Britain’s fourth largest building society said it continued to grow its membership and increased its mortgage balances by 6 per cent since the end of 2018 but total profit before tax was down £32.4m.
Skipton Building Society says it helped 14,641 people purchase or remortgage their properties during the first half of 2019. It’s gross lending of £2.5bn was 43 per cent higher than the same period in 2018.
Despite a challenging environment, the mutual said it recorded underlying profits before tax of £84.2m, down from the £94.9m it registered during the six months ended June 30, 2018.
Total profit before tax was £72.3m, down from £104.7m in the samer period last year.
Skipton Building Society said the decrease in total profit was predominantly in its Mortgages and Savings division, primarily attributed to fair value losses of £12.5m relating to its equity release portfolio, which is closed to new business.
The fair value losses were driven by changes in market expectations of long term interest rates, inflation and house price growth, the mutual added.
David Cutter, chief executive of Skipton Building Society, said: “I’m pleased to report a further increase in the Society’s membership, and strong growth in both mortgage and savings balances.
“Profitability remains good but the decline in net interest margin is reflective of intense competition in the mortgage market, and more latterly in the savings market.”
Skipton Building Society said its estate agency division Connells continued to perform well in a subdued UK property market and reported profits before tax of £26.2m, during the samer period last year it registered a profit of £28.9m.
Mr Cutter said: “An 8 per cent reduction in house sales reported by Connells estate agency is also reflective of a subdued housing market, but the diversification and resilience of Skipton’s business model has contributed to a further improvement in the society’s very strong capital ratios.”
The building society warned on the potential impact of a no deal Brexit although it said such a scenario wouldn’t have an immediate impact.
Mr Cutter said: “The more competitive mortgage and savings environment coincides with a continuous period of increased political uncertainty, as the UK is in the midst of withdrawing from the European Union.
“Should there be a no-deal Brexit we would not expect an immediate significant impact on the society but we would be cautious and vigilant regarding the potential medium to longer term implications arising from possible movements in house prices, unemployment or bank base rates.
“We currently anticipate that profits at the end of 2019 will be lower than 2018 due to a combination of ongoing pressures on mortgage and savings margins, and the continuation of a subdued housing market. However, the political and economic uncertainty highlighted above makes forecasting difficult and creates a need for caution.
“We remain vigilant regarding potential economic headwinds, but with the strong capital and liquidity position we have maintained during the first half of 2019, the society is well placed to manage the risks that we face and to capitalise upon opportunities that may arise for the benefit of our members.”