TIDMYBSC
RNS Number : 5738R
Yorkshire Building Society
02 March 2023
YORKSHIRE BUILDING SOCIETY
FULL YEAR RESULTS 2022
"The Society's performance this year demonstrates our clear
commitment to supporting our members and to delivering against our
purpose of providing Real Help with Real Life.
2022 saw some of the best outcomes we have seen as an
organisation, across areas including the quality of customer
service provided, the number of members and customers we have
supported, and the robust financial results we have delivered - all
while operating within a context of elevated unpredictability and
uncertainty."
Alasdair Lenman
Interim Chief Executive
2022 key highlights:
-- Helping people to have a place to call home is one of the
Society's core purpose ambitions. In support of this, total gross
mortgage lending remained high, matching 2021 volumes at GBP10.3bn.
2022 net lending was GBP3.0bn (2021: GBP3.6bn).
-- Supported member financial wellbeing through multiple
increases to savings rates over the year. Overall rates were on
average 0.56 percentage points higher than the market average over
2022 (2021: 0.32 percentage points higher), equating to GBP198.6m
of additional interest paid(1) .
-- Strong savings book growth achieved, owing to continued
success in rewarding loyal members and transforming customer
experience. Shares balances increased by GBP6.5bn in 2022 (2021:
GBP2.1bn increase).
-- Retail deposit performance and continued wholesale issuance
has allowed early repayment of a proportion of government funding,
TFSME, in 2022. This strategy of early exit from TFSME reflects the
non-structural nature of TFSME as part of the Society's overall
funding profile.
-- Net interest income was GBP724.1m in 2022, increasing
GBP186.7m year on year (2021: GBP537.4m), and represents an
improved net interest margin of 1.30% (2021: 1.07%). The
improvement reflects increased interest income in light of the
frequent and material increases made to Bank Rate, alongside the
successful execution of trading strategies.
-- Management expenses ratio stable year on year at 0.54% (2021:
0.55%), despite inflationary pressures and increased investment in
ongoing capability transformation.
-- On a statutory reporting basis, profit before tax was
GBP502.5m (2021: GBP320.0m). Core operating profit(2) was GBP425.6m
(2021: GBP297.3m), which excludes a GBP74.9m fair value gain driven
by volatility in the external interest rate environment.
-- Liquidity and capital positions continue to be strong and
comfortably in excess of regulatory minimums. Common Equity Tier 1
(CET1) ratio stands at 16.8% (2021: 16.8%).
-- Asset quality of loan book remains strong. The number of
accounts which are more than three months in arrears, including
possessions, was 0.44% (2021: 0.50%) which compares favourably to
the industry average of 0.74% (2021: 0.79%). As at December 2022,
the rate of arrears was among the lowest observed by the Society
historically.
Alongside the above commercial and financial outcomes, the
Society also continued to make progress in a number of other
important areas.
Customers and colleagues
Underpinning the strong performance in the year was the
Society's Strategic Blueprint and ongoing investment in
transforming customer experience. The first phase of work under the
Transformation Roadmap is reaching its conclusion, and in the last
two years some tangible improvements for customers have been
delivered.
The process for new account openings was streamlined in the
year, and focus was placed on addressing some of the known points
of customer dissatisfaction. This included the implementation of a
new, simplified login process allowing access to online services
with greater ease. Digital Net Promoter Score(3) (NPS) increased
against 2021, and a high proportion of the shares balance growth in
2022 was driven through online channels, demonstrating the progress
made in enhancing digital capabilities.
Volatility in the mortgage market, coupled with the accelerated
growth targets, resulted in material peaks in transaction volumes,
to which operational teams were able to adapt without detriment to
the standard of customer service provided. The Society's overall
Net Promoter Score - a measure of how willing customers are to
recommend products and services - stood at +54 in 2022, an increase
of 3 points on the score in 2021.
The Society remains committed to supporting colleagues,
fostering an environment aligned to the values of inclusion and
diversity, and actively maintaining effective dialogue. In 2022,
overall colleague engagement increased once again, from 8.5 in 2021
to 8.6, which continues to place the Society within the upper
quartile for financial organisations.
The Society continues to embrace being a part of the communities
in which it operates, with a range of active community and
charitable initiatives to promote financial and digital education,
and employability skills. Support for charitable causes and
community programmes will continue on an ongoing basis on local,
regional, and national scales. In 2022, successful partnerships
delivered valuable help, including those working with Age UK and
Citizens Advice.
The external environment
The progress made as an organisation in 2022 is noteworthy given
the context within which it was achieved. Over the course of the
year, a number of events caused significant levels of uncertainty
in the geopolitical and economic landscapes. The Society navigated
the environment of elevated uncertainty well, guided by its
unchanged organisational purpose and strategy.
Periods toward the end of the year saw significant levels of
disruption, during which the Society adapted its wholesale funding
strategy, and maintained a principled and responsible approach to
lending. In the context of the cost-of-living pressures, members
benefitted from the Bank Rate increases which were effected in the
year, going some way toward supporting them through the challenges
that many face.
Looking forward, challenges appear likely to remain in the
external environment. A key uncertainty is for how long
inflationary pressures will persist, and what this will mean for
the cost of living and the functioning of markets, including the
market for housing.
The security of the Society's financial position has been
further strengthened by 2022 performance. Good levels of growth
were achieved on both sides of the balance sheet, and the elevated
profit will support capital reserves and future sustainability. The
effective generation of capital is important in ensuring resilience
in the event of an economic shock or downturn, and will support the
Society in preparation for anticipated changes to capital
regulations and requirements.
