2013 Interim Results

Yorkshire Building Society has today announced another strong financial performance in the first six months of 2013 as it again demonstrated the benefits of being a trusted financial services provider.

The UK’s second largest building society achieved healthy levels of profit, increased mortgage lending and further improved member satisfaction rates.

The Society has also begun a five-year investment programme to enhance its products and services and develop new systems and technology for the benefit of its customers.

In addition, the Society has created 100 new jobs so far this year and is expecting to create an additional 100 new jobs by the end of 2013, providing a boost to the Bradford and Leeds economies.

2013 Interim Results Key Highlights

  • Group pre-tax profit of £80.1m (June 2012: £82.8m) with a core operating profit of £82.6m (June 2012: £92.4m)
  • Increase in gross lending to £2.5bn (June 2012: £2.4bn) and net mortgage lending of £450m (June 2012: £523m)
  • Total mortgage balances grown to £28.0bn (December 2012: £27.6bn)
  • Member savings balances stable at £26.3bn (December 2012: £26.8bn) with 100% of mortgages funded by member savings balances and reserves)
  • Core Tier 1 capital ratio1 remains one of the strongest for any UK financial services organisation at 13.7% (December 2012: 13.6%)
  • Leverage ratio of 4.8% (December 2012: 4.8%)
  • Group liquidity remains above the regulatory minimum at 13.7% (December 2012: 16.9%)
  • Net interest margin increased to 1.23% (June 2012: 1.05%)

Commenting on the results, Yorkshire Building Society Chief Executive Chris Pilling said:

Our figures for the first six months of 2013 are very pleasing and reflect our consistent, positive financial performance.

Our fundamental aims as a building society - helping people to save for the future and buy their own home - are unwavering and being so closely rooted in our communities makes us ideally placed to achieve them.

Net lending has been solid so far this year and we strongly expect this will increase further in the second half of 2013.

These interim results show that our responsible approach and long-term financial stability has resulted in a strong, consistently well-capitalised mutual playing a major role in the modern UK financial services sector.

I believe the excellent service the Yorkshire provides members and the trust they place in us demonstrate how we are providing a credible and successful mutual alternative to the big banks.

Our continued financial strength has allowed us to begin the significant investment programme, which we announced earlier this year, to further improve the quality of service we deliver to our members.

The new phase in our growth includes the planned opening in the coming months of a major new office in Leeds, which will see up to 1,000 colleagues based in the city centre, as well as investing £11m in our principal Bradford site and £5m invested in our offices in Cheltenham and Peterborough.

This investment will create modern, flexible environments from which to deliver great value and service to our members and I am delighted that this will allow us to create more than 200 additional jobs, split broadly equally between Bradford and Leeds, by the end of the year.

These new jobs will cover a variety of roles across the Society and reflect our on-going ability to make a positive impact on our communities as we continue to grow as an organisation.

2013 Half-year Highlights

Product provision

  • Achieved 2,244 best buy mentions for our mortgages and savings products2.
  • Opened more than 6,000 of our Regular Saver accounts - three times as many compared to the same period last year.
  • Continued support to help people on to the housing ladder, with 37% of house purchase mortgages taken out by first time buyers.
  • Almost one in five UK offset mortgages3 were provided by the Society, helping borrowers make their money work harder.
  • Maintained asset quality with the proportion of people more than three months in arrears excluding possessions at 1.28% (December 2012: 1.25%), considerably lower than the CML average of 1.89%.4
  • Accord Mortgages marked 10 years of supplying the intermediary sector with competitive products.
  • Provided additional loan facilities totalling £70m to a number of new housing association customers.
  • Continued to grow prudently the Norwich & Peterborough (N&P) SME commercial lending division, with gross lending of £32.2m (June 2012: £28.9m) and net lending of £15.0m (June 2012: £12.0m).
  • N&P current account continues to achieve consistent customer growth and achieved Which? Recommended Provider status.

Member service

  • Continued to offer face-to-face financial advice to all customers through our partnership with Legal & General.
  • Opened two new branches, in Wetherby and Ripon, with two more due to open by the end of 2013. This will bring the total number of new branches opened in the past two years to eight.
  • Three new high street agencies have opened with further additions to the network expected in the second half of the year.
  • Launched a new flagship concept branch in Harrogate with a view to rolling out aspects of the new format across the branch network.

Member satisfaction

  • Voted Most Trusted Financial Provider and Most Trusted Savings Account Provider following a poll of 20,000 consumers by Moneywise, two of nine industry awards received for mortgages, savings and current account provision.
  • Continued to receive a high Net Promoter Score® with an average of 34%5, compared to an industry average of 15%6.
  • Customer satisfaction surveys show 92% of Yorkshire members, 91% of N&P members and 90% of Chelsea members rate our service as good or excellent7.

Community activities

  • Yorkshire Building Society Charitable Foundation reached milestone of £5m donated since it was launched in 1999.
  • Donated £597,000 to more than 800 different charities and local good causes.
  • This included £265,000 from Yorkshire Building Society’s Charitable Foundation, which is majority funded by the Small Change Big Difference® scheme, and £245,000 from contributions based on savers’ affinity account balances.
  • Over 90% of the Charitable Foundation donations were nominated by members.
  • More than 4,400 employee hours spent volunteering with charities, local schools and good causes in the communities where we are based.

