REG - Yorkshire B.S. - Final Results

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02/03/2023 08:15

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RNS Number : 5738R  Yorkshire Building Society  02 March 2023

YORKSHIRE BUILDING SOCIETY

FULL YEAR RESULTS 2022

"The Society's performance this year demonstrates our clear commitment to
supporting our members and to delivering against our purpose of providing Real
Help with Real Life.

2022 saw some of the best outcomes we have seen as an organisation, across
areas including the quality of customer service provided, the number of
members and customers we have supported, and the robust financial results we
have delivered - all while operating within a context of elevated
unpredictability and uncertainty."

Alasdair Lenman

Interim Chief Executive

2022 key highlights:

·      Helping people to have a place to call home is one of the
Society's core purpose ambitions. In support of this, total gross mortgage
lending remained high, matching 2021 volumes at £10.3bn. 2022 net lending was
£3.0bn (2021: £3.6bn).

·      Supported member financial wellbeing through multiple increases
to savings rates over the year. Overall rates were on average 0.56 percentage
points higher than the market average over 2022 (2021: 0.32 percentage points
higher), equating to £198.6m of additional interest paid(1).

·      Strong savings book growth achieved, owing to continued success
in rewarding loyal members and transforming customer experience. Shares
balances increased by £6.5bn in 2022 (2021: £2.1bn increase).

·      Retail deposit performance and continued wholesale issuance has
allowed early repayment of a proportion of government funding, TFSME, in 2022.
This strategy of early exit from TFSME reflects the non-structural nature of
TFSME as part of the Society's overall funding profile.

·      Net interest income was £724.1m in 2022, increasing £186.7m
year on year (2021: £537.4m), and represents an improved net interest margin
of 1.30% (2021: 1.07%). The improvement reflects increased interest income in
light of the frequent and material increases made to Bank Rate, alongside the
successful execution of trading strategies.

·      Management expenses ratio stable year on year at 0.54% (2021:
0.55%), despite inflationary pressures and increased investment in ongoing
capability transformation.

·      On a statutory reporting basis, profit before tax was £502.5m
(2021: £320.0m). Core operating profit(2) was £425.6m (2021: £297.3m),
which excludes a £74.9m fair value gain driven by volatility in the external
interest rate environment.

·      Liquidity and capital positions continue to be strong and
comfortably in excess of regulatory minimums. Common Equity Tier 1 (CET1)
ratio stands at 16.8% (2021: 16.8%).

·      Asset quality of loan book remains strong. The number of accounts
which are more than three months in arrears, including possessions, was 0.44%
(2021: 0.50%) which compares favourably to the industry average of 0.74%
(2021: 0.79%). As at December 2022, the rate of arrears was among the lowest
observed by the Society historically.

Alongside the above commercial and financial outcomes, the Society also
continued to make progress in a number of other important areas.

Customers and colleagues

Underpinning the strong performance in the year was the Society's Strategic
Blueprint and ongoing investment in transforming customer experience. The
first phase of work under the Transformation Roadmap is reaching its
conclusion, and in the last two years some tangible improvements for customers
have been delivered.

The process for new account openings was streamlined in the year, and focus
was placed on addressing some of the known points of customer dissatisfaction.
This included the implementation of a new, simplified login process allowing
access to online services with greater ease. Digital Net Promoter Score(3)
(NPS) increased against 2021, and a high proportion of the shares balance
growth in 2022 was driven through online channels, demonstrating the progress
made in enhancing digital capabilities.

Volatility in the mortgage market, coupled with the accelerated growth
targets, resulted in material peaks in transaction volumes, to which
operational teams were able to adapt without detriment to the standard of
customer service provided. The Society's overall Net Promoter Score - a
measure of how willing customers are to recommend products and services -
stood at +54 in 2022, an increase of 3 points on the score in 2021.

The Society remains committed to supporting colleagues, fostering an
environment aligned to the values of inclusion and diversity, and actively
maintaining effective dialogue. In 2022, overall colleague engagement
increased once again, from 8.5 in 2021 to 8.6, which continues to place the
Society within the upper quartile for financial organisations.

The Society continues to embrace being a part of the communities in which it
operates, with a range of active community and charitable initiatives to
promote financial and digital education, and employability skills. Support for
charitable causes and community programmes will continue on an ongoing basis
on local, regional, and national scales. In 2022, successful partnerships
delivered valuable help, including those working with Age UK and Citizens
Advice.

The external environment

The progress made as an organisation in 2022 is noteworthy given the context
within which it was achieved. Over the course of the year, a number of events
caused significant levels of uncertainty in the geopolitical and economic
landscapes. The Society navigated the environment of elevated uncertainty
well, guided by its unchanged organisational purpose and strategy.

Periods toward the end of the year saw significant levels of disruption,
during which the Society adapted its wholesale funding strategy, and
maintained a principled and responsible approach to lending. In the context of
the cost-of-living pressures, members benefitted from the Bank Rate increases
which were effected in the year, going some way toward supporting them through
the challenges that many face.

Looking forward, challenges appear likely to remain in the external
environment. A key uncertainty is for how long inflationary pressures will
persist, and what this will mean for the cost of living and the functioning of
markets, including the market for housing.

