in person • by post • onlinefor you. owned by you. use your vote.
• Loyalmemberswhotrustus.
• Greatpeoplewhoarecommittedandpassionate.
• Averysolidfinancialbase.
• Arobustgovernanceprocess.
• StrongregionalbrandsacrosstheUK.
• Acommitmenttothelocalcommunitiesweserve.
Thesefactorshaveplayedacrucialroleinachievingourexcellent2012resultswhichinclude;organicgrowthofourmortgagebook,anincreaseinoursavingsbalancesandastablenetinterestmarginreflectingthelong-termvalueofourproducts.Ourprofitsremainatahighlevelandwehavemaintainedrobustcapitalandliquiditypositions.
what is the vision for our society? BecauseourSocietyisfinanciallystrong,wehavebeenabletotakeadvantageofmerger
andacquisitionopportunitiesduringthecrisis,with2012beingourfirstfullyearincorporatingourNorwich&Peterborough(N&P)andEggbusinesses.Thankstothesuccessfulwaywe’vetakentheopportunities
has it been a good year?Foralmost150yearswe’vebroughtsaversandhomebuyerstogetherforthebenefitofall.Asweareownedbyourmembers,notexternalshareholders,wecandowhatisright–investinthebusinessforthelongtermandplanforourfuturesuccess.That’swhyIamproudtoreportanotherexcellentperformancefor2012.
AsmypredecessorIainCornishexplainedin2008,weenteredwhatwenowknowtobetheglobalfinancialcrisisinastrongposition.Iampleasedtosaywearenavigatingourwaythroughthecrisisexactlyasintended,asaprofitableandreliableSocietywithareputationforgreatcustomerservice.
Usingskilfulandprudentmanagement,particularlyincreditrisk,liquidityandtreasury-relatedactivitiesinthewholesalemarkets,wehavecontinuedtoofferattractiveproductsatcompetitiverates.Thisprovideslong-termvalueandfinancialsecuritytoourmembers.
IhavebeeninthebusinessforoverayearnowandIamproudtobepartofanorganisationwhichhas:
opentous,ourstrategyisnowevolvingfromacquisitionandintegrationintoajourneyoftransformation.
In2012theBoardcarriedoutastrategicreviewresultinginanewvisionforourSociety.Onethatsupportsourbeliefthattrustiscriticalandthatitisthisthatmakesusdifferentfromthecompetition.
Ourvisionis‘TobethemosttrustedprovideroffinancialservicesintheUK’.
Thisisunderpinnedbyfivestrategicprioritiesthatwilltakeustothenextstageofourdevelopment.TheywillallowourSocietytocontinueseizingopportunitiesandmovingforwardasaprogressiveandtrustedbusiness.
Ourfivestrategicprioritiesare:
• Attractandretainthebesttalentwithaleadingpeopleexperiencebuiltonourcultureofmutualtrust.
• Deliveramarket-leadingcustomerexperiencebuiltonempathy,simplicityandtrust.
• Deliverasustainablefinancialperformancethatensuresrealfinancialsecurityforourcustomers,withinourriskappetite.
• Deliverproducts,processesandsystemsforallourchannelsandbrandsthatareeasyandsimpletouse.
• Be‘locallyfamous’andmeaningfullyengagedinourcommunities.
Wearenowfocusingourenergiesona£160mtransformationprogramme,£60mofwhichwillbeinvestedin2013.Thewide-rangingprogrammewillcoverinvestmentinoursystems(includingourriskandfinancialcontrolsystems),network,peopleandproducts.Thescaleoftheinvestmentwillbereflectedinincreasedcostsin2013andbeyond,andthelikelihoodthereforeofareducedlevelofprofitsinthenextfewyears.Thisisanaturalconsequenceofmaking
suchanimportantcommitmenttobuildingthebusinessforthefutureandhelpingtosecurethelong-termsustainabilityoftheGroup.
what makes the yorkshire different?Wehaveanamazingteamofcommittedandenthusiasticpeoplewhohavedemonstratedtheirabilitytorisetonewchallenges.Weaimtorecruitthebestpeopleandtrainthemwellsothattheycanprotectandserveourmembers’interests.
Arecentinternalsurveyshowedanimpressive82%ofourpeople1aresatisfiedwiththeYorkshireastheiremployer.Thisinturnleadstoourlowerabsenceandturnoverrates,meaningwespendlessofourmembers’moneyonrecruitment.
Italsomeansourmembersbenefitfromthecontinuityofwell-trainedpeopleintheirlocalbranches,whoareabletodeveloptrustedrelationshipswiththem.Itisimportantthatwecontinuetodevelopoursupportiveandcaringculturethroughregularface-to-facecontactbymeandmyseniorleadershipteamwithallofourpeople.
Throughrecentmergersournumbershaveincreasedfrom2,327employeesin2008to4,111in2012.Despitechallengingeconomictimeswehavecreatedover250newjobsin2012acrossthebusiness.
Iwouldliketotakethisopportunitytothankallourpeoplefortheircontinuedcommitmenttoservingtheneedsofourmembersandalltheircontributionstoanotherexcellentsetoffinancialresults.
how important is customer service? Ourcommitmenttodeliveringaconsistent,market-leadingcustomerexperienceisatthe
10 11
with our mutual heritage we put customers firstAreportfromyourChiefExecutive,ChrisPilling.
our vision is:‘to be the most trusted provider of financial services in the uk’.
