2014 Financial Results

Yorkshire Building Society Group has today announced a strong financial performance in 2014, its 150th anniversary year, as it achieved record gross and net mortgage lending and a record core operating profit.

Gross mortgage lending totalled £7.6bn and net lending reached £2.6bn while core operating profit grew to £178.8m. The Group also retained its strong capital position, increasing its total capital ratio to 16.1%.

The UK’s second-largest building society continued to deliver on its mutual values, putting its customers, people and communities first, but today has called on authorities to do more to incentivise greater financial services sector competition for the benefit of consumers, particularly in the current account market.

2014 Annual Results key highlights

  • Record gross lending of £7.6bn (13% increase on 2013: £6.8bn) and net lending of £2.6bn (32% increase on 2013: £2.0bn)
  • Strong and sustainable financial performance enabling continued investment in the business: core operating profit of £178.8m (18% increase on 2013: £152.0m) and profit before tax of £188.2m1 (5.5% decrease on 2013: £199.3m)
  • Retained one of the strongest capital positions among all UK financial services providers: total capital ratio rose to 16.1% (2013: 14.3%)
  • Competitive return for savers at a time of an historically low official Bank rate: overall average interest rate of 1.60% compared to the market average of 1.34%2
  • Further improved the level of service given to members and customers: achieved an average Net Promoter Score® of 40%3 (December 2013: 37%) compared to an industry average of 3%4

Chris Pilling, Yorkshire Building Society Group’s Chief Executive, said:

I am delighted to report another set of strong financial results for the Group.

These results reflect our qualities as a modern mutual. We offer customers long-term value and excellent service while strengthening our financial security and ability to invest for the future.

Our passion for customers is reflected in the 34,800 mortgages we completed during the year - including a record 8,200 to first-time buyers - and the competitive return we provided savers which beat the market average5.

I am proud that in our 150th anniversary year we continued to deliver on the fundamental aims of our founding fathers – to help people save for the future and buy their own home. Further investment in our technology, digital capabilities and branch and agency network is designed to help us continue to deliver long-term value for our customers over the next 150 years too.

We must acknowledge that, as well as delivering excellent products and service in 2014, we were fined twice by our regulator for previously letting customers down. We have apologised for our errors, taken action to fix those problems swiftly and decisively and reimbursed those affected, which demonstrates our absolute commitment to fair outcomes for customers.

It is our customer-focussed approach that offers a real difference to consumers in a more competitive and diverse financial services market. However, we are frustrated that despite broad consensus on encouraging challenger institutions, there is little evidence of meaningful progress.

The ongoing reviews into the current account market represent a unique opportunity to overcome the big banks self-interested resistance to change.

The existing current account switching service has failed to tackle the dominance of the big banks and raise the quality of the current account market. The banks self-interested opposition to greater reform resulted in a seven-day switching service and since its introduction we believe only 3%6 of accounts have been switched.

Switching your current account provider should be as easy as downloading an app to your phone. We urge the FCA and the new Payments Regulator to make this a top priority and commit within the next year to implementing full current account portability. Only then will consumers be able to benefit from a truly diverse financial services sector.

2014 Annual Results highlights

Achieving sustainable financial performance

  • Grew total assets to a record £37.6bn (2013: £34.5bn)
  • Increased liquid balances to £4.8bn (2013: £4.4bn), comfortably above regulatory requirements
  • Achieved a Common Equity Tier 1 capital ratio of 13.8% (2013: 13.9%) and leverage ratio of 4.8% (2013: 4.6%)
  • Became the first UK building society since 20077 to receive an upgrade of its Moody's long-term deposit rating, in addition to an upgrade of its Fitch long and short-term deposit ratings
  • Continued to develop the wholesale funding strategy, completing a series of public issues demonstrating market confidence in the Group
  • Made efficient use of funding, leading to a net interest margin of 1.52% (2013: 1.56%).
  • Secured a stable share of gross lending market at 3.7% (2013: 3.8%)8
  • Achieved a net lending market share of three times gross lending share at 11.4%9 (2013: 17.7%)
  • Maintained strong asset quality, with an average indexed loan to value of 51% (2013: 54%) and the number of loans in arrears by more than three months of 1.21% (2013: 1.45%), below the industry average of 1.39%10

Delivering an award-winning customer experience

  • Helped 34,800 people own the home they want through residential mortgages (2013: 33,800)
  • Provided support for a record 8,200 first-time buyers (2013: 7,400), equating to 37% of all Group house purchase mortgages (2013: 36%), including through 5% deposit mortgages
  • Continued to help borrowers make their money go further by providing 34% of all UK offset mortgages
  • Offered a range of competitive savings accounts to customers, with almost 200,000 new accounts opened across the Group (2013: 190,000)
  • Rewarded loyalty of members by ensuring off-sale accounts pay a higher interest rate than on-sale equivalents and launching a 5% gross pa/AER children’s savings account for customers of two years or more
  • Maintained backing for small and medium sized enterprises through provision of commercial mortgages, with gross lending totalling £107m (2013: £88m)
  • Supported the development of affordable housing with £73m lent to registered social landlords (2013: £59.3m)
  • Received 2,116 best buy mortgage mentions and 869 best buy savings mentions in national media11
  • Won a total of 14 awards for mortgage, savings, current account provision and charitable support, including Best Building Society Savings Provider (Moneyfacts Finance Awards 2014), First Time Mortgage Buyers’ Choice (Consumer Moneyfacts 2014) and Best Debit Card for Use Abroad (Moneynet Awards 2014).

