Yorkshire Building Society
Half-Yearly Financial Report 30 June 2024
Interim Management Report
Introduction from the Chief
Executive
Welcome to
the 2024 Half-Yearly Financial Report for Yorkshire Building
Society. Over the first six months of the year, I have seen
first-hand a clear commitment from our colleagues to deliver on our
purpose. We have continued to offer above-market savings rates,
launched new, purpose-aligned propositions to help first-time
buyers, and delivered a solid financial
performance.
Though the degree of uncertainty remains
elevated, there are indications that the UK economy may have cause
for cautious optimism. The rate of price inflation - a primary
driver for the increasing interest rates over the past few years -
appears to be under greater control, and some aspects of the
cost-of-living pressures have eased somewhat. That said, household
finances for many remain more strained than they once were, and
those seeking a mortgage still face borrowing costs much higher
than a few years ago.
Our purpose at YBS has been constant across
our 160-year history. We are here to provide Real Help with Real Life and that
means supporting our members and customers through the good times
and the bad. The recent years have provided no shortage of
challenges, making the support we provide even more
important.
Helping First Homes Happen
The prospect of home ownership is, for some,
further out of reach than ever. One of the most significant
challenges faced by first-time buyers is saving for their deposit.
To provide direct support for this challenge, we launched two
innovative additions to our range of mortgage and savings
products.
Our First
Home Saver provides a regular savings tool which is
specifically targeted to help aspiring first-time buyers reach
their goal. The benefits of saving extend far beyond the financial.
Recent research sponsored by YBS1 found that not only
are those who save on a regular basis much more likely to go on to
become homeowners in the future, but also that there is a strong,
positive relationship between the act of saving and mental
wellbeing.
Our £5k
Deposit Mortgage serves to bring this savings goal closer
within reach and makes the prospect of home ownership much more
achievable for a greater number of people, including some who may
have thought they would never own their own home.
This is a brilliant demonstration of how
mortgage and savings propositions can work in harmony, and the
positive response from customers has been a real highlight of this
year. I am proud that our teams were able to bring these
innovative, purpose-aligned products to market and we will continue
to focus on ways to make home ownership a reality for more
people.
Supporting the Financial Resilience of Our
Communities
We play a key role in strengthening financial
resilience within the wider community. Our community programmes
operate both locally and nationally, and they place the issues of
financial hardship, financial education, and employability skills
front and centre. Our partnerships with FareShare and Citizens
Advice are two particular highlights.
Until June 2026, money raised by YBS will fund
FareShare's Building Skills for
the Future employability programme. Our aim is to raise £1
million to help lift over 2,500 people out of financial hardship
and into the world of work. We are delighted with the progress we
have already made toward this goal. So far, almost 200 people have
been reached through the programme.
Our award-winning partnership with Citizens
Advice funds advisers to hold free, confidential appointments in
our branches for members and non-members alike. Beginning as a
trial in a small number of our branches, this was quickly expanded
after observing the genuine, positive difference the service makes
to people's lives. To date, the programme has assisted over 8,100
people. This is a key example of how the ways we use our
face-to-face retail network are evolving as we seek out
opportunities to take full advantage of our national
presence.
1
https://www.ybs.co.uk/w/saving-small-amount-can-help-financial-and-mental-wellbeing
Moving Our Strategy
Forward
I am delighted to see so much momentum
building behind Our
Strategy in its first year since being refreshed. Our
near-term priorities are progressing well, and our plan for the
next five years is taking shape.
We want to deliver the best possible
experience for our members and customers, whether that is face to
face, online, or over the phone. We continue to evolve our digital
customer journeys, which includes continually expanding the
features available through our app.
As our organisation continues to mature, and
the risks that we face evolve, we will keep investing in our
capabilities. This includes investing in our colleagues to ensure
that they have the appropriate skills and expertise needed to meet
future challenges.
Focusing on Delivering for our Members and
Customers
Achieving our strategic objectives will not be
possible without fostering an ambitious culture. Our people set us
apart, and I would like to extend a big thank-you to all of the
Society's colleagues for their unwavering efforts. The energy and
enthusiasm with which Our
Strategy has been embraced has been fantastic to see. It is
no surprise to me that our colleagues continue to feature so highly
in the feedback we receive from customers and brokers. This
supports our achievement of an overall Net Promoter Score (NPS) of
+64 (2023: +63)2 in this period.
We hold ourselves to high standards when
serving our members and customers. An area that remains a priority
for us is complaints handling, where actions taken to improve
outcomes are now evidencing improvements. Delivering good outcomes
to our customers remains of great importance to us.
An Update on our Performance
Our core markets of mortgages and savings
continue to be influenced by external factors, including the
interest rate environment and the intensity of
competition.
The level of demand in the mortgages market
has been stronger than expected in 2024 so far, and house prices
have proven more resilient than some previous expectations. Coupled
with the larger application pipeline as we entered 2024, the
Society's gross mortgage lending in the period increased, reaching
£5.2 billion (2023 H1: £4.2 billion); net lending also increased,
to £2.0 billion (2023 H1: £0.7 billion). In line with the more
challenging economic environment, we have observed an increase in
the level of mortgage arrears, though levels remain significantly
more favourable than the industry average (0.49% at 30 June 2024
vs. industry average 0.97%)3. We will continue to offer
support for our members who are experiencing difficulty in meeting
their repayments.
The savings market in the first half of the
year again saw a lot of activity aligned to the new tax year and
the renewal of individual savings account (ISA) allowances.
Understandably, ISA products have become much more popular in this
environment, and the Society used our member loyalty programme to
ensure that our long-standing members had a good-value option
available to them.
The savings rates we offer continue to compare
very favourably to the market average. Over 2024 so far, we
delivered savings rates that were on average 0.91 percentage points
higher than the market average (1.01 percentage points higher over
2023)4. Members value our rewarding rates, our network
of branches and the substantial investment we have made in our
digital capabilities over the last few years. This has led to
savings balances continuing to grow strongly. Balances increased by
£2.6 billion in the period (2023 H1: £3.7 billion increase), now
standing at £50.3 billion5.
The set of financial results delivered in the
first six months of 2024 are robust. As a mutual, it is vitally
important that we operate a responsible and sustainable business on
behalf of our members. We hold levels of capital and liquidity that
comfortably exceed regulatory minimums, and continued profitability
will aid our resilience and provide optionality to weather
uncertainties that future periods may bring.
Statutory profit before tax for the period was
£158.1 million (2023 H1: £180.6 million) and core operating profit
was £149.2 million (2023 H1: £246.4 million). Lower levels of
profit are largely a result of an anticipated reduction in net
interest income following a compression in both mortgage and
savings margins, this trend stabilised in quarter two and we expect
this to continue in to half two. Management expenses have increased
against last year in line with inflationary pressures as well as
making further investment in our colleagues and our ongoing
transformation programme.
Net interest margin remains under pressure
across the industry, and the prospect of a reducing interest rate
environment adds to this dynamic. In this context, it is
increasingly important that the investments we make toward our
future are made purposefully, and in a disciplined manner, ensuring
that they translate into benefits for our members and
customers.
In the first half of this year, we welcomed
Annemarie Durbin as our new Chair of the Board and Tom Ranger as
our new Chief Financial Officer. I, and our committed leadership
team, are determined to build on our strong foundations and deliver
against our clear strategy to ensure Yorkshire Building Society
continues to benefit its members long into the future.
Susan Allen,
OBE
Chief Executive
2 Net Promoter Score and NPS are
trademarks of Bain & Company, Inc., Fred Reichheld and
Satmetrix Systems, Inc. Data period January - June 2024. Following
a change in the
calculation methodology for Group
NPS, the comparative period has been restated on a consistent
basis.
3 Retail 3m+ in arrears including
possessions by number of accounts. Industry average sourced from UK
Finance: Retail, 3m+ in arrears. Latest data available is as at
March 2024.
4 CACI's Current Account and
Savings Database (CSDB), Stock. Data period January - April
2024.
5 Refer to Summary Balance Sheet
on Page 9.
Performance at a glance
Member value
|
Statutory profit before
tax
|
|
Core operating
profit6
|
|
Cost to core income
ratio
|
|
Common Equity Tier 1
ratio
|
|
£158.1m
|
|
£149.2m
|
|
53.1%
|
|
17.8%
|
|
£180.6m 30 June 2023
|
|
£246.4m 30 June 2023
|
|
39.0% 30 June 2023
|
|
16.7% 31 December 2023
|
|
This is
the profit we earned from our ongoing business operations,
excluding taxes.
|
|
This is
the profit we earned, excluding taxes, fair value volatility and
one-time charges.
|
|
This
ratio is a measure of efficiency, showing how much we are spending
to generate every pound of our income.
|
|
Maintaining this ratio above a certain minimum helps to
protect the Society against unexpected losses.
|
|
UK Leverage
ratio
|
|
Liquidity coverage
ratio
|
|
Average savings rate
differential7
|
|
Net Promoter Score
(NPS®)8
|
|
6.3%
|
|
173.4%
|
|
0.91pp higher than the
market
|
|
+64
|
|
6.2% 31 December 2023
|
|
156.4% 31 December
2023
|
|
1.01pp higher over
2023
|
|
+63 in 2023
|
|
This
ratio highlights the capital we hold compared to our assets,
showing our ability to cope with unexpected events.
|
|
A
liquidity metric which aims to ensure that an adequate level of
liquidity is maintained to meet a severe, 30-day stress
scenario.
|
|
This
shows how much higher the rates we paid our customers were compared
to the rest of market average.
|
|
This
measures how willing our customers are to recommend us to
others.
|
Place to call
home
|
Gross
lending
|
|
Gross mortgage lending
market share9
|
|
Growth in mortgage
balances10
|
|
New residential mortgages
provided
|
|
£5.2bn
|
|
4.8%
|
|
4.3%
|
|
23,000
|
|
£4.2bn 30 June 2023
|
|
3.9% 31 December 2023
|
|
1.5% 30 June 2023
|
|
21,000 30 June 2023
|
|
This
represents the amount we have provided to customers to help finance
properties over the period.
|
|
This
represents our share of all mortgage lending in the UK housing
market.
|
|
This
represents the growth in our overall mortgage balances over the
period.
|
|
The
number of new residential mortgages advanced in the period, helping
our customers to have a place to call home.
|
Financial
Wellbeing
|
Savings accounts
opened
|
|
Savings balance market
share11
|
|
Growth in shares
balances
|
|
Average savings rate
paid12
|
|
290,000
|
|
2.4%
|
|
5.5%
|
|
4.21%
|
|
320,000 30 June 2023
|
|
2.3% 31 December 2023
|
|
8.6% 30 June 2023
|
|
3.43% over 2023
|
|
The
number of accounts opened by new and existing members over the
period, helping them save for the future.
|
|
This
reflects our share of the UK savings market.
|
|
This
shows the total deposits from members. We use these balances to
fund the mortgages we offer to our customers.
|
|
This
shows the benefit we are giving back to our members.
|
More detail on business performance can be
found in the Business
Highlights on page 5.
6 Definitions of alternative
performance measures are provided in the glossary for the 2023
Annual Report and Accounts.
7 YBS Group average savings rate
compared to rest of market average rates. Data source: CACI's
Current Account and Savings Database (CSDB), Stock. Data period:
January - April 2024 (latest data available). Comparative period:
January - December 2023.
8 Net Promoter Score and NPS are
trademarks of Bain & Company, Inc., Fred Reichheld and
Satmetrix Systems, Inc. Following a change in the calculation
methodology for Group NPS,
the comparative period has been
restated on a consistent basis.
9 Based on Bank of England total
industry gross lending. Data period January - May 2024.
10 Growth in mortgage balances
excludes fair value adjustments for hedged risk on loans and
advances to customers.
11 Based on analysis of BSA
deposits Held by Households. Data period: May 2024.
12 CACI's Current Account and
Savings Database (CSDB), Stock. Data period January - April
2024.
Business highlights
This section provides a brief overview of the
Society's key activities in the first six months of the year, as
well as updates on the environments in which YBS
operates.
Economic environment overview
Much focus within the UK economy remains on
the rate of price inflation and what this may mean for the future
path of Bank Rate, set by the Monetary Policy Committee (MPC).
According to the Office for National Statistics, the Consumer Price
Index (CPI) increased by 2.0% in the 12 months to May 2024, down
from 2.3% in the 12 months to April 2024. This is much lower than
the peak that CPI reached, which was 11.1% in the 12 months to
October 202213. Price inflation has been reported to be
moderating across most goods categories, whilst services inflation
is proving more persistent, remaining elevated despite having
declined from its previous position.
Bank Rate has stood at 5.25% since August
2023, and the MPC elected to hold rates at each of its meetings in
the year to June, with the March 2024 meeting being the first where
no members voted for an increase since the 5.25% rate was set. The
MPC is clear that it remains prepared to adjust monetary policy to
return inflation to the 2% target rate, informed by the close
monitoring of the economy as a whole.
Market expectations for the future path of
interest rates have continued to be dynamic in the first half of
2024. Expectations remain sensitive to the periodic releases of key
economic data, each of which provide the markets an opportunity to
revise assumptions on when and by how much Bank Rate may
change.
Some of the cost-of-living pressures have
begun to show signs of easing, with real earnings growth having
emerged as the rate of inflation fell across the second half of
2023 and into 2024. Positive growth in earnings should result in a
greater ability to save and spend; that said, many domestic
households and landlords are yet to be impacted by refinancing to
more expensive mortgages after their current fixed-rate product
term comes to an end.
The UK mortgages market
In 2024 so far, the UK housing market has
performed more strongly than some previous expectations. Increasing
levels of demand have been observed, with higher residential
mortgage application volumes recorded than those over the same
period in 2023. House price indices have also shown resilience;
average UK house prices increased 1.8% in the 12 months to March
2024, according to the Office for National
Statistics14.
The interest rates available to mortgage
customers have been subject to volatility across the period.
Customer rates reduced sharply at the beginning of January 2024,
reacting to a downward shift in funding costs over the Christmas
period, though this reduction mostly unwound in the months that
followed as Bank Rate expectations again shifted. The cost of
borrowing remains much higher than in recent years, and meeting
affordability requirements remains a constraint on the market,
especially for first-time buyers. Existing mortgage holders remain
strongly incentivised to seek the best product available to them
and their circumstances given the scale of the differential between
their previous rate and the rate that they will lock in for the
coming years.
The current environment for borrowers is
therefore a challenging one. At YBS, we leverage our common-sense
approach to lending and our product development to support those
borrowers who are underserved by the wider market. This year we
have bolstered our Cascade
Score proposition, which allows us greater flexibility in
our lending decisions, to now accommodate a loan-to-value of up to
95%. March also saw the launch of our £5k Deposit Mortgage, specifically
targeted to support first-time buyers. We are delighted to have
assisted over 310 customers in securing accepted applications
within the first three months of the launch of this proposition.
These enhancements open up opportunities for more aspiring
homeowners.
The Society achieved gross lending of £5.2
billion in the first six months of 2024 (2023 H1: £4.2 billion),
with the year-on-year increase owing to carrying a larger pipeline
of mortgage applications into the year, in addition to capturing a
larger share of the market in 2024. A higher year-on-year net
mortgage lending position is predominantly driven by this increase
in completions; net lending in H1 2024 was £2.0 billion, compared
to £0.7 billion over the same period in 2023.
