Leeds BS 

New Leeds BS boss warns of lower profits

New Leeds BS boss warns of lower profits

The chief executive of Leeds Building Society has hailed the lender’s buy-to-let "success story" and product innovation as driving last year’s mortgage growth but warned of further pressure on margins in 2019.

The lender published its annual results earlier today (February 27), also marking its first day under new chief executive Richard Fearon.

This showed the lender’s buy-to-let business made up 29 per cent of its mortgage balance, up from its share of 25 per cent in 2017.  

For the year ended December 31, 2018 Leeds reported its mortgage balances increased by 6 per cent to £15.8bn, while total assets rose by 5 per cent to £19.4bn.

The building society’s £1bn in net mortgage lending last year increased its total mortgage balances to £15.8bn, up from £14.9bn in 2017.

Mr Fearon said the houses in multiple occupation (HMO) range launched by the lender earlier this month was progressing "well beyond expectations".

He said: "Buy-to-let is growing really well and it is our innovation that is driving market lending - our proposition for landlords has been a real success story."

Despite the mortgage growth the lender warned it expected profits to be lower in the near-term against a backdrop of increased market competition and Brexit.  

Leeds reported a pre-tax profit of £116.9m for 2018, down from £120.9m the previous year, in a drop the lender primarily attributed to sale of its Irish mortgage book which was valued at £6.5m.

Mr Fearon said: "Increased competition is expected to put further pressure on margin in 2019, and ongoing political and economic uncertainty linked to Britain’s exit from the EU will continue to affect consumer confidence and the housing market in unpredictable ways.

"We expect this, combined with the costs of our ongoing investment in member value and further developing our digital capability, to result in lower, though still robust, profitability in the near term."

Despite this caution Mr Fearon said the building society intended to "embrace innovation" to adapt to any upcoming change in the financial services sector.

He said: "Investment during 2019 will be the highest in our history so we can carry on helping more members save and have the home they want, while increasing our digital capability and moving forward with pace and focus to meet and surpass their expectations.

"This is possible thanks to the fact we’re financially stronger than we’ve ever been, because of our sustained and carefully-managed growth, supported by record profits in recent years."

Mr Fearon has succeeded Peter Hill after seven and a half years in the role of chief executive at the building society. 

rachel.addison@ft.com