THE chief executive of Yorkshire Building Society has warned that the proposed bank surcharge could have “significant consequences for the UK mortgage market”.
Chris Pilling was talking up the society’s performance in the first half of 2015, but believes building societies will be “unfairly hit” by the 8% surcharge on profits announced earlier this month by Chancellor George Osborne in the summer Budget.
The second-largest building society in the country had enjoyed a “robust” first half performance which built on last year’s record results.
“We have continued to deliver on the goals and aims that our organisation was originally established to achieve, which we remain true to today – helping people to become homeowners and save for their futures,” said Mr Pilling. “We have performed well in our core business areas, completing 15,430 mortgages and opening more than 85,000 savings accounts.
“We were proud that in the first six months of this year, we helped 3,386 people take a step on to the housing ladder, with two in five of our house purchase mortgages provided to first-time buyers.
“But this level of lending can only continue if we can retain our profits and reinvest them back into our business. The Government’s proposal to introduce a bank surcharge of 8% on all banking services organisations’ profits over £25m will unfairly hit the six largest building societies, with these institutions paying about a third of the additional £1.7bn expected to be raised over five years.
“As the six largest building societies were responsible for 50% of the UK’s net mortgage lending in 2014, a tax which could impact our ability to fund growth in lending could have significant consequences for the UK mortgage market.”
The group, which is 150 years old this year, employs 2,700 people across Yorkshire and the Humber, which accounts for about 60% of the total workforce.
Its preferred measure of performance, core operating profit before tax, was up 8% to £115.9m – although its statutory pre-tax profits were down 5% to £111.2m. The difference was mostly caused by a £13.1m gain last year on non-core investments and smaller income levels from interest on non-core items.
Members’ savings balances grew to £27.5bn, up £0.3bn since December, although an increase in lending meant the proportion of mortgages funded by those savings was down slightly, from 84.5% to 83.6%.
The society says it maintains a strong liquidity position, as balances increased £0.4bn to £5.2bn, and “overall levels are safely above regulatory requirements whilst managing the cost of holding too much liquidity”.
Mr Pilling added: “The first half of this year has demonstrated how, as a mutual organisation with no external shareholders to satisfy, we focus on maintaining financial strength and stability. We operate in an increasingly competitive mortgage market and will continue to lend responsibly, remaining true to our mutual values of putting our customers and colleagues at the forefront of everything we do.”
