Bradford-based Yorkshire Building Society said in its half-yearly financial report that its balances increased £2.6 billion in the six months to June 30, 2024, and now stand at £50.3 billion.
New CEO Susan Allen said the mutual’s statutory profit before tax for the period fell to £158.1 million from £180.6 million and core operating profit fell to £149.2 million from £246.4 million.
The Society’s gross mortgage lending in the period increased to £5.2 billion (2023 H1: £4.2 billion). Net lending also increased, to £2.0 billion (2023 H1: £0.7 billion).
“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,” said Allen.
“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.”
In April, Yorkshire Building Society defended its remuneration package for new CEO Allen by saying a big one-off payment included in her £4.046 million package for 2023 was to cover “lost earnings” related to her move from Barclays and is “common practice” for executive pay in financial services.
In its half-yearly financial report, Yorkshire said net interest income fell to £340.8 million in the period from £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,” said the mutual.
“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).”