Efficient business model boosts Leeds Building Society’s profits

LEEDS Building Society today said its “highly efficient, successful, sustainable business model” helped it increase pre-tax profits by 10% in the first half of 2010.

The fifth largest building society in the UK saw pre-tax profits for the six months to June 30 leap by a tenth to £18m compared with the same period last year, while its savings balances rose by £254m to a record level of £7bn.

Leeds attracted 34,000 new members over the period, taking total membership to a record level of more than 688,000.

Chief Executive Ian Ward, who is retiring at the end of this year after 15 years in the position, said: “Leeds Building Society has achieved a strong financial performance for the first half of the year.
 
“Throughout the first half of 2010, we offered a wide range of mortgage products, with new lending totalling £400m, enabling many people to remortgage or buy their first home. All of the Society’s residential mortgage lending is funded entirely by retail savings and we are targeting £1bn of new lending this year.
 
“Efficiency remains a cornerstone of our success and this is highlighted by our excellent cost ratios. Our cost income and cost asset ratios remained very strong at just 35% and 45p per £100 of assets.

These are very favourable compared to the average of the major building societies, which were 86% and 83p respectively, at the end of 2009.”
 
Mr Ward said profitability and high levels of capital enabled the society to repay £39m of its subordinated debt, while its capital and reserves are £515m.

However, Mr Ward said: “As we move into a period of austerity following the worst recession for over 60 years, there are inevitably a very small number of borrowers experiencing difficulties meeting their mortgage repayments and we continued to work with these customers through this period.

“Our residential arrears (2.5% or more of outstanding mortgage balances) have increased slightly to 2.32%.
 
“Despite this, the charge for impairment losses and provisions for commercial and residential property reduced to £24m in the first half of 2010.”
 
Leeds Building Society has maintained its long term deposit ‘A’ credit ratings, with both Fitch and Moody’s.

Mr Ward added: “Our business model remains robust and successful as we continue to focus on efficiency, a prudent approach to lending, maintaining very strong levels of capital and high credit ratings.

“This, combined with delivering good value for money products backed up by excellent service to our members, means that we are in a very good position to deal with the challenging economic outlook for the remainder of 2010 and beyond.”

Mr Ward is to be replaced by the society’s finance director and deputy chief executive David Pickersgill.