Skipton Building Society Final Results (9295P)

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RNS Number : 9295P

Skipton Building Society

23 February 2016

PRESS RELEASE 23 FEBRUARY 2016

FIRST RATE CUSTOMER EXPERIENCE AND RECORD NUMBER OF CUSTOMERS -

SKIPTON BUILDING SOCIETY REPORTS ANOTHER STRONG YEAR

Skipton, the UK's fourth largest building society, today announces its annual results for the year ended 31 December 2015. The Society has remained true to its 162-year mutual heritage; helping people save for their future and buy their own home, and is pleased to report another strong year's performance.

The building society, headquartered in the Yorkshire market town whose name it shares, reports the following highlights:

Building a strong and better Society

   --     Increased Society customer numbers by 43,348 to a record 838,087; 

-- Skipton was declared the UK's top building society for customer experience in the KPMG Nunwood Customer Experience Excellence survey, and the seventh best out of 272 UK brands;

   --     Increased gross mortgage lending by 23% to GBP3.7bn (2014: by 23% to GBP3.0bn); 

-- Helped 23,094 homeowners to purchase or remortgage their properties, including 3,847 first time buyers;

-- Skipton's mortgage book grew by GBP1.5bn to GBP14.2bn, a growth rate of 11.9% (2014: by GBP1.3bn, a growth rate of 11.2%);

-- Savings balances grew by GBP1.4bn to GBP12.8bn, a growth rate of 11.9% (2014: by GBP1.2bn, a growth rate of 11.7%);

-- Total Group Profit Before Tax (PBT) amounted to GBP146.9m (2014: GBP180.6m[1]). The sale of subsidiaries, associates and equity investments generated a combined profit of GBP1.0m (2014: GBP38.2m);

-- Underlying Group PBT from continuing operations[2] increased by 2.1% to GBP153.3m (2014: GBP150.1m);

-- Group administrative expenses increased by 8.6% to GBP464.4m (2014: GBP427.7m), partly due to increased activity and partly due to increased investment across all areas of the business to help ensure we deliver a sustainable performance over the long term;

   --     Common Equity Tier 1 (CET 1) ratio[3] increased to 16.8%, from 16.1%; 

-- Leverage ratio remains strong at 6.1% (2014: 5.9%), comfortably ahead of the regulator's expected minimum; and

   --     Skipton was upgraded by both Fitch and Moody's credit ratings agencies during 2015. 

David Cutter, Group Chief Executive of Skipton Building Society, said:

"Today's results show that 2015 was another year of strong performance for Skipton Building Society, and further demonstrated that our 162-year-old core purpose of delivering consistent value to our members is still as relevant today as it was when we were founded. In 2015 we enabled more people to save for their future and buy their own home than we ever have before.

"The level of service experienced by our members is important to us. One of our achievements that we are most proud of over the past 12 months was leaping into the prestigious 'top ten' for customer experience excellence across major UK brands and being named the UK's top building society for customer experience.

"The early part of 2015 saw net savings outflows, and was impacted by the market distortion created by NS&I's pensioner bonds. However, strong growth in retail savings resumed throughout the remainder of the year, such that savings balances have increased by 36% over the last three years".

Unwavering focus on our members and our people

   --     The Society continued to grow with a 43,348 increase in its customer numbers to 838,087; 
   --     Achieved a Net Customer Satisfaction rating of 88%[4] (2014: 88%); 

-- In June 2015, the Society achieved an employee engagement level of 90%[5] (June 2014: 88%), significantly ahead of industry norms;

   --     Listed for the first time in The Sunday Times 100 Best Companies To Work For; and 

-- 32% of Skipton complaints made to the Financial Ombudsman Service were upheld during 2015 compared with 55%[6] for the industry.

Enabling our members to achieve their home ownership, savings and life ahead aspirations

-- Skipton's mortgage book grew by GBP1.5bn to GBP14.2bn (2014: GBP12.7bn), an annual growth rate of 11.9% (2014: 11.2%);

   --     Skipton's gross residential mortgage lending was up 23% at GBP3.7bn (2014: GBP3.0bn); 

-- Skipton's net residential mortgage lending accounted for 6.4% of the growth in the UK residential mortgage market[7], compared to our 1.0% share of UK residential mortgage balances;

-- The Society helped 23,094 homeowners (2014: 19,512) to purchase or remortgage their properties, including 3,847 first time buyers (2014: 2,946), and 618 (2014: 667) through participation in the Government's 'Help to Buy' equity loan scheme;

-- The rental market remained strong and GBP467m (13%) (2014: GBP323m or 11%) of Group new lending was on buy-to-let mortgages;

-- Skipton's prudent approach to lending is demonstrated by the number of Group residential mortgages in arrears by three months or more. This represents only 0.91% of mortgage accounts (2014: 1.20%) and compares to an industry average of 1.12%[8] (2014: 1.30%);

-- Our award-winning range of competitive savings products saw member deposit balances grow by GBP1.4bn to GBP12.8bn, an annual growth rate of 11.9% (2014: 11.7%);

-- The growth in Skipton's savings balances accounted for 2.1% of the growth in the UK deposit savings market[9] (2014: 2.3%), compared to our market share of savings balances of 1.0%;

-- The average savings rate paid across all of our accounts reduced by 0.25% during the 12 month period, but nevertheless averaged 1.69% during the year, compared to Bank Base Rate of 0.5%;

-- Skipton paid on average 0.48% higher interest than the market average for banks and building societies during the 10 month period to 31 October 2015 (31 October 2014: 0.53%), being the latest available comparable data[10];

-- Skipton was the UK's fourth largest ISA provider in terms of transfers-in activity during April and May 2015([11]) ; and

-- Skipton Financial Services Limited launched a pensions accumulation and pension switching service.

