Leeds Building Society sets sights on the £1bn lending landmark

Ian Ward, who is due to retire next year, predicted year-on-year profit growth in the second half of the year as the society increased its pre-tax profit to 18m, compared to 16.3m the previous year.

New lending totalled 400m and the society hopes to grow this to 1bn in the next six months.

But Mr Ward added: "As we move into a period of austerity following the worst recession for over 60 years, there are inevitably a very small number of borrowers experiencing difficulties meeting their mortgage repayments and we continued to work with these customers through this period.

"Our residential arrears (2.5 per cent or more of outstanding mortgage balances) have increased slightly to 2.32 per cent.

"Despite this, the charge for impairment losses and provisions for commercial and residential property reduced to 24m in the first half of 2010."

Mr Ward predicted that house prices would remain flat for the next year or two and said the economy was more stable now than many people expected.

He added: "It's good to see that the major banks and building societies are producing good results because the UK economy has to have strong financial institutions."

The UK's fifth largest building society grew its savings balances by 254m to a record level of 7bn.

The society attracted 34,000 new members, taking total membership to a record level of over 688,000.

This is the first time the society has published half-year results since 2005. It decided to stop five years ago to save money but Mr Ward said yesterday: "We succumbed to what is probably best practice."

Mr Ward said profitability and high levels of capital enabled the society to repay 39m of its subordinated debt, while its capital and reserves are 515m.

Plans for East Yorkshire shopping village Hornsea Freeport are also going well, he said. The society bought the retail outlet for 7m after lending 16m to the former owners Hornsea Estates and Hornsea Estates (No.2) in 2007, which later went into administration.

The mutual plans to sell the site in the future once it has increased in value.

"Occupancy is up from 70 per cent to 81 per cent," said Mr Ward. "We are also in negotiations with planners about potential changes to the planning restrictions. It's predominantly clothes retailers and there's not much potential for food or white goods at the moment.

"If you have wider uses some businesses might be attracted to it because it's a big site but you have to go through the formal processes before you can do anything new."

Mr Ward is stepping down after 15 years as chief executive. He is to be replaced by the society's finance director and deputy chief executive David Pickersgill.

Mr Ward said of his time at the society: "It's been fantastic and I've really enjoyed it – still enjoy it. We've had 15 years of fantastic success.

"The business has quadrupled in that period, made good levels of profits every year and we've grown our reserves enormously so that's been a tremendous satisfaction to me."

He added: "We've got the best cost ratios of any building society. We spend 35p in every pound we earn and the average for the larger societies is over 80p.

"I suppose our efficiency means we can make good levels of profit but also give good rates of interest. That is something I'm very proud of."

Leeds Building Society has maintained its long term deposit 'A' credit ratings, with both Fitch and Moody's.

Mr Ward added: "Our business model remains robust and successful as we continue to focus on efficiency, a prudent approach to lending, maintaining very strong levels of capital and high credit ratings.

"This, combined with delivering good value for money products backed up by excellent service to our members, means that we are in a very good position to deal with the challenging economic outlook for the remainder of 2010 and beyond."