Yorkshire Building Society announces 2018 results

Yorkshire Building Society reported a strong performance for 2018, growing profit and savings balances, while delivering record mortgage lending and reducing costs.

In a competitive market, the mutual increased its pre-tax profit by 16% to £192.5m (2017: £165.8m) and improved its core operating profit by 13% to £180.8m (2017: £160.2m).

The Society supported tens of thousands of people to secure a place they can call home, financing more than 36,000 mortgages,[1] increasing gross lending by 10% to a record £8.9bn (2017: £8.1bn), and net lending by 60% to £1.6bn (2017: £1.0bn).

It helped members to save for the future, opening 197,000 new accounts and growing savings balances to £29.6bn (2017: £28.9bn). The mutual paid savings account holders £100m in additional interest because its average savings rates were 0.37% higher than the market average.[2]

Key 2018 highlights:

  • Growing profit: Profit before tax increased by 16% to £192.5m (2017: £165.8m) and core operating profit increased by 13% to £180.8m (2017: £160.2m).
  • Increasing financial strength and sustainability: Increased Common Tier Equity 1 ratio to 16.3% (2017: 15.8%). Liquid assets at £5.5bn (2017: £6.1bn), with a liquidity ratio of 13.9%(2017: 15.7%) remained above regulatory requirements.
  • Increasing member value for money: Costs reduced by £29m to £311m (2017: £340m), with the cost to income ratio decreasing to 61.0% (2017: 63.4%).
  • Helping people to buy homes: Gross mortgage lending increased 10% to a record £8.9bn (2017: £8.1bn) and net lending increased 60% to £1.6bn (2017: £1.0bn).
  • Helping members build financial resilience through saving: Retail savings balances grew by £0.7bn to £29.6bn (2017: £28.9bn), a growth rate of 2.1% (2017: 0.9%), and 2.7m people now save with the Society.[3]
  • Delivering long-term value for savers: Savings rates were on average 0.37% higher than the market2 (2017: 0.28%), which means the Society paid members more than £100m in additional interest through higher savings rates.   
  • Providing excellent customer service: Customer satisfaction was maintained at well above the industry average, with our Net Promotor Score (NPS) remaining at +41, with an industry average of +5.[4]
  • Supporting communities: The Society, members and colleagues raised £254,000 for charity partner End Youth Homelessness, bringing the total raised to £547,000. The money will help support homeless young people into rented homes.

Mike Regnier, Yorkshire Building Society Group’s Chief Executive, said:

It’s very pleasing that in a competitive market, which has seen margins under pressure, we’ve delivered a sustainable level of profit whilst also improving value for members. But it’s even more pleasing to know we’ve supported millions of people to achieve the financial goals which enable their life goals.

As a building society, our members are our customers and our shareholders. We’re here to provide them with the financial tools they need to achieve the things in life they want – whether that’s buying their first home, saving to build financial resilience, or using their money to help the next generation.

All of the money we make is either used to help our members, through higher than average savings rates, more flexible products and improved services, or kept within the Society to make us financially stronger and more resilient.

Our year-on-year reduction in operating costs, along with improvement in the management expense ratio, shows that we’re becoming more efficient and giving our members better value for money.


Achieving sustainable financial performance

  • Total capital ratio of 20.3% (2017: 20.1%).
  • Liquid assets at £5.5bn (2017: £6.1bn) and liquidity ratio of 13.9% (2017: 15.3%), ahead of regulatory liquidity requirements.
  • Cost:income ratio of 61.0% (2017: 63.4%) and management expense ratio of 0.73% (2017: 0.83%).
  • Net interest margin of 1.11% (2017: 1.23%) and a net interest income of £471.7m (2017: £502.1m), in line with the Society’s strategic plan.
  • Proportion of accounts in arrears by more than three months (including possessions) reduced to 0.50% (2017: 0.58%), against an industry average of 0.80%[5], reflecting the high quality of lending and the benign economic conditions.
  • Completed three successful public bond issuances in the wholesale markets as part of a continued strategy to diversify funding, including a €500m Medium Term Note issue, a £300m Residential Mortgage Backed Security issue and a £500m 5-year issue in the Covered Bond market.

Providing real help with real life to our members

  • Maintained an average Net Promoter Score of +41 (2017: +41), with an industry average of +5.4
  • Provided good long-term value for savers, paying on average 0.37% higher rates than the average rate for the rest of the market2 (2017: 0.28%).
  • Helped first-time buyers secure 6,960 mortgages.
  • Won 22 awards, with 11 accolades for mortgages and customer service, including First-Time Mortgage Buyers’ Choice Award at the Moneyfacts Consumer Awards 2018 and Best Customer Service at the TMA Supernovas 2018.
  • Simplified the way savings accounts are opened, reducing the time customers need to spend in a branch.
  • Enabled 12,500 customers to apply for and complete their remortgages online, saving customers time and reducing paper.
  • Introduced an innovative Help to Buy ISA mortgage, which offers preferential interest rates to first-time buyers who saved using a Help to Buy ISA account.
  • Completed our brand consolidation programme, transferring more than 570,000 Norwich & Peterborough Building Society (N&P) savings customers to the Yorkshire Building Society brand, giving members access to a larger national high street network in more than 240 towns and cities.

