By Scott Wright
Scottish Building Society (SBS) has hiked profits by more than one-third in the year ended January 31, driven by rising mortgage lending and savings balances as people sought the safe harbour of a “trusted brand” in the pandemic.
The 173-year-old mutual emphasised the support it has shown Scottish homeowners in “tough times” as it reported a 34 per cent rise in profit before tax to £840,000.
Profits rose as the Edinburgh-based society flagged record rises in mortgage lending and savings balances.
New accounts show the society’s mortgage book increased to £409.2m from £334.9m as SBS repositioned its offer away from “niche and bespoke” to “personal and flexible”.
The society said this shift in strategy helped it win more business in the mainstream market.
Retail savings balances, meanwhile, grew by £58m as SBS noted that it had reduced its savings rates, on average, by less over the last 12 months than the 0.65% cut in the Bank Rate, to 0.1%, in March. The Bank of England cut interest rates to an historic low in response to the pandemic. SBS said it had maintained above-market rates on its three main savings products – instant access, loyalty ISA (individual savings account) and fixed rate bonds.
The growth in mortgages and savings came as the number of active members at the mutual increased by 9%.
The financial period saw the Society expand its footprint with the opening of a branch in Aberdeen – its sixth in total – taking employee numbers to around 70.
While all branches have remained open during lockdown, the society launched a new digital savings and mortgage service, SBS Online, which was introduced in January. A new telephony services was also added.
The society has branches in Galashiels, Glasgow, Inverness and Troon, as well as Edinburgh, and also markets its products through a range of mortgage intermediaries.
Chief executive Paul Denton said: “One of the strongest pillars of a trusted brand is its history and heritage. Throughout our 173 years, we have supported members through wars, recessions and now a generation-defining pandemic.
“As a society, we have adapted quickly whilst staying true to our purpose: to help members build for the future.”
Amid the challenges arising from the pandemic, more than 500 members deferred mortgage payments for up to six months, the society said, stating that the “vast majority are now back on a stable footing.”
The society did not put any staff on furlough or utilise any form of government support scheme.
Mr Denton said: “It did not seem right to take Government aid at a time when other areas of the economy were in far greater need. That remains our position going forward.”
He added: “It is not all about growth – during the pandemic staff worked tirelessly to support members impacted financially by Covid-19.”
The accounts show the society booked an impairment provision of £161,000 to reflect the economic uncertainty linked to the continuing health crisis. Mr Denton said: “With an uncertain economic outlook, we prudently increased our impairment provisions, however, despite these our profit before tax for the year increased by 34%.
“I am particularly proud of the fact that the growth in profits is a direct result of increased mortgage lending and that our savings members still benefit from market leading rates, particularly on our Loyalty ISA.”
He added: “While the world has changed since we first opened in 1848, the one thing that has stayed constant are our core values.”
Chairman Raymond Abbott said: “These results demonstrate what the society is capable of, even during extreme conditions, and our plans for the years ahead aim to build on this excellent foundation.”
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