1Our N&P colleagues were not included in the sample for this survey question due to timing of the survey
in person • by post • onlinefor you. owned by you. use your vote.
coreofourstrategy.Thisisthereasonwhy9out10ofourcustomersarehappytorecommendustotheirfamilyorfriends.Exceptionalpersonalserviceacrossourbranchandagencynetworkandthroughourinternetandphonechannelsisalsodemonstratedbycontinuedhighscoresinourcustomersatisfactionsurveys.OurNetPromoterScore®2 rangesfrom32%to54%acrossourmainhighstreetbrands–comparedtoanaverageofjust15%3forthebankingindustry.
Althoughweunderstandthatbeingtrustedby100%ofpeople100%ofthetimeistremendouslyambitious,andthatwemayneverachieveit,thisisthegoalwestrivefor.
IbelievethatourSocietyhasgainedtrustbybeingdifferentfromthehighstreetbanks.Forexample,unlikemanyothers,wehavecontinuedtoinvestinournetworkofbranchesandagencies.In2012weopenedfournewbranchesandincreasedouragencynetworkto96,givingus324locationstoserveourmembersacrosstheUK.
Tomaintainthistrust,itisvitalwekeepourpromisesandtakecorrectiveactionifandwhenwemakeanymistakesorhaveinheritedissuesfrommergerswithothersocieties.Wehavereviewedanddealtwiththepaymentprotectioninsurance(PPI)issuesweinheritedinourmergerswiththeChelseaandN&Pandwillcontinuetodothisforanyothersuchissuesthatarise.
WehavekeptourpromisemadetomembersatthetimeofthemergerwiththeBarnsleyBuildingSociety.TheBarnsleyhadinvested£10mwithtwoIcelandicbanksthatwentintoadministration,leadingtothemerger
withtheYorkshireon31December2008.Atthetime,theYorkshiremadeacommitmenttorecoveringthesemoniesand,ifsuccessful,toconsidermakinganex-gratiapaymentfromtheproceedstoeligibleBarnsleymembers.Intheevent,werecoveredatotalof£8.8m,whichisthelargestpossibleamountwecouldreasonablyexpecttorealise.In2012wedistributedfundstoaround28,000peoplewhoweremembersoftheBarnsleyatthetimeofthemergerannouncementandhaveremainedmembersoftheYorkshiresince.
Disappointingly,wehadtospendalotoftimeandmoneyin2012administeringthehighvolumeofPPIandmortgagepaymentprotectioninsurance(MPPI)mis-sellingclaimswereceived,largelyatthehandsofaggressiveclaimsmanagementcompaniesandonpoliciesthatwehadnotsold.Inover90%ofcasesreferredtotheFinancialOmbudsmanServicetheyfoundnoevidenceofmis-sellingandallofthesecaseshavebeenoverturnedinourfavour.Despitethis,thecosttotheGroupofadministeringtheseclaimshasreachedalmost£1m.Wefeelstronglythatthisisunfairtoourmembers.
Weareproudofthecustomerexperienceweofferthroughallofourbrandsandchannelsandin2012weachievedaFinancialOmbudsmanServiceoverturnratethat’smuchbetterthantheindustryaverage4.Wewillcontinuetomanagecomplaintstothehigheststandards,treatingmembersfairlyandresolvingissuesattheirrootcause.
what did we achieve in 2012? •Ourcustomerbasegrewby6%to3.5m.
• Ourmarketshareofnewlendingincreasedtoarecord3.2%5(from2.9%in2011).
• Weopenedover340,000newsavingsaccounts-arecordnumber.Oursaversgetrealvalue,withtheaveragerateacrossoursavingsrangepaidin2012being2.45%comparedtothelatestavailablemarketaverageof1.97%6. Memberscanalsouseourin-branchcomparisontooltoseehowmuchbetterofftheycouldbebysavingwithus.
• Ournumberofbestbuy7mentionscontinuedathighlevelswith816savingsbestbuysand2,399mortgagebestbuys.That’sanincreaseofalmost14%on2011.
•WesawasignificantincreaseinpeopleswitchingtoourN&Pcurrentaccount.
• Wehelpedfirsttimebuyers,whoaccountedfornearly40%ofourtotallendingtohomebuyers.Wealsolent£0.5bntoborrowerswithaloan-to-valueofover85%,supportingthosebuyerswithsmallerdeposits.
• WeshowedourcommitmenttolendprudentlytosmallandmediumenterpriseborrowersinourlocalcommunitiesbyinvestinginthecommerciallendingarmofN&Pandincreasinglendingby82%on2011.
• Westrengthenedourcorecapitalpositionbyexecutingabuybackof£235m ofourremuneratedcapital.Thisdoesnotprovidethesamequalityofcapitalasretainedearnings(andwouldhavematuredorbecomeineligiblefor regulatorypurposesoverthenextfive years).Thebuybackexercisewaspositively receivedbyinvestorsandgenerated£62mofprofitfortheSocietyin2012.
• ThroughourSharePlansbusinessweopenedafurther101,000accountsandconsolidatedourpositionasamajorplayerintheSAYEandSIPmarkets-nowserving243companiesrangingfromsmallenterprisestoglobalcompanies.Wealsoachievedsuccesswithourclients,winningfiveawardsattheEmployeeShareOwnershipCentreAwardsandtheIfsProShareAwards,includingBestNewPlanforStagecoachGroupplc.
• Wewonanimpressivenumberofawardsacrossthebusiness:
consumer moneyfacts award
• best high street savings provider
moneynet awards
• best overall mortgage provider • best offset mortgage provider • best fixed rate mortgage provider• best debit card for use abroