mortgage Lender at the 2017 What Mortgage Awards, its second consecutive year of success in this category.

Leeds Building Society operates throughout the UK, Gibraltar and Ireland and has assets of £18.5bn at 31st December 2017 (£15.9bn at 31st December 2016). The Society’s head office has been based in the centre of Leeds since 1886.


GROUP RESULTS FOR THE YEAR ENDED 31 DECEMBER 2017

 

 

 

 

 

 

 

 

 

Summary Consolidated Income Statement

 

 

 

 

 

2017

 

 

2016

 

£M

 

 

£M

 

 

 

 

 

Interest receivable and similar income

413.2

 

 

406.3

Interest payable and similar charges

(200.0)

 

 

(204.5)

Net Interest receivable

213.2

 

 

201.8

Fees and commissions receivable

8.7

 

 

10.4

Fees and commissions payable

(0.5)

 

 

(0.8)

Fair value gains less losses from derivative financial instruments

(1.3)

 

 

(1.3)

Other operating income

0.9

 

 

1.9

Total income

221.0

 

 

212.0

Administrative expenses

(92.5)

 

 

(88.7)

Depreciation and amortisation

(3.0)

 

 

(3.2)

Impairment of loans and advances to customers

5.5

 

 

0.9

Impairment losses on intangible assets

(5.6)

 

 

0.0

Impairment losses on property, plant and equipment

(0.9)

 

 

(0.5)

Provisions charge

(3.6)

 

 

(3.9)

Operating profit and profit before tax

120.9

 

 

116.6

Tax expense

(32.9)

 

 

(30.6)

Profit for the financial year

88.0

 

 

86.0

 

 

 

 

 

Summary Statement of Financial Position

 

 

 

 

 

31 December 2017

 

 

31 December 2016

 

£M

 

 

£M

Assets

 

 

 

 

Liquid assets

2,730.3

 

 

1,904.0

Derivative financial instruments

258.5

 

 

263.1

Loans and advances to customers

15,223.0

 

 

13,477.7

Intangible assets

5.2

 

 

3.0

Property, plant and equipment

54.4

 

 

30.1

Deferred income tax assets

1.9

 

 

2.6

Retirement benefit surplus

1.0

 

 

0.0

Prepayments, accrued income and other assets

209.7

 

 

249.2

Total assets

18,484.0

 

 

15,929.7

 

 

 

 

 

Liabilities and equity

 

 

 

 

Shares

13,065.7

 

 

11,233.2

Derivative financial instruments

161.9

 

 

214.4

Deposits and securities

4,061.6

 

 

3,400.8

Current income tax liabilities

15.6

 

 

14.1

Deferred income tax liabilities

3.2

 

 

2.7

Provision for liabilities, accruals and deferred income

192.0

 

 

162.6

Retirement benefit obligations

0.0

 

 

2.6

Subscribed capital

25.0

 

 

25.0

Total equity attributable to members

959.0

 

 

874.3

Total liabilities and equity

18,484.0

 

 

15,929.7

 

 

 

 

 

Statement of Comprehensive Income

 

 

 

 

2017

 

2016

 

£M

 

£M

Available for sale investment securities gain/(loss)

(3.9)

 

7.8

Actuarial (loss)/gain on retirement benefit obligations

2.0

 

(9.5)

Revaluation loss on properties revalued

0.0

 

(1.8)

Tax on items taken directly to equity

(1.4)

 

1.2

Other comprehensive income net of tax

(3.3)

 

(2.3)

Profit for the year

                      88.0

 

                      86.0

Total comprehensive income for the year

84.7

 

83.7

 

 

 

 

 

 

 

 

Summary Consolidated Cash Flow

2017

 

2016

 

£M

 

£M

Net cash flows from operating activities

508.3

 

(15.9)

Net cash flows from investing activities

(39.4)

 

73.5

Net cash flows from financing activities

356.5

 

241.2

 

825.4

 

298.8

Cash and cash equivalents at the beginning of the year

1,126.2

 

827.4

Cash and cash equivalents at the end of the year

1,951.6

 

1,126.2

 

 

 

 

Summary of key ratios

 

 

 

Gross capital as a percentage of shares and borrowings

5.7%

 

6.1%

Liquid assets as a percentage of shares and borrowings

15.9%

 

13.0%

Profit for the financial year as a percentage of mean total assets

0.51%

 

0.58%

Management expenses as a percentage of mean total assets

0.56%

 

0.62%

 

Notes to the Financial Information

 

 

 

1. The financial information set out above, which was approved by the Board of directors on 27 February 2018, does not constitute accounts within the meaning of the Building Societies Act 1986.