5 years of growth leads to record results for Leeds Building Society
Leeds Building Society reported record results for 2015 as it celebrated sustained growth for the fifth consecutive year and helped more borrowers than ever before have the homes they want.
Mortgage completions in 2015 reached their highest ever level at £3.1bn, taking gross lending in the past five years to almost £11bn, as the Society continued to deliver a strong lending performance above its market share year on year1.
Rising customer numbers during 2015 took the Society's membership to record levels and savings balances were greater than at any time in its history.
2015 highlights:
- New residential mortgage lending increased by 15% to to £3.1bn (£2.7bn 2014), significantly above our market share1
- Net residential lending of £1.4bn (£1.1bn 2014) is our best ever performance
- Operating profit rose by 34% to a record £108.5m (£80.9m 2014)
- Savings balances grew by £751m (£560m 2014) to £9.9bn, the highest level in our history
- We attracted 22,000 new members, taking total membership to a record 719,0002 (697,000 2014)
- Capital and reserves increased to £830m (£745m 2014)
- Total assets increased by 11% to £13.5bn (£12.1bn 2014)
Leeds Building Society Chief Executive Officer at the time, Peter Hill said: "I'm proud to report another excellent set of results after a successful 12 months, building on the sustained growth in recent years.
"We achieved this by providing good value products, despite the historically low interest rate environment. Increasing our lending led to record levels of profit, which enabled us to increase our capital and reserves and invest further in the long-term financial strength of the Society.
"As we celebrated our 140th anniversary in 2015, we helped more people than ever before to save for the future and to have the homes they want.
"And in the spirit of our founders, we continue to move with the times and innovate, to keep improving the service we offer to members.
Mortgage lending
"Meeting the ever-changing needs of members drives our innovation and we remain focused on helping more borrowers, including those who are not well served by the wider market, as part of increased lending across a balanced product range.
"In addition to our strong offering of competitive mainstream products, we are active in markets including Shared Ownership and Interest Only, where our product innovation has been recognised with industry awards.
"We endorse the Government's aims to build more homes and are part of initiatives such as Help to Buy, including in London, and I'm pleased we helped more than 9,400 first time buyers purchase their homes in 2015. This accounted for 37% of our total lending by value (33% 2014), an increase of £252m compared to a year earlier.
Savings and members
"While borrowers have benefited from historic low rates, we understand the current economic environment remains challenging for savers and we continue to work hard to provide competitive returns. We paid our savers on average 1.78%, compared to the rest of the market equivalent of just 1.20%3, and all our savers receive a minimum return of 0.5%, which is equivalent to the current Bank Base Rate.
"The Society received the award of 'Best Regular Savings Account Provider' for the second year running from the independent consumer advice website Savings Champion and we also offered savers a competitive and popular ISA range.
"We enabled debit card usage for payments in branch and are piloting our mobile application, which is part of developing the ways our members can access information and do business with us at a time to suit them and in a way they choose.
"Independent member surveys show overall customer satisfaction remained high, at 91%4, and our Net Promoter Score® of +49 benchmarks very well against the industry5. Towards the end of 2015 we launched our online membership panel, 'TalkingPoint', to build even closer relationships with our members. This allows us to find out what matters to them and helps us improve our products and services based on their feedback.
Financial performance
"The rise in our mortgage lending, combined with a fall in the charge for impairment losses to £18.5m (£39.5m 2014), drove an increase in pre-tax profit of 23% to £108.5m (£87.9m 2014).
"Our net interest margin has improved but is likely to face some downward pressure as we move through 2016 and into 2017. This is due to increased competition, particularly in the mortgage market, which we've already experienced in the second half of 2015 and anticipate will intensify further in the coming months.
"However our excellent financial performance meant the credit ratings agencies, Moody's and Fitch, both continue to assign long-term 'A' ratings to the Society.
"We believe it's right to use our financial strength to move forward to meet the changing needs and expectations of members and our strong profitability and sustainable business model mean we're well placed to continue with our investment plan in 2016.
Investing in the future
"During the first half of 2015, we successfully upgraded the Society's core IT systems, which has created a platform for future improvements to our service. These include a new mobile application and members will see further benefits from these enhancements in the coming months.
"Well-trained and highly-motivated colleagues are essential to our delivery of outstanding service to our members and in 2015 we achieved Best Companies accreditation6, highlighting the Society as an 'employer of choice'.
"To support the Society's growth, we created 150 more jobs in 2015, taking the total number of colleagues to 1,300 and requiring additional office space in Leeds and the North East. As a result of this investment, our cost to asset and cost to income ratios increased to 62p (2014: 57p) per £100 of assets and 36% (2014: 33%) respectively. However, our focus on efficiency will ensure these ratios remain among the best in the building society sector.”
Ends
1 Leeds Building Society defines market share as follows:
Mortgages - Council of Mortgage Lenders market share statistics
Savings - Mutual sector net retail savings as published by the Building Societies Association
2 The methodology for calculating the number of members was reviewed and refined in 2015. The previous year has been restated for comparative purposes.