Other highlights

  • Began drawing down from the Government’s Funding for Lending Scheme, to support borrowers at all levels.
  • Appointment of Guy Parsons as Non-Executive Director with effect from 1 May.
  • Appointment of Mark Pain as Non-Executive Director with effect from 1 August.

Important information

  • 1 Yorkshire Building Society reports Core Tier 1 on a Basel Standardised Approach basis
  • 2 Source: PressWatch Financial from Kantar Media
  • 3 Source: Based on those UK lenders writing offset mortgages that contribute to the CACI Mortgage Market Database, which covers 94% of the UK residential mortgage market. Data based on new mortgages by volume between 1 January to 30 April 2013
  • 4 Latest CML figures available for first quarter of 2013 only
  • 5 Source: Nunwood. Net Promoter Score® refers to the net percentage of customers (excluding N&P) who, when responding to the question "how likely are you to recommend us to friends and family" would either strongly recommend or strongly detract from the organisation
  • 6 Source: Satmetrix 2012 Net Promoter® Benchmark Study of Consumers in France, Germany and the UK, as at 31 December 2012
  • 7 Internal research between January and June 2013 with average of 366 customers with Yorkshire Building Society, Chelsea Building Society and Norwich and Peterborough Building Society

Financial Summary

Reconciliation of Core Operating Profits

  6 months to 30 June 2013
6 months to 30 June 2012
Year to 31 December 2012
Statutory Profit before tax 80.1 82.8 157.1
Reverse out the following items:
Net losses from fair value volatility (0.5) (0.7) 11.8
Sale of assets/other income (3.4) 0.5 (60.2)
Non core provisions - - 12.1
Mergers, acquisition and closure costs 6.4 9.8 16.4
Core Operating Profit 82.6 92.4 137.2

Group Income Statement

  6 months to 30 June 2013 (Unaudited)
6 months to 30 June 2012 (Unaudited)
Year to 31 December 2013 (Audited)
Net interest income 203.8 171.7 346.0
Net gains/(losses) from fair value volatility 0.5 0.7 (11.8)

Net realised profits

1.2 20.8 77.9

Non-interest income

22.1 24.5 48.3
Total Income 227.6 217.7 460.4

Administrative expenses

(132.0) (111.8) (233.6)
Merger & acquisition costs (0.6) (9.8) (16.4)
Operating profit before provisions 95.0 96.1 210.4
Provisions (14.9) (13.3) (53.3)
Profit before tax 80.1 82.8 157.1
Tax Expense (20.1) (19.7) (34.2)
Net profit 60.0 63.1 122.9

Group statement of comprehensive income


6 months to 30 June 2013 (Unaudited)
6 months to 30 June 2012 (Unaudited)
Year to 31 December 2012 (Audited)
Net profit 60.0 63.1 122.9
Items that will subsequently be reclassified to profit and loss
Available-for-sale investments:      
Valuation gains taken to equity (7.9) 13.6 33.2
Amounts transferred to income statement (0.8) (26.7) (40.4)
Cash flow hedges:      
Gains/(losses) taken to equity 32.0 (22.2) (34.8)
Amounts transferred to income statement 0.3 6.6 6.2
Tax relating to items that may be reclassified (5.4) 7.2 7.2
Items that will not subsequently be reclassified to profit and loss:
Actuarial gain on retirement benefit obligations 6.1 20.7 (22.5)
Tax relating to items not reclassified (1.4) (7.3) 3.5
Total comprehensive income 82.9 55.0 75.3

Group statement of financial position


30 June 2013 (Unaudited)
30 June 2012 (Unaudited)
31 December 2012 (Audited)
Liquid assets 4,140.2 4,813.2 5,231.5
Loans secured on residential property 27,622.0 27,168.9 27,213.1
Other loans 353.8 358.2 359.3
Derivative financial instruments 314.2 383.4 380.6
Fixed and other assets 298.8 345.1 312.6
Total Assets 32,729.0 33,068.8 33,497.1
Shares 26,293.8 26,123.8 26,817.5
Borrowings 3,996.4 4,156.7 4,171.1
Derivative financial instruments 398.1 545.7 517.4
Other liabilities 194.7 221.7 228.1

Subordinated liabilities

123.2 230.3 122.8
Subscribed capital 7.0 178.0 7.3
Reserves 1,715.8 1,612.6 1,632.9
Total Liabilities 32,729.0 33,068.8 33,497.1

Key Ratios


30 June 2013
30 June 2012
31 December 2012
Group net interest margin 1.23 1.05 1.05
Group management expenses/mean assets 0.80 0.74 0.76
- excluding impact of merger/acquisition/closures 0.71 0.68 0.71
Group asset growth (2.3) 1.3 2.6
Group loans and advances growth 1.5 1.9 2.0
Member balances growth (2.0) 0.6 3.2
Liquidity ratio 13.7 15.9 16.9
Funding ratio 13.2 13.7 13.5
Solvency ratio 14.6 16.1 14.6
Core Tier 1 ratio 13.7 12.9 13.6