13
https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/may2024
14
https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/privaterentandhousepricesuk/may2024
The UK savings market
In contrast to the preceding year, Bank Rate
has remained constant so far in 2024 resulting in a shift in the
dynamic within the retail savings market. Competition has been
observed to ease as market-leading rates have slowly reduced since
the peak of market activity in the second half of 2023, and
customer rates have also been subject to fewer and less material
changes. The market currently expects Bank Rate to begin reducing
in the second half of the year which, if it comes to pass, will
likely bring about changes in the competitive landscape as well as
impacting customer preferences.
Aligned to the beginning of the new tax year,
the opening part of the year is a time when many look to take
advantage of renewed Individual Savings Account (ISA) allowances.
This period was a successful one for the Society, driven by our
range of competitively priced fixed- and variable-rate products,
including our Loyalty ISA which carried a preferential rate for our
long-standing members. ISAs have proven to be especially valuable
for customers in this high interest rate environment, with stronger
net flows than last year across the market.
The range of products we offer can help our
members to save in the way that suits them, whether they need ready
access to their funds, are looking for a fixed-term option, or
simply want to build healthy savings habits. We know that reaching
savings goals can be challenging, especially for aspiring
homeowners.
This is why we launched a new savings
proposition in March, exclusively designed to support first-time
buyers: our First Home
Saver product, which offers a rewarding interest rate on
deposits of up to £500 per month. In tandem with our £5k Deposit Mortgage product, launched
at the same time, these propositions aim to address the challenges
faced by prospective borrowers. We will continue to explore similar
opportunities to deepen the impact we have on the lives of our
members and customers.
The rates of return we offered continued to
outperform the market average; our variable rates were 0.91
percentage points higher (1.01 percentage points higher over 2023).
The minimum variable rate we offered, 3.45%, was 0.16 percentage
points higher than the average in this period (3.00% average
minimum rate over 2023, 0.57 percentage points
higher)15. Our competitively priced products, combined
with continued strength in retention performance, and our
transformational changes, has contributed to the growth achieved in
retail savings balances over the period. Balances increased by £2.6
billion, reaching £50.3 billion (2023 H1: £3.7 billion
growth).
Outlook
The UK economy experienced growth in the first
quarter of 2024; gross domestic product (GDP) increased by 0.7%,
which comes after two consecutive quarters of falling GDP over the
second half of 202316. Looking ahead, the economy is
expected to continue to grow, albeit modestly. CPI inflation had
fallen to the 2.0% MPC target in the 12 months to May 2024, and is
currently expected to remain around the 2.0% to 2.5% range until
the year is out; the rate of unemployment is also expected to
remain relatively low. With inflationary pressures showing signs of
subsiding and the cost-of-living picture starting to improve,
attention has now turned to when the Monetary Policy Committee may
begin to lower interest rates.
With our core markets of mortgages and savings
being so intrinsically linked to the interest rate environment,
central bank policy can have a material bearing on the prevailing
dynamics for both competition within the market, and for customer
behaviours. If and when the Bank of England begin to loosen
monetary policy, this will bring both challenges and opportunities.
A general increase in consumer confidence should result from lower
living and borrowing costs. This will include those seeking a
mortgage, whether for the first time or refinancing, who will be
provided more optionality as affordability and monthly payment
obligations will be within closer reach. Savers, however, are
likely to see the rates of return available to them decrease
alongside Bank Rate, and a changing preference between fixed and
variable rate products could emerge.
For the wider banking industry, a declining
Bank Rate environment has the effect of pressurising earnings.
Intensifying competition could exacerbate this pressure and amplify
the challenges, whether this stems from the market requirement to
repay TFSME funding, actions taken to retain balances following the
high levels of maturities, or other external factors.
Risks continue to be posed by geopolitical
factors such as the recent tensions in the Middle East and the
possible disruptive impact this could have on oil supply and
prices. Additionally, with the result of the UK general election
being a change to the governing party, this could in turn bring
changes to economic policy. Impacts may also be felt from more
global political changes, with a US election later in the year, and
growing signs of shifting political sentiments in the
Eurozone.
The Society will continue to prioritise the
strength of our position, financial and otherwise, so as to ensure
that we continue to be here to serve our members. The environments
in which we operate are monitored closely in order that challenges
and threats are identified as they emerge, and action taken where
appropriate.
15 CACI's Current Account and
Savings Database (CSDB), Stock. Data period January - April
2024.
16 GDP quarterly national
accounts, UK - Office for National Statistics
(ons.gov.uk)
Our financial
performance
The following summary sets out the key drivers
of our financial results over the first half of the year, and the
impact they have on the condensed interim financial
statements.
The table below presents the results of
Yorkshire Building Society ('YBS' or 'the Society') and its
controlled entities (collectively 'the Group' or 'YBS Group') for
the half-year ended 30 June 2024. See note 1 to the condensed
interim financial statements for more information on the basis of
preparation.
Income Statement
The rising Bank Rate environment has served to
elevate levels of profitability across the industry over the past
two years. This dynamic has been absent from the first six months
of 2024, as Bank Rate appears to have reached its peak rate, and
income performance and profitability have stepped down
accordingly.
Net interest income was £340.8 million in the
period, a decrease from the same period last year (2023 H1: £417.2
million). A primary driver of the reduction is the repricing of our
mortgage and savings books, particularly the maturity of mortgages
written in 2021, as prevailing new business margins are narrower in
comparison. No changes were made to Bank Rate in the period, which
contrasts with the 2023 comparative where the four rate increases
supported income. These impacts were partially offset by the
continued growth in the balance sheet; growth was achieved in both
mortgages and savings balances. Management expenses have increased
year on year, owing to a higher than typical pay award for all
colleagues, an increase in headcount, and inflationary pressures on
costs such as IT and utilities. We have also made additional
investment in our transformation programme.
Our financial performance is monitored by our
Board who, in addition to looking at statutory profit before tax,
look at core operating profit. Core operating profit excludes items
such as fair value volatility and one-time charges that are either
temporary in nature or reverse over time and so do not reflect the
Group's day-to-day activities. In this reporting period, core
operating profit was £149.2 million, a decrease of £97.2 million on
the equivalent period last year (30 June 2023: £246.4
million).
The following table shows the items removed from
statutory profit before tax to arrive at core operating
profit.
|
|
Half-year
ended
30 June
2024
|
Half-year
ended
30 June
2023
|
Year ended
31 December
2023
|
|
|
Statutory
|
Remove non-core
items
|
Core
|
Statutory
|
Remove non-core
items
|
Core
|
Statutory
|
Remove non-core
items
|
Core
|
|
|
Notes
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
|
Net interest income
|
i
|
340.8
|
(1.8)
|
339.0
|
417.2
|
(1.4)
|
415.8
|
786.0
|
(2.4)
|
783.6
|
|
|
Fair value gains and
losses
|
ii
|
7.1
|
(7.1)
|
-
|
(71.3)
|
67.4
|
(3.9)
|
(5.5)
|
2.2
|
(3.3)
|
|
|
Net realised gains
|
|
-
|
-
|
-
|
1.5
|
-
|
1.5
|
1.6
|
-
|
1.6
|
|
|
Other income
|
|
1.2
|
-
|
1.2
|
1.8
|
-
|
1.8
|
4.3
|
-
|
4.3
|
|
|
Total income/core income
|
|
349.1
|
(8.9)
|
340.2
|
349.2
|
66.0
|
415.2
|
786.4
|
(0.2)
|
786.2
|
|
|
Management expenses
|
|
(180.5)
|
-
|
(180.5)
|
(161.9)
|
-
|
(161.9)
|
(332.7)
|
-
|
(332.7)
|
|
|
Impairment of financial
assets
|
(10.7)
|
-
|
(10.7)
|
(7.5)
|
-
|
(7.5)
|
(4.0)
|
-
|
(4.0)
|
|
|
Movement in provisions
|
iii
|
0.2
|
-
|
0.2
|
0.8
|
(0.2)
|
0.6
|
0.6
|
(0.2)
|
0.4
|
|
|
Profit before tax/core operating profit
|
158.1
|
(8.9)
|
149.2
|
180.6
|
65.8
|
246.4
|
450.3
|
(0.4)
|
449.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
The notes below explain the adjustments made to
statutory profit to arrive at the core operating profit
figure:
i.
Historical fair value credit adjustments on acquired
loans.
ii.
Removed fair value volatility i.e. gains and losses on derivatives
not qualifying for hedge accounting, and on non-core equity
investments. See note 5 to the condensed interim financial
statements for more information.
iii. Non-core
elements of the restructuring provision.
The following are the main items in the income
statement that contribute to core operating profit:
· Net
interest income for the year to June is £340.8 million (2023 H1:
£417.2 million), representing a net interest margin of 1.09%, a
decrease of 0.29 percentage points compared to the equivalent
period last year.
· Other income of £1.2 million relates to fees, commissions,
and other operating income (2023 H1: £1.8 million).
· Management expenses were £180.5 million, an increase of £18.6
million against the same period in 2023. The increase is driven by
the full-year impact of a higher than typical colleague pay award
and an increase in headcount, partially to accommodate the increase
in operational scale in addition to bolstering strategically
important roles such as change and risk. Investment in our
portfolio of change has also increased year on year as we look to
accelerate the delivery of enhancements to customer experience.
Also impacting 2024 costs is the recognition of the Bank of England
Levy Framework which replaces the previous Cash Ratio Deposit
scheme.
· Movements in management expenses and net interest income have
resulted in an increase in cost to core income ratio from 39.0% to
53.1%.
· An
impairment charge of £10.7 million has been recorded in the period
(2023 H1: £7.5 million). See note 8 to the condensed interim
financial statements for more information on expected credit
losses, including the economic scenarios used.
As a mutual we do not pay dividends to external
shareholders; profit requirements are driven solely by our need for
ongoing capital to support our activities. Profit remains
sufficient to provide capital for our growth aspirations and ensure
we are resilient to severe economic stresses.
The Group's business activities are focused
within the UK and predominantly relate to mortgage lending which is
funded primarily through domestic deposits. We continue to have a
cautious approach to liquidity management and as at 30 June 2024,
the majority of our liquidity portfolio consisted of exposures to
the Bank of England and the UK Government.
Balance Sheet
The balance sheet presented below is rounded
to the nearest point one of a billion. Any figures or measures
quoted are based on the consolidated balance sheet on page
18.
|
|
Half-year
ended
30 June
2024
|
Half-year
ended
30 June
2023
|
Year ended
31 December
2023
|
|
|
£bn
|
£bn
|
£bn
|
|
Liquid assets
|
13.7
|
14.9
|
12.8
|
|
Loan and advances to
customers
|
48.8
|
45.9
|
46.8
|
|
Fair value adjustment for hedged
risk on loans and advances to customers
|
(0.7)
|
(1.8)
|
(0.6)
|
|
Other assets
|
2.1
|
3.2
|
2.0
|
|
Total assets
|
63.9
|
62.2
|
61.0
|
|
Shares - retail savings
|
49.6
|
45.6
|
47.1
|
|
Wholesale funding and other
deposits17
|
8.1
|
10.8
|
7.8
|
|
Subordinated
liabilities
|
1.5
|
1.2
|
1.6
|
|
Other liabilities
|
0.9
|
1.1
|
0.8
|
|
Total liabilities
|
60.1
|
58.7
|
57.3
|
|
Members' interest and
equity
|
3.8
|
3.5
|
3.7
|
|
Total members' interest, equity, and
liabilities
|
63.9
|
62.2
|
61.0
|
Overall balance sheet growth in the year to
June was 4.8% (2023 H1: 5.8%).
Growth in shares balances was £2.6 billion (2023
H1: £3.6 billion), with net savings flows contributing £1.8 billion
(2023 H1: £3.1 billion). This growth has been supported by the
strength of our product propositions, maintaining a significant
rate differential to the market, and enhancements in our digital
savings offering.
Net mortgage lending increased compared to last
year, reaching £2.0 billion in the first half of this year (2023
H1: £0.7 billion). Completion volumes in early 2023 were impacted
by the disruption to the mortgage market in the Autumn of 2022
which resulted in a smaller application pipeline being carried
forward. The pipeline volumes were more typical as 2024 began,
further supported by strong in-year completion volumes.
The asset quality of our loan book remains high,
though arrears levels have been observed to have increased year on
year. The value of loans more than three months in arrears
represents 0.41% of our mortgage book at 30 June 2024 (31 December
2023: 0.39%). The number of accounts which are more than three
months in arrears (including possessions) is 0.49% at 30 June 2024
(31 December 2023: 0.50%), which remains significantly better than
the industry average, the latest data for which is 0.97% (31
December 2023: 0.94%)18. A number of indicators are used
in assessing the credit quality of our loan book, which are
continually monitored. We also continue to consider our lending
criteria carefully.
The Society maintained our active presence in
the wholesale funding markets. In the first six months of 2024, we
issued two Covered Bonds, one Euro and one Sterling, with the
latter also accompanied by a liability management exercise to
repurchase a proportion of an existing Covered Bond issuance. In
May, we made a £0.5 billion repayment in respect of TFSME funding,
the outstanding balance of which now stands at £0.5 billion (2023
H1: £2.2 billion outstanding).
Levels of liquidity remain robust and sufficient
headroom to regulatory requirements has been maintained. As at 30
June 2024, our liquidity ratio stands at 23.7% (2023: 23.3%), and
our liquidity coverage ratio was 173.4% (2023: 156.4%).
Key capital ratios also demonstrate significant
headroom against regulatory minimums. As part of the Society's work
to strengthen its governance, risk, and control capabilities, we
have been undertaking focused work to improve the maturity of our
control environment in respect of disclosures and regulatory
reporting. Work has now concluded regarding the Society's approach
to reporting Mortgage Risk-Weighted Assets (RWAs), the
implementation of which results in a reduction in the Society's
Mortgage RWAs at half-year, and supports an increase in the Common
Equity Tier 1 (CET1) ratio.
Our CET 1 ratio, which represents the
relationship between the strongest form of capital (predominantly
retained profits) and risk-weighted assets, is 17.8% (2023: 16.7%).
Our UK leverage ratio, which compares Tier 1 capital with total
assets, stands at 6.3% (2023: 6.2%).
The Society is anticipating the publication of
the final Basel 3.1 rules and, as such, only has an initial
assessment of the impacts that the rules may have upon the
Society's capital position. Whilst the final outcome of the rules
is unknown, it is currently expected that the Basel 3.1 rules will
not have a significant impact upon the Society's capital position.
The Society will undertake a full assessment of the final rules
once published.
17 Within 'wholesale funding and
other deposits' are £0.7 billion of retail savings deposits not
classed as shares (2023 H1: £0.5 billion, 2023: £0.6
billion).
18 Industry average sourced from
UK Finance: Retail, 3m+ in arrears. Latest data available is as at
March 2024.
Risk overview
The environment within which we operate and the
nature of the threats we face are continually evolving. A
description of the principal risks and uncertainties to which we
are exposed is included in the table below, and further commentary
on how these risks have evolved is included after the
table.
We have performed stress tests to assess the
impact of a range of risk scenarios. It is our assessment that,
while they each bring their individual challenges, we are well
placed to manage them.
We continue to invest in our risk management
capability to ensure that emerging and evolving risks are closely
monitored, and that timely and appropriate action is taken to
protect the interests of YBS and its customers. Significant
emerging risks are regularly reviewed through the senior risk
committees and are considered as part of our planning
process.
