Yorkshire making itself mutual to trust after the bank debacle

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yorkshire Building Society’s profits and membership numbers soared last year, as it positioned itself as the “trusted mutual alternative to the banks”.

However, new chief executive Chris Pilling said he would approach 2012 with caution, despite recent data which suggests the UK will avoid a double dip recession.

In 2011, the Yorkshire, which is the UK’s second-largest building society, raised its core operating profit by 27 per cent to £163.2m.

Membership numbers rose by 27 per cent to more than 3.3m.

The Yorkshire also increased new lending by 46 per cent to £4.1bn. One in four mortgages were provided to first-time buyers.

The lender said the volatile economic and market conditions which continued in 2011, as well as regulatory changes, presented the society with fresh challenges and opportunities.

Mr Pilling, said: “It is clear to me that when trust in banks is at an all-time low, the Yorkshire’s success is based on our operating principles as a trusted independent mutual, our financial strength and the commitment, attitude and skills of our people.”

Earlier this month, the society announced that it planned to open 12 branches over the next two years. Yesterday, Mr Pilling said that the “first tranche” of these branches would be in Yorkshire. According to Mr Pilling, two or three new branches would be established in Yorkshire, including one in Pudsey, near Leeds.

Member savings balances increased by more than 20 per cent to £26.0bn while mortgage balances rose by 14 per cent to £26.7bn.

During the year, the Yorkshire bought the savings and mortgage business of Egg Banking, it merged with N&P and it completed the integration of Chelsea Building Society into the Yorkshire.

Mr Pilling, the former head of branch network at HSBC, became chief executive of the Bradford-based society on December 31 last year. He took over from Iain Cornish, who stepped down after eight years as chief executive.

Mr Pilling said yesterday: “I would like to thank Iain Cornish for his tremendous leadership which resulted in the society being in an exceptionally strong position and with a very bright future.

“Throughout the global financial crisis, the society has ensured that the focus has been on protecting savers as far as possible from historically low interest rates and continuing to lend to borrowers looking to get on to the property ladder, while demonstrating forbearance to those who are struggling with repayments.”

Mr Pilling also criticised the Financial Services Compensation Scheme (FSCS) because he believed it unfairly penalised building societies who had acted in the best interests of their members. Building societies claim they have been forced to shoulder an unfair burden of contributions to the FSCS, which pays compensation to customers of collapsed financial services firms.

All banks and building societies must pay a levy into the scheme, but building societies claim their contribution is disproportionate as banks took far greater risk.

The Building Societies Association Director-General, Adrian Coles, said yesterday: “We have always been deeply concerned about the overall structure of the FSCS scheme which puts a disproportionate cost burden on to building societies, simply because they are primarily funded by retail deposits.

“The result is that the customers of building societies are paying for the failure of plc banks whose approach to wholesale funding and riskier banking activities caused their downfall.

“After a number of false starts it is now time for the scheme itself to be restructured.”

In October last year, the Financial Services Authority (FSA) announced that it was restarting the FSCS funding review, and plans to conduct consultation in the first half of this year. An FSA spokesman said: “The review initially started in October 2009 but was put on hold 12 months later due to uncertainties around the impact of UK regulatory reform on the FSCS, and the ongoing development of EU directives.

“HM Treasury has now published its proposals on the future structure, rule-making arrangements and accountability of the FSCS, and further progress is being made on the EU Deposit Guarantee Schemes Directive (DGSD).

“In light of these developments, the FSA has decided it is time to restart the FSCS Funding Model Review (FFMR), looking at issues such as the composition of the nine funding classes, the levy thresholds applicable to each and their tariff bases.”

greg.wright@ypn.co.uk

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