Strong financial Group performance

-- Group total assets increased by 9.7% during the year to GBP17.5bn (2014: 10.3% to GBP16.0bn);

   --      Group net interest margin reduced to 1.33% (2014: 1.40%); 
   --      Total Group PBT amounted to GBP146.9m (2014: GBP180.6m); 

-- Underlying Group PBT from continuing operations increased by 2.1% to GBP153.3m (2014: GBP150.1m);

-- Included in underlying Group PBT is a GBP15.9m (2014: GBP5.4m) charge for a long term incentive scheme for senior management of Connells Limited. Excluding this charge gives an adjusted underlying Group PBT of GBP169.2m, up 8.8% on the prior year (2014: GBP155.5m);

   --      The charge to loan loss provisions reduced by GBP4.9m to GBP8.4m from GBP13.3m; 

-- The charge to provisions for liabilities reduced by GBP5.7m to GBP11.8m from GBP17.5m, and included a levy of GBP7.4m payable to the FSCS (2014: GBP7.8m); and

-- In June 2015, two credit ratings agencies upgraded the Society's long term ratings: Fitch to BBB+ with a stable outlook from BBB, and Moody's to Baa2 with a stable outlook from Baa3. Both upgrades followed an upgrade by each rating agency within the previous nine months.

Excellent results from the Mortgages and Savings division

-- In addition to reporting strong growth in mortgage and savings balances the Mortgages and Savings division produced PBT of GBP104.8m, up from GBP98.4m in 2014, an increase of GBP6.4m (or 6.5%);

-- Group net interest income (98% of which is derived from this division) increased by GBP10.0m (or 4.7%) to GBP223.3m from GBP213.3m;

-- When expressed as a percentage of mean assets, Group net interest margin decreased to 1.33% from 1.40%;

-- The division's profits were impacted by a 14.2% increase in administrative costs to GBP111.3m as we continued to invest in our customer proposition, risk management frameworks, processes and people;

-- The cost income ratio of the Mortgages and Savings division was 48.0% (2014: 44.5%), whilst the management expense ratio[12] of the division was 67bps (2014: 65bps);

-- The Group remains primarily funded by retail savings, representing 87.8% of total funding (2014: 85.9%);

-- In addition, the division also accepts deposits through its Guernsey based subsidiary, Skipton International Limited (SIL). Offshore deposits increased by 20.2% to GBP1.08bn from GBP0.90bn;

   --     SIL increased PBT by GBP1.5m (12.3%) to GBP13.7m from GBP12.2m; 

-- The percentage of cases in Amber Homeloans and North Yorkshire Mortgages in arrears by three months or more at 31 December 2015 were 6.64% and 5.54% respectively (2014: 8.13% and 6.45%), a significant improvement on reducing closed books;

-- The Society's three months arrears levels fell from 0.52% at 31 December 2014 to 0.44% at 31 December 2015. The quality of the SIL mortgage book remains excellent with nil cases in arrears by three months or more (2014: nil);

-- The average indexed loan-to-value of residential mortgages across the division reduced to 48.5% (2014: 50.3%);

-- At 31 December 2015, the Society had drawn down GBP880m under the Government's Funding for Lending Scheme (2014: GBP650m); and

-- At 31 December 2015, Liquidity amounted to 17.0% of shares, deposits and borrowings (2014: 18.4%).

Improved performance and a growing presence in Estate Agency

-- Connells, our estate agency division, delivered a good set of results in 2015 with profits before tax of GBP62.5m. This is compared to a total profit of GBP62.2m in 2014 which included a GBP10.1m profit from the part disposal of shares on the flotation of Zoopla (the 2015 results include a profit of GBP0.3m arising from the sale of shares). Excluding these gains, Connells' pre-tax profits increased by 19.4% year-on-year;

February 23, 2016 12:41 ET (17:41 GMT)

[4] As measured from an independent survey by KPMG Nunwood of 2,399 Society members. The net customer satisfaction score is calculated by subtracting dissatisfied customers (those scoring satisfaction with the Society as 1-3 on a scale of 1-7) from those who are satisfied (those scoring satisfaction as 5-7 on the same scale).

[5] Source: As measured by Willis Towers Watson, an independent company who provide benchmarking on employee surveys both in the UK and globally.

[6] Source: Financial Ombudsman Service (FOS) complaints data (resolved cases) for the financial services industry for the 12 months to 31 December 2015.

[7] Source: Bank of England statistics, 'Lending secured on dwellings' for the 12 months to 31 December 2015.

[8] Source: Council of Mortgage Lenders, industry arrears data (mortgages in arrears by more than three months) at 31 December 2015.

[9] Source: Bank of England statistics, 'UK deposits from households' for the 12 months to 31 December 2015.

[10] Source: CACI Savings Market Database.

[11] Source: Data provided by the British Bankers' Association.

[12] Administrative expenses as a percentage of mean total assets. Mean total assets is the average of the 2015 and 2014 total assets as shown within the Statement of Financial Position.

This information is provided by RNS

The company news service from the London Stock Exchange

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February 23, 2016 12:41 ET (17:41 GMT)