Leeds Building Society’s profits headed north for the fourth year in a row, but boss warns low interest rates and Brexit could make the road ahead tough
Leeds Building Society announced today its annual profits before tax had risen for the fourth year in a row, but the lender's boss warned super low interest rates could lead to tough times ahead.
The figures
The building society revealed profits before tax of £116.6m, up 7.5 per cent compared with £108.5m the year before.
However, profits after tax for the year dropped to £86m, down 3.3 per cent on £88.9m in 2015, while total income slipped to £212m, down 3.2 per cent from £218.9m.
Leeds also revealed mortgage lending increased to £1.9bn, compared with £1.4bn in 2015, while gross lending broke the £4bn mark, up 28 per cent compared with £3.1bn the year before. The company's total assets grew to £15.9bn, up from £13.5bn in 2015.
The building society's common equity tier 1 capital ratio stands at 15.2 per cent.
Why it's interesting
The Bank of England slashed interest rates to a historic low of 0.25 per cent last August. While rock bottom rates might be good for homeowners paying back a mortgage, it's not so good for lenders, as it effectively limits their earning potential.
What Leeds Building Society said
Chief executive Peter Hill warned:
Competition among mortgage lenders remained strong in 2016, resulting in downward pressure on our net interest margin, and we expect this to continue in 2017.
Combined with Bank base rate at an historic low and uncertainty linked to the UK’s exit from the EU, these factors are likely to prove testing this year, both to us and the wider financial services sector.
Despite this, our successful sustainable business model means we’re well-placed to withstand the challenges that may arise in 2017 and beyond.