We have a robust risk management framework,
strong capital position, diverse funding sources and high liquidity
levels; we are confident in our ability to deliver good outcomes
for our members and customers; and we remain confident in the
financial resilience, operational resilience and the sustainability
of the Group.
|
Risk
|
Description
|
Approach
|
|
Strategic risk
|
The risk to the Group's earnings
or sustainability arising from changes in the business environment
or from the effectiveness of decisions and actions in our strategic
response to those changes.
Sources:
§ The business environment we operate in could change
unexpectedly
§ The decisions we make and actions we take could prove
ineffective
|
§ We perform regular horizon scanning, corporate planning,
scenario analysis, competitor analysis and business performance
monitoring to mitigate risks arising from the economic environment
and our strategic choices
§ We have defined risk attitudes, risk appetites and risk
metrics for all our other principal risks
§ Our business model is relatively simple, but we operate in a
highly competitive market. Our hedging strategy therefore
mitigates the risks arising from our focused range of products in
this market
|
|
Capital risk
|
The risk that the Group is not
able to meet regulatory capital requirements or deliver on its
strategic plans due to insufficient capital resources.
Sources:
§ Principal risks could crystallise, causing losses and
depleting capital
§ Regulatory requirements for capital could increase
|
§ Capital risk is constrained by a Board-approved risk appetite
and the Board-approved capital risk policy
§ Current and projected capital positions are regularly
monitored and considered in stress scenarios as part of the
internal capital adequacy assessment process
§ We conduct internal tests to ensure sufficient capital is
available for the Group to maintain its minimum capital
requirements, even in a stress scenario
§ Further information on our capital management can be found in
the Group's Pillar 3 disclosures on our website
|
|
Funding and liquidity
risk
|
The risk of having inadequate cash
flow to meet current or future requirements and
expectations.
Sources:
§ Members can withdraw their deposits at short- or
no-notice
§ Wholesale investors may lose confidence in the
Group
|
§ We are primarily funded through retail savings balances,
supported by a strong franchise in key wholesale funding
markets
§ Funding and liquidity risk is constrained by a Board-approved
risk appetite and the Board-approved funding and liquidity
risk policy
§ The Board annually approves the key assumptions and controls
for managing liquidity risk as part of the internal liquidity
adequacy assessment process
§ We conduct internal tests to ensure sufficient liquidity is
available to meet business-as-usual and stressed
requirements
§ We manage to the Liquidity Coverage Ratio (LCR) and the Net
Stable Funding Ratio (NSFR) external regulatory measures
|
|
Market risk
|
The risk to the Group's earnings
or the value of its assets and liabilities due to changes in
external market rates.
Source:
§ Our earnings or the value of our assets and liabilities
deteriorate because of adverse changes in market interest
rates
|
§ Market risk is constrained by a Board-approved risk appetite
and the market risk policy
§ We adopt a risk-averse approach to interest rate mismatches,
although some position-taking is allowed, subject to the risk
appetite
§ We conduct internal tests to ensure market risk is within an
acceptable range over a series of interest rate
scenarios
§ Our limits for basis risk include limits for sensitivities
around isolated movements in underlying rates (SONIA), for overall
mismatch ratios, and for ensuring the Group has sufficient levels
of margin management capability
|
|
Treasury risk
|
The risk of losses following
default on exposures arising from balances with other financial
institutions, liquid asset holdings and the use of derivative
instruments to manage interest rate and foreign exchange
risk.
Source:
§ Transacting with other financial market participants when
managing market risk who then fail to fulfil their
obligations
|
§ Treasury risk is constrained by a Board-approved risk
appetite and the treasury risk policy
§ Most of our liquid asset buffer portfolio is invested in the
highest quality assets
§ The majority of derivative contracts are subject to mandatory
centralised clearing to minimise risk exposures to counterparties.
Where this is not possible, derivative exposures are restricted to
high quality counterparties which are subjected to regular review
and scrutiny by the Asset and Liability Committee (ALCO) within
overall risk limits. These bi-lateral positions have daily
margining requirements in place via a Credit Support Annex
(CSA).
|
|
Model risk
|
The risk that the Society's models
that are used to manage the business are inaccurate, perform
inadequately or are incorrectly used.
Sources:
§ Models may be incorrectly designed or contain coding
errors
§ Models may use logic and assumptions based on the past which
are no longer relevant
|
§ We maintain an inventory of models which are governed by our
model risk policy and model governance framework
§ We have a process to identify and monitor new models to bring
these into governance
§ Compliance with the policy is monitored by the Model Risk
Committee (MRC), which is chaired by the Chief Risk
Officer
|
|
Retail and commercial credit
risk
|
The risk of credit losses from a
failure to design, implement and monitor an appropriate credit risk
appetite.
Source:
§ Loans to retail and commercial customers may not be fully
repaid
|
§ Retail and commercial credit risk is constrained by a
Board-approved risk appetite and the commercial lending
policy
§ Our robust credit risk framework ensures lending remains
within limits and appropriate remedial action is taken if a breach
occurs. Adherence is monitored through governance
committees
§ We regularly use stress testing to assess the resilience of
our portfolio
§ Our credit risk models are overseen by the model governance
framework
|
|
Operational risk
|
The risk of direct or indirect
loss resulting from inadequate or failed internal processes, people
and systems, or from external events.
Sources:
§ Our technology may fail
§ Our suppliers may fail to meet their contractual
obligations
§ We may not be able to recruit and retain the right
people
§ Criminals may use the Society for illegal activity
§ Other external events
|
§ Operational risk is constrained by a Board-approved risk
appetite and a number of risk-specific policies
§ The ERMF defines how colleagues are expected to identify,
assess, monitor, manage and report their operational risk
exposures
§ Directors must regularly attest to the effectiveness of the
controls they are responsible for through the risk and control
self-assessment process
|
|
Compliance and conduct
risk
|
The risk of direct or indirect
loss from a failure to comply with regulation or to ensure good
customer outcomes.
Sources:
§ Developing new products for our customers
§ Marketing our products
§ Serving our customers
|
§ Compliance and conduct risk is constrained by a
Board-approved risk appetite and a number of risk-specific
policies
§ We monitor conduct risk metrics for a number of areas
including sales, service, complaints and collections
§ The second line of defence provides compliance support on all
regulatory matters to the first line, for both day-to-day
operations and change programmes
|
Evolution of principal risk exposures
Our principal risks and uncertainties continue
to evolve. The key areas of focus during the first half of 2024
were the continued effects on our customers and members of higher
interest rates and cost-of-living concerns; mitigating financial
crime and cyber security threats; improving our operational
resilience; attracting and retaining skills and talent for
in-demand areas; and strengthening our risk management capabilities
to support the next phase of our growth.
The political and economic environment (retail and commercial
credit risk, market risk and funding and liquidity
risk)
Although the rate of inflation in the UK has
fallen in the first half of 2024, the impact of higher interest
rates and an uncertain economic outlook continue to add pressure to
household incomes. This has reduced affordability for both mortgage
borrowers and tenants of buy-to-let landlords.
We assess affordability for new lending using
a sophisticated model which uses a stressed interest rate, and is
reviewed at least every six months. Our lending criteria aim to
balance the level of purposeful risk we take with lending
responsibly to deliver good customer outcomes, minimise arrears,
and comply with the Consumer Duty regulations.
We ensure that our products are carefully
priced, and we are disciplined in our approach to hedging, so that
we do not exceed the Board-approved risk appetite. We stress
test our liquidity position regularly and our liquidity ratios
continue to remain significantly within the Board-approved risk
appetite.
Attracting and retaining skills and talent in high demand
areas (operational risk)
Employer competition continues for in-demand
skills, such as those relating to change, cybersecurity, digital,
and data. Coupled with low levels of unemployment and higher wage
inflation, attracting and retaining the right people to deliver our
strategy is vital and challenging.
Effective resource planning, forecasting, and
succession planning remain priorities. We have also strengthened
our risk management capabilities for people risk and have improved
our people policies, particularly for working families.
The use of sophisticated models (model
risk)
We use sophisticated models to help manage our
financial risks. These use historical data and assumptions based on
the past, to provide future estimates to assist with running the
business and in understanding our risks. Any approach that seeks to
predict the future carries inherent risk.
Our Model Risk Committee reviews the specific
risks associated with the models regularly. We also ensure that our
model risk framework meets regulatory requirements.
The regulatory environment (compliance and conduct
risk)
Following the implementation of the FCA's new
Consumer Duty requirements for open products last year, we are on
track to meet the requirements for closed products by 31 July
2024.
We continue to have open and constructive
dialogue with our regulators, and work with them and industry
bodies to contribute to the regulatory agenda. Monitoring and
maintaining our actual regulatory compliance positions is of the
highest priority across management.
Climate change risk (retail and commercial credit risk and
operational risk)
The main risks from climate change for the
Society arise in the physical risks to our customers' properties,
such as from flooding, subsidence, and coastal erosion, and those
posed by the transition to a lower-carbon economy, such as changes
in energy efficiency regulation.
We continue to develop our environmental and
climate change risk management capabilities, to ensure that we
align with industry good practice and meet reporting and disclosure
requirements.
Financial crime threats (compliance and conduct
risk)
Financial crime threats arise both from
customers falling victim to fraud attempts, particularly through
digital channels, as well as from individuals attempting to use the
Society for unlawful reasons such as to launder money or evade
sanctions. These threats are heightened in the uncertain economic
and geopolitical environment.
Our continued focus on our financial crime
capability remains paramount, and we continue to invest to deliver
proportionate and effective monitoring and prevention
controls.
New and evolving cyber security threats (operational
risk)
The increasing use of technology and digital
services means the UK financial services sector is exposed to
increasing cyber security risks. These are heightened further
because of geopolitical tensions, such as the war in
Ukraine.
Resilience to such threats, and an ability to
respond effectively in the event of an attack, remains essential to
protect the Society and our customers, and to maintain the
confidence of regulators. We have significantly enhanced our
cyber threat monitoring and response capability and our plans to
continue doing so in 2024 are on track.
IT resilience (operational risk)
As IT components age, their health and value
can deteriorate. This poses a risk to our customers who
increasingly rely on our digital channels, and our colleagues who
use our systems to deliver services to our customers.
We are continually modernising and simplifying
our IT estate to improve its resilience so we can deliver the
services our customers expect.
Continued risk management effectiveness
The Group always wishes to proactively ensure
that risk management capability is equal to or ahead of that which
is necessary. Having now passed the regulatory threshold of
holding £50 billion of retail deposits, and with the possibility of
being designated a category one firm in the future, the Group is
therefore strengthening its governance, risk and control
capabilities and further maturing its regulatory reporting
framework. This activity includes enhancing subject matter
expertise in key areas; leveraging the latest technology and data
to deliver automation and efficiencies, particularly for regulatory
reporting; improving the risk and control self-assessment process;
refining the standard library controls; and further encouraging
challenge and learning.
Regulatory environment
The Society places emphasis on operating the
Society in a responsible and sustainable way in the long-term
interests of our members. As part of this we monitor the regulatory
environment and take steps to ensure compliance with all existing
and upcoming regulation. Relevant updates from the regulatory
environment include:
Financial Conduct Authority (FCA) Consumer
Duty
The FCA Consumer Duty (the Duty) came into
force for all on-sale products (defined by the FCA as open book) in
July 2023. A second deadline of 31 July 2024 is now approaching, by
which time firms must ensure that all products no longer on sale
but still being serviced (closed book) are compliant with the Duty.
Firms must ensure the same, higher standards of consumer protection
are in place for both open and closed book products.
The impact of the Duty is far-reaching with
firms expected to embed a 'consumer first' approach into how they
run their organisations, how they price and service products, how
they communicate with their customers, and how support is
provided.
The FCA recently wrote to firms to highlight
the key themes that they expect to be considered before the 31 July
2024 implementation deadline. These include making sure that
vulnerable customers are not adversely impacted by aspects of a
product or design of a service, and that firms should respond
flexibly to meet the needs of these customers. In addition, firms
should consider the fair value of closed products and services on a
forward-looking basis, this includes ensuring that there is a
reasonable relationship between the price paid by customers and the
benefits they receive from the product or service.
Borrowers In Financial Difficulty
On 4 November 2024, stronger protections for
borrowers in financial difficulty will come into force. The new
rules, implemented by the FCA, will require lenders to provide more
tailored support to borrowers who are facing financial
difficulties. In effect making permanent the measures introduced
during the pandemic, as well as additional changes designed to
improve outcomes for these customers.
Under these new rules, the FCA has widened the
scope of their regulations to include customers at risk of payment
difficulty as well as those already experiencing difficulties. They
have also highlighted a requirement for firms to consider the
information it receives from customers and take appropriate action
where there are signs of potential repayment difficulties. New
guidance is also being introduced requiring firms to be transparent
about the full range of support options that it 'may' consider,
rather than those it 'will' consider. Firms must make it clear
these are potential options and that the specific support available
will depend on the customer's individual circumstances. YBS has a
programme of change underway to ensure these new rules are
implemented by the regulatory deadline.
It is important to note that these new rules
are in addition to the options available to customers through the
Mortgage Charter which was introduced in June 2023 with the support
of the UK Government, the FCA, and lenders.
Help and support for customers experiencing
difficulty paying their mortgage is available via the YBS website
and through our helpline 0800 138 2402.
Advice Guidance Boundary Review
On 8 December 2023, HM Treasury (HMT) and the
FCA published a joint discussion paper (Advice Guidance Boundary
Review) to examine the regulatory boundary between financial advice
and guidance. The review is seen as providing a key opportunity to
rethink the way that advice and support is provided to financial
services consumers.
The review highlights that a lack of
appropriate financial advice may be leading consumers to make
decisions which are not in their best interests. Whilst not
everyone will need or want support, consumers could be missing out
on the value that support can provide, known as the 'advice
gap'.
The review sets out initial proposals which
are designed to close the 'advice gap' and hopes to address the
issues as to why consumers are not choosing to access financial
advice. The issues include an unwillingness to pay for advice and a
perception that they will not benefit from it, for example, holding
savings in a low interest cash account which may decline in value
over time in comparison to being invested. The aim of the review is
to ensure that a broader range of consumers are empowered to
proactively manage their finances. The outcome of the review is
awaited, however, YBS does not currently offer investments-based
products.
Authorised Push Payment Scams (APP)
A directive from the Payment Systems Regulator
(PSR) to reimburse customers who have fallen victim and made
payments to scammers goes live on 7 October 2024. The policy is
seen by the regulator as a step-change in fraud prevention and will
see consumers who fall victim to APP scams reimbursed in most
cases. This forms part of the PSR's wider work on reducing fraud in
the payment system and follows the introduction of Confirmation of
Payee checks for customers sending payments, which YBS implemented
in 2023. Currently the proposals cover payments made using the
Faster Payment System, but the PSR are consulting on extending the
proposal to cover CHAPS payments as well.
Changes to the Board
A complete list of the board of directors can be
found in the 2023 Annual Report and Accounts (ARA) on the YBS
website at www.ybs.co.uk.
As reported in the 2023 ARA, John Heaps stepped
down following the Annual General Meeting on 23 April 2024 after
nine years as Chair of the Board. He was succeeded by Annemarie
Durbin, who joined the YBS Board as Chair of the Board Designate in
December 2023.
In January 2024, we announced that Alasdair
Lenman intended to retire from his role as Chief Finance Officer.
Alasdair stepped down from the Society's Board following the Annual
General Meeting on 23 April 2024; he continued to work for the
Society as Chief Finance Officer until his retirement on 30 June
2024.
Following a comprehensive recruitment process,
we announced in February 2024 that he would be succeeded by Tom
Ranger who joined the Society as Chief Financial Officer on 18 June
2024, subject to regulatory approval.
