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2018 Interim Results

July 26, 2018

Yorkshire Building Society has today announced a good start to 2018 as it continues to support the nation’s homeownership and savings goals by consistently delivering both excellent customer service and good long-term value to its members.

In a challenging environment, the Society has delivered an increase in core operating profit to £86.3m (30 June 2017: £84.2m) and a sustainable profit before tax of £88.6m (30 June 2017: £92.3m), enabling the Society to grow at a sensible and healthy rate.

The Society’s liquidity and capital positions have remained solid, with liquidity comfortably above regulatory requirements at £6.0bn (31 December 2017: £6.1bn) and common equity tier 1 capital increased to 16.1% (31 December 2017: 15.8%).

In the first six months of the year the Society offered the lowest discounted variable mortgage rate in the market and advanced more than 4,700 mortgages to first time buyers. It also supported savers by offering rates on average 0.37% higher than the market.

Delivering excellence to customers has remained a priority for the Society. This is demonstrated by a Net Promoter Score® of +41, more than 13 times higher than the industry average of +3.[i] The Yorkshire retained its status as one of the UK’s most trusted financial services providers, consistently ranking in the top three for customer trust.[ii]

2018 interim results key highlights:

  • Sustainable profits to facilitate ongoing growth: core operating profit of £86.3m (30 June 2017: £84.2m) and profit before tax of £88.6m (30 June 2017: £92.3m).
  • Robust capital position: common equity tier 1 capital increased to 16.1% (31 December 2017: 15.8%).
  • Secure liquidity position: comfortably above regulatory requirements at £6.0bn
    (31 December 2017: £6.1bn).
  • Supported first time buyers: advanced 4,744 mortgages to first time buyers, accounting for more than half of all house purchase completions.
  • Assisted homeownership: completed 20,058 mortgages, increased total mortgage balances to £35.4bn (31 December 2017 £35.1bn) and achieved gross lending of £4.0bn (30 June 2017: £3.4bn).
  • Supported savers: delivered rates which consistently beat the market average by 0.37% (31 December 2017: 0.35%)[iii] and maintained savings balances at £28.8bn (31 December 2017: £28.9bn).
  • Continued to make a positive impact on communities: raised £131,723 for our charity partner End Youth Homelessness, taking the total to £424,075 since the campaign’s launch at the beginning of 2017.

 

Mike Regnier, Chief Executive of Yorkshire Building Society, said: “I’m pleased to report the Society has had a good start to 2018.

“Our priority is to continue delivering good long term value to our members while maintaining a focus on our core purpose of helping people into homeownership and save for the future. We believe this is increasingly important, considering the challenges many people are facing as a result of housing affordability and an extended period of low interest rates in the savings market.

“Our improved financial strength and solid profits reflect our prudent and disciplined approach. This enables us to deliver the flexible, competitive products and services which help our members achieve their financial aims.

“Reducing the cost base has been a key strategic focus for us. This has resulted in a 10% reduction in our underlying management expenditure. We continue to improve efficiency and we have completed the retirement of the Norwich & Peterborough Building Society brand from the high street and successfully transferred savings customers to Yorkshire Building Society systems.

“We are also investing in developing enhanced digital capabilities. As well as improving the services we offer members, this ongoing work will ensure we are able to make the most of opportunities presented by technological advancement, including Open Banking.”

2018 interim results summary

Delivered good financial performance and an award-winning customer experience

  • Increased mortgage balances through gross lending of £4.0bn (30 June 2017: £3.4bn), gross lending market share of 2.6%[iv] and net lending of £365m (30 June 2017: -£2m).
  • Continued to help more people to become homeowners, with 56.7% of all house purchase mortgages to first-time buyers.
  • Increased savings balances by providing an average savings rate of 1.05% against the industry average of 0.68%.[v]
  • Increased our total asset base to £42.3bn (December 2017: £42.0bn).
  • Maintained strong asset quality, with the value of loans in arrears by more than three months reducing to 0.41% (31 December 2017: 0.46%) and lower than the industry average.[vi]
  • Diversified our funding base to support mortgage lending by successfully issuing a €500m five-year senior unsecured bond in March 2018, demonstrating market confidence in the Society.
  • Recognised for our excellent product range, outstanding customer and colleague experience, and contribution to communities with a total of 13 industry awards, including Most Innovative Approach to Driving Culture Change,[vii] Best First-Time Buyer Mortgage Provider[viii] and Best Overall Mortgage Provider.[ix]

 

Made a positive impact on our colleagues and communities

  • 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.[x]
  • Gained national recognition for our corporate responsibility work by winning the CSR Team of the Year at the Business Charity Awards.[xi]
  • Contributed more than 6,756 hours of volunteering, with colleagues sharing their skills with charities, schools and groups in their communities.
  • Raised £131,723 towards our campaign to help End Youth Homelessness, bringing our fundraising total for the charity to date to £424,075.
  • The Yorkshire Building Society Charitable Foundation donated £234,425 to 182 charities and good causes nominated by customers and colleagues and largely funded by customers through the Small Change Big Difference® scheme.

 

ENDS PR68-18

Notes to Editors

About Yorkshire Building Society

Yorkshire Building Society has assets of £42.3 billion and has more than 3 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 more information on Yorkshire Building Society visit www.ybs.co.uk

For further media information please contact:

Press Office on 0345 1200 890

[i] Nunwood Customer Experience Excellence Annual Study average Net Promoter Score of +3 for the UK financial services sector, correct as at September 2017.

