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Skipton announces 48% increase in half-year performance

27 July 2010

Skipton Building Society continues to enhance its financial strength while maintaining its focus on meeting members' needs, latest Half-Year Results show.

The Society's clear plan for steering the business through the aftershocks of the historic economic downturn has boosted performance, compared to the equivalent period of 2009. Group Profit before tax amounted to £21.7m, a 48% increase compared to £14.7m for the six months ended 30 June 2009.

Financial Performance in the six months to 30 June 2010 at a glance:

Improved profits

- Group pre-tax profit of £21.7m (H1 2009: £14.7m)

Improved capital strength

- Core Tier One capital ratio up 38% to 9.9% (June 2009: 7.2%);

- Tier One capital ratio up 34% to 11.4% (June 2009: 8.5%);

- Solvency ratio up 26% to 15.1% (June 2009: 12.0%).

Strong retail savings franchise

- 83.2% of funding is comprised of retail balances (June 2009: 78.8%).

- Saving membership up 1% to 744,000 (June 2009: 739,000).

- Retail balances represent 99.9% of mortgage balances (June 2009: 89.8%)

Prudent, measured reduction in mortgage assets

- Group mortgage assets reduced by £0.6bn since the year end to £10.1bn.

Maintained high levels of liquidity

- Liquidity represents 28.7% of shares, deposits and liabilities (June 2009: 22.6%).

Business Highlights

- Our merger with Chesham Building Society completed on 1 June 2010, further increasing the enlarged Skipton's capital strength; boosting our member base by 21,000 and adding three new branches to our network.

- The Mortgage and Savings division reported a loss of £5.7m, compared to a loss of £9.1m for the six months end 30 June 2009.

- Group net interest margin reduced by £12.3m to £26.5m compared to the first six months of 2009, but increased by £12.3m compared to the second six months of 2009.

- The charge for mortgage losses amounted to £3.2m, compared to £22.1m for the six months ended 30 June 2009, a reduction of £18.9m. This reflects a 12% reduction in arrears and greater macro economic stability.

- The Financial Advice division continued to enhance its performance, reporting a profit of £1.7m compared to a loss of £0.1m for the comparative period and is well placed to comply with the Retail Distribution Review requirements which come into force on 31 December 2011.

- Our Estate Agency Division continued to perform strongly, with revenues and profits well up against the first half of 2009. New instructions increased 23% and the level of exchanges rose 13%. Profits for the period amounted to £31.7m (six months to 30 June 2009: £20.8m).

Skipton's diversified business model continues to play a significant part in the Group's success in the face of continued economic challenges, as does its prudent management of the business and its balance sheet.

Group Chief Executive David Cutter said:

"A 48% increase in profit and 34% increase in our Tier One capital ratio is a very pleasing performance compared to our June 2009 results. But there is no room for complacency. Uncertainty stemming from fears over the financial stability of certain European nations and the impact of the Government's austerity package has highlighted the need for continued vigilance.

"However, these most recent results once again demonstrate our ability to prosper despite such adverse conditions while, at the same time, remaining true to our ethos of offering consistent good value and service to our members.

"Therefore I remain confident that steps we took in the first six months of this year, coupled with our unique business model, will ensure a sustainable and strong future for our business."

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