Making it easy and simple for customers

  • Refurbished 51 branches to give customers and colleagues a more modern and pleasant environment to do business
  • Improved web and mobile technology, including the introduction of paperless ISA account openings12 and enhanced customer security
  • Maintained excellent customer satisfaction rates of 93% (2013: 93%), reflecting the business’s passion for great service
  • Significantly improved the complaints processes and experienced only 7% of complaints referred to the Financial Services Ombudsman being upheld, compared to an industry average of 57%13
  • Introduced contemporary branding which unites all parts of the Group
  • Ensured a smooth transition to comply with the Mortgage Market Review (MMR) regulations by having the required changes in place before the deadline and without impacting business volumes.

Being locally famous for making a positive impact on communities

  • Launched the Hour of Need charity campaign in aid of Marie Curie and raised £210,784 to fund more than 10,000 hours of nursing care
  • Donated an additional £1.7m through donations to charities and good causes, including:
  • £1.1m from contributions based on savers’ affinity account balances
  • £464,000 from the Yorkshire Building Society Charitable Foundation, which is in majority funded by the Small Change Big Difference® scheme, taking the total donated to £6m since the Foundation’s first donation in 1999
  • £150,000 to 15 charities nominated and voted for by colleagues, customers and members of the public as part of the Lasting Legacy community support scheme
  • Helped members make a positive impact, with 91% of Charitable Foundation donations nominated by members
  • Contributed more than 10,000 colleague hours volunteering with charities, local schools and good causes in communities where the Group is based
  • Became an official supporter of the Tour de France Grand Départ and demonstrated pride in the Group’s heritage as the Tour travelled through Yorkshire, East Anglia and London, after which brand awareness for Yorkshire Building Society reached a record 83%14 in our Yorkshire heartland and peaked at 56%15 across the UK
  • Implemented a number of initiatives which help us to reduce waste and energy use across the Group, including the installation of 1,400 solar panels at two of the main office sites.

Offering a leading people experience

  • Completed the refurbishment of the principal office in Bradford to provide modern working environment for approximately 1,500 colleagues and made improvements to other office sites in Peterborough and Cheltenham
  • Created 264 jobs, taking the total number of colleagues to 4,597 (December 2013: 4,333)
  • Introduced uniforms for colleagues across branches of the Yorkshire in response to customer feedback, bringing them in line with the other building society brands
  • Implemented a new colleague intranet to improve engagement and knowledge sharing
  • Maintained the Group’s Investors in People status, reflecting good people management practices
Appendix 1 containing:
  • Reconciliation of Core Operating Profits
  • Group Income Statement for the year ended 31 December 2014
  • Group Statement of Comprehensive Income for the year ended 31 December 2014
  • Group Statement of Financial Position as at 31 December 2014
  • Key ratios


1 This includes a number of non-core items that are detailed in the reconciliation of core operating profits (see Appendix 1)

2 Source: Average rates based on Savings stock from CACI’s Current Account and Savings Database (CSDB), currently covering 86% of the retail savings market. Data as at the last working day of October 2014.

3 Source: Average of monthly Nunwood Customer Experience survey of Group customers

4 Source: Nunwood 2014 annual Customer Experience Excellence study.

5 Source: Average rates based on Savings stock from CACI’s Current Account and Savings Database (CSDB), currently covering 86% of the retail savings market. Data as at the last working day of October 2014.

6 Based on Payments Council Current Account Switch Service monthly data since launch in September 2013 and January 2015, and Mintel estimate of number of total UK current accounts as of May 2014 as included in its report Packaged and Current Accounts UK, published in July 2014

7 Excluding upgrades due to takeovers or mergers

8 Source: Bank of England: Monthly amount of sterling secured on gross lending and housing associations (in sterling millions) not seasonally adjusted

9 Source: Bank of England: Monthly changes of total sterling net secured lending to individuals and housing associations

10 Expressed as a percentage of outstanding balances, including repossessions

11 Source: Presswatch Financial from Kantar Media

12 Available for Barnsley, Chelsea and Yorkshire building society customers

13 Source: Financial Ombudsman Service complaints data 1 January - 30 June 2014 resolved cases.

14 Source: YouGov Monthly Brand Tracker Study, July 2014

15 Source: YouGov Monthly Brand Tracker Study, September 2014

Small Change Big Difference® is a registered trademark of Yorkshire Building Society. Net Promoter, Net Promoter Score, and NPS are trademarks of Satmetrix Systems, Inc., Bain &Company, Inc., and Fred Reichheld.