TIDMLBS
RNS Number : 9831G
Leeds Building Society
30 July 2021
30 July 2021
Record support for housing market key in successful Leeds
performance
Building Society CEO says lending strategy central to remarkable
H1
Supporting first time buyers and the vibrant housing market were
key to Leeds Building Society's successful performance in the first
half of this year, said its Chief Executive Officer.
As he reported interim results for H1 2021, Richard Fearon said
the mutual's strategy of supporting customers in under-served
sectors had driven a successful six months as the housing market
continued to trade strongly.
This included helping more than 8,600 first time buyers onto the
housing ladder in 2021, a new record for any half year period and a
record 37% share of the Society's new lending overall.
The rebound in home buying and remortgage activity since summer
2020 led to some of the biggest months for mortgage applications in
Leeds Building Society's long history and in 2021 its busiest ever
half year.
Gross lending was up by 97% at GBP2.0bn (GBP1.0bn 30 June 2020)
which, together with an increase in Net Interest Margin(1) ,
delivered half year profit before tax of GBP70.3m ( GBP32.6m 30
June 2020).
"In responding to the ongoing challenges posed by the pandemic
we've remained focused on our core purpose, to help people save and
have the home they want, and kept our members at the heart of our
long term business priorities," said Richard.
"We've supported the housing market at an exceptionally busy
time, and supported our existing borrowers by offering mortgage
payment deferrals, as well as waiving arrears fees until the end of
this year.
"We've supported our savers by keeping branches open for access
to essential financial services and have carried on paying 0.56%
above the market average rate(2) , which equates to an extra
GBP78.5m in our savings members' pockets.
"I'm immensely proud of my colleagues and their sustained
efforts as the impact of the pandemic on our members has continued
to evolve. Their professionalism and dedication served the Society
well throughout 2020 and has been evident again during 2021,
helping us to achieve an outstanding performance.
"Whether it's developing new products or providing great
service, our people have been integral to successes such as
re-entering mainstream 95% LTV lending, backing national affordable
housing initiatives such as First Homes and Shared Ownership, and
creating new 'green' products.
"Having been able to accelerate our planned investment in 2020,
we've now completed more steps to upgrade our IT systems, including
introducing Lender Connect to save our intermediary partners time
and effort. We're proceeding to plan with further major
improvements to future-proof operations and boost resilience, such
as our new data centres.
"This investment programme will benefit our membership as a
whole by enabling greater efficiencies, reducing costs and cutting
our environmental impact.
"In reporting 2020's results, we set out our strategic aim to be
carbon net neutral for scope 1 and 2 emissions by the end of
2022(3) and are on target to achieve this 12 months early, as we
continue to invest significant effort in progressing our
responsible business strategy.
"At a time when other employers have been laying off staff or
placing them on furlough, I'm pleased we've done neither and
instead have been able to carry on investing in skills and created
more than 80 new roles. These have been concentrated on
strengthening important functions such as IT and data, as well as
adding more underwriters and business development managers to
improve service for our intermediary partners.
"In addition, we're increasing our minimum full time equivalent
(FTE) salary to GBP18,200 per annum, a new base salary level for
colleagues of GBP10 per hour, above and beyond our commitment as an
accredited Living Wage Employer, and 50p per hour more than the
Real Living Wage outside London.
"It's a landmark year for us in 2021 and we're using learnings
from the pandemic to ensure we keep on evolving. Having completed
the move into our EPC A-rated new head office in Sovereign Street,
we're experimenting with the flexible space it offers to find the
right balance for hybrid working, and we're really looking forward
to the imminent opening of our newest, largest branch in Leeds city
centre."
While the UK's fifth-largest mutual retains its focus on
efficiency, increased operating costs for 2021 were anticipated to
reflect the scale of investment in future-proofing the Society and
its operations for years to come. Despite that, cost to income and
cost to asset ratios of 44.9% and 0.56% respectively (52.5% and
0.47% 30 June 2020) remain among the best in the building society
sector.
The Society maintained its cautious approach to navigating the
pandemic, with tighter lending policy and criteria than pre-COVID,
strong liquidity levels well above regulatory requirements and
appropriate levels of provisions to reflect the fact economic
conditions remain volatile and uncertain. Total arrears remain at a
low level, comparing favourably against industry benchmarks(4) ,
and the Society continues to retain extremely strong levels of
capital, with a CET 1 ratio of 37.6% (34.5% 30 June 2020).
Pleasingly, customer satisfaction and colleague engagement
scores remain at record highs, at 93% and 86% respectively, and
both groups have continued their enthusiastic support for the
Society's national charity partner, Dementia UK. In May the
partnership launched Closer to Home, to increase access to
specialist dementia clinics for communities across the UK.