Signed on behalf of the Board by
Susan Allen,
OBE
Chief Executive Officer
24 July 2024
Tom
Ranger
Chief Financial Officer
24 July 2024
Condensed Interim Financial Statements
Consolidated Income Statement
(Unaudited)
|
|
Half-year to
30 June
2024
|
Half-year to
30 June
2023
|
Year
to
31
December 2023
|
|
|
Notes
|
£m
|
£m
|
£m
|
|
Interest revenue calculated using
the effective interest rate method
|
3
|
1,186.3
|
874.3
|
1,954.6
|
|
Other interest revenue
|
3
|
473.0
|
467.8
|
1,011.7
|
|
Interest revenue
|
3
|
1,659.3
|
1,342.1
|
2,966.3
|
|
Interest expense
|
4
|
(1,318.5)
|
(924.9)
|
(2,180.3)
|
|
Net interest income
|
|
340.8
|
417.2
|
786.0
|
|
Fee and commission
revenue
|
|
9.0
|
9.6
|
20.0
|
|
Fee and commission
expense
|
|
(8.1)
|
(8.1)
|
(16.6)
|
|
Net fee and commission
income
|
|
0.9
|
1.5
|
3.4
|
|
Net gains/(losses) from financial
instruments held at fair value
|
5
|
7.1
|
(71.3)
|
(5.5)
|
|
Net realised gains on disposal of
financial instruments
|
|
-
|
1.5
|
1.6
|
|
Other operating income
|
|
0.3
|
0.3
|
0.9
|
|
Total income
|
|
349.1
|
349.2
|
786.4
|
|
Administrative expenses
|
|
(170.5)
|
(152.2)
|
(312.3)
|
|
Depreciation and
amortisation
|
|
(10.0)
|
(9.7)
|
(20.4)
|
|
Impairment of financial
assets
|
6
|
(10.7)
|
(7.5)
|
(4.0)
|
|
Movement in provisions
|
|
0.2
|
0.8
|
0.6
|
|
Profit before tax
|
|
158.1
|
180.6
|
450.3
|
|
Tax expense
|
7
|
(41.6)
|
(47.7)
|
(118.6)
|
|
Profit for the period
|
|
116.5
|
132.9
|
331.7
|
Consolidated Statement of Comprehensive
Income
(Unaudited)
|
|
Half-year to
30 June
2024
|
Half-year to
30 June
2023
|
Year
to
31
December 2023
|
|
|
|
£m
|
£m
|
£m
|
|
Profit for the period
|
|
116.5
|
132.9
|
331.7
|
|
Items that may be subsequently
reclassified though profit or loss
|
|
|
|
|
|
Cash flow hedges:
|
|
|
|
|
|
Fair
value movements taken to equity
|
|
-
|
(6.5)
|
-
|
|
Amounts
transferred to the income statement
|
|
(0.1)
|
(7.5)
|
(13.2)
|
|
Tax on
amounts recognised in equity
|
|
-
|
3.9
|
3.7
|
|
Effect of
change in corporation tax
|
|
-
|
-
|
-
|
|
Financial assets measured through
other comprehensive income:
|
|
|
|
|
|
Fair value
movements taken to equity
|
|
18.6
|
1.8
|
(18.0)
|
|
Amounts
transferred to the income statement
|
|
0.3
|
-
|
1.2
|
|
Tax on amounts
recognised in equity
|
|
(5.3)
|
(0.5)
|
4.7
|
|
Effect of
change in corporation tax rate
|
|
-
|
-
|
-
|
|
Items that will not be
reclassified through profit or loss
|
|
|
|
|
|
Remeasurement of retirement
benefit obligations
|
|
2.2
|
(12.1)
|
(11.2)
|
|
Tax on remeasurement of retirement
benefit obligations
|
|
(0.6)
|
3.4
|
3.1
|
|
Effect of change in corporation
tax rate
|
|
-
|
-
|
-
|
|
Total other comprehensive
income/(expense)
|
|
15.1
|
(17.5)
|
(29.7)
|
|
Total comprehensive income for the
period
|
|
131.6
|
115.4
|
302.0
|
Consolidated Balance Sheet
(Unaudited)
|
|
As
at
30 June
2024
|
As
at
30 June
2023
|
As
at
31
December 2023
|
|
|
Notes
|
£m
|
£m
|
£m
|
|
Assets
|
|
|
|
|
|
Cash and balances with the Bank of
England
|
|
5,274.8
|
7,563.7
|
4,839.1
|
|
Loans and advances to credit
institutions
|
|
568.9
|
450.5
|
397.4
|
|
Debt securities
|
|
7,864.3
|
6,887.0
|
7,561.9
|
|
Loans and advances to
customers
|
8
|
48,840.2
|
45,868.1
|
46,815.9
|
|
Fair value adjustment for hedged
risk on loans and advances to customers
|
|
(689.9)
|
(1,792.1)
|
(615.5)
|
|
Derivative financial
instruments
|
|
1,793.0
|
2,983.9
|
1,755.0
|
|
Investments
|
|
3.2
|
3.0
|
3.3
|
|
Intangible assets
|
|
16.3
|
16.5
|
18.3
|
|
Investment property
|
|
15.7
|
15.9
|
15.7
|
|
Property held for sale
|
|
0.6
|
0.9
|
0.6
|
|
Property, plant and
equipment
|
|
98.8
|
97.7
|
99.5
|
|
Current tax assets
|
|
16.2
|
22.7
|
-
|
|
Retirement benefit
surplus
|
9
|
40.3
|
36.5
|
38.6
|
|
Other assets
|
|
33.5
|
27.0
|
38.9
|
|
Total assets
|
|
63,875.9
|
62,181.3
|
60,968.7
|
|
Liabilities
|
|
|
|
|
|
Shares
|
|
49,637.6
|
45,632.8
|
47,056.7
|
|
Amounts owed to credit
institutions
|
|
1,885.1
|
4,375.8
|
1,886.3
|
|
Other deposits
|
|
1,201.4
|
1,027.3
|
983.6
|
|
Debt securities in issue
|
|
5,035.3
|
5,409.8
|
4,919.4
|
|
Derivative financial
instruments
|
|
677.5
|
908.6
|
697.4
|
|
Current tax liabilities
|
|
-
|
-
|
-
|
|
Deferred tax liabilities
|
|
45.7
|
17.7
|
22.5
|
|
Other liabilities
|
|
67.6
|
64.4
|
70.5
|
|
Retirement benefit
obligations
|
9
|
7.6
|
7.2
|
8.1
|
|
Provisions
|
|
2.9
|
4.0
|
4.0
|
|
Subordinated liabilities
|
|
1,485.1
|
1,221.8
|
1,621.7
|
|
Total liabilities
|
|
60,045.8
|
58,669.4
|
57,270.2
|
|
Members' interests and
equity
|
|
3,830.1
|
3,511.9
|
3,698.5
|
|
Total members' interest, equity
and liabilities
|
|
63,875.9
|
62,181.3
|
60,968.7
|
Consolidated Statement of Changes in Members'
Interests and Equity
(Unaudited)
|
|
General
reserve
|
Cash
flow hedge reserve
|
Fair
value through other comprehensive income
|
Total
|
|
|
|
£m
|
£m
|
£m
|
£m
|
|
Half-year to 30 June
2024
|
|
|
|
|
|
|
At 1 January 2024
|
|
3,708.3
|
0.4
|
(10.2)
|
3,698.5
|
|
Profit for the period
|
|
116.5
|
-
|
-
|
116.5
|
|
Net remeasurement of defined
benefit obligations
|
|
1.6
|
-
|
-
|
1.6
|
|
Net movement in cash flow
hedges
|
|
-
|
(0.1)
|
-
|
(0.1)
|
|
Net movement in fair value through
other comprehensive income
|
|
-
|
-
|
13.6
|
13.6
|
|
Total comprehensive
income
|
|
118.1
|
(0.1)
|
13.6
|
131.6
|
|
At 30 June 2024
|
|
3,826.4
|
0.3
|
3.4
|
3,830.1
|
|
Half-year to 30 June
2023
|
|
|
|
|
|
|
At 1 January 2023
|
|
3,384.7
|
9.9
|
1.9
|
3,396.5
|
|
Profit for the period
|
|
132.9
|
-
|
-
|
132.9
|
|
Net remeasurement of defined
benefit obligations
|
|
(8.7)
|
-
|
-
|
(8.7)
|
|
Net movement in cash flow
hedges
|
|
-
|
(10.1)
|
-
|
(10.1)
|
|
Net movement in fair value through
other comprehensive income
|
|
-
|
-
|
1.3
|
1.3
|
|
Total comprehensive
income
|
|
124.2
|
(10.1)
|
1.3
|
115.4
|
|
At 30 June 2023
|
|
3,508.9
|
(0.2)
|
3.2
|
3,511.9
|
|
Year to 31 December
2023
|
|
|
|
|
|
|
At 1 January 2023
|
|
3,384.7
|
9.9
|
1.9
|
3,396.5
|
|
Profit for the period
|
|
331.7
|
-
|
-
|
331.7
|
|
Net remeasurement of defined
benefit obligations
|
|
(8.1)
|
-
|
-
|
(8.1)
|
|
Net movement in cash flow
hedges
|
|
-
|
(9.5)
|
-
|
(9.5)
|
|
Net movement in fair value through
other comprehensive income
|
|
-
|
-
|
(12.1)
|
(12.1)
|
|
Total comprehensive
income
|
|
323.6
|
(9.5)
|
(12.1)
|
302.0
|
|
At 31 December 2023
|
|
3,708.3
|
0.4
|
(10.2)
|
3,698.5
|
|
|
|
|
|
|
| |
Consolidated Statement of Cash
Flows
(Unaudited)
|
|
|
Half-year to
30 June
2024
|
Half-year to
30 June
2023
|
Year
to
31
December 2023
|
|
|
Notes
|
£m
|
£m
|
£m
|
|
Cash flows from operating
activities
|
|
|
|
|
|
Profit before tax
|
|
158.1
|
180.6
|
450.3
|
|
Non-cash items included in profit
before tax
|
11
|
64.1
|
5.2*
|
147.0
|
|
Net change in operating
assets
|
11
|
(1,822.1)
|
(1,037.7)*
|
(1,937.2)
|
|
Net change in operating
liabilities
|
11
|
2,719.5
|
2,913.9*
|
1,744.7
|
|
Tax paid
|
|
(35.5)
|
(58.5)
|
(101.0)
|
|
Net cash flow from operating
activities
|
|
1,084.1
|
2,003.5
|
303.8
|
|
Cash flows from investing
activities
|
|
|
|
|
|
Purchase of property, plant and
equipment, and intangible assets
|
|
(7.2)
|
(2.4)
|
(15.0)
|
|
Proceeds from sale of property,
plant and equipment
|
|
-
|
-
|
(0.2)
|
|
Purchase of debt
securities
|
|
(1,671.7)
|
(2,035.1)
|
(3,412.9)
|
|
Redemption and other movements of
debt securities
|
|
1,388.2
|
836.2
|
1,520.6
|
|
Net cash flow from investing
activities
|
|
(290.7)
|
(1,201.3)
|
(1,907.5)
|
|
Cash flows from financing
activities
|
|
|
|
|
|
Redemption of debt securities in
issue
|
11
|
(1,006.4)
|
(796.3)
|
(1,423.7)
|
|
Issue of debt
securities
|
11
|
1,178.6
|
1,005.3
|
999.2
|
|
Redemption of subordinated
liabilities
|
11
|
(142.5)
|
(136.4)
|
(136.4)
|
|
Issue of subordinated
liabilities
|
11
|
-
|
350.0
|
650.0
|
|
Interest paid on subordinated
liabilities
|
|
(37.4)
|
(17.2)
|
(51.5)
|
|
Interest paid on lease
liabilities
|
|
0.2
|
(0.3)
|
(0.6)
|
|
Capital repayments on lease
liabilities
|
|
(2.2)
|
(1.6)
|
(3.6)
|
|
Net cash flow from financing
activities
|
|
(9.7)
|
403.5
|
33.4
|
|
Net change in cash and cash
equivalents
|
|
783.7
|
1,205.7
|
(1,570.3)
|
|
Opening balance
|
|
5,060.0
|
6,630.3
|
6,630.3
|
|
Closing cash and cash
equivalents
|
|
5,843.7
|
7,836.0
|
5,060.0
|
|
Cash and cash
equivalents
|
|
|
|
|
|
Cash and cash
equivalents
|
|
5,274.8
|
7,563.7
|
4,839.1
|
|
Less Bank of England cash ratio
deposit
|
|
-
|
(178.2)
|
(176.5)
|
|
Loans and advances to credit
institutions
|
|
568.9
|
450.5
|
397.4
|
|
Closing cash and cash
equivalents
|
|
5,843.7
|
7,836.0
|
5,060.0
|
* Please see Note 11 Notes to the consolidated statement
of cashflows for
restatement details
Notes to the Interim Financial
Statements
1.
Basis of Preparation
These condensed interim financial statements
present the results of Yorkshire Building Society ('YBS') and its
controlled entities (collectively 'the Group' or 'YBS Group') for
the half-year ended 30 June 2024.
The accounting policies, presentation and
measurement applied during the period are consistent with those
applied by the Group in the 31 December 2023 audited annual
financial statements being International Accounting Standards
(IAS), International Financial Reporting Standards (IFRS) and
interpretations (IFRICs) issued by the International Accounting
Standards Board (IASB) endorsed by the UK Endorsement Board (UKEB)
and effective as at 1 January 2024. The presentation applied in the
period is consistent with the presentation applied in the 31
December audited annual financial statements.
The Group is required under the Building
Societies Act 1986 to apply 'UK-adopted international accounting
standards' as endorsed by the UKEB. The condensed interim financial
statements have therefore been prepared in accordance with
UK-adopted IAS 34 Interim Financial Reporting and the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
Pounds sterling is both the functional currency
of the YBS Group and the presentation currency applied to these
financial statements. Except where otherwise stated, all figures in
the financial statements are presented in round hundreds of
thousands of pounds sterling (£0.0 million).
The Group operates solely within the retail
financial services sector and within the United Kingdom. As such,
no segmental analysis is presented.
During the half-year to 30 June 2024 there
have been no changes to the composition of the Group. The condensed
interim financial statements have been subject to a review and have
not been audited.
Accounting
developments
The information on future accounting
developments and their potential effect on the financial statements
are provided on page 153 of the 2023 Annual Report and
Accounts.
Going concern
The YBS Board of Directors undertake regular
assessments of whether the Group is a going concern in light of
changing economic and market conditions, using all available
information about future risks and uncertainties. Details of the
review undertaken to support the 31 December 2023 financial
statements are given on pages 133-134 of the 2023 Annual Report and
Accounts.
The directors confirm that, based on the latest
formal review undertaken in July 2024, and stress tests performed
throughout the period, they consider the Group has adequate
resources to continue in existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing these condensed interim financial statements.
2.
Critical accounting judgements and key sources
of estimation uncertainty
In applying its accounting policies, the Group
makes judgements that have a significant impact on the amounts
recognised in the condensed interim financial
statements.
In addition, estimates and assumptions are used
which could affect the reported amounts of assets and liabilities.
The estimates and underlying assumptions are reviewed on an ongoing
basis.
Other than the specific changes highlighted
below, the key sources of estimation uncertainty remain unchanged
since those disclosed on pages 159 to 160 of the 2023 Annual Report
and Accounts.
