Leeds maintains momentum with record results

Unaudited interim results for six months to 30 June 2013

Leeds Building Society announced a strong set of half year results with savings balances, assets and membership numbers all at record levels.

Business Highlights:

• New residential lending increased by 20% to £921m (£769m, 30 June 2012), double our market share1.
• Net residential lending was 26% higher at £423m (£335m, 30 June 2012).
• Savings balances grew by £521m (£189m, 30 June 2012) to a record £8.3bn.
• 39,000 new members attracted (33,000, 30 June 2012), taking total membership to a record 703,000.
• Pre-tax profit increased by 13% in the first half of 2013 to £30.6m (£27.1m, 30 June 2012).
• Capital and reserves rose to a record £629m (£598m, 30 June 2012).
• Wholesale funding ratio reduced to 17.4% compared to 19.0% as at 30 June 2012.
• Liquidity ratio remains high at 19.2% (20.2%, 30 June 2012).
• Efficiency ratios remain strong:
  • Cost income ratio reduced to 31% (33%, 30 June 2012).
  • Cost asset ratio remained at 48p (48p, 30 June 2012) per £100 of assets.
• Assets increased by 7% to a record £10.8bn (£10.1bn, 30 June 2012).

Chief Executive at the time, Peter Hill, said “Leeds Building Society continues to provide security and value to its savers and support home ownership. I am also delighted that our mutual model has great appeal and we now have more members than at any time in our history.

“New loans rose to £921m, which continues our commitment to the mortgage market, following our strong performance throughout 2012. We have particular expertise in the first-time-buyer (FTB) sector and 30% of our lending, over £280m of completions, has helped almost 3,000 members to purchase their first home.

“We intend to increase new lending further this year and recently launched our unique Welcome Mortgage range, which offers borrowers a combination of flexibility and certainty over a 3 or 5-year term. This range is available up to 90% LTV and members have the option of paying 0% on the first 3 or 6 months of their mortgage, with the remaining monthly payments at a fixed rate for up to 3 or 5 years. We believe this innovation will support many more FTBs onto the housing ladder and enable other borrowers to achieve their home ownership aspirations.

“We continue to provide our members with competitive savings products backed up by excellent service, and we had a particularly strong ISA season. This combination has resulted in savings balances increasing by £521m in the first half of the year, to a record £8.3bn. Furthermore, this success means that all of the Society’s residential mortgage balances are funded entirely by retail deposits.

“Our successful savings strategy has enabled us to reduce our wholesale funding ratio to 17.4% (19.0%, 30 June 2012). Whilst members’ deposits remain the major component of our traditional building society business, we continue to benefit from access to diverse sources of funding and successfully completed our debut public securitisation in July 2013, raising £300m. We also continue to utilise the Funding for Lending Scheme to support our mortgage lending aspirations and have now drawn a total of £250m.

“The liquidity ratio remained high at 19.2% (20.2%, 30 June 2012) and is expected to reduce in the second half of the year as a consequence of our continuing lending growth.

“We attach great importance to our superior efficiency, highlighted by excellent cost ratios, whilst investing appropriately in the business. Our cost income ratio improved to 31%, from 33%, as a result of the increase in our total income. The cost asset ratio remained at 48p per £100 of assets. These are favourable compared to the average of building societies.

“As the recovery appears fragile and the economy is still some way from returning to full health, we work closely with borrowers to provide forbearance support where appropriate. Despite the challenging economic backdrop, our residential arrears (1.5% or more of outstanding mortgage balances) have reduced to 2.27% (2.76%, 30 June 2012).

“Commercial loan balances in arrears (1.5% or more of outstanding mortgage balances or balances in LPA receivership) reduced to 7.7% (11.3%, 30 June 2012). The Society’s exposure to this sector has reduced by £75m (16%) since June 2012 and now represents only 4.7% of our total mortgage portfolio.

“The charge for impairment losses and provisions for residential and commercial property increased to £26.4m in the first half of 2013 (£19.9m, 30 June 2012) as we continue to reduce our commercial loan portfolio. Total balance sheet mortgage provisions are £86m at 30 June 2013 compared to £81m at 31 December 2012 and £91m at 30 June 2012.

“As a result of our strong performance, pre-tax profit increased by 13% to £30.6m (£27.1m, 30 June 2012) in the first half of 2013 driven by higher net interest income. This has enabled us to increase capital and reserves by £31m, to a record £629m (£598m, 30 June 2012), resulting in a core tier 1 ratio of 14.2% (14.1%, 30 June 2012), and a Leverage Ratio of over 5%. Both of these ratios are significantly above regulatory requirements. We also remain one of only three building societies with ‘A’ long term credit ratings from Moody’s and Fitch.

“Leeds Building Society has again proven its ability to grow its lending, attract savings balances and increase its membership. This has led to a record level of total assets and strong profit growth. This means that we are in an excellent position to increase new lending significantly in 2013 and beyond, and continue to provide our members with security, value and excellent service.”

Note 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

Download a copy of the Society’s Interim Financial Results for the 6 month period ended 30 June 2013

Leeds Building Society has assets of £10.8bn (as at 30 June 2013) and 67 branches throughout the UK, Gibraltar and Ireland. The Society has operated from the centre of Leeds since 1886.