Leeds Building Society reveals record profits as 60,000 new savers sign up

LEEDS Building Society, the sixth largest mutual in the UK, has posted record profits despite the impact of both the recession and rising unemployment on its borrowers.

The mutual saw underlying earnings rise by 17 per cent to 80.1 million, while pre-tax profits increased 56 per cent to 31.7m last year.

Although the homeowner arrears rate rose to 2.24 per cent from 1.26 per cent in 2008, the society said the level had started to ease back since the summer.

Impairment losses rose by nearly two thirds to 52.5m as some borrowers struggled to make their repayments.

The recession and housing market downturn also impacted the society's mortgage business, with the group's gross lending down to 922m from 1.28 billion the previous year.

Despite the building society sector facing stiff competition for savers from banks, the group attracted 59,000 new savers – an increase of a third on 2008.

Its capital reserves – a key measure of financial strength that has been under scrutiny amid the financial crisis – rose to 543m as it shored up its balance sheet.

There were fears for many building societies after a swathe of downgrades by ratings agencies amid concerns over their financial strength and exposure to impairment losses.

But Leeds said it had maintained strong credit ratings throughout.

Chief executive Ian Ward said: "Leeds Building Society has delivered a sound performance in 2009, with rising retail balances, increased profitability and even stronger reserves.

"This, combined with our prudent approach to lending, keen cost control and strong levels of capital, means that we are in an excellent position to deal with the challenging economic outlook for 2010 and beyond."

The group now has more than 680,000 members after adding another 71,000 last year.

Leeds was founded in 1875, but has a history dating back as far as 1845.

Formerly known as Leeds and Holbeck, it changed its name to Leeds Building Society in 2005 and a year later it merged with fellow mutual Mercantile.

There are now 52 building societies in the UK, with total assets of 335bn, but the number of mutuals has fallen steeply in recent years after a wave of consolidations, mergers and rescue deals.

Last December, Leeds' rival the Yorkshire Building Society announced a merger with the struggling Chelsea Building Society.

The Dunfermline Building Society also had to be bailed out by the Nationwide earlier in the year after incurring losses of 26m.