Impairment of
loans and advances to customers
The impairment calculation of expected credit
loss (ECL) for a portfolio of mortgage loans is inherently
uncertain. ECLs are calculated using historical default and loss
experience but require judgement to be applied in predicting future
economic conditions (e.g. interest rates and house prices) and
customer behaviour (e.g. default rates). The most critical
judgements that lead to estimation uncertainty are as
follows.
Economic scenario and
weightings
The UK Economy technically entered recession at
the end of 2023, attributed to the ongoing cost-of-living crisis
and higher interest rate environment. Since then, the UK economy
has started growing again modestly, this trend is expected to
continue throughout 2024.
Headline inflation has fallen back to its 2%
target, for the first time since July 2021, however there are
elements of the inflation data which continue to prove persistent,
with services inflation still above 5%. It is therefore likely that
headline inflation will creep back up again throughout H2 2024.
Interest rate expectations have remained volatile, as the market
anticipates the timing for the first interest rate cut.
Unemployment has been rising steadily since the
start of the year, indicating the labour market is loosening,
albeit gradually and as expected throughout H1 2024, this trend is
likely to continue throughout 2024.
Scenarios are generated internally using
external data, statistical methodologies, and senior management
judgement, to span a range of plausible economic conditions. The
Group continues to use four scenarios: an upside scenario that
assumes more benign economic conditions; our core or central best
estimate scenario; a downturn scenario that assumes more adverse
economic conditions; and a more Severe Downturn
scenario.
The key driver of changes in ECL is the House
Price Index (HPI), sourced from the quarterly Office of National
Statistics (ONS) updates. For the first half of 2024 these updates
have been negative and so have increased the provision by £4.9
million.
The Group considered the sensitivity to an
alternative set of weightings which shifted 10% from Downturn and
Severe scenarios to Core. This led to an increase in ECL of £22.5
million when compared to 31 December 2023. This change in
weightings has been fully modelled and been allowed to impact
staging and post model adjustments (PMA).
In terms of sensitivity to key changes in
economic variables within the model, the HPI forecast within the
core scenario was fully replaced with the forecast from the
downturn and severe scenarios. With no other changes to inputs or
weightings ECL increased by £5.3 million and £40.9 million
respectively (December 2023: £5.3 million and £28.4 million). Below
are the percentage changes in HPI forecast for both scenarios for
the next 5 years in relation to the core scenario.
|
|
June
2024 Scenario (% change)
|
|
2024
|
2025
|
2026
|
2027
|
2028
|
|
HPI
|
|
|
|
|
|
|
Downturn
|
(3.9)
|
(7.0)
|
(0.5)
|
(3.0)
|
(2.8)
|
|
Severe
|
(10.9)
|
(17.4)
|
(8.2)
|
(5.6)
|
(3.5)
|
|
|
December
2023 Scenario (% change)
|
|
2024
|
2025
|
2026
|
2027
|
2028
|
|
HPI
|
|
|
|
|
|
|
Downturn
|
(3.5)
|
(6.0)
|
(0.5)
|
(3.0)
|
(2.8)
|
|
Severe
|
(8.0)
|
(14.5)
|
(9.0)
|
(4.5)
|
(3.5)
|
3.
Interest revenue
|
|
Half-year to
30 June
2024
|
Half-year to
30 June
2023
|
Year
to
31
December 2023
|
|
|
£m
|
£m
|
£m
|
|
Calculated using the effective
interest rate method:
|
|
|
|
|
Loans secured on residential
property
|
884.1
|
616.8
|
1,366.2
|
|
Other loans
|
23.4
|
20.8
|
44.7
|
|
Other interest
income/(expense)*
|
(24.9)
|
(26.6)
|
(61.5)
|
|
Liquid assets
|
147.3
|
168.9
|
364.0
|
|
On debt securities
|
156.4
|
94.4
|
241.2
|
|
Interest revenue calculated using
the effective interest rate method
|
1,186.3
|
874.3
|
1,954.6
|
|
Other:
|
|
|
|
|
Derivatives in hedge
relationships
|
431.4
|
434.8
|
926.4
|
|
Derivatives not included in hedge
relationships
|
40.7
|
32.2
|
82.7
|
|
Investments held at fair
value
|
0.9
|
0.8
|
2.6
|
|
Other interest revenue
|
473.0
|
467.8
|
1,011.7
|
|
Total interest revenue
|
1,659.3
|
1,342.1
|
2,966.3
|
* Includes net interest income on
clearing collateral agreements
4.
Interest expense
|
|
Half-year to
30 June
2024
|
Half-year to
30 June
2023
|
Year
to
31
December 2023
|
|
|
£m
|
£m
|
£m
|
|
Shares held by
individuals
|
992.3
|
627.5
|
1,509.6
|
|
Deposits from banks
|
31.1
|
72.2
|
126.8
|
|
Other deposits
|
11.1
|
11.8
|
24.2
|
|
Debt securities in
issue
|
84.6
|
71.0
|
164.6
|
|
Subordinated
liabilities
|
37.4
|
17.2
|
51.5
|
|
Other interest payable
|
0.1
|
0.1
|
0.2
|
|
Derivatives in hedge
relationships
|
99.0
|
62.0
|
174.4
|
|
Derivatives not included in hedge
relationships
|
62.7
|
62.8
|
128.4
|
|
Interest expense for leasing
arrangements
|
0.2
|
0.3
|
0.6
|
|
Total interest expense
|
1,318.5
|
924.9
|
2,180.3
|
5. Net
gains/(losses) from financial instruments held at fair
value
|
|
Half-year to
30 June
2024
|
Half-year to
30 June
2023
|
Year
to
31
December 2023
|
|
|
£m
|
£m
|
£m
|
|
Derivatives and debt securities
not included in hedge relationships
|
(9.9)
|
(55.5)
|
23.1
|
|
Hedge accounting
ineffectiveness
|
17.1
|
(16.0)
|
(29.1)
|
|
Equity investments held at fair
value
|
(0.1)
|
0.2
|
0.5
|
|
Net gains/(losses) from financial
instruments held at fair value
|
7.1
|
(71.3)
|
(5.5)
|
Derivatives and hedging
The Society enters into interest rate swaps to
hedge their exposure to interest rate risk. All interest rate swaps
are transacted for economic hedging purposes, however not all are
designated into accounting hedges. Those interest rate swaps not
designated into accounting hedges are recorded at fair value
through profit and loss within derivatives and debt securities not
included in hedge relationships. This portfolio consists of
interest rate swaps that receive fixed cash flows (receive fix) and
that pay fixed cash flows (pay fix).
Interest rates used to determine fair values
which are linked to BoE base rate have remained high but stable in
the first half of 2024. This has led to a reduction in fair value
volatility, in the designated and unmatched portfolios, compared to
prior periods.
Hedge accounting ineffectiveness includes the
ineffective portion of the accounting hedges and amortisation
adjustments relating to the inception and de-designation of these
hedges.
Investments held at fair value include the fair
value gains and losses on equity shares investment.
6.
Impairment of financial assets
The following table splits the
income statement impairment of financial assets into those elements
impacting the ECL and other items.
|
|
Half-year to
30 June
2024
|
Half-year to
30 June
2023
|
Year
to
31 December
2023
|
|
|
£m
|
£m
|
£m
|
|
Impairment charge on loans and
advances to customers
|
11.2
|
7.6
|
4.5
|
|
Recoveries relating to loans and
advances previously written off
|
(0.4)
|
(0.4)
|
(0.8)
|
|
Impairment (release)/charge of
other financial assets
|
(0.1)
|
0.3
|
0.3
|
|
Impairment charge on financial assets
|
10.7
|
7.5
|
4.0
|
7.
Tax expense
On 1 April 2023 the UK corporation tax rate
increased from 19% to 25%. This measure was substantively enacted
on 24 May 2021 and deferred tax assets and liabilities at 30 June
2024, at 31 December 2023 and at 30 June 2023 have all been
calculated based on the 25% rate.
On 1 April 2023 the banking surcharge decreased
from 8% (on taxable profits in excess of £25 million) to 3% (on
taxable profits in excess of £100 million). This change was
substantively enacted on 2 February 2022. Deferred tax assets and
liabilities at 30 June 2024, at 31 December 2023 and at 30 June
2023 have all been calculated based on the 3% rate.
The Group has an effective tax rate of 26.3%,
which is higher than the UK statutory corporation tax rate of 25.0%
for the year. This is mainly due to the effects of the banking
surcharge on the taxable profits of the Society.
On 11 July 2023, the government enacted
legislation to implement the G20-OECD Inclusive Framework Pillar
Two rules in the UK. The intention of the legislation is to
ensure that UK-headquartered multinational enterprises pay a
minimum tax rate of 15% on UK and overseas profits arising after 31
December 2023. The rules include a Qualified Domestic Minimum
Top-Up Tax, which aims to ensure that large UK groups pay a minimum
tax rate of 15% on their UK profits.
The Group has carried out an assessment of the
expected impact of the Pillar Two rules and the impact is expected
to be immaterial.
The tax expense arising from Pillar Two is
£nil for the period ended 30 June 2024.
8.
Credit risk on loans and advances to
customers
Gross contractual
exposure
The table below splits the loans and advances to customers
balance into its constituent parts and reconciles to the gross
exposures used in the Expected Credit Loss (ECL) model.
Effective Interest Rate (EIR) is the
measurement method used for financial assets held at amortised cost
which spreads income and fees over the life of the
asset.
The fair value rate adjustment reflects the
market value adjustment on acquired portfolios of mortgage assets
in respect of interest rates on the underlying products. This is
amortised over the expected life of the acquired
portfolio.
The fair value credit adjustment is the fair
value discount applied on purchased or originated credit impaired
(POCI) mortgage assets acquired as part of the Norwich &
Peterborough Building Society (N&P) and Chelsea Building
Society (CBS) acquisitions. Impairment represents the difference
between the total ECL and the fair value credit
adjustment.
ECL is calculated using models that take
historical default and loss experience and apply predictions of
future economic conditions (e.g. unemployment and house prices) and
customer behaviour (e.g. default rates). In certain circumstances,
the core models may not fully reflect other factors that could
result in a change in credit risk. When this happens, a post model
adjustment (PMA) is overlaid to reflect the impact on ECL. The
economic scenarios and the PMAs applied at 30 June 2024 are
described below.
|
|
30 June
2024
|
30 June
2023
|
31 December
2023
|
|
|
£m
|
£m
|
£m
|
|
Gross contractual
exposures
|
48,902.8
|
45,923.8
|
46,868.6
|
|
EIR and other
adjustments
|
33.6
|
43.7
|
39.5
|
|
Fair value rate
adjustment
|
(26.7)
|
(35.0)
|
(32.2)
|
|
Gross loans and advances to customers
|
48,909.7
|
45,932.5
|
46,875.9
|
|
Impairment
|
(49.1)
|
(40.7)
|
(37.7)
|
|
Fair value credit
adjustment
|
(20.4)
|
(23.7)
|
(22.3)
|
|
ECL
|
(69.5)
|
(64.4)
|
(60.0)
|
|
Loans and advances to customers
|
48,840.2
|
45,868.1
|
46,815.9
|
Analysis of changes in
ECL
The following tables analyse the changes in
ECL, split by impairment and fair value credit
adjustments.
|
|
Half-year to
30 June
2024
|
Half-year to
30 June
2023
|
Year
to
31 December
2023
|
|
|
£m
|
£m
|
£m
|
|
Opening impairment
|
37.7
|
33.1
|
33.1
|
|
Amounts written off in the
period
|
(0.7)
|
(0.7)
|
(1.3)
|
|
Discounting recognised in net
interest income
|
0.9
|
0.7
|
1.4
|
|
Charge for the period recognised
in the income statement
|
11.2
|
7.6
|
4.5
|
|
Impairment
|
49.1
|
40.7
|
37.7
|
|
|
Half-year to
30 June
2024
|
Half-year to
30 June
2023
|
Year
to
31 December
2023
|
|
|
£m
|
£m
|
£m
|
|
Opening fair value credit
adjustment
|
22.3
|
25.3
|
25.3
|
|
Release recognised in the income
statement through net interest
|
(1.7)
|
(1.5)
|
(2.3)
|
|
Write-offs
|
(0.2)
|
(0.1)
|
(0.7)
|
|
Fair value credit adjustment
|
20.4
|
23.7
|
22.3
|
Expected Credit Loss
(ECL)
Economic Scenarios
Accounting standards require ECL to be
calculated by applying multiple economic scenarios. Each economic
scenario is provided a weighting, and these are combined to arrive
at the total ECL.
These scenarios are generated internally using
external data, statistical methodologies and management judgement
to span a range of plausible economic conditions. The Group
continues to use four scenarios: an upside scenario that assumes
more benign economic conditions; our core or central best estimate
scenario; a downturn scenario that assumes more adverse economic
conditions; and a more severe downturn scenario.
Scenarios are projected over a 5-year window,
reverting to long-term averages past that point. The Group allows
all macro-economic scenarios to impact staging.
Current Macroeconomic
Conditions
After technically entering recession at the
end of 2023 the UK economy has begun to grow modestly and is
expected to continue growing through 2024. Inflation has fallen
back to its 2% target; however, some elements are still high -
services inflation remains above 5%.
Interest rate cuts expected in 2024 have not
materialised and the timing of the first cut is still unknown.
Unemployment is steadily rising with this trend set to continue.
2024 has been relatively stable, with base rate remaining at 5.25%
after an increase of 1.75% across 2023. BoE is expected to now ease
policy and interest rates are likely to fall in 2024.
Upside
This assumes inflation returns to the 2% target
by the end of 2024 and unemployment remains low with house prices
growing at a moderate rate. The BoE note the slowdown of inflation
and cut rates to more sustainable levels, to stimulate economic
growth.
Core
The Core scenario is the Group's best estimate
of how the UK economy will evolve and is aligned with the central
scenario used in the Group's financial planning
processes.
It assumes the economy will grow modestly in
2024 and 2025 with inflation falling to around 2% at the end of H1
2024, then increasing moderately towards the end of 2024.
Unemployment rises slowly throughout 2024, remaining at sustainable
levels. Small increase in house prices in 2024, and a recovery in
2025 due to easing affordability pressures and cheaper mortgage
rates.
Downturn
This can be described as a stagflation
scenario, persistent inflation and low growth. The UK re-enters
recession in H2 2024. Domestic inflationary pressures persist,
including wage growth, BoE keep rates stagnant throughout 2024.
Unemployment increases and house prices fall as a
result.
Severe Downturn
Geopolitical tensions escalate, materially
impacting energy prices and supply chains. Another wave of
inflation ensues, forcing the Bank of England to raise interest
rates to an unsustainable level. Consequently, the economy falls
into a deep recession, resulting in significant unemployment and
house price reductions.
Macroeconomic
variables
The following table shows the values of the
key variables used by each economic scenario for the period until
December 2028. The table includes the three key parameters used to
predict probability of default (PD) - unemployment, HPI and Bank of
England base rate. GDP is also presented as it is the key input for
determining the economic parameters used and provides context to
the nature of the overall scenario.