[ii] YBS Brand Tracker, conducted by YouGov.

[iii] CACI’s CSDB, stock, April 2018. December 2017 figure revised from 0.28% reported in Annual Results Announcement 2017.

[iv] CACI’s CSDB, stock, April 2018. December 2017 figure revised from 0.28% reported in Annual Results Announcement 2017.

[v] CACI’s CSDB, stock, April 2018. December 2017 figure revised from 0.28% reported in Annual Results Announcement 2017.

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

[vii] Winner of Most Innovative Approach to Driving Culture Change at the PEX Network Awards 2018 .

[viii] Winner of First-Time Mortgage Buyers’ Choice at the Moneyfacts Consumer Awards 2018.

[ix] Winner of Best Overall Mortgage Provider at the Moneynet Personal Finance Awards 2018.

[x] 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.

[xi] Winner of CSR Team of the Year at the Third Sector Business Charity Awards 2018.

Group Income Statement

 

6 months

to 30 June 2018

6 months to 30 June 2017

Year to 31 December 2017

 

£m

£m

£m

Net interest income

237.6

238.7

502.1

Non-interest income (net)

5.3

11.1

14.5

Net gains/(losses) from fair value volatility

1.5

13.8

13.1

Net realised profits/(losses)

4.6

9.7

6.1

Total income

249.0

273.3

535.8

Administrative expenses

(158.0)

(159.3)

(339.5)

 

Operating profit before provisions

91.0

114.0

196.3

Provisions

(2.4)

(21.7)

(30.5)

 

Profit before tax

88.6

92.3

165.8

Tax expense

(19.3)

(23.3)

(41.4)

 

Net profit

69.3

69.0

124.4

 

Reconciliation of Core Operating Profit

 

6 months to 30 June 2018

6 months to 30 June 2017

Year to 31 December 2017

 

£m

£m

£m

 

Statutory profit before tax

88.6

92.3

165.8

 

Reverse out the following items:

 

FSCS levy

(1.4)

2.5

2.5

Provision for restructuring costs

2.9

8.5

13.6

Timing differences - fair value volatility

(1.5)

(8.1)

(7.4)

Mergers - adjustments to balances acquired

(2.5)

-

(3.5)

Non-core investments

-

(5.3)

(5.1)

Other non-core items

0.2

(5.7)

(5.7)

Core operating profit

86.3

84.2

160.2

Statement of Comprehensive Income

 

6 months to 30 June 2018

6 months to 30 June 2017

Year to 31 December 2017

 

£m

£m

£m

 

Net profit

69.3

69.0

124.4

 

Items that will subsequently be reclassified to profit and loss:

Available for sale investments:

 

 

 

Valuation gains/(losses) taken to equity

(5.2)

12.1

11.6

Amounts transferred to income statement

1.2

(13.6)

(8.0)

Tax on available for sale securities

1.1

0.4

(1.0)

Effect of change in corporation tax rate

-

-

0.1

 

Cash flow hedges:

Gains taken to equity

0.8

3.9

2.2

Amounts transferred to income statement

0.8

(0.5)

3.8

Tax on cash flow hedge reserve

(0.4)

(0.9)

(1.6)

Effect of change in corporation tax rate

-

-

0.1

 

Items that will not subsequently be reclassified to profit and loss:

 

Remeasurement of net retirement benefit obligations

9.6

(32.1)

(27.0)

Tax relating to retirement benefit obligations

(2.5)

8.1

(13.5)

Effect of change in corporation tax rate

-

-

1.2

 

Total comprehensive income for the period

74.7

46.4

168.9

Group Statement of Financial Position

 

30 June 2018

30 June 2017

31 December 2017

 

£m

£m

£m

 

Liquid assets

5,994.6

4,998.2

6,095.7

Loans and advances to customers

35,426.5

34,038.5

35,061.2

Derivative financial instruments

549.7

573.2

591.8

Other assets

311.2

226.8

298.5

Total assets

42,282.0

39,836.7

42,047.2

 

Shares

28,751.7

28,440.0

28,938.0

Borrowings

10,197.5

8,449.1

9,805.1

Derivative financial instruments

122.0

261.7

156.9

Other liabilities

141.1

111.6

157.3

Subordinated liabilities

594.8

300.4

593.7

Subscribed capital

6.3

6.6

6.4

Reserves

2,468.6

2,267.3

2,389.8

Total liabilities

42,282.0

39,836.7

42,047.2

Key ratios

 

30 June 2018

30 June 2017

31 December 2017

 

%

%

%

 

Net Interest Margin

1.16

1.20

1.23

Management expenses/Mean Assets

0.77

0.80

0.83

Asset growth

0.6

0.6

6.2

Loans and advances growth

3.9

(0.2)

2.8

Member balance growth

(0.6)

(0.9)

0.9

Liquidity ratio

15.4

13.5

15.7

Funding ratio

26.2

22.9

25.3

Gross Capital

7.9

7.0

7.7

Free Capital

7.5

6.6

7.4

Total Capital ratio

20.2

18.0

20.1

Common Equity Tier 1 ratio

16.1

15.7

15.8

Leverage Ratio

5.7

5.3

5.7

Cost Income ratio

63.5

58.3

63.4

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