The security of the Society's financial position has been further strengthened
by 2022 performance. Good levels of growth were achieved on both sides of the
balance sheet, and the elevated profit will support capital reserves and
future sustainability. The effective generation of capital is important in
ensuring resilience in the event of an economic shock or downturn, and will
support the Society in preparation for anticipated changes to capital
regulations and requirements.

The Yorkshire Building Society will continue to prioritise the areas it has
over the many years of its operations including responsible lending, robust
risk management, and operational resilience. Alongside this, further
investment will be made to enhance strategically important capabilities,
including transforming customer experience, to continue to deliver on the
Society's purpose.

ENDS

 

About Yorkshire Building Society

The Yorkshire Building Society was founded in 1864.

As at December 2022, the Society has assets of £58.8 billion.

Chelsea Building Society and Norwich & Peterborough Building Society are
part of Yorkshire Building Society. Its subsidiary companies include Accord
Mortgages Limited. For more information on Yorkshire Building Society visit
www.ybs.co.uk.

1.     YBS Group average savings rate compared to rest of market average
rates. Source: CACI's Current Account and Savings Database (CSDB), Stock. Data
period January - December 2022.

2.     Core operating profit is an alternative performance measure which
excludes items such as fair value volatility and material one-time charges
that do not reflect the Group's day-to-day activities. The main difference
between statutory profit before tax and core operating profit in 2022 is a
£74.9m gain on fair value volatility (2021: £19.1m gain) which was largely
driven by the heightened uncertainty in the economic outlook and the interest
rate environment.

3.     Net Promoter Score and NPS are trademarks of Bain & Company,
Inc., Fred Reichheld and Satmetrix Systems, Inc. Data period January -
December 2022, based on 41,703 responses. Following a change in the
calculation methodology for Group NPS in 2022, the comparative period 2021 has
been restated on a consistent basis.

Appendix: Summary Financial Statements

Consolidated Income Statement

                                     2022     2021
                                     £m       £m
 Net interest income                 724.1    537.4
 Fair value gains/(losses)           75.6     26.7
 Net realised gains/(losses)         2.9      0.8
 Other income                        8.8      12.7
 Total income                        811.4    577.6
 Management expenses                 (298.7)  (274.5)
 Operating profit before provisions  512.7    303.1
 Impairments of financial assets     (6.0)    19.2
 Movement in provisions              (4.2)    (2.3)
 Profit before tax                   502.5    320.0
 Tax expense                         (123.2)  (62.9)
 Net profit                          379.3    257.1

 

Consolidated Statement of Comprehensive Income

                                                             2022    2021
                                                             £m      £m
 Net profit                                                  379.3   257.1
 Items that may be reclassified through profit or loss
 Cash flow hedges:
 Fair value movements taken to equity                        26.1    15.3
 Amounts transferred to the income statement                 (28.1)  0.4
 Tax on amounts recognised in equity                         0.5     (4.2)
 Effect of change in corporation tax rate                    0.8     (0.9)
 Assets measured through other comprehensive income:
 Fair value movements taken to equity                        (27.0)  18.3
 Amounts transferred to the income statement                 (1.9)   (3.7)
 Tax on amounts recognised in equity                         7.8     (4.0)
 Effect of change in corporation tax rate                    1.9     (1.9)

 Items that will not be reclassified through profit or loss
 Remeasurement of net retirement benefit obligations         (80.0)  30.5
 Tax on remeasurement of retirement benefit obligations      21.6    (8.0)
 Effect of change in corporation tax rate                    6.9     (7.2)
 Total comprehensive income for the year                     307.9   291.7

 

Consolidated Statement of Financial Position

                                                  2022      2021
                                                  £m        £m
 Liquid assets                                    12,482.3  9,996.7
 Loans and advances to customers                  43,695.4  41,922.4
 Other assets                                     2,576.4   804.6
 Total assets                                     58,754.1  52,723.7
 Shares - retail savings                          42,008.2  35,506.4
 Wholesale funding and other deposits             11,558.3  12,854.2
 Subordinated liabilities                         1,035.1   857.7
 Other liabilities                                756.0     416.8
 Total liabilities                                55,357.6  49,635.1
 Members' interest and equity                     3,396.5   3,088.6
 Total members' interest, equity and liabilities  58,754.1  52,723.7

 

Reconciliation of Core Operating Profit

                                                             2022    2021
                                                             £m      £m
 Statutory profit before tax                                 502.5   320.0
 Reverse out the following items:

 Fair value gains and losses                                 (74.9)  (19.1)
 Historical fair value credit adjustments on acquired loans  (2.4)   (3.2)
 Movement in restructuring provision                         0.1     2.1
 Other non-core items                                        0.3     (2.5)
 Core operating profit                                       425.6   297.3

 

Key ratios

                             2022  2021
                             %     %
 Net interest margin         1.30  1.07
 Management expense ratio    0.54  0.55
 Asset growth                11.4  10.0
 Loans and advances growth   4.2   8.1
 Member balance growth       18.3  6.4
 Liquidity ratio             23.3  20.7
 Funding ratio               21.6  26.6
 Gross Capital               8.3   8.2
 Free Capital                8.1   7.8
 Total Capital Ratio         18.2  18.7
 Common Equity Tier 1 ratio  16.8  16.8
 Leverage Ratio              6.2   5.9
 Cost: Core Income ratio     40.7  49.8

 

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