Household disposable income is forecast to
remain strained in our economic scenarios as a result of inflation
and cost-of-living, combined with higher interest rates and the
pressure on house prices in the short term. This is assumed to lead
to affordability pressures which are expected to impact on
customers' ability to meet mortgage repayments. This risk is not
directly captured in our models. See the Affordability post model
adjustment below for details on how this risk has been assessed and
incorporated into ECL.
|
|
June 2024
Scenario
|
December 2023
Scenario
|
|
|
2024
|
2025
|
2026
|
2027
|
2028
|
2024
|
2025
|
2026
|
2027
|
2028
|
|
HPI
|
|
|
|
|
|
|
|
|
|
|
|
Upside
|
3.5
|
6.0
|
5.5
|
4.0
|
4.0
|
2.0
|
3.0
|
3.5
|
4.0
|
4.5
|
|
Core
|
1.0
|
3.0
|
3.0
|
3.5
|
4.0
|
(4.0)
|
2.0
|
3.0
|
3.5
|
4.0
|
|
Downturn
|
(2.9)
|
(4.0)
|
2.5
|
0.5
|
1.2
|
(7.5)
|
(4.0)
|
2.5
|
0.5
|
1.2
|
|
Severe
Downturn
|
(9.9)
|
(14.4)
|
(5.2)
|
(2.1)
|
0.5
|
(12.0)
|
(12.5)
|
(6.0)
|
(1.0)
|
0.5
|
|
GDP
|
|
|
|
|
|
|
|
|
|
|
|
Upside
|
1.5
|
1.8
|
2.0
|
1.9
|
1.9
|
1.5
|
1.8
|
2.0
|
1.9
|
1.9
|
|
Core
|
0.5
|
1.0
|
1.0
|
1.2
|
1.3
|
0.3
|
0.8
|
1.0
|
1.2
|
1.3
|
|
Downturn
|
(0.5)
|
0.1
|
0.2
|
0.2
|
0.4
|
(0.1)
|
0.1
|
0.1
|
0.2
|
0.3
|
|
Severe
Downturn
|
(3.0)
|
(3.0)
|
-
|
0.5
|
1.0
|
(4.5)
|
(1.5)
|
-
|
0.5
|
1.0
|
|
Unemployment
|
|
|
|
|
|
|
|
|
|
|
|
Upside
|
4.0
|
4.0
|
4.0
|
4.0
|
4.0
|
4.0
|
4.0
|
4.0
|
4.0
|
4.0
|
|
Core
|
4.5
|
4.5
|
4.5
|
4.4
|
4.3
|
5.0
|
4.8
|
4.6
|
4.4
|
4.0
|
|
Downturn
|
5.5
|
6.0
|
5.8
|
5.5
|
5.0
|
6.5
|
6.0
|
5.8
|
5.5
|
5.0
|
|
Severe
Downturn
|
6.2
|
8.8
|
8.0
|
7.0
|
6.5
|
7.0
|
9.0
|
8.0
|
7.0
|
6.5
|
|
Bank Rate
|
|
|
|
|
|
|
|
|
|
|
|
Upside
|
4.3
|
3.5
|
3.5
|
3.5
|
3.3
|
4.8
|
4.0
|
3.5
|
3.5
|
3.3
|
|
Core
|
4.8
|
4.0
|
3.8
|
3.5
|
3.5
|
5.0
|
4.5
|
4.3
|
4.3
|
4.0
|
|
Downturn
|
5.3
|
4.8
|
4.0
|
3.3
|
3.0
|
6.0
|
5.5
|
5.5
|
4.0
|
3.5
|
|
Severe
Downturn
|
6.5
|
6.0
|
5.5
|
5.0
|
5.0
|
7.0
|
6.0
|
5.5
|
5.0
|
5.0
|
Weightings
The following table shows the expected credit
loss under each of our four economic scenarios along with the
weightings that have been applied to arrive at the weighted average
ECL. PMAs are calculated using the weighted scenario results and so
their sensitivity in each of the individual scenarios cannot be
accurately determined. For completeness they have been included as
a uniform adjustment across each scenario.
|
|
30 June
2024
|
31 December
2023
|
|
Weighted
|
ECL
|
Weighted
|
ECL
|
|
Scenario
|
%
|
£m
|
%
|
£m
|
|
Upside scenario
|
5
|
42.4
|
5
|
35.3
|
|
Core scenario
|
60
|
45.5
|
40
|
38.7
|
|
Downturn scenario
|
25
|
87.2
|
35
|
63.9
|
|
Severe downturn
scenario
|
10
|
182.6
|
20
|
102.1
|
|
Probability weighted ECL
|
100
|
69.5
|
100
|
60.0
|
A modelling approach using quantitative
analysis is applied to assess the weightings which uses
industry-level write-off data to infer the Society's loss rates
over the period, as internal loss data is not available to
establish a historical loss rate distribution which reflects the
nature of our losses (i.e. relatively low losses in 'normal' times
but the potential to make more substantial losses in recessionary
conditions). An econometric model was developed which could be used
to infer future loss rates based on a range of different economic
scenarios.
The loss rates were mapped under each of the
IFRS 9 economic scenarios to the historical loss rate distribution
and using the distribution-defined probabilities of each loss rate
being realised to derive relative likelihoods of each scenario
occurring. SME judgment is then applied in the final assessment of
weights, informed by assessment of the quantitative
analysis/model.
Since year end, the economic outlook has
improved with inflation having fallen back to target and Bank Rate
cuts expected in the coming months. The General Election outcome
will also lead to political stability, continuing the more positive
stance taken by the market. This more favourable outlook, combined
with a review and update of the Gen 4 model, has led to a 20%
weighting shift from Downturn and Severe scenarios to Core being
necessary.
Whilst the change in economics and weightings
have been positive to reflect market changes, the ECL associated
with each scenario has increased. This is because a higher ECL
provision is being allocated to each mortgage, due to both an
increase in risk across the book and the negative HPI updates that
have been seen so far in 2024. The HPI outlook is now positive, and
this is built into the future scenarios.
Post Model Adjustments
A post model adjustment (PMA) is applied when
a change in credit risk is identified that is not effectively
captured in the expected credit loss models.
PMAs are reviewed by SMEs throughout the year
to determine whether the identified risks are still applicable and
whether any new risks have arisen.
The PMAs applied at 30 June 2024 are as
follows:
|
|
30 June
2024
|
31 December
2023
|
|
|
£m
|
£m
|
|
Model Performance
|
12.1
|
10.0
|
|
Affordability
|
3.6
|
7.1
|
|
Other
|
1.0
|
(1.5)
|
|
Total PMA
|
16.7
|
15.6
|
Model Performance
PD Underprediction
The Society's Gen 4 models were first used as
the basis of the Society's ECL in 2023. A level of probability of
default (PD) underprediction, that was observed within the Gen 3
models, was also seen in the new Gen 4 models. A PMA has been
established to adjust the PD estimates used to establish ECLs.
Accounts are then re-staged if their revised PD estimate exceeds
the significant increase in credit risk (SICR) threshold for the
risk grade.
Predictive accuracy monitoring on a perfect
foresight basis has been developed by the Society to evaluate the
risk. This monitoring has been produced at a product level over a
range of outcome periods. The results for each portfolio were
evaluated and the need for an adjustment was acknowledged. The
under-prediction factors for Prime and BTL have been incorporated
into PD estimates by directly uplifting the estimate by the
associated under-prediction factor and recalculating staging and
ECLs using the adjusted PD value.
Sensitivity of Models to Economic
Stresses
The Gen 4 IFRS 9 PD model has displayed limited
sensitivity to the different economic scenarios as a result of the
benign economic conditions in the data period used to develop the
model. A narrow range in average PD estimates across the four
economic scenarios of differing severity highlighted the model
weakness. A PMA has been established to mitigate against the lack
of sensitivity in IFRS 9 PDs to economic factors.
An internally developed Credit Cycle Index (CCI)
model was used with its ability to perform well under a range of
different economic conditions making it a useful tool in informing
this PMA. The results of the CCI model across the different
IFRS 9 scenarios were established and outcomes from the Core
scenario compared to the Upside, Downturn and Stress
scenarios. Adjustments were then applied to these non-core
scenarios to produce adjusted PD estimates for each individual
scenario. As this PMA is driven by a weakness that will be inherent
within both initial and current PDs, it was not considered
appropriate to adjust stage allocation based on the adjusted
results.
Affordability
Inflation is not a direct input into the
underlying ECL models and, as such, does not have a direct
influence on the output. Although the lending undertaken by the
Society is risk-averse, with a significant amount of affordability
assessment undertaken, there are several segments of the mortgage
book that are likely to be at greater risk of affordability
stresses due to cost-of-living pressures.
The PMA was established by considering
affordability levels of the mortgage book by applying a stress to
the monthly expenditure amounts such as increase in outgoings,
interest rate changes, cost-of-living challenges and income
decreases. These elements are used to identify accounts that would
be most vulnerable to stresses and find their mortgage
unaffordable. PD allocation of the accounts identified as
vulnerable to affordability stresses is uplifted to the equivalent
of what they would need to be for the model to assign them to Stage
2 as a result of meeting the SICR criteria.
Further consideration was given to segments of
the book that have been under-represented in this assessment and
the Group considered whether the coverage in those areas was
sufficient. Relative insensitivity to the stresses provided above
was found and so additional provision was raised to cover this
underestimation.
Since year end, the PMA has been refined and
reduced as actual increases in credit risk in relation to
affordability have materialised and are being captured within the
models and inflation levels and associated forecasts have moved
more favourably in the first half of 2024.
This PMA will be monitored as we progress
through the year and will be held until a sufficient reduction in
inflation and cost-of-living pressures is observed.
Other
Whilst we incorporate a range of economic
assumptions in the scenarios and weightings used to calculate ECL
the approach still has limitations. The PMAs detailed below aim to
cover these risks.
House Price Volatility
This PMA relates to the risk that the ONS
(Office for National Statistics) indexation data used in the ECL
model is not a true representation of the market conditions as at
the reporting date. There is a two-month lag in the publication of
results which means that the reported valuations are only indexed
up to the end of Q1 2024.
This PMA at year end aimed to correct for the
lag by using an average of Nationwide and Halifax indexations for
Q4 of 2023. Recent analysis shows stronger correlation between
Nationwide and ONS data and so a different approach has been taken
for half year. The most recent Nationwide indexation has instead
been used as a proxy to forecast ONS data for Q2 2024 and this has
been incorporated within the models. As the assumption has been
updated and built into the model no PMA is necessary.
Climate risk
We have assessed the risks associated with
climate change, both physical and transitional, in the context of
ECL and concluded that the majority of these risks do not meet the
requirements for recognition as:
There have been no observed climate related
defaults and therefore no identifiable significant increase in
credit risks ('SICR'); and the material transition risks identified
are expected to occur over a timescale in excess of the current
behavioural life of our portfolio (i.e. the average term before a
customer either moves onto an alternative deal or transfers to
another provider) and, as such, any potential impact would be
against loans yet to be underwritten.
This PMA aims to identify properties which are
or will in the near future be at most risk from a climate
perspective and assess the additional ECLs that we could expect to
incur if material costs/reductions to the value of security arise
from those risks. The four main risks considered are Energy
Performance Certificate (EPC) impacts, flood risk, subsidence risk
and coastal erosion risk.
A similar approach has been taken within each of
these areas where the properties with the very highest risks
associated are identified, appropriate adjustments are applied to
the valuation of the properties and the impacts of these changes
then quantified and held as a PMA. The total PMA held is £1.0
million (2023: £0.7 million).
Staging and POCI
The tables below show the staging of loans and
advances to customers, including those considered to be purchased
or originated credit impaired ('POCI'). The discount on acquisition
is recognised in the fair value credit adjustment.
The Group has £318.1 million of POCI loans
(December 2023: £339.7 million). Of these, 85% (December 2023: 85%)
are considered performing loans but are not permitted to be
reclassified to Stage 1 or 2. Problem loans represent the total of
the Group's Stage 3 balances and the non-performing portion of our
POCI loans.
Details of the movements in staging are
explained in the Movement
analysis section of this
note.
The following table shows the staging split by
days overdue.
|
|
30 June
2024
|
31 December
2023
|
|
|
£m
|
%
|
£m
|
%
|
|
Gross exposures by stage
|
|
|
|
|
|
Stage 1
|
44,061.2
|
90.1
|
41,597.7
|
88.8
|
|
Stage 2
|
4,067.8
|
8.3
|
4,521.8
|
9.6
|
|
Stage 3
|
455.7
|
0.9
|
409.4
|
0.9
|
|
POCI
|
318.1
|
0.7
|
339.7
|
0.7
|
|
Total gross exposures
|
48,902.8
|
100.0
|
46,868.6
|
100.0
|
|
Problem loans (stage 3 plus
non-performing POCI)
|
504.1
|
1.0
|
458.9
|
1.0
|
|
ECL and coverage ratio by stage
|
|
|
|
|
|
Stage 1
|
9.4
|
-
|
8.5
|
-
|
|
Stage 2
|
31.3
|
0.8
|
26.5
|
0.6
|
|
Stage 3
|
16.3
|
3.6
|
13.8
|
3.4
|
|
POCI
|
12.5
|
3.9
|
11.2
|
3.3
|
|
Total ECL
|
69.5
|
0.1
|
60.0
|
0.1
|
|
|
Gross
exposure
|
ECL
|
|
|
30 June
2024
|
31 December
2023
|
30 June
2024
|
31 December
2023
|
|
|
|
£m
|
£m
|
£m
|
£m
|
|
|
Stage 1
|
44,061.2
|
41,597.7
|
9.4
|
8.5
|
|
|
Stage 2:
|
4,067.8
|
4,521.8
|
31.3
|
26.5
|
|
|
Less than 30 days past
due
|
3,866.8
|
4,331.4
|
25.6
|
23.5
|
|
|
More than 30 days past
due
|
201.0
|
190.4
|
5.7
|
3.0
|
|
|
Stage 3:
|
455.7
|
409.4
|
16.3
|
13.8
|
|
|
Less than 30 days past
due
|
195.5
|
161.1
|
2.8
|
2.7
|
|
|
30-90 days past due
|
94.7
|
83.8
|
1.7
|
1.6
|
|
|
More than 90 days past
due
|
165.5
|
164.5
|
11.8
|
9.5
|
|
|
POCI:
|
318.1
|
339.7
|
12.5
|
11.2
|
|
|
Less than 30 days past
due
|
278.2
|
294.5
|
9.6
|
8.5
|
|
|
30-90 days past due
|
25.9
|
29.4
|
1.6
|
1.5
|
|
|
More than 90 days past
due
|
14.0
|
15.8
|
1.3
|
1.2
|
|
|
Total
|
48,902.8
|
46,868.6
|
69.5
|
60.0
|
|
|
|
|
|
|
|
|
|
|
|
| |
All accounts in stage 1 are less than 30 days
past due.
Risk
Assessment
The following tables are included to give an
overview of the Group's credit risk.
Lending by Risk Grade
The risk models cover the majority of loans
underwritten by the Group, with exceptions for portfolios subject
to bespoke modelling requirements, mainly Accord Mortgages Limited
buy-to-let (Accord BTL), commercial lending and POCI accounts. The
Accord BTL population currently has very strict underwriting
criteria and limited behavioural history. Commercial lending has
significantly different behavioural characteristics to the retail
mortgages.
