Highlights 2003
- Group assets up 9.6% to £7.3 billion
- Society assets up 8.5% to £7.1 billion
- Group pre-tax profits up £4.4 million to £57.8 million
- Society pre-tax profit £41.0 million (2002: £52.4 million)
- Group interest rate margin at 1.27%
- Society interest rate margin at 0.83%
- Group loans and advances to customers up 7.3% to £5.5 billion
- Gross capital ratio up to 8.22%
- Society management expenses ratio down to 74 pence per £100 assets
- Profits & Interest Rate Margin – An 8% increase in the profitability of the Group has once again allowed the Society to further reduce its interest rate margin. This now stands at 0.83%, one of the lowest in the industry, down from 0.91% in 2002. Whilst the Society pre-tax profit has fallen in 2003, this is largely due to the timing of dividend payments from subsidiaries.
- Lending – 22,000 mortgage applications were received during the year, leading to gross applications totalling £1.6 billion on residential lending – the highest figure in the Society’s 150 year history. In addition, readers of Financial Adviser voted Skipton a ‘Five-Star’ Mortgage Service Provider for the fourth year in succession. The Society has now received five ‘Five-Star Service Awards’, more than any other building society.
- Funding – Despite an unsettled year for retail inflows, overall balances increased and ended the year at over £4 billion.
- Information Technology – In April, the Society successfully moved its entire IT core processing infrastructure to a Microsoft Windows environment. The result is improved usability, improved customer service and a projected £3 million fall in IT costs per annum.
- Subsidiaries – Two new subsidiary companies were added to the Skipton Group in 2003, bringing the total number to 16. Pearson Jones plc, a Leeds-based firm of independent financial advisers specialising in wealth management, was acquired in January, whilst in April, Baseline Capital Ltd was formed to turn a new set of EU regulations on capital adequacy into a business opportunity. In addition, Group company Connells Ltd became the second largest estate agency in the UK, following the acquisitions of Sharman Quinney in June and Sequence, bought from Royal & Sun Alliance, in October.
The Skipton Group’s excellence has been recognised with many awards throughout the year, including: the Editor’s Special Award from Your Mortgage; IFA Woman of the Year 2003 for Pearson Jones IFA, Yvonne Goodwin; Supplier of the Year prize at the International Direct Marketing Fair for EuroDirect; the Credit Today award for Credit Service of the Year for Callcredit; Mortgage Introducer’s Best Packager of the Year Award, and a Financial Adviser Five Star Service Award for Pink Home Loans.
Speaking about the results, John Goodfellow, chief executive and director, said, "The economic climate in 2003, our 150th year, meant the financial industry was once again operating in a challenging environment, facing fierce competition to gain new customers – and retain existing ones – alongside the growing costs of compliance and regulation. Against this background, I am very pleased to report that Skipton Building Society has met each challenge head on, with the result that this year’s figures show a trend of continued growth for both the Society and its Group.
“The objective behind our growth is simple. The more the Society and its subsidiaries prosper, the greater the level of profit generated. From this comes a sound financial foundation from which the Society can continue offering members real value. That value can be seen in many ways, across the entire business.
“On the investment side, with 2003 interest rates having been their lowest for nearly 50 years, the Society has faced a balancing act with its savings accounts. Over the last 12 months we have seen steady inflows into our savings accounts, peaking in April with the ISA season. These dropped off as the stock market began its recovery and the Bank of England’s rates hit a new low, and then rose again from October, with predictions that rates would take an upward turn.
“Regardless of these peaks and troughs, we were able to increase our retail balances to over £4 billion. One product that has contributed to this, due in part to its regular appearance in best buy tables, is the Mini-Cash ISA.
“On the lending side, Skipton’s approach to its mortgage portfolio is to offer consistently good value. This means avoiding the ‘boom and bust’ approach of other lenders, whose headline-grabbing rates may entice the novice borrower, but leave them high and dry after the initial deal is over. Through this approach, the 5-Year Fixed Rate Mortgage appeared in numerous best buy tables and the re-launch of the ever-popular Stateside Mortgage in September received very favourable media coverage and contributed to our record lending levels at that time. The result of this activity was the receipt of a record 22,000 mortgage applications during 2003, leading to gross applications totalling £1.6 billion on residential lending – the highest figure in the Society’s 150 year history. Indications are that this will continue in 2004. In addition, Skipton’s commercial lending arm saw lending increase by 36% to over £200 million, another record.
“In March, the Society improved its Mortgage Discount Scheme to offer a reduction of 0.75% from our variable rate to borrowers who have held a mortgage with us for two years or more. What this means is that, in essence, these borrowers are not paying the full variable rate of 5.74%, but are instead paying 4.99%. We are determined our variable rate will remain one of the lowest in the industry, and so carry out regular reviews of both this and the Scheme, thus ensuring transparency for all borrowers.
“Looking forward to 2004 and beyond, we shall be further concentrating on our successful strategy to make sure we remain in the prime position of having a group of companies to meet the ebbs and flows of the financial cycle. At the same time, I also emphasise our commitment to remaining a mutual building society, with the ethics that brings, whilst still being seen as innovative.”