Making a positive impact on colleagues and communities

  • Named for the second year running as one of the top 30 UK employers for building flexible, family-friendly workplaces by charity Working Families.[6]
  • Won two national awards for inclusivity and diversity, including UK’s Most Improved Organisation of the Year and UK Financial Services Company of the Year.[7]
  • Increased apprentice numbers to 56 by recruiting 24 new apprentices for the Group’s award-winning scheme, which offers a permanent role on the same terms and conditions as other colleagues as well as the ability to gain relevant professional qualifications.
  • Raised £254,000 for End Youth Homelessness, bringing total fundraising to £547,000 and helping to provide young people with a safe place to call home.
  • Helped members to raise £309,000 for Yorkshire Building Society Charitable Foundation through the Small Change Big Difference™ scheme and made more than 312 donations totalling £439,000 to UK charities.
  • Helped charities and good causes to benefit from 16,923 hours of volunteering by enabling colleagues to share their skills and experience through their annual 31 hours’ volunteering allowance.
  • Delivered more than 560 financial education sessions to more than 17,000 young people through the innovative Money Minds programme, since its launch in 2015.

ENDS PRXX-18

Notes to Editors

About Yorkshire Building Society

Yorkshire Building Society has assets of £43.1 billion and has more than three million customers.

The YBS Group includes Yorkshire Building Society and its brands Chelsea Building Society and Norwich & Peterborough Building Society, and its subsidiary companies including Accord Mortgages Limited.

For further media information please contact:

Press Office on 0345 1200 890


[1] Excludes buy-to-let and further advances.

[2] YBS Group average savings rate compared to rest of market average rates based on savings stock from CACI’s Current Account and Savings Database (CSDB), covering 87% of the retail savings market (based on stock value). Data period January to November 2018.

[3] Figure includes customers who save through employer share save schemes administered by Yorkshire Building Society.

[4] KPMG Nunwood Customer Voice Programme, January to December 2018. Based on 14,556 completed interviews with customers. Net Promoter score and NPS are trademarks of Satmetrix Systems, Inc. Bains & Company, Inc., and Fred Reichheld.

[5] Council of Mortgage Lenders (CML), retail mortgages more than three months in arrears to 31 December, 2018.

[6] Working Families – Top 30 Employer for Working Families 2018 (2018).

[7] Winner of UK’s Most Improved Organisation of the Year and UK Financial Services Company of the Year at the National Centre for Diversity Grand Awards 2018.


Group Income Statement

2018

2017

 

 £m

 £m

Net interest income

       471.7 

       502.1 

Non-interest income

10.4 

14.5 

Net gains from financial instruments held at fair value

20.1 

13.1 

Net realised profits

8.0 

6.1 

Total income

510.2 

535.8 

     

Administrative expenses and depreciation

(311.2)

(339.5)

Provisions

(6.5)

(30.5)

Profit before tax

192.5 

165.8 

     

Tax expense

(42.7)

(41.4)

Net profit

149.8 

124.4 

 

 

 

Reconciliation of Core Operating Profits

2018

2017

 

 £m

 £m

Statutory Profit before tax

192.5 

165.8 

Reverse out the following items:

   

FSCS levy

(0.9)

2.5 

Restructuring provision

10.5 

13.6 

Non-core investments

(6.9)

(5.7)

Timing differences - fair value volatility

(13.3)

(7.4)

Mergers – adjustments to balances acquired

(2.5)

(3.5)

GMP equalisation

1.7 

Other non-core items

(0.3)

(5.1)

Core Operating Profit

180.8 

160.2 


Group Statement of Comprehensive Income

2018

2017

 

 £m

 £m


Net profit

149.8 

124.4 

     

Items that may subsequently be reclassified to the income statement

   

Assets measured through other comprehensive income:

   

Fair value movements taken to equity

(3.7)

11.6 

Amounts transferred to income statement

(0.3)

(8.0)

Taxation

1.1 

(0.9)

Cash Flow hedges:

   

Fair value movements taken to equity

(0.2)

2.2 

Amounts transferred to income statement

2.7 

3.8

Taxation

(0.6)

(1.5)

 

   

Items that will not be reclassified subsequently to the income statement

   

Remeasurement of net retirement benefit obligations

(19.1)

49.6

Taxation

5.2 

(13.5)

Effect of change in corporation tax rate

(0.4)

1.2

 

 

 

Total comprehensive income for the year

134.5

168.9

Group Statement of Financial Position

2018

2017

 

 £m

 £m

Liquid assets

5,504.7

6,095.7

Loans and advances to customers

36,702.4

35,061.2

Derivative financial instruments

564.4

591.8

Fixed and other assets

283.2

298.5

Total Assets

43,054.7

42,047.2

 

 

 

Shares

29,558.6

28,938.0

Borrowings

10,139.6

9,805.1

Derivative financial instruments

97.8

156.9

Other liabilities

139.1

157.3

Subscribed capital

6.1

6.4

Subordinated liabilities

585.1

593.7

Reserves

2,528.4

2,389.8

Total Liabilities

43,054.7

42,047.2

Key ratios

2018

2017

 

 %

 %

Net interest margin

1.11

1.23

Management expenses/Mean assets

0.73

0.83

Asset growth

2.4

6.2

Loans and advances growth

4.7

2.8

Retail savings balance growth

2.1

0.9

Liquidity ratio

13.9

15.7

Funding ratio

25.5

25.3

Gross capital

7.9

7.7

Free capital

7.5

7.4

Total capital ratio

20.3

20.1

Common equity tier 1 ratio

16.3

15.8

Leverage ratio

5.8

5.7

Cost:income ratio

61.0

63.4

Liquidity coverage ratio

159.3

165.0

CRR Leverage ratio

5.4

5.1


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