Profits fall as Yorkshire Building Society battles an unpredictable climate

chris pilling: Room for manoeuvring is getting harder because the lower the Bank of England base rate, the harder it is to have some manoeuvrability on that.
chris pilling: Room for manoeuvring is getting harder because the lower the Bank of England base rate, the harder it is to have some manoeuvrability on that.
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Yorkshire Building Society saw its pre-tax profits fall against a backdrop of an unpredictable economic environment and competitive trading conditions.

Pre-tax profits fell from £111.2m to £99.9m in the first six months of 2016.

The mutual described its first half results as “robust” despite core operating profits plummeting from £115.9m in June 2015 to £62.5m.

Yorkshire Building Society said it further improved liquidity position with balances increasing to £4.7bn from £4.4bn at the end of December 2015. The mutual added that it had further strengthened its capital position.

The industry has seen record low mortgages and that has put pressures on margin performances.

Although the Bank of England has indicated that it would lower the base rate further, from its historic low of 0.5 per cent, the Monetary Policy Committee decided to hold, much to the surprise of experts.

Chris Pilling, chief executive of Yorkshire Building Society, told The Yorkshire Post: “Most people were predicting a change in July, that didn’t happen. All eyes are now on August 4, which is important.

“Obviously in the intervening period, rates are very, very favourable for customers, which is fantastic.

“The thing to counter that is the margin performance generally in the marketplace is quite challenging at the moment.

“Room for manoeuvring is getting harder because the lower the Bank of England base rate, the harder it is to have some manoeuvrability on that.

“I’m not sure that they will go down too much further, even if the Bank of England base rate goes down to zero.

“I wouldn’t see for example that all of that 50 basis points would be coming off today’s rates.”

Britain’s decision to leave the European Union hasn’t had a “significant impact on the mortgage market” thus far, Mr Pilling said.

The building society boss said the CML (Council of Mortgage Lenders) are talking about June being a record month for mortgage lending since 2008.

He added: “That was pre-Brexit vote, which took place at the end of June.

“Since then we’ve seen a little bit of movement in and out and generally house enquiries have fallen a bit.”

Though Mr Pilling says year-on-year comparisons are flattered by the post-General Election bounce last year.

Mr Pilling said that the prospects of Brexit “muddies the waters a bit”. However, there are component parts available to help navigate potential economic turbulence.

The central bank has already announced the countercyclical buffer cut and could look at extending its funding for lending scheme.

Yorkshire Building Society reported mortgage and savings balances growth in the first six months, with mortgage balances of £34bn and savings balances of £29.4bn.

Yorkshire Building Society has 219 branches, 98 agencies and assets of £39.6bn. It employs 4,500 people and has 3.3 million customers.

Chief executive to say farewell

Last month Chris Pilling, a former First Direct CEO, announced that he was to step down as chief executive of Yorkshire Building Society in order to pursue new opportunities that would allow him to spend more time with his family.

Mr Pilling said the organisation is “in great shape” and that he felt “very, very happy” handing over to whoever succeeds him in the role because of the customer satisfaction the mutual has been able to deliver.

The search for a new CEO has already begun, Yorkshire Building Society said.

John Heaps, chairman of Yorkshire Building Society, said Mr Pilling had made a “tremendous contribution” at the building society over the past five years.

“Chris has provided outstanding and strong leadership and demonstrated a deep commitment to ensuring that our members’ interests are at the centre of everything that we do,” he added.