The Group's Half-Year performance shows Skipton has balanced maintaining financial strength with consistent good value for members. In spite of ongoing economic uncertainty, the UK's 4th largest building society remains financially strong and continues to prudently develop its business.
Profitable throughout the financial crisis, Skipton reports an operating profit before impairment losses and provisions of £25.7m for the six months ended 30 June 2011 (H1 2010: £20.4m). The Group's profits before tax were £6.3m (H1 2010: £21.7m).
Member focus
- Gross mortgage lending increased to £717m in H1 2011, from £141m in H1 2010;
- Residential mortgage balances increased by £83m in H1 2011, a significant turnaround from the decline of £616m seen in H1 2010;
- Gross mortgage lending in H1 2011 represented 1.1% of the UK market, which is 40% more than the Group's market share;
- Enabled homeownership with a market leading 95% loan-to-value mortgage for first and next-time buyers;
- Launched innovative new savings accounts promoting financial responsibility and wellbeing, including Super ISA Feeder to help members make more of their taxable allowances in tough economic times;
- Grew ISA balances by 7% in the period, from £2.40bn to £2.57bn;
- Offered dependable, good value mortgages and savings for evolving needs - reflected in 388 independent media best buy table mentions between 31 December 2010 and 30 June 2011;
- Average savings rate increased from 2.44% at 31 December 2010 to 2.56% by 30 June 2011, despite Bank Base Rate remaining historically low at 0.5%;
- Invested in Skipton Direct to provide even better service and improved online capabilities while extending our branch presence in communities around the UK. Following the opening of 13 branches in late 2010, we now have more than 100 branches serving members and their communities.
Financially strong
- Group operating profit before impairment losses and provisions up 26% to £25.7m in H1 2011 (H1 2010: £20.4m); Group profit before tax of £6.3m in H1 2011 (H1 2010: £21.7m);
- Increased Core Tier 1 capital ratio year on year to 10.5% (H1 2010: 9.9%);
- The number of Group loans where the arrears balance was greater than 2.5% of the total outstanding balance was 1.48% (31 December 2010: 1.42%) in line with the latest published CML industry figure (as at 31 March 2011) of 1.47%;
- Further improvement in the Society's mortgage arrears performance. Accounts where the amount in arrears was >2.5% of the balance outstanding down to 0.65% of the total mortgage book from 0.66% at 31 December 2010;
- Thanks to market confidence in our Group's strength, we successfully completed our inaugural market securitisation, raising £800m of funding;
- 95% of mortgages funded by retail balances;
- Group retail funding as a percentage of total funding reduced from 83% in H1 2010 to 78% in H1 2011, due to the cash raised from the securitisation programme;
- Mortgage and Savings division (comprising the Society and mortgage lending subsidiaries) reported an operating profit before impairment losses and provisions of £12.4m in H1 2011, compared to a loss of £5.1m in H1 2010;
- Loan impairment losses of £17.2m were recognised in H1 2011 (H1 2010: £3.2m; H2 2010 £11.6m) due to further prudent provisioning against specialist lending, commercial and other loans advanced prior to the credit crunch;
- Group net interest margin improved to 0.50% in H1 2011, from 0.35% in H1 2010, a trend we expect to continue as we ensure ongoing sustainable profitability while providing great member value.
Society net interest margin increased to 0.32% in H1 2011 from 0.13% in H1 2010. Margin held at a low enough rate to give good value to members whilst being high enough to operate the business in a prudent manner.
Financial advice
- Financial Advice division comprising Skipton Financial Services, Pearson Jones and Torquil Clark had a successful first half of the year recording an operating profit of £2.5m compared to £1.7m in H1 2010;
- In excess of £5bn of funds under management across the division with growth largely driven by Skipton Financial Services which continues to provide customers with outstanding support via a market leading investment offering, Monitored Informed Investing (MII) which now has over £1bn funds invested;
- Skipton Financial Services included in the Times top 100 companies to work for.
Estate agency ahead of expectations
- Connells Group estate agency subsidiary reported operating profits of £16.9m, a better-than-expected performance given the subdued market conditions in late 2010, though down from £29.6m in H1 2010;
- An improved sales pipeline and recent trading activity indicate that second half performance will again be robust. During H1 2011 the sales pipeline increased by £14m;
- Connells' lead indicators show the market remains cautious but is holding up well:
- The number of properties coming onto the market was 3% higher in Q2 2011 compared to Q2 2010;
-Second-hand house sales were 11% higher in June 2011 compared to June 2010;
- Sales of new build properties were 44% higher in Q2 2011 compared to Q2 2010;
- The stock of properties for sale at 30 June 2011 was 9% higher than a year earlier;
- The number of residential mortgage valuations undertaken in the period was 6% higher than H1 2010.
Enriching communities
- Skipton supported 47 grassroots community projects with funding from our branch Community Contribution Award pot in H1 2011;
- £72,000 was awarded by the Skipton Building Society Charitable Foundation to 38 charities up and down the UK;
- Over £89,000 was given to key partners, mainly in our heartland, to fund community cultural and sporting events.
David Cutter, Skipton Group Chief Executive, said:
"The past six months have seen us concentrating heavily on our mutual commitment to enabling homeownership while continuing to provide good value to savers despite Bank Base Rate remaining at only 0.50%.
"We have increased our new lending fivefold and helped to boost market competition by offering product solutions for evolving needs, such as mortgages for low-deposit buyers and landlords.
"Considerable challenges remain in the wider economy, coupled with uncertainty over the impact of regulatory developments such as the Independent Commission's review of the banking sector.
"However, despite this, our confidence in the underlying performance of our business is reflected in our plans to prudently grow the business during the remainder of the year."
