Housing market drives successful six months for Leeds Building Society

Supporting first time buyers and the vibrant housing market were key to Leeds Building Society doubling its profits in the first half of this year, according to its chief executive.

Richard Fearon, chief executive of Leeds Building Society.

Revealing the mutual’s interim results, Richard Fearon said the it helped more than 8,600 first time buyers onto the housing ladder, a new record for any half year period and a record 37 per cent share of the society’s new lending overall.

The rebound in home buying and remortgage activity since summer 2020 led to some of the biggest months for mortgage applications in Leeds Building Society’s long history and in 2021 its busiest ever half year.

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Gross lending was up by 97 per cent at £2bn, which, together with an increase in net interest margin, delivered half year profit before tax of £70.3m, compared to £32.6m on June 30, 2020.

Speaking to The Yorkshire Post, Mr Fearon said: “As a mutual, a key part of our purpose is helping people have the home they want. We’re one of only a few lenders who are supporting the Government’s new first home scheme and that’s exactly the sort of thing that suits our mutual purpose.”

The pandemic has propelled the modernisation plans for the UK’s fifth largest mutual forward. It has moved into its new headquarters on Sovereign Street, which will house 900 staff, completed more steps to upgrade its IT systems and is preparing to invest in new data centres. It is also preparing to move into its newest, largest branch in the former Monsoon store in Leeds city centre.

“I’m delighted how quickly we’re getting through our investment priorities,” Mr Fearon said. “I think it’s helped propel us forward faster than would have been possible otherwise, which is a silver lining.”

By the end of 2022, the mutual is also on target to achieve its carbon neutral target 12 months early.

Mr Fearon added that the society is investing in skills. Rather than laying off and furloughing staff, it created more than 80 new jobs and plans to create more new roles in the second half of the year, although he declined to reveal how many.

In addition, it’s increasing its minimum full time equivalent salary to £18,200 per annum, a new base salary level for colleagues of £10 per hour.

“It’s a landmark year for us in 2021 and we’re using learnings from the pandemic to ensure we keep on evolving,” Mr Fearon said.

Increased operating costs for 2021 were anticipated to reflect the scale of investment in future-proofing the society and its operations for years to come.

Despite that, cost to income and cost to asset ratios of 44.9 per cent and 0.56 per cent respectively (52.5 per cent and 0.47 per cent 30 June 2020) remain among the best in the building society sector, Mr Fearon said.

The society maintained its cautious approach to navigating the pandemic, with tighter lending policy and criteria than pre-covid, strong liquidity levels well above regulatory requirements and appropriate levels of provisions to reflect the fact economic conditions remain volatile and uncertain.

Total arrears remain at a low level, comparing favourably against industry benchmarks, and the society continues to retain extremely strong levels of capital, with a CET 1 ratio of 37.6 per cent (34.5 per cent June 30, 2020).

Mr Fearon added: “The pandemic has created obstacles for all of us to overcome but for almost a century and a half the society’s strength has protected our security and independence through previous periods of economic and social upheaval.

“The trust of our members and support of our intermediary partners is all the more valued in today’s testing times and the faith they have placed in us, combined with our strong performance, gives me added confidence when I look to our future.”