Richard said: "The pandemic has created obstacles for all of us
to overcome but for almost a century and a half the Society's
strength has protected our security and independence through
previous periods of economic and social upheaval.
"The trust of our members and support of our intermediary
partners is all the more valued in today's testing times and the
faith they have placed in us, combined with our strong performance,
gives me added confidence when I look to our future."
Ends
Notes to Editors
Key information from the Society's Group Interim Results to 30 June 2021 is attached.
For the Society's Interim Financial Report, follow the link:
http://www.rns-pdf.londonstockexchange.com/rns/9831G_1-2021-7-29.pdf
To arrange an interview with Leeds Building Society Chief
Executive Officer Richard Fearon, please contact the press office
on 07769 675330. Hi res photos are available from the press
office.
The Society operates throughout the UK and had assets of
GBP21.1bn at 30 June 2021 (GBP20.5bn at 30 June 2020). The UK's
fifth-largest mutual has its head office in the centre of Leeds,
where it has been based since 1886.
The Society won the title of Best Shared Ownership Mortgage
Lender in the 2021 What Mortgage Awards, its sixth consecutive year
of success in this category. It also received a Gold Ribbon from
Fairer Finance for savings accounts for the third year running,
based on customer happiness and trust, along with the ability to
explain things clearly.
(1) NIM increased to 1.23% for the six months to 30 June 2021
compared to 0.99% for the year to 31 December 2020
(2) Leeds Building Society paid an average rate of 0.97% to its
savers, compared to the rest of market average rate of 0.41%.
CACI's CSDB, Stock, June 2020 to May 2021, latest data
available
(3) Part of our Climate Change Framework, based on four pillars
(Risk Management and Scenario Analysis, Reporting and Disclosure,
Carbon Footprint and Products), designed to meet the requirements
of TCFD on a proportionate basis.
Scope 1 covers direct emissions from owned or controlled
sources; Scope 2 covers indirect emissions from the generation of
purchased electricity, steam, heating and cooling consumed by the
reporting company; and Scope 3 includes all other indirect
emissions that occur in a company's value chain.
(4) The Society's total arrears greater than 2.5% of balance at
30 June 2021 were lower than the market average (Source: UK
Finance: Mortgage Arrears and Possessions Update Quarter 1
2021).
Key facts and figures from Group Results for H1 2021:
Safely keeping the Society operating for the benefit of our
members
-- All Society premises COVID-secure and continue to keep
branches open as far as possible to enable members to access
essential financial services
-- Continued to pay our savings members above the market
average, equating to GBP78.5m extra in their pockets
-- Again secured a Gold Ribbon from Fairer Finance for offering
a good customer experience for savers, explaining our accounts
clearly and making them straightforward to operate
-- Continued to support the housing market with GBP2 billion of gross lending
-- Our busiest ever half year for mortgage applications as the
housing market rebound from H2 2020 continued strongly through H1
2021
-- Carried on with our successful strategy to support customers
less well-served by the wider market, including later life
borrowers affordable housing purchasers, and first time buyers
-- Helped more than 8,600 first time buyers onto the housing
ladder, a new record for any half year period in the Society's long
history and a record 37% of new lending
-- Continued shared ownership lending across LTV levels
including 95%, with strength in this specialist sector earning the
title of Best Shared Ownership Mortgage Lender in 2021's What
Mortgage Awards, for the sixth year running
-- Continued to support borrowers at risk of financial
difficulty as the mortgage payment deferral scheme drew to a close,
members having made use of this scheme in relation to more than
28,400 mortgages
-- Waived arrears fees until the end of 2021 and suspended
repossessions during the pandemic, as we continued to work closely
with members at risk of financial difficulty to agree a solution to
best suit their circumstances
Keeping the Society financially resilient
-- Generated record half year profit before tax of GBP70.3m ( GBP32.6m 30 June 2020)
-- Capital and reserves increased to GBP1.4bn (GBP1.3bn June
2020) , well above the regulatory requirement
-- Retained our keen focus on efficiency - our cost to income
ratio of 44.9% and cost to mean asset ratio of 0.56% remain among
the best in the building society sector
-- Rise in Net Interest Margin to 1.23% (0.96% June 2020)
-- Proceeding to plan with longer term projects to future-proof
Society systems and deliver efficiency savings, including
successful additions to Mortgage Hub online platform for brokers,
and moved into our environmentally friendly new head office in
