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RNS Number : 2880Y

Skipton Building Society

28 February 2012

SOLID PERFORMANCE FOR SKIPTON AS IT DELIVERS FOR MEMBERS

In 2011 Skipton Building Society delivered again on profit and financial strength while increasing new lending threefold.

We achieved our objectives of maintaining our financial strength, managing the business prudently, ensuring steady growth and offering the best possible value and service to our members. Remaining profitable throughout the financial crisis, we face the continued economic uncertainty with confidence.

By lending GBP1.7bn, 50% more than our natural market share, and offering some of the most competitive and innovative savings accounts available, the Society maintained an unwavering focus on looking after our members, while investing in the communities where they live and work.

Remaining profitable throughout the credit crunch

   --      Pre-tax profits of GBP22.2m (2010: GBP35.0m); 
   --      GBP16.3m improvement in net interest margin (2011: 52bps, 2010: 37bps);

-- Operating profit before impairment losses and provisions up GBP17.8m to GBP65.7m (2010: GBP47.9m);

-- While the quality of our mortgage assets remains good, our prudent approach to provisioning against historic exposures resulted in impairment loss charges increasing to GBP30.0m (2010: GBP14.8m);

-- Strong Estate Agency division (Connells group) pre-tax profits of GBP35.8m (2010: GBP48.1m), above expectations despite an ongoing difficult market;

   --      Group administrative expenses reduced by 2.7%;

-- Charge for contribution to the Financial Services Compensation Scheme increased to GBP5.8m (2010: GBP0.9m).

Financially strong

   --      Gross mortgage advances up more than threefold to GBP1.7bn (2010: GBP0.5bn); 
   --      Total assets up 1.2% to GBP13.9bn (2010: GBP13.7bn); 
   --      Total capital ratio remains strong at 15.5% (2010: 16.6%); 
   --      Core Tier 1 ratio 10.5% (2010: 11.1%);

-- Maintained good levels of highly liquid assets - the liquidity ratio was 24.7% (2010: 27.8%);

-- Successfully obtained over GBP1bn of funding through our inaugural securitisation and other secured wholesale funding, demonstrating the market's confidence in Skipton's strength;

-- Accounts with arrears greater than 2.5% of the balance outstanding only 1.45% of the portfolio (2010: 1.42%).

Focus on members

While maintaining financial strength was a clear priority for the year, we delicately balanced this with delivering innovative, good value mortgage and savings products and outstanding personal service for our members in the following ways:

-- In line with our commitment to enabling homeownership, we lent almost 50% more than our natural market share of 0.81% during the year, with gross new lending totalling GBP1,700m compared to GBP493m the year before. The fact that we were able to do so despite the continued market volatility is also a powerful demonstration both of our robustness as a business and our confidence in the future;

-- Our 4.3% growth in mortgage assets compares to an industry (CML) figure of 0.5%, demonstrating that we played a disproportionate part in stimulating the mortgage market with products available for vital groups such as first time buyers and buy-to-let landlords;

-- These complemented our varied suite of options for all circumstances, from short term fixes and trackers to longer term deals and alternative solutions such as switch-to-fix;

-- Acutely conscious of the plight of savers in the continued high inflation/low interest rate environment, we helped them to improve the returns on their investments through straightforward and consistent long term good value. The average rate we paid to customers increased by 0.14%, from 2.42% to 2.56%, during the year, despite Bank of England Base Rate remaining unchanged at 0.5%;

-- We also maintained our commitment, as a mutual, to encouraging people to manage their finances responsibly and save - with offerings such as our goal-based My Savings range, which allows savers to focus on achieving their personal savings goals and avoiding debt through badged accounts for needs from bills to rainy day savings;

-- Thanks to our competitive and comprehensive ISA offering, we grew our ISA balances by 4.8% during 2011. Underlining this trend, we were also one of the first providers to offer the new government-backed Junior ISAs from 1 November, with a competitive, no strings account, now paying 3.02%;

-- As a result of this strong savings performance, 91.4% of our mortgages are now funded by retail balances;

-- We also continued to cater for our members' general lifetime requirements, with a selection of products designed to provide them and their families with security and peace of mind, including wills and insurance;

-- As one of the few building societies with our own, whole of market, advice offering in Skipton Financial Services ('SFS'), we have been able to help members through life's pitfalls - and the additional challenges posed by the current operating environment - by offering a helping hand with everything from stock market investments to inheritance tax planning. SFS's market leading investment service, Monitored Informed Investing ('MII'), offers customers peace of mind through proactive fund monitoring and fee refunds in cases of underperformance;

-- The strength of our product range was recognised by almost 1,000 independent media best buy table mentions and numerous editorial endorsements during the year;

-- Our success was also recognised in the form of awards - "Best National Building Society" from What Mortgage magazine and Best Cash ISA in the Personal Finance Awards for the second year running.

Subsidiary performance

Our diversified Group structure, comprising a variety of subsidiary businesses, continues to underpin our ongoing success. Highlights include:

-- Our Estate Agency division, the Connells group, recorded profits of GBP35.8m which, although down from 2010's GBP48.1m, represents a fine performance in what continues to be a difficult market;

-- Profits in our Financial Advice division, which includes the Society's whole of market financial adviser Skipton Financial Services ('SFS'), have increased to GBP2.9m, compared to GBP1.0m the year before. Our IFA businesses are well prepared for the implementation of the Retail Distribution Review on 1 January 2013 and SFS has over 80% of its advisers already qualified to the required Diploma standard;

-- In the Mortgage Services division, Homeloan Management Limited ('HML') made an operating profit of GBP0.2m. However, restructuring costs aimed at repositioning the business to take advantage of future opportunities resulted in a net pre-tax loss of GBP3.1m, compared to a GBP0.1m profit in 2010.

Community involvement

As a responsible business, we also strongly believe in helping to enhance the communities to which we and our members belong. In 2011, we did this by investing GBP297,000 in the following ways:

-- GBP111,000 was donated to charities across the UK which help children and older people in need by our independent Skipton Building Society Charitable Foundation;

-- 151 grassroots good causes contributing to the Arts, Sport, Education and general community enhancement, in areas surrounding our national branch network and Yorkshire Head Office, also benefited from Society funding to the tune of GBP186,000.

Outlook

The outlook for the markets in which we operate, and the economy in general, remains uncertain, with low GDP growth figures, continued fall out from government austerity measures, rising unemployment, a flat housing market and the continued threat of contagion from the Eurozone. These things are likely to result in the continuation of an historically low UK Bank Base Rate for the foreseeable future.

However, for the reasons highlighted above, Skipton remains in a good position to withstand such unusual market conditions. We continue to concentrate on our clear strategy of prudent lending, while offering the best possible returns to our savers. Our goal remains to continue to drive our profit performance while keeping members' interests firmly at the heart of everything we do.

David Cutter, Skipton Group Chief Executive, said: "I am pleased to report another robust financial performance from Skipton. We continue to react well to the continuing economic challenges while helping our members to achieve their saving and homeownership aspirations, in line with our mutual commitment.

"While we are not complacent and fully expect that there will be more challenges ahead of us, our members can continue to have confidence in Skipton as a safe haven for their funds and a source of trusted support for their families, as we continue our unwavering emphasis on them."

ENDS

For further information or to arrange interviews, please contact the Skipton Press Office on

08456 017247, email newsline@skipton.co.uk or visit the press section of our website at www.skipton.co.uk

Tracy Fletcher, Head of Corporate Communications

Tel: 01756 705855

If outside Press Office hours (8am - 6pm, Monday to Friday), please call 07867 851628

Skipton Building Society