3 CACI Data, November 2015, latest figures available – CACI is an independent company that provides Financial Services benchmarking data and covers 85% of the high street cash savings market
4 Customer Satisfaction rating based on the views of 2,300 customers
5 Net Promoter, NPS, and the NPS-related emoticons are registered service marks, and Net Promoter Score and Net Promoter System are service marks, of Bain & Company, Inc., Satmetrix Systems, Inc. and Fred Reichheld - based on the views of 750 customers surveryed in Q4 2015
6 Best Companies measures employee engagement levels, through extensive research into employee opinions and workplace concerns
A copy of the Society's results for 2015 follows.
GROUP RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
Summary Consolidated Income Statement
|
2015 |
2014 |
|
|
£M |
£M |
|
|
Interest receivable and similar income |
402.7 |
397.5 |
|
Interest payable and similar charges |
(195.2) |
(212.7) |
|
Net Interest receivable |
207.5 |
184.8 |
|
Fees and commissions receivable |
12.3 |
13.8 |
|
Fees and commissions payable |
(1.0) |
(0.7) |
|
Fair value gains less losses from derivative financial instruments |
(0.9) |
(0.4) |
|
Other operating income |
1.0 |
0.9 |
|
Total income |
218.9 |
198.4 |
|
Administrative expenses |
(77.0) |
(64.6) |
|
Depreciation and amortisation |
(2.7) |
(1.6) |
|
Impairment of loans and advances to customers |
(18.5) |
(39.5) |
|
Provisions charge |
(8.8) |
(11.8) |
|
Investment property fair value movement |
(3.4) |
0.0 |
|
Operating profit before exceptional item |
108.5 |
80.9 |
|
Pension curtailment gain |
0.0 |
7.0 |
|
Profit before tax |
108.5 |
87.9 |
|
Tax expense |
(19.6) |
(18.5) |
|
Profit for the financial year |
88.9 |
69.4 |
|
Summary Statement of Financial Position |
||
|
31 December 2015 |
31 December 2014 |
|
|
£M |
£M |
|
|
Assets |
||
|
Liquid assets |
1,676.7 |
1,584.2 |
|
Derivative financial instruments |
104.9 |
120.4 |
|
Loans and advances to customers |
11,544.3 |
10,260.9 |
|
Intangible assets |
3.4 |
0.0 |
|
Property, plant and equipment |
32.1 |
29.9 |
|
Investment properties |
0.0 |
4.4 |
|
Deferred income tax assets |
0.1 |
1.4 |
|
Retirement benefit surplus |
5.1 |
1.3 |
|
Prepayments, accrued income and other assets |
140.0 |
128.7 |
|
Total assets |
13,506.6 |
12,131.2 |
|
Liabilities |
||
|
Shares |
9,932.9 |
9,181.6 |
|
Derivative financial instruments |
135.7 |
155.7 |
|
Deposits and securities |
2,531.0 |
1,971.0 |
|
Current income tax liabilities |
10.0 |
9.3 |
|
Deferred income tax liabilities |
2.4 |
2.6 |
|
Provision for liabilities, accruals and deferred income |
79.0 |
79.8 |
|
Subordinated liabilities |
0.0 |
0.9 |
|
Subscribed capital |
25.0 |
25.0 |
|
Total equity attributable to members |
790.6 |
705.3 |
|
Total liabilities and equity |
13,506.6 |
12,131.2 |
|
Statement of Comprehensive Income |
||
|
2015 |
2014 |
|
|
£M |
£M |
|
|
Valuation of available for sale investments |
(3.5) |
10.1 |
|
Actuarial gain/(loss) on retirement benefit obligations |
2.1 |
(7.4) |
|
Tax on items taken directly to equity |
0.0 |
(1.5) |
|
Other comprehensive income net of tax |
(1.4) |
1.2 |
|
Profit for the year |
88.9 |
69.4 |
|
Total comprehensive income for the year |
87.5 |
70.6 |
|
Summary Consolidated Cash Flow |
2015 |
2014 |
|
£M |
£M |
|
|
Net cash flows from operating activities |
(608.1) |
(450.3) |
|
Net cash flows from investing activities |
145.3 |
(203.6) |
|
Net cash flows from financing activities |
711.1 |
220.8 |
|
248.3 |
(433.1) |
|
|
Cash and cash equivalents at the beginning of the year |
579.1 |
1,012.2 |
|
Cash and cash equivalents at the end of the year |
827.4 |
579.1 |
|
Summary of key ratios |
||
|
Gross capital as a percentage of shares and borrowings |
6.6% |
6.5% |
|
Liquid assets as a percentage of shares and borrowings |
13.5% |
14.2% |
|
Profit for the financial year as a percentage of mean total assets |
0.69% |
0.60% |
|
Management expenses as a percentage of mean total assets |
0.62% |
0.57% |
Notes to the Financial Information
- The financial information set out above, which was approved by the Board of directors on 23 February 2016, does not constitute accounts within the meaning of the Building Societies Act 1986.
Peter Hill is currently Chairman of the Council for Mortgage Lenders and Chairman of the Northern Association of Building Societies.
Leeds Building Society received the 'Innovation Award (Lenders)' at the Mortgage Finance Gazette Awards 2016, the third consecutive year the Society has won this category, as well as the award for 'Product Innovation (Lenders)'.
The Society has also been named 'Best Regular Savings Account Provider' for the second consecutive year by independent consumer advice website Savings Champion.
Leeds Building Society has 67 branches throughout the UK, Gibraltar and Ireland and assets of £13.5bn (at 31 December 2015). The Society has operated from the centre of Leeds since 1886.
