Leeds Building Society has reported another set of strong results as its retiring Chief Executive Officer Peter Hill hands over to his successor, Richard Fearon.
The UK’s fifth largest building society, which has a proven track record of mortgage innovation, delivered UK net lending of £1.0bn and grew more than twice as quickly as the market. As a result, mortgage balances increased by six per cent to £15.8bn, while total assets rose by five per cent to £19.4bn.
As a mutual, it’s essential to balance the needs of all members, whether borrowers or savers, and Leeds Building Society continues to seek ways to support savers in a challenging, low interest rate environment. Paying 0.62% above the market average on savings equates to an annual benefit to the Society’s savers of £81.5m.
This strong performance in its core markets of mortgages and savings means the Society has an excellent platform to invest in the future to meet the changing needs of its 800,000 members.
Despite intense competition in the mortgage market, profit before tax remained robust at £116.9m compared to £120.9m a year earlier, lower primarily as a result of the one-off impact of the sale of its Irish mortgage book (£6.5m).
The buoyant 2018 performance brings to an end Peter Hill’s seven and a half years as Chief Executive Officer, as he is succeeded by Richard Fearon, who joined the Society Board three years ago.
Richard said: “Our robust 2018 caps off Peter’s successful tenure at the head of Leeds Building Society and I’m proud to take over from him as I look ahead to the future and the next stage of our development.
“Under Peter’s leadership the Society’s total assets and profits have more than doubled, giving us the platform to keep growing sustainably and focusing on what matters to our members, as we carry on striving to offer them security and value.
“Building societies, including our own, have been around a long time but have always embraced innovation and we’ll continue to adapt as the pace of change in modern financial services moves ever faster.
“Investment during 2019 will be the highest in our history so we can carry on helping more members save and have the home they want, while increasing our digital capability and moving forward with pace and focus to meet and surpass their expectations.
“This is possible thanks to the fact we’re financially stronger than we’ve ever been, because of our sustained and carefully-managed growth, supported by record profits in recent years.”
Total capital rose to £1.2bn (£988m 2017), well above the regulatory minimum requirements, as the Society raised £200m of capital as part of its plans to meet Minimum Requirement for Own Funds and Eligible Liabilities (MREL), well ahead of the regulatory timeframe.
Leeds Building Society secured IRB (Internal Ratings Based) permission from the Prudential Regulation Authority last year, enabling it to assess its own capital requirements for credit risk through use of internal models.
Richard said: “IRB permission shows the Society has the correct tools in place to make the right lending decisions and underpins our future growth by supporting continued innovation to develop new mortgage products and meet customer need in segments not well served by the wider market.
“The permission reflects how we measure, manage and control risk effectively, and empowers better business decisions as well as further enhancing our capital resilience.
“We retain strong investment grade long term credit ratings, with CET1 and total capital ratios of 31.3 per cent and 38.5 per cent respectively.”
The Society further managed down legacy portfolios – its residential arrears reduced to 0.46 per cent and the commercial lending portfolio now represents less than 0.2 per cent of all loans.
In addition to mainstream home loans, it was active in segments such as Shared Ownership, one of a variety of ways it helped almost 12,000 first time buyers onto the property ladder. Other segments included Buy to Let and Interest Only and the Society was the first national high street lender to launch a Retirement Interest Only mortgage range.
Customer focus also extends to taking account of members’ views on how the business conducts itself – in 2018 the Society was the first national high street financial institution to secure the Fair Tax Mark, an independent validation of tax policies and transparency which form part of its wider responsible business commitment.
It also was the first financial services organisation to receive Leaders in Diversity accreditation from the National Centre for Diversity, demonstrating the commitment from senior leadership to diversity and inclusion.
Achieving a 2* Best Companies rating marks it out as an “employer of choice” and secured the Society a place in the 2019 Sunday Times Top 100 Best Companies to Work For.
Engaged colleagues provide great service, helping the business’s KPMG Nunwood Customer Experience Excellence ranking to jump from 107th in 2017 to the equivalent of 53rd last year, one of only two top 15 financial services brands to improve score and ranking for two consecutive years.
As a building society, profits are retained for the long term benefit of members, enabling continued investment for the future while maintaining security through the ups and downs of economic cycles.
Such financial prudence has helped Leeds Building Society to weather external economic challenges throughout its long history so it remains strong, secure and independent.
Richard said: “Increased competition is expected to put further pressure on margin in 2019, and ongoing political and economic uncertainty linked to Britain’s exit from the EU will continue to affect consumer confidence and the housing market in unpredictable ways.
“We expect this, combined with the costs of our ongoing investment in member value and further developing our digital capability, to result in lower, though still robust, profitability in the near term.
“We’ve become the successful business we are today by evolving to meet the changing needs of our members, remaining focused on delivering the best for customers while responding to the challenges of the world around us.
“Our colleagues remain integral to our ongoing success and their commitment to delivering excellence to our members every day helps us to keep moving forward to be ready for an increasingly digital world and ensure we can be around for at least another 140 years.”