Gross exposures in the table below are presented
pre PMAs being applied.
|
|
30 June
2024
|
31 December
2023
|
|
Gross
exposure
|
ECL
|
Gross
exposure
|
ECL
|
|
Stage 1
|
Stage 2
|
Stage 3
|
POCI
|
Total
|
|
|
|
|
Probability of default range
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
0.00%-<0.15%
|
27,398.6
|
1,424.2
|
-
|
-
|
28,822.8
|
0.9
|
28,671.7
|
1.0
|
|
0.15%-<0.25%
|
4,372.9
|
253.8
|
-
|
-
|
4,626.7
|
0.6
|
3,919.7
|
0.5
|
|
0.25%-<0.50%
|
1,499.6
|
124.8
|
-
|
-
|
1,624.4
|
0.4
|
1,286.9
|
0.4
|
|
0.50%-<0.75%
|
818.1
|
159.8
|
-
|
-
|
977.9
|
0.4
|
891.5
|
0.3
|
|
0.75%-<1.00%
|
694.6
|
295.4
|
-
|
-
|
990.0
|
0.7
|
868.3
|
0.6
|
|
1.00%-<2.50%
|
344.3
|
1,061.1
|
-
|
-
|
1,405.4
|
3.6
|
1,237.5
|
3.2
|
|
2.50%-<10.0%
|
23.6
|
322.8
|
-
|
-
|
346.4
|
3.0
|
313.7
|
2.8
|
|
10.0%-<100%
|
15.2
|
199.0
|
-
|
-
|
214.2
|
3.8
|
175.5
|
2.5
|
|
Default
|
-
|
-
|
434.7
|
39.8
|
474.5
|
16.3
|
430.0
|
14.8
|
|
Accord buy-to-let
|
6,952.3
|
118.4
|
9.6
|
-
|
7,080.3
|
6.5
|
6,715.4
|
3.6
|
|
Commercial
|
1,845.4
|
80.9
|
11.4
|
8.5
|
1,946.2
|
9.7
|
1,867.3
|
9.3
|
|
Other
|
96.6
|
27.6
|
-
|
269.8
|
394.0
|
9.9
|
491.1
|
9.0
|
|
PMAs
|
-
|
-
|
-
|
-
|
-
|
13.7
|
-
|
12.0
|
|
Total
|
44,061.2
|
4,067.8
|
455.7
|
318.1
|
48,902.8
|
69.5
|
46,868.6
|
60.0
|
Lending by origination
year
|
|
30 June
2024
|
31 December
2023
|
|
Gross
exposure
|
ECL
|
Gross
exposure
|
ECL
|
|
Stage 1
|
Stage 2
|
Stage 3
|
POCI
|
Total
|
|
Origination year
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
2024
|
4,304.4
|
346.0
|
6.1
|
-
|
4,656.5
|
3.1
|
-
|
-
|
|
2023
|
8,334.1
|
512.4
|
25.4
|
-
|
8,871.9
|
8.5
|
9,199.2
|
6.5
|
|
2022
|
8,520.0
|
514.5
|
30.5
|
-
|
9,065.0
|
9.5
|
9,570.7
|
8.2
|
|
2021
|
6,180.7
|
466.0
|
50.2
|
-
|
6,696.9
|
6.9
|
7,010.6
|
6.3
|
|
2013 - 2020
|
14,664.2
|
1,317.7
|
155.2
|
-
|
16,137.1
|
15.7
|
17,348.5
|
14.2
|
|
2009 - 2012
|
728.2
|
81.0
|
10.8
|
-
|
820.0
|
0.4
|
884.1
|
0.4
|
|
Pre-2009
|
616.9
|
524.8
|
104.4
|
-
|
1,246.1
|
4.9
|
1,335.6
|
5.8
|
|
Acquired loans
|
712.7
|
305.4
|
73.1
|
318.1
|
1,409.3
|
20.5
|
1,519.9
|
18.6
|
|
Total
|
44,061.2
|
4,067.8
|
455.7
|
318.1
|
48,902.8
|
69.5
|
46,868.6
|
60.0
|
Lending by Loan to
Value
|
|
30 June
2024
|
31 December
2023
|
|
Gross
exposure
|
Gross
exposure
|
|
Stage 1
|
Stage 2
|
Stage 3
|
POCI
|
Total
|
|
Loan-to-value
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Less than 60%
|
17,671.8
|
3,009.1
|
258.2
|
267.1
|
21,206.2
|
23,248.4
|
|
60% to 75%
|
13,509.2
|
609.5
|
133.6
|
37.9
|
14,290.2
|
14,614.4
|
|
75% to 90%
|
10,137.3
|
386.5
|
55.4
|
8.6
|
10,587.8
|
8,102.4
|
|
90% or greater
|
2,742.9
|
62.7
|
8.5
|
4.5
|
2,818.6
|
903.4
|
|
Total
|
44,061.2
|
4,067.8
|
455.7
|
318.1
|
48,902.8
|
46,868.6
|
|
Average LTV (%)
|
53.1
|
39.3
|
44.7
|
41.0
|
51.9
|
49.0
|
Movement
analysis
The following table details the movement in
the gross exposures and ECL from the beginning to the end of the
reporting period split by stage.
Mortgage balances in Stage 2 have decreased by
£454.0 million across 2024, but the ECL associated with loans
moving from Stage 1 to Stage 2 has increased by £7.3 million. This
is due to the type of mortgages that are transferring between
stages. £649.4 million of loans have moved into Stage 2 from Stage
1 and are primarily newer lending, with longer terms and higher
LTVs. These factors lead to a higher calculated ECL. The total
mortgage balance coming out of Stage 2 in to Stage 1 is much higher
- £965.6 million, however these mortgages are generally much lower
risk, lower LTV and shorter-term with lower ECLs, shown by the £2.4
million reduction in ECL.
The House Price Index (HPI) updates applied in
2024 have been negative, leading to a higher loan-to-value (LTV)
associated with all loans and advances. A higher LTV is an
indicator of higher credit risk and default, which in turn leads to
a higher associated ECL. As the HPI updates affect every mortgage
this increase in ECL is seen across all staging.
|
|
Stage 1
|
Stage 2
|
Stage 3
|
POCI
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Gross exposure at 31 December
2023
|
41,597.7
|
4,521.8
|
409.4
|
339.7
|
46,868.6
|
|
Transfers
from stage 1 to 2
|
(649.4)
|
649.4
|
-
|
-
|
-
|
|
Transfers
from stage 1 to 3
|
(37.2)
|
-
|
37.2
|
-
|
-
|
|
Transfers
from stage 2 to 1
|
965.6
|
(965.6)
|
-
|
-
|
-
|
|
Transfers
from stage 2 to 3
|
-
|
(69.9)
|
69.9
|
-
|
-
|
|
Transfers
from stage 3 to 1
|
13.0
|
-
|
(13.0)
|
-
|
-
|
|
Transfers
from stage 3 to 2
|
-
|
23.1
|
(23.1)
|
-
|
-
|
|
Changes to carrying
value
|
(729.2)
|
(5.2)
|
1.1
|
(5.7)
|
(739.0)
|
|
New financial assets originated or
purchased
|
4,550.2
|
-
|
-
|
-
|
4,550.2
|
|
Financial assets derecognised
during the period
|
(1,649.5)
|
(85.8)
|
(23.5)
|
(15.5)
|
(1,774.3)
|
|
Write-offs
|
-
|
-
|
(2.3)
|
(0.4)
|
(2.7)
|
|
Gross exposure at 30 June 2024
|
44,061.2
|
4,067.8
|
455.7
|
318.1
|
48,902.8
|
|
ECL at 31 December 2023
|
8.5
|
26.5
|
13.8
|
11.2
|
60.0
|
|
Transfers from stage 1 to 2
|
(0.2)
|
7.3
|
-
|
-
|
7.1
|
|
Transfers from stage 1 to 3
|
-
|
-
|
1.4
|
-
|
1.4
|
|
Transfers from stage 2 to 1
|
0.5
|
(2.4)
|
-
|
-
|
(1.9)
|
|
Transfers from stage 2 to 3
|
-
|
(1.5)
|
3.5
|
-
|
2.0
|
|
Transfers from stage 3 to 1
|
-
|
-
|
(0.3)
|
-
|
(0.3)
|
|
Transfers from stage 3 to 2
|
-
|
0.2
|
(0.6)
|
-
|
(0.4)
|
|
Changes in
PDs/LGDs/EADs
|
(2.3)
|
2.8
|
(0.2)
|
2.2
|
2.5
|
|
New financial assets originated or
purchased
|
1.8
|
-
|
-
|
-
|
1.8
|
|
Changes to model assumptions and
methodologies
|
(0.2)
|
(0.1)
|
(0.4)
|
(0.4)
|
(1.1)
|
|
Unwind of discount
|
-
|
-
|
0.4
|
0.3
|
0.7
|
|
Financial assets derecognised
during the period
|
(0.1)
|
(0.6)
|
(1.3)
|
(0.7)
|
(2.7)
|
|
Write-offs
|
-
|
-
|
(0.6)
|
(0.1)
|
(0.7)
|
|
PMA
|
1.4
|
(0.9)
|
0.6
|
-
|
1.1
|
|
ECL at 30 June 2024
|
9.4
|
31.3
|
16.3
|
12.5
|
69.5
|
Loans Purchased or Originated
Credit Impaired (POCI)
The table below shows the status of the
Group's POCI loans. A substantial proportion of POCI balances, were
they not required to be classified as Stage 3 by accounting
standards, would transfer to other stages. The table below shows
that 69.0% (December 2023: 69.4%) of balances have been fully up to
date for the last 24 months and only 15.2% (December 2023: 14.6%)
of balances would be classified as in default.
|
|
Up to date for the last 24
months
|
Some arrears in the last 24
months
|
Meets definition of
default
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
|
At 30 June 2024
|
|
|
|
|
|
Gross exposure
|
219.3
|
50.4
|
48.4
|
318.1
|
|
ECL
|
6.8
|
3.1
|
2.6
|
12.5
|
|
At 31 December 2023
|
|
|
|
|
|
Gross exposure
|
235.9
|
54.3
|
49.5
|
339.7
|
|
ECL
|
6.1
|
2.7
|
2.4
|
11.2
|
9.
Retirement benefit obligations
Reconciliation of funded defined benefit
scheme
|
|
30 June
2024
|
30 June
2023
|
31 December
2023
|
|
|
£m
|
£m
|
£m
|
|
Present value of defined benefit
obligation
|
(532.7)
|
(574.0)
|
(572.5)
|
|
Assets at fair value
|
573.0
|
610.5
|
611.1
|
|
Funded defined benefit asset
|
40.3
|
36.5
|
38.6
|
Unfunded
defined benefit scheme
|
|
30 June
2024
|
30 June
2023
|
31 December
2023
|
|
|
£m
|
£m
|
£m
|
|
Present value of unfunded defined benefit
scheme
|
(7.6)
|
(7.2)
|
(8.1)
|
The present value at 30 June 2024 of the
unfunded defined benefit scheme was £7.6 million (31 December 2023:
£8.1 million) and the relevant disclosures have been separated from
those of the main employee benefits scheme where
appropriate.
The present value of the defined benefit
obligation as at 30 June 2024 has been calculated using assumptions
that are derived consistently with those used for the 31 December
2023 year end, allowing for updated market conditions.
Liabilities have decreased as a result of
corporate bond yields increasing due to the high interest rate
environment, which has subsequently increased the discount rate.
Future long-term expectations of inflation have increased
slightly.
Asset returns over the first half of the year
have been less than the discount rate. The overall surplus has
increased by £2.2 million since 31 December 2023, as both the
assets and liabilities have reduced as yields have risen, with the
assets falling to a slightly lower degree than the
liabilities.
Summary of
assumptions
|
|
30 June
2024
|
31
December 2023
|
|
|
%
pa
|
%
pa
|
|
Retail prices index (RPI)
inflation
|
3.3
|
3.2
|
|
Consumer price index (CPI)
inflation
|
2.7
|
2.5
|
|
Discount rate
|
5.1
|
4.5
|
|
Salary increases
|
3.9
|
3.8
|
10.
Related parties
There have been no material changes to related
parties and the associated related party transactions since the
year end. For further information on these see pages 229 to 231 of
the 2023 Annual Report and Accounts.
11.
Notes to the consolidated statement of cash
flows
|
|
Half-year to
30 June
2024
|
Half-year to
30 June
2023
|
Year
to
31
December 2023
|
|
|
£m
|
£m
|
£m
|
|
Depreciation and
amortisation
|
10.0
|
9.7
|
20.4
|
|
Loss/(profit) on sale of
assets
|
0.3
|
-
|
0.3
|
|
Interest on subordinated
liabilities
|
37.4
|
17.2
|
51.5
|
|
Impairment charge/(release) for
the year
|
10.7
|
7.5
|
4.0
|
|
Provisions
(release)/charge
|
(0.2)
|
(0.8)
|
(0.6)
|
|
Non-cash movement in subordinated
liabilities
|
5.9
|
(26.9)
|
73.0
|
|
(Gain)/loss on realisation of debt
securities
|
-
|
(1.5)
|
(1.6)
|
|
Non-cash items included in profit
before tax
|
64.1
|
5.2
|
147.0
|
|
(Increase)/decrease in operating
assets
|
|
|
|
|
Change in loans and advances to
customers and related fair value adjustments for hedged risk,
excluding impairment
|
(1,960.6)
|
(388.0)*
|
(2,509.0)
|
|
Derivative financial
assets
|
(38.1)
|
(641.4)
|
588.3
|
|
Other assets
|
176.5
|
(8.1)*
|
(16.0)
|
|
Investments
|
0.1
|
(0.2)
|
(0.5)
|
|
Net change in operating
assets
|
(1,822.1)
|
(1,037.7)
|
(1,937.2)
|
|
Increase/(decrease) in operating
liabilities
|
|
|
|
Shares
|
2,580.9
|
3,624.6
|
5,048.5
|
|
Amounts owed to credit
institutions
|
(1.2)
|
(785.1)
|
(3,274.6)
|
|
Non-cash movements on debt
securities in issue
|
(56.3)
|
(58.5)
|
84.6
|
|
Other deposits
|
217.8
|
(110.8)
|
(154.5)
|
|
Derivative financial
liabilities
|
(19.9)
|
242.3
|
31.1
|
|
Other liabilities and
provisions
|
(1.8)
|
1.4*
|
9.6
|
|
Net change in operating
liabilities
|
2,719.5
|
2,913.9
|
1,744.7
|
* The classification of these
three lines have been corrected, moving them to their current
position. Both line items were previously reported within the
"Non-cash items included in profit before tax" section.
The following tables reconcile liabilities
arising from financing activities.
|
Liabilities from financing
activities
|
Brought
forward
|
Cash
flows
|
Non-cash
changes caused by:
|
Carried
forward
|
|
Redemption
|
Issue
|
Foreign
exchange
|
Accrued
interest
|
Fair
value adjustments
|
|
Period to 30 June 2024
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Debt securities in
issue
|
4,919.4
|
(1,006.4)
|
1,178.6
|
(55.7)
|
(1.7)
|
1.1
|
5,035.3
|
|
Subordinated
liabilities
|
1,621.7
|
(142.5)
|
-
|
-
|
31.1
|
(25.2)
|
1,485.1
|
|
Total
|
6,541.1
|
(1,148.9)
|
1,178.6
|
(55.7)
|
29.4
|
(24.1)
|
6,520.4
|
|
Period to 30 June 2023
|
|
Debt securities in
issue
|
5,259.3
|
(796.3)
|
1,005.3
|
(86.0)
|
-
|
27.5
|
5,409.8
|
|
Subordinated
liabilities
|
1,035.1
|
(136.4)
|
350.0
|
-
|
9.8
|
(36.7)
|
1,221.8
|
|
Total
|
6,294.4
|
(932.7)
|
1,355.3
|
(86.0)
|
9.8
|
(9.2)
|
6,631.6
|
|
Year to 31 December
2023
|
|
|
|
|
|
|
|
|
Debt securities in
issue
|
5,259.3
|
(1,423.7)
|
999.2
|
(58.6)
|
3.4
|
139.8
|
4,919.4
|
|
Subordinated
liabilities
|
1,035.1
|
(136.4)
|
650.0
|
-
|
6.6
|
66.4
|
1,621.7
|
|
Total
|
6,294.4
|
(1,560.1)
|
1,649.2
|
(58.6)
|
10.0
|
206.2
|
6,541.1
|
12.
