Skipton’s lending thrives despite market uncertainty

The announcement today of the Skipton Building Society Group’s annual results for 2007 shows the mutual and its 19 subsidiaries delivered a strong lending performance, despite a turbulent market.

Chief executive John Goodfellow commented, “With the preponderance of the Society’s mortgage funding – over 77% - coming from its members, Skipton has consistently had ample funds for borrowers. The vast majority of new mortgages are for values totaling less than 75%, with only 6% of loans advanced last year having LTVs above 90% and the result is a strong, low-risk mortgage book which has grown 16% year-on-year.”

Skipton’s prudent approach means, at the end of December 2007, only 1.2% of the Society’s outstanding balances were in arrears by any amount, with only 12 properties in possession or 0.014% of accounts.

John Goodfellow added, “At a time when the focus is on interest rates, it’s worth pointing out that our borrowers have also benefited from Skipton’s SVR which, at 6.70%, is currently one of the lowest on the market.”

In addition, the Group’s presence in the mortgage market in 2007 was considerable and applications to Skipton Building Society, Skipton Guernsey, Pink Home Loans, Connells and Amber Homeloans for the year totalled nearly £19 billion.

The annual results also show strong performances in other areas: the Society’s pre-tax profit (excluding dividends from subsidiaries) is up 11.7% to £33.4 million whilst its management expenses ratio dropped from 57 pence to 49 pence per £100 of assets. In addition, at 0.74%, the net interest margin, which demonstrates the value the Society continues to pass back to its members, is one of the lowest in the sector. At a Group level, its diversification and ongoing profitability resulted in pre-tax profits of 1.43% as a percentage of mean assets – which is confidently expected to be double that of any other building society. The Group profit figure includes a one-off credit of £36 million following the sale by Connells of 4.7% of the shares in Rightmove, the property website it helped set up in 2000.

Financial highlights include:

At 31 December 2007:

Group assets £12.53bn
Group pre-tax profits £165.5m (including a one-off gain of £36.0m (2006: £15.7m))
Group interest rate margin 0.95%

Year-on-year:

Group assets grew by 18.3%
Group pre-tax profit up 13.6%
Group residential mortgage balances grew by 15.5% to £8.7bn

John Goodfellow concluded, “It is futile to spend too long looking backwards and instead the future is what matters. At Skipton, we do not believe in standing still and will continue to ensure the Society - and Group - outperforms the market and shows itself to be the epitome of a modern mutual.”