MortgagesJul 29 2015

Skipton’s profits fall as advice division reports a loss

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Skipton’s profits fall as advice division reports a loss

Skipton Building Society’s group profits before tax were down to £72.1m over the first six months of this year, compared to £90m during the same period last year.

The group blamed the reduction in underlying profitability on an increase in costs and loan impairment provisions in the mortgages and savings division, the latter mainly as a result of enhancements made to credit risk loan impairment models, together with a reduction in profits from estate agency division Connells, following the slowdown of the housing market in the second half of 2014.

Connells’ profits before tax fell to £27.3m for the first half this year, compared to £42.6m for the first half last year, although income from mortgage services was 16 per cent higher than the comparative period in 2014.

Skipton’s financial advice division also reported a loss before tax of £900,000 compared to a profit during the first half of last year of £800,000. This included a loss on the disposal the entire shareholding in Pearson Jones of £800,000 when it was sold to Standard Life.

Mortgage balances did increase by an annualised rate of 15.5 per cent, as gross lending of £1.9bn was up 31 per cent compared to the same period last year.

Gross mortgage lending over the last six months amounted to £1.9bn, up from £1.5bn in the first half of 2014, an increase of 31 per cent achieved without extending existing credit risk appetite.

The average loan-to-value of the society’s new lending was 66 per cent and the maximum permitted LTV remained at 90 per cent for residential mortgages and 75 per cent for buy-to-let mortgages.

During the six-month period, 95 per cent of lending was introduced through intermediaries and 9 per cent was on buy-to-let products.

However, profits before tax of the mortgages and savings division were £49.1m, down from £51.3m during the same period last year, and represented 68 per cent of group pre-tax profits, up from 57 per cent in H1 2014.

Administrative expenses of £50.4m were £4.1m higher than the £46.3m charged during the comparative period in 2014 as the society continued to invest in various areas of the business such as Skipton Direct, to meet customer demand and growth in the business.

David Cutter, Skipton’s group chief executive, said he was pleased to see that gross mortgage lending increased by nearly a third, with continued strong growth in both mortgage and savings balances.

peter.walker@ft.com