Half Yearly Report

7th August 2015

Record growth in mortgage lending leads to strong financial results

for Leeds Building Society

Record growth in mortgage lending, favourable funding conditions and a reduction in impairment provisions has enabled Leeds Building Society to report strong interim results.

The UK's fifth largest building society now holds assets of £12.7bn, the highest in its 140 year history, and continues to create more jobs to serve its growing business.

Significant investment in the future of the Society included the successful upgrade of IT systems during the first half of 2015, creating a platform for future improvements for its members.

The Society's sustained financial strength was recognised by the credit rating agencies, Moody's and Fitch - both continued to assign long-term 'A' ratings to the Society, while Moody's upgraded its rating earlier this year.

2015 half-year highlights:

· New residential mortgage lending increased by 22% to £1.45bn (£1.19bn to June 2014), significantly above our market share1

· Net residential lending of £668m (£446m in 2014), a new record

· Total charge for impairment losses reduced to £5.5m (£17.8m to June 2014)

· As a consequence of these, pre-tax profit increased by 42% in the first half of 2015 to £55.0m (£38.6m to June 2014)

· Attracted new members, taking total membership to a record 724,000 (total 722,000 at June 2014)

· Paid 0.53% more to savers than the rest of the market average2

· Savings balances grew in the first half of 2015 to £9.2bn (£9.1bn to June 2014)

Leeds Building Society Chief Executive Peter Hill said:

Mortgage growth

"New residential lending was significantly above our market share, increasing by 22% to record levels, and we provided home loans to more borrowers than ever before.

"In the first half of 2015 we helped more than 4,500 First Time Buyers step on to the property ladder, accounting for 37.3% of our total lending, and we continue to be active in supporting borrowers who are not well-served by the wider market, through initiatives including shared ownership and the Government's Help to Buy equity scheme.

"We anticipate a modest increase in the size of the mortgage market for 2015 and expect competition for new business to intensify as established lenders and new entrants look to build market share.

Proposition for our savers

"Bank Base Rate (BBR) remains historically low and, while the current low interest rate environment has benefitted borrowers, it means the economic situation remains challenging for savers.

"In this difficult market, we have worked hard to deliver value to savers and paid an average of 1.82% across our savings range, 0.53%2 above the rest of the market average. In addition, all our savings accounts pay at least 0.5%, which is equivalent to today's BBR.

"We experienced exceptional demand for our competitive ISAs at the start of the new tax year in April and we were named 'Best Regular Savings Account Provider 2015' by independent consumer advice website Savings Champion for our Regular Saver (Issue 3).

"Savings balances grew in the first half of 2015 to £9.2bn (£9.1bn to June 2014).

Strength and security

"Strong growth in mortgage lending and a reduction in impairment provisions and charges have helped to deliver an increase in profit of 42% in the first half of 2015.

"The total charge for impairment losses reduced to £5.5m (£17.8m to June 2014) and the Society's residential arrears (1.5% or more of outstanding mortgage balances) fell to 1.62% (2.12% June 2014).

"Our total assets increased to £12.7bn (£12.1bn at June 2014) and our Leverage Ratio remained strong at 5.6% (5.5% June 2014) compared to the minimum requirement of 3%.

"We have been able to increase capital and reserves to a record £771m (£691m 30 June 2014), which is in excess of the regulatory minimum, and Common Equity Tier 1 capital remained strong, with a ratio of 15.5% (15.3% in June 2014).

"As a result, credit rating agencies, Moody's and Fitch, both maintained our long-term 'A' ratings3 during the first half of 2015, and Moody's applied an upgrade from A3/Prime-2 to A2/Prime-1.

"Despite uncertainty in the Eurozone, we remain very well-placed to deal with any economic shocks, deliver our investment programme, further develop our service proposition and continue to provide value to our members.

Investing in the future

"We are pressing on with our investment in the Society, its people and systems to continue growing the business in a strong and sustainable way.

"We have created 120 new roles in 2015 as we further increase our capacity and now employ 1,224 colleagues, more than at any time in our history.

"Almost 18% of colleagues are aged under 25 and our ambitious recruitment targets include the expansion of our successful apprenticeship scheme. We are pleased so many talented young people choose to start their careers with the Society and all colleagues, including apprentices, earn at least the Living Wage.

"Significant investment in the future of the business included the successful upgrade of the Society's core systems during the first half of 2015, which has created a platform for future improvements in our proposition. Members will see benefits from these enhancements in the next 12 months.

"As we continue to invest, our cost to mean asset ratio has increased to 0.60% (0.55% to June 2014) per £100 of assets and our cost to income ratio is 34% (33% to June 2014) but our focus on efficiency means these ratios remain among the best in the building society sector.

"The Society has seen tremendous growth and change during the first half of 2015 which has, at times, put a strain on both our operations and colleagues. This resulted in service levels temporarily falling below the highest standards to which we aspire but these issues are now behind us. In spite of these challenges, colleague engagement remains high at 77% and we achieved a customer satisfaction score of 92% 4.

"In our 140th anniversary year, we are celebrating the strength and sustainability of the building society model as we follow our founders' progressive principles to continue to innovate as we seek new ways to support and empower our members to take control of their financial futures."

Ends

Notes to Editors

A copy of the Society's interim results for 2015 is attached.

To arrange an interview with Leeds Building Society Chief Executive Peter Hill, please contact the press office on 0113 225 7606.

For further information please contact:

Gary Brook

Head of Corporate Communication

0113 225 7606 or 07866 455111 (out of office hours)

[email protected]

Awards won by Leeds Building Society in the past 12 months include the 'Innovation Award (Lenders)' at the Mortgage Finance Gazette Awards 2015, in addition to being named 'Best Intermediary Lender', both for the second consecutive year. The Society also received the award for 'Best Use of Technology (Lenders)'.

Leeds Building Society has 67 branches throughout the UK, Gibraltar and Ireland and assets of £12.7bn (as at 30th June 2015). The Society has operated from the centre of Leeds since 1886.