The Yorkshire Building Society will continue to prioritise the
areas it has over the many years of its operations including
responsible lending, robust risk management, and operational
resilience. Alongside this, further investment will be made to
enhance strategically important capabilities, including
transforming customer experience, to continue to deliver on the
Society's purpose.
S
About Yorkshire Building Society
The Yorkshire Building Society was founded in 1864.
As at December 2022, the Society has assets of GBP58.8
billion.
Chelsea Building Society and Norwich & Peterborough Building
Society are part of Yorkshire Building Society. Its subsidiary
companies include Accord Mortgages Limited. For more information on
Yorkshire Building Society visit www.ybs.co.uk.
1. YBS Group average savings rate compared to rest of market
average rates. Source: CACI's Current Account and Savings Database
(CSDB), Stock. Data period January - December 2022.
2. Core operating profit is an alternative performance measure
which excludes items such as fair value volatility and material
one-time charges that do not reflect the Group's day-to-day
activities. The main difference between statutory profit before tax
and core operating profit in 2022 is a GBP74.9m gain on fair value
volatility (2021: GBP19.1m gain) which was largely driven by the
heightened uncertainty in the economic outlook and the interest
rate environment.
3. Net Promoter Score and NPS are trademarks of Bain &
Company, Inc., Fred Reichheld and Satmetrix Systems, Inc. Data
period January - December 2022, based on 41,703 responses.
Following a change in the calculation methodology for Group NPS in
2022, the comparative period 2021 has been restated on a consistent
basis.
Appendix: Summary Financial Statements
Consolidated Income Statement
2022 2021
GBPm GBPm
------------------------------------ -------- --------
Net interest income 724.1 537.4
Fair value gains/(losses) 75.6 26.7
Net realised gains/(losses) 2.9 0.8
Other income 8.8 12.7
------------------------------------ -------- --------
Total income 811.4 577.6
------------------------------------ -------- --------
Management expenses (298.7) (274.5)
Operating profit before provisions 512.7 303.1
Impairments of financial assets (6.0) 19.2
Movement in provisions (4.2) (2.3)
------------------------------------ -------- --------
Profit before tax 502.5 320.0
------------------------------------ -------- --------
Tax expense (123.2) (62.9)
------------------------------------ -------- --------
Net profit 379.3 257.1
------------------------------------ -------- --------
Consolidated Statement of Comprehensive Income
2022 2021
GBPm GBPm
--------------------------------------------- ------- ------
Net profit 379.3 257.1
--------------------------------------------- ------- ------
Items that may be reclassified through
profit or loss
Cash flow hedges:
Fair value movements taken to equity 26.1 15.3
Amounts transferred to the income
statement (28.1) 0.4
Tax on amounts recognised in equity 0.5 (4.2)
Effect of change in corporation tax
rate 0.8 (0.9)
Assets measured through other comprehensive
income:
Fair value movements taken to equity (27.0) 18.3
Amounts transferred to the income
statement (1.9) (3.7)
Tax on amounts recognised in equity 7.8 (4.0)
Effect of change in corporation tax
rate 1.9 (1.9)
Items that will not be reclassified
through profit or loss
Remeasurement of net retirement benefit
obligations (80.0) 30.5
Tax on remeasurement of retirement
benefit obligations 21.6 (8.0)
Effect of change in corporation tax
rate 6.9 (7.2)
--------------------------------------------- ------- ------
Total comprehensive income for the
year 307.9 291.7
--------------------------------------------- ------- ------
Consolidated Statement of Financial Position
2022 2021
GBPm GBPm
-------------------------------------- --------- ---------
Liquid assets 12,482.3 9,996.7
Loans and advances to customers 43,695.4 41,922.4
Other assets 2,576.4 804.6
Total assets 58,754.1 52,723.7
-------------------------------------- --------- ---------
Shares - retail savings 42,008.2 35,506.4
Wholesale funding and other deposits 11,558.3 12,854.2
Subordinated liabilities 1,035.1 857.7
Other liabilities 756.0 416.8
Total liabilities 55,357.6 49,635.1
-------------------------------------- --------- ---------
Members' interest and equity 3,396.5 3,088.6
Total members' interest, equity and
liabilities 58,754.1 52,723.7
-------------------------------------- --------- ---------
Reconciliation of Core Operating Profit
2022 2021
GBPm GBPm
------------------------------------------ ------- -------
Statutory profit before tax 502.5 320.0
Reverse out the following items:
Fair value gains and losses (74.9) (19.1)
Historical fair value credit adjustments
on acquired loans (2.4) (3.2)
Movement in restructuring provision 0.1 2.1
Other non-core items 0.3 (2.5)
------------------------------------------ ------- -------
Core operating profit 425.6 297.3
------------------------------------------ ------- -------
Key ratios
2022 2021
% %
---------------------------- ----- -----
Net interest margin 1.30 1.07
Management expense ratio 0.54 0.55
Asset growth 11.4 10.0
Loans and advances growth 4.2 8.1
Member balance growth 18.3 6.4
Liquidity ratio 23.3 20.7
Funding ratio 21.6 26.6
Gross Capital 8.3 8.2
Free Capital 8.1 7.8
Total Capital Ratio 18.2 18.7
Common Equity Tier 1 ratio 16.8 16.8
Leverage Ratio 6.2 5.9
Cost: Core Income ratio 40.7 49.8
---------------------------- ----- -----
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