‘Volatility in financial markets’ causes £12m pre-tax profit drop at building society
Bradford-headquartered Yorkshire Building Society has seen its pre-tax profits fall £12m in the first six months of trading for 2019.
Reporting on the period to June 30 2019, listed YBS said its statutory pre-tax profit stood at £76.5m – a reduction from the £88.6m achieved in the same period last year; and a further drop from the £92.3m it reported in 2017.
YBS said: “Statutory profit before tax has been adversely impacted by fair value losses during H1 2019. This is as a result of volatility in the financial markets, and is an accounting adjustment which will typically reverse in future periods.”·
The firm’s retail savings balances improved slightly, up from £29.6bn in the same period of 2018 to £30.3bn this year. The mutual added: “We have grown deposit balances to support lending growth and ensure we maintain adequate levels of liquidity at all times. We have helped people build financial resilience and have given them a safe home for their money by opening 84,529 new savings accounts. We also offered savings rates which were typically 0.37% higher than the market average (December 2018: 0.37%).”
Overall mortgage balances stood at £37.9bn (31 December 2018: £36.7bn) and gross lending stayed static at £4bn (30 June 2018: £4bn). YBS said its net lending was £1.1bn (30 June 2018: £0.4bn).
The firm added: “Our lending performance remains on plan and with this growth we are continuing to support people to have a place to call home. We have helped people buy their first home and move home 8,393 times so far this year.”
Mike Regnier, Chief Executive, said: “The current macroeconomic and market environment is very dynamic, with the impact of trade wars, the UK’s exit from the EU and political uncertainty likely to continue into the foreseeable future, impacting business and consumer confidence and growth. Uncertainty around the future Bank Rate path is also leading to volatility in financial markets.
“We continue to see margins under pressure across the mortgage market, driven in part by the competitive actions of the newly created ring-fenced banks. This ring-fencing means that customer deposits can no longer be used to support non-retail activities like investment banking; instead they can only be deployed in retail markets including mortgage lending putting downwards pressure on mortgage margins. The scheduled repayment of the Bank of England’s funding schemes to the financial services industry is also putting pressure on margins, as the increased demand for retail savings is pushing up rates for new deposits.”
Despite this, Regnier said he was “pleased to report on a strong start to 2019 for Yorkshire Building Society.”
He added: “Despite difficult trading conditions and intense competition, we have been able to deliver a robust set of financial results and, at the same time, we have made considerable progress with key elements of our strategic plan. Above all we are focused on our fundamental purpose of helping people into a place to call home and creating greater financial wellbeing. Our ability to deliver high levels of service to our customers and our customer experience measure have remained significantly ahead of industry averages. We also saw growth in our mortgage and retail savings balances.”
