2012 Interim Results

Yorkshire Building Society announces strong interim results and an increase in lending.

Another strong performance

Yorkshire Building Society, the UK's second largest building society, has reported another strong financial performance for the first six months of 2012. During the period the Group increased its lending to new borrowers and boosted existing borrower retention whilst strengthening its robust capital position and maintaining asset quality.

This positive performance in the first half of the financial year, together with the Yorkshire's recent merger and acquisition activity, underlines its position as a strong and resilient independent financial mutual and reinforces members' confidence and trust in the Group.

Financial Performance

  • Group pre-tax profit £82.8m (£73.1m Jun 2011). Core operating profit increased by 2% to £92.4m (£90.2m Jun 2011)
  • Net lending of £523m with total mortgage balances growing to £27.5bn (£27.0bn Dec 20111)
  • Member savings balances stable at £26.1bn (£26.0bn Dec 20111)
  • Gross mortgage lending increased by 58% compared to same period last year
  • Increased non-interest income to £24.5m (£20.5m Jun 2011), earned principally from sales of insurance and investment products through third party partners
  • Successfully issued a debut four year sterling floating rate covered bond

Member Security

  • Robust capital position - Core Tier 1 capital ratio 12.9% (12.6% Dec 2011)
  • Liquidity maintained at 15.9% - sensibly above regulatory requirements
  • 100% of mortgages funded by savings balances and reserves
  • All sovereign exposure is to the UK - no direct exposure to Eurozone economies
  • Group averaged indexed loan-to-value remains low at 54.5%
  • Maintained asset quality - loans in arrears by more than three months by volume reduced to 1.38%, materially below the industry average of 1.96%2
  • Reduced mortgage impairment charge by 17% reflecting our improved arrears position
  • Maintained a prudent weighted average life of wholesale funding of 36 months

Member Benefits and Other Highlights

  • Opened three new branches and a further nine are planned over the next 18 months. Also opened two new high street agencies taking our high street presence to 323 outlets across the UK, the 9th largest financial services high street network
  • Continued investment in online services to improve and simplify management of online accounts
  • Integration of Egg mortgage and savings balances and Norwich & Peterborough Building Society well underway
  • 112,000 new customers attracted by offering competitive products with over 300 savings and 1,300 mortgage mentions in national press best buy tables3
  • Triple Access Saver, a traditional branch-based passbook account which combines a sustainable competitive variable rate with access to savings, attracted 87,000 new savers since its launch last year
  • One in four (24%) loans granted to first-time buyers, helped by our unique range of fee-assisted mortgages
  • Customer satisfaction surveys show 91% of our members rate our service as good or excellent
  • Net Promoter Score4, an industry measure of active customer advocacy, of +48% compared to an average of 0% for UK banks
  • Financial Ombudsman Service5 upheld 13% of complaints in favour of the customer compared to the latest published average for the industry of 64%
  • Increased employment by 190 roles across the Society's head office sites and branch network
  • The Group continued to be recognised by the industry winning 10 Awards so far this year, including Best High Street Savings Provider (Consumer Moneyfacts), Best Overall Mortgage Provider (Moneynet) and Best Lender for Fixed Rates (Moneywise)
  • Donated around £175,000 to 500 different charities and local community good causes, of which over 90% were nominated by members

Changes to the Board

  • After six and a half years on the Board, Richard Davey retired as Vice Chairman on 18 April 2012, a position he held for five years
  • Lynne Charlesworth, who joined the Board in 2006 and has extensive experience in risk management in the financial services and property industry, was appointed Vice Chairman on the same date

Chris Pilling, Chief Executive of Yorkshire Building Society said:

The strong performance of the Group in the first six months of 2012 reflects our track record for adopting an ambitious but prudent approach to our business. Whilst the economic environment remains uncertain we are confident that the Group is very well placed to continue to grow and prosper, providing our members with a credible and secure alternative to the high street banks and an organisation in which they can continue to place their trust.

Our activities remain focused on our members and the communities we serve and I am pleased that the Yorkshire is bucking the trend with investment in new branches and agencies. We are fully committed to retaining a strong presence on the high street, providing customers with access to a wide range of good value financial service products backed with the exceptional personal service they value. It is pleasing to report our strongest ever levels of customer advocacy across the Group, through the Net Promoter Scores. This is further evidenced by a recent increase in activity in our branches, with new customers opening savings accounts and switching to the N&P current account following the recent banking scandals, clearly recognising us as a credible alternative to our plc competitors. We have also continued to invest in our award winning internet and telephony channels, ensuring members can deal with us in whatever way they choose.

Our purpose is to provide funding to enable people to own their own home and offer a safe home for those wishing to save. I am therefore proud that these results show an overall increase in our net lending, which we have achieved without changing our risk appetite, and growth in our retail funding which has been attracted at sustainable rates.

Whilst we continue to operate in a period of change and increased regulation, we look forward with optimism to the opportunities which lie ahead. In particular, due to the importance we place on providing competitive mortgages, the Government's proposed 'Funding for Lending' scheme looks very interesting and we are examining the detail to see if there is an opportunity for us to use this in our funding mix. We were also encouraged that the Treasury in its recent White Paper supported the building society sector, recognising the inherent differences between the mutual model and that of our plc competitors. In addition, we welcome the Government's interest in different business ownership models and its desire to create a more diversified financial services market. We are keen to continue to contribute to these debates.

Personally, it has been an amazing start for me as Chief Executive of the Yorkshire and it is a privilege to take this organisation forward, building on its strong legacy. I would like to take this opportunity to thank colleagues and members for their welcome and support.

 

Important information

  • Note 1: Comparison to Dec 2011 to reflect balances from merger and acquisition activity in the second half of 2011
  • Note 2: Source - PressWatch Financial from Kantar Media
  • Note 3: Source - Council of Mortgage Lenders for Q1, 2012 published 04 May 2012
  • Note 4: Source - Satmetrix 2011 Net Promoter® Benchmark Study of Consumers in France, Germany and the UK. Net Promoter Score refers to the net percentage of customers who, when responding to the question "How likely is it that you would recommend us to a friend or colleague? Would either strongly recommend or strongly detract from the organisation."
  • Note 5: Source - Financial Ombudsman Service for year ending 31 March 2012, including N&P figures from the date of merger (1 November 2011)