Skipton H1 profit falls 45% as assets top £24bn

David Cutter

Skipton Building Society said its total profit before tax fell to £72.3 million in the first half of 2019 from £104.7 million at the same stage last year amid “intense competition in the mortgage market.”

The UK’s fourth largest building society said the decrease in total profit happened predominantly in its mortgages and savings division “which can be attributed primarily to fair value losses of £12.5m relating to our equity release portfolio which is closed to new business …”

Skipton added: “The fair value losses are driven by changes in market expectations of long term interest rates, inflation and house price growth …”

Skipton’s gross lending of £2.5 billion in the period was 43% higher than the same period of 2018.

The society’s membership increased by 20,100 to 1,030,526.

Skipton’s total assets grew to £24.2 billion from around £22 billion at the same stage last year.

Skipton CEO David Cutter said: “I’m pleased to report a further increase in the Society’s membership, and strong growth in both mortgage and savings balances.

“Profitability remains good but the decline in net interest margin is reflective of intense competition in the mortgage market, and more latterly in the savings market.

“An 8% reduction in house sales reported by Connells estate agency is also reflective of a subdued housing market, but the diversification andresilience of Skipton’s business model has contributed to a further improvement in the Society’s very strong capital ratios.”

Cutter added: “The more competitive mortgage and savings environment coincides with a continuous period of increased political uncertainty, as the UK is in the midst of withdrawing from the European Union.

“Should there be a no- deal Brexit we would not expect an immediate significant impact on the Society but we would be cautious and vigilant regarding the potential medium to longer term implications arising from possible movements in house prices, unemployment or bank base rates.

“We currently anticipate that profits at the end of 2019 will be lower than 2018 due to a combination of ongoing pressures on mortgage and savings margins, and the continuation of a subdued housing market.

“However, the political and economic uncertainty highlighted above makes forecasting difficult and creates a need for caution.

“We remain vigilant regarding potential economic headwinds, but with the strong capital and liquidity position we have maintained during the first half of 2019, the Society is well placed to manage the risks that we face and to capitalise upon opportunities that may arise for the benefit of our members.”