Sovereign Street in Leeds city centre
-- As part of our commitment to a sustainable branch network
where there is sufficient demand, refurbished new premises for our
Leeds city centre branch in Commercial Street, opening shortly as
we vacate our previous base on Albion Street
Communicating with our members and colleagues
-- High customer satisfaction score of 93% (93% 31 December 2020)
-- High colleague engagement of 86% (86% 31 December 2020)
-- Continued to successfully operate through widespread
dispersed working while supporting effective colleague
collaboration across multiple teams, departments and functions
-- No colleagues furloughed and no pay cuts during pandemic and
84 new roles created, concentrated on key functions including IT,
data and mortgage underwriting
-- Was reaccredited with the Fair Tax Mark and retained the
Carbon Trust Standard for Carbon, as well as being a Living Wage
Employer and Leaders in Diversity
-- Celebrated first anniversary of our four-year partnership
with Dementia UK with the launch of our Closer to Home project, to
increase access to specialist dementia clinics for communities
across the UK
GROUP RESULTS FOR THE SIX MONTHSED
30 JUNE 2021
Condensed Consolidated Income Statement
Six months Six months Year to
to 30 June to 30 June
2021 (Unaudited) 2020 (Unaudited) 31 December
2020
(Audited)
GBPM GBPM GBPM
Interest receivable and similar income 201.6 219.1 402.6
Interest payable and similar charges (73.9) (119.4) (197.2)
------------------- ------------------- --------------
Net interest receivable 127.7 99.7 205.4
Fees and commissions receivable 3.1 2.8 5.6
Fees and commissions payable (0.2) (0.2) (0.6)
Fair value losses from financial instruments (1.2) (9.3) (16.8)
Other operating (expense) / income (1.2) 0.3 3.2
------------------- ------------------- --------------
Total income 128.2 93.3 196.8
Administrative expenses (52.9) (45.5) (92.9)
Depreciation and amortisation (4.6) (3.5) (7.5)
Impairment gains / (losses) on loans and
advances to customers 0.7 (11.7) (14.6)
Provisions charge (1.1) - (1.1)
------------------- ------------------- --------------
Operating profit and profit before tax 70.3 32.6 80.7
Tax expense (18.0) (5.8) (18.7)
Profit for the period 52.3 26.8 62.0
=================== =================== ==============
Summary Condensed Statement of Financial
Position
30 June 30 June 31 December
2020
2021 (Unaudited) 2020 (Unaudited) (Audited)
GBPM GBPM GBPM
Assets
Liquid assets 3,063.0 2,997.4 2,974.8
Derivative financial instruments 133.0 235.3 192.8
Loans and advances to customers 17,549.0 16,834.3 16,988.9
Fair value adjustment for hedged risk on
loans and advances to customers (23.1) 113.8 96.1
Intangible assets 27.2 23.6 28.8
Property, plant and equipment 84.0 69.4 81.3
Retirement benefit surplus 2.1 4.5 1.0
Deferred tax assets 6.8 6.6 5.6
Prepayments, accrued income and other assets 245.9 247.3 270.4
Total assets 21,087.9 20,532.2 20,639.7
=================== =================== ============
Liabilities
Shares 14,470.8 14,201.7 14,162.7
Fair value adjustment for hedged risk on
shares (51.7) (18.9) (13.5)
Derivative financial instruments 162.2 278.4 237.9
Deposits and securities 4,597.9 4,502.6 4,654.7
Current tax liabilities 3.1 1.5 2.3
Deferred tax liabilities 4.9 6.1 4.7
Provision for liabilities, other liabilities
and accruals 113.6 196.0 194.7
Subordinated liabilities 347.6 - -
Subscribed capital 233.4 242.0 241.5
Total equity attributable to members 1,206.1 1,122.8 1,154.7
Total liabilities and equity 21,087.9 20,532.2 20,639.7
=================== =================== ============
Condensed Statement of Comprehensive Income Six months Six months Year to
to 30 June to 30 June
2021 (Unaudited) 2020 (Unaudited) 31 December
2020
(Audited)
GBPM GBPM GBPM
Fair value (losses) / gains on investment
securities (1.9) 11.8 8.6
Actuarial gain / (loss) on retirement benefit
surplus 1.1 1.4 (1.9)
Revaluation gain on properties revalued - - 2.7
Tax on items (0.1) (3.3) (2.8)
------------------- ------------------- --------------
Other comprehensive income net of tax (0.9) 9.9 6.6
Profit for the period 52.3 26.8 62.0
Total comprehensive income for the period 51.4 36.7 68.6
=================== =================== ==============
Summary Condensed Statement of Cash Flows Six months Six months Year to
to 30 June to 30 June
2021 (Unaudited) 2020 (Unaudited) 31 December
2020
(Audited)
GBPM GBPM GBPM
Net cash flows from operating activities 275.0 (462.2) (209.1)
Net cash flows from investing activities 62.2 262.6 735.3
Net cash flows from financing activities (178.3) 137.1 (116.2)
------------------- ------------------- --------------
158.9 (62.5) 410.0
Cash and cash equivalents at the beginning
of the period 2,025.1 1,615.1 1,615.1
Cash and cash equivalents at the end of
the period 2,184.0 1,552.6 2,025.1
------------------- ------------------- --------------
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END
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