10 August 10
Leeds Building Society, the UK’s fifth largest building society, today announced strong half year results despite the challenging economic climate.
Business Highlights:
• Pre-tax profit increased in the first half of 2010 by 10% to £18m (£16.3m, 30 June 2009).
• Savings balances rose by £254m (£66m, 30 June 2009), to a record level of £7bn.
• 34,000 new members attracted (32,000, 30 June 2009) taking total membership to a record level of over 688,000.
• Efficiency remains strong:
o Cost asset ratio of 45p per £100 of assets.
o Cost income ratio of 35%, down from 36% at the end of 2009, which was the lowest of any major society.
• Capital and reserves remain strong at £515m even after the buy back of £39m of subordinated debt.
• Wholesale funding ratio reduced to 20% compared to 23% as at 31 December 2009.
Chief Executive, Ian Ward, said "Leeds Building Society has achieved a strong financial performance for the first half of the year. Our highly efficient, successful, sustainable business model continues to deliver good results, with pre-tax profit increasing by 10%, to £18m, compared to the same period last year.
"Total membership increased to almost 690,000 and our savings balances rose by £254m. This half year performance was £177m above our natural building society market share.
"Throughout the first half of 2010, we offered a wide range of mortgage products, with new lending totalling £400m, enabling many people to remortgage or buy their first home. All of the Society’s residential mortgage lending is funded entirely by retail savings and we are targeting £1bn of new lending this year.
"Efficiency remains a cornerstone of our success and this is highlighted by our excellent cost ratios. Our cost income and cost asset ratios remained very strong at just 35% and 45p per £100 of assets. These are very favourable compared to the average of the major building societies, which were 86% and 83p respectively, at the end of 2009.
"Strong profitability and high levels of capital enabled the Society to repay £39m of its subordinated debt. Our capital and reserves remain very strong at £515m (£543m 31 December 2009) and our regulatory capital is in excess of regulatory requirements.
"As we move into a period of austerity following the worst recession for over 60 years, there are inevitably a very small number of borrowers experiencing difficulties meeting their mortgage repayments and we continued to work with these customers through this period. Our residential arrears (2.5% or more of outstanding mortgage balances) have increased slightly to 2.32%.
"Despite this, the charge for impairment losses and provisions for commercial and residential property reduced to £24m in the first half of 2010 (£26.6m, 30 June 2009) and pre-tax profit increased to £18m (£16.3m, 30 June 2009). Total balance sheet provisions increased to £77.1m at 30 June 2010 from £59.1m at 31 December 2009.
"Leeds Building Society maintained its strong long term deposit ‘A’ credit ratings, with both Fitch and Moody’s, despite the very challenging economic environment. In February 2010, Fitch said "The ratings of Leeds Building Society reflect its good earnings capacity, excellent cost efficiency and strong capital position". In July 2010, Moody’s noted the Society’s key strengths as strong efficiency ratios, strong capital and strong management of margin in a low base rate environment.
"Our business model remains robust and successful as we continue to focus on efficiency, a prudent approach to lending, maintaining very strong levels of capital and high credit ratings. This, combined with delivering good value for money products backed up by excellent service to our members, means that we are in a very good position to deal with the challenging economic outlook for the remainder of 2010 and beyond."