Fair values
Fair value is the price that would
be paid upon the purchase of an asset or received upon the sale of
a liability in an arm's length transaction between two entities at
a specific measurement date.
Where external market prices are
available these are used to determine the fair value. When these
are not available internal pricing models using external market
data are used. The following hierarchy is used when measuring fair
value:
Level 1: Quoted prices are
available for identical assets or liabilities in active markets,
these are unadjusted.
Level 2: Significant inputs to the
calculated fair values are taken from observable market data, other
than those in Level 1. This may include direct inputs (i.e. prices)
or indirect inputs (i.e. derived from prices).
Level 3: Fair value is derived from
non-observable inputs and not solely based on external market
data.
The table below summarises the carrying value
and fair value of financial assets and liabilities measured at
amortised cost as at the Balance Sheet date.
|
Held at amortised cost
|
|
Carrying
value
|
Fair
values
|
Total
fair value
|
|
|
Level
1
|
Level
2
|
Level
3
|
|
30 June 2024
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Assets
|
|
|
|
|
|
|
|
Loans and advances to credit
institutions
|
1
|
568.9
|
-
|
568.9
|
-
|
568.9
|
|
Loans and advances to
customers
|
2
|
48,840.2
|
-
|
-
|
47,586.8
|
47,586.8
|
|
Debt securities - amortised
cost
|
|
2,091.7
|
2,086.8
|
-
|
-
|
2,086.8
|
|
Liabilities
|
|
|
|
|
|
|
|
Shares
|
3
|
49,637.6
|
-
|
49,745.8
|
-
|
49,745.8
|
|
Amounts owed to credit
institutions
|
|
1,885.1
|
-
|
1,885.1
|
-
|
1,885.1
|
|
Other deposits
|
|
1,201.4
|
-
|
1,201.4
|
-
|
1,201.4
|
|
Debt securities in
issue
|
|
5,035.3
|
4,471.9
|
584.2
|
-
|
5,056.1
|
|
Subordinated
liabilities
|
4
|
1,485.1
|
1,476.5
|
27.6
|
-
|
1,504.1
|
|
30 June 2023
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Loans and advances to credit
institutions
|
1
|
450.5
|
-
|
450.5
|
-
|
450.5
|
|
Loans and advances to
customers
|
2
|
45,868.1
|
-
|
-
|
43,031.2
|
43,031.2
|
|
Debt securities - amortised
cost
|
|
2,119.9
|
2,103.7
|
-
|
-
|
2,103.7
|
|
Liabilities
|
|
|
|
|
|
|
|
Shares
|
3
|
45,632.8
|
-
|
45,341.2
|
-
|
45,341.2
|
|
Amounts owed to credit
institutions
|
|
4,375.8
|
-
|
4,375.8
|
-
|
4,375.8
|
|
Other deposits
|
|
1,027.3
|
-
|
1,027.3
|
-
|
1,027.3
|
|
Debt securities in
issue
|
|
5,409.8
|
5,810.0
|
817.8
|
-
|
6,627.8
|
|
Subordinated
liabilities
|
4
|
1,221.8
|
1,169.2
|
33.8
|
-
|
1,203.0
|
|
31 December 2023
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Loans and advances to credit
institutions
|
1
|
397.4
|
-
|
397.4
|
-
|
397.4
|
|
Loans and advances to
customers
|
2
|
46,815.9
|
-
|
-
|
45,298.5
|
45,298.5
|
|
Debt securities - amortised
cost
|
|
2,339.0
|
2,332.2
|
-
|
-
|
2,332.2
|
|
Liabilities
|
|
|
|
|
|
|
|
Shares
|
3
|
47,056.7
|
-
|
46,976.7
|
-
|
46,976.7
|
|
Amounts owed to credit
institutions
|
|
1,886.3
|
-
|
1,886.3
|
-
|
1,886.3
|
|
Other deposits
|
|
983.6
|
-
|
983.6
|
-
|
983.6
|
|
Debt securities in
issue
|
|
4,919.4
|
4,222.9
|
693.4
|
-
|
4,916.3
|
|
Subordinated
liabilities
|
4
|
1,621.7
|
1,566.8
|
32.4
|
-
|
1,599.2
|
1. The fair
values of all cash in hand, balances with the Bank of England and
loans and advances to credit institutions have been measured at par
as they are all due in under one year.
2. The fair
value of loans and advances to customers is assessed as the value
of the expected future cash flows. Future cash flows are projected
using contractual interest payments, contractual repayments and the
expected prepayment behaviour of borrowers. The resulting expected
future cash flows are discounted at current market rates to
determine fair value.
For standard variable rate
mortgage products, the interest rate on such products is equivalent
to a current market product rate and as such the Group considers
the fair value of these mortgages to be equal to their carrying
value. Fixed rate mortgages have been discounted using current
market product rates. The difference between book carrying value
and fair value results from market rate volatility relative to the
fixed rate at inception of the loan; in addition to assumptions
applied in relation to redemption profiles, which are regularly
reviewed and updated where necessary.
As these redemption profiles
are not considered to be observable by the market, then the fair
value of loans and advances to customers continues to be a Level 3
valuation technique. Overall, the fair value is lower than the
carrying value by £1,253.3 million (December 2023: £1,517.4 million
lower), which arises primarily due to the fair value losses being
calculated on a lifetime basis for all mortgage
accounts.
3. All the
Group's non-derivative financial liabilities are initially recorded
at fair value less directly attributable costs and are subsequently
measured at amortised cost. The only exception is where an
adjustment is made to certain fixed rate shares balances that are
in hedging relationships. The fair value of shares and deposits
that are available on demand approximates to the carrying value.
The fair value of fixed term shares and deposits is determined from
the projected future cash flows from those deposits, discounted at
the current market rates. In 2024, the estimated fair value of
share balances, using a Level 2 method, is higher than the carrying
value by £108.1 million (December 2023: £80.0 million
lower).
4. Society
accounts include some subordinated liabilities classified as Level
2 as fair values are calculated using a method based on observable
market prices. The fair value of subordinated liabilities, which is
a fixed rate product, is lower than the carrying value due to the
volatility in market rates over the course of the
year.
The table below classifies all financial
instruments held at fair value according to the method used to
establish the fair value.
|
Held at fair value
|
Fair
values
|
Total
fair value
|
|
Level
1
|
Level
2
|
Level
3
|
|
30 June 2024
|
£m
|
£m
|
£m
|
£m
|
|
Debt securities - fair value
through income statement
|
27.3
|
-
|
-
|
27.3
|
|
Debt securities - fair value
through other comprehensive income
|
5,745.3
|
-
|
-
|
5,745.3
|
|
Derivative financial
assets
|
-
|
1,790.1
|
2.9
|
1,793.0
|
|
Investments
|
-
|
-
|
3.2
|
3.2
|
|
Derivative financial
liabilities
|
-
|
677.5
|
-
|
677.5
|
|
30 June 2023
|
|
|
|
|
|
Debt securities - fair value
through income statement
|
25.6
|
-
|
-
|
25.6
|
|
Debt securities - fair value
through other comprehensive income
|
4,741.5
|
-
|
-
|
4,741.5
|
|
Derivative financial
assets
|
-
|
2,980.5
|
3.4
|
2,983.9
|
|
Investments
|
-
|
-
|
3.0
|
3.0
|
|
Derivative financial
liabilities
|
-
|
908.2
|
0.4
|
908.6
|
|
31 December 2023
|
|
|
|
|
|
Debt securities - fair value
through income statement
|
27.3
|
-
|
-
|
27.3
|
|
Debt securities - fair value
through other comprehensive income
|
5,195.7
|
-
|
-
|
5,195.7
|
|
Derivative financial
assets
|
-
|
1,751.9
|
3.1
|
1,755.0
|
|
Investments
|
-
|
-
|
3.3
|
3.3
|
|
Derivative financial
liabilities
|
-
|
697.4
|
-
|
697.4
|
The Group's Level 1 portfolio of available for
sale debt securities comprises liquid securities for which traded
prices are readily available.
Some derivative financial instruments are also
included within Level 2 as fair values are derived from discounted
cash flow models using yield curves based on observable market
data.
Instruments move between fair value hierarchies
primarily due to increases or decreases in market activity or
changes to the significance of unobservable inputs to valuation,
and are recognised at the date of the event or change in
circumstances which caused the transfer. There were no transfers
between the portfolios during the year.
Level 3
instruments
Derivative financial instruments within Level 3
are interest rate swaps held in the special purpose vehicles
(SPVs). These are valued using similar valuation technique as Level
2 derivatives, namely present value calculations using interest
rate curves, but these are not based on market observable
data.
The interest rate swaps are balance tracking and
the swap notional is projected, and changes over time to match the
balance of the underlying mortgage portfolio. The changes in the
fair value of these instruments from movements in Level 3
parameters related to prepayment risk will largely offset across
the interest rate swaps as the Group is hedged across these
positions. Sensitivity analysis to the individual Level 3
parameters has not been disclosed on the basis that the Group does
not have a significant exposure to these.
Investments classified in Level 3 relate to the
Group's holding in equity preference shares. These shares are
convertible into common equity shares at various intervals during
the life of the instrument, based on a conversion factor set by the
issuer. The valuation method therefore uses the quoted share price
of the unrestricted stock as a base, applies the current estimated
conversion factor as advised by the issuer and applies a
discount.
This discount reflects the current illiquidity
of the instrument and the risks to changes in the conversion factor
between the balance sheet date and the next conversion date. Whilst
the valuation is primarily based on an observable market price, the
level and significance of the unobservable input relating to the
calculation of the discount moves this asset into Level
3.
Changes in the carrying value of Level 3
financial instruments in the period all relate to changes in fair
value. There have been no changes in methodology, redemption,
additions or transfers in or out of Level 3 in the year.
13.
Events occurring after the end of the
reporting period
There have been no material post balance sheet
events between 30 June 2024 and the approval of the condensed
interim financial statements.
Responsibility Statements
The directors confirm, to the best of their
knowledge:
· the condensed set
of financial statements have been prepared in accordance with
UK-adopted International Accounting Standard 34 Interim Financial Reporting;
and
· the condensed set
of financial statements give a true and fair view of the assets,
liabilities, financial position and profit or loss of Yorkshire
Building Society and its controlled entities ("the Group");
and
· the interim
management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the
first six months and description of principal risks and
uncertainties for the remaining six months of the year).
By order of the Board
Susan Allen, OBE
Tom Ranger
Chief Executive
Officer
Chief Financial Officer
24 July 2024
Independent review report to Yorkshire Building
Society
Report on the condensed
consolidated interim financial statements
Our conclusion
We have reviewed Yorkshire Building Society's
condensed consolidated interim financial statements (the "interim
financial statements") in the Half-Yearly Financial Report of
Yorkshire Building Society for the 6 month period ended
30 June 2024 (the "period").
Based on our review, nothing has come to our
attention that causes us to believe that the interim financial
statements are not prepared, in all material respects, in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
The interim financial statements
comprise:
· the
Consolidated Balance Sheet as at 30 June 2024;
· the
Consolidated Income Statement and Consolidated Statement of
Comprehensive Income for the period then ended;
· the
Consolidated Statement of Cash Flows for the period then
ended;
· the
Consolidated Statement of Changes in Members' Interest and Equity
for the period then ended; and
· the
explanatory notes to the interim financial statements.
The interim financial statements included in the
Half-Yearly Financial Report of Yorkshire Building Society have
been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Basis for
conclusion
We conducted our review in accordance with
International Standard on Review Engagements (UK) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Financial Reporting Council for use in
the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of
persons responsible for financial and accounting matters, and
applying analytical and other review procedures.
A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and, consequently, does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
We have read the other information contained in
the Half-Yearly Financial Report and considered whether it contains
any apparent misstatements or material inconsistencies with the
information in the interim financial statements.
Conclusions relating to going
concern
Based on our review procedures, which are less
extensive than those performed in an audit as described in the
Basis for conclusion section of this report, nothing has come to
our attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with ISRE (UK) 2410.
However, future events or conditions may cause the group to cease
to continue as a going concern.
Responsibilities for the
interim financial statements and the review
Our responsibilities and those
of the directors
The Half-Yearly Financial Report, including the
interim financial statements, is the responsibility of, and has
been approved by the directors. The directors are responsible for
preparing the Half-Yearly Financial Report in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority. In preparing the Half-Yearly
Financial Report, including the interim financial statements, the
directors are responsible for assessing the group's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
group or to cease operations, or have no realistic alternative but
to do so.
Our responsibility is to express a conclusion on
the interim financial statements in the Half-Yearly Financial
Report based on our review. Our conclusion, including our
Conclusions relating to going concern, is based on procedures that
are less extensive than audit procedures, as described in the Basis
for conclusion paragraph of this report. This report, including the
conclusion, has been prepared for and only for the Society for the
purpose of complying with the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct
Authority and for no other purpose. We do not, in giving this
conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent
in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
Leeds
24 July 2024
Other information
The information set out in this document is
unaudited and does not constitute accounts within the meaning of
section 73 of the Building
Societies Act 1986. The financial information for the year
ended 31 December 2023 has been extracted from the audited Annual
Accounts for that year. The Annual Accounts for the year ended 31
December 2023 have been filed with the Financial Conduct
Authority.
The Auditor's report on the Annual Accounts was
unqualified and did not include any matters to which the Auditor
drew attention by way of emphasis without qualifying their
report.
A copy of the Half-Yearly Financial Report is
placed on Yorkshire Building Society's website. The directors are
responsible for the maintenance and integrity of the information on
the website. Information published on the internet is accessible in
many countries with different legal requirements. Legislation in
the UK governing the preparation and dissemination of financial
statements may differ from legislation in other
jurisdictions.
References to 'YBS Group' or
'Yorkshire Group' refer to Yorkshire Building Society, the trading
names under which it operates (Barnsley Building Society, Barnsley,
Chelsea Building Society, Chelsea, Norwich & Peterborough
Building Society, N&P and Egg) and its subsidiary companies.
Egg is a registered trademark of Yorkshire Building Society. Accord
Mortgages Limited is authorised and regulated by the Financial
Conduct Authority.
Accord Mortgages Limited is entered
in the Financial Services Register under registration number
305936. Buy to Let mortgages for business purposes are not
regulated by the Financial Conduct Authority. Accord Mortgages
Limited is registered In England No: 02139881. Registered Office:
Yorkshire House, Yorkshire Drive, Bradford BD5 8LJ. Accord
Mortgages is a registered Trade Mark of Accord Mortgages
Limited.
FareShare is a registered charity in
England & Wales (1100051) and Scotland (SC052672).
Yorkshire Building Society is a
member of the Building Societies Association and is authorised by
the Prudential Regulation Authority and regulated by the Financial
Conduct Authority and the Prudential Regulation Authority.
Yorkshire Building Society is entered in the Financial Services
Register and its registration number is 106085. Head Office:
Yorkshire House, Yorkshire Drive, Bradford BD5 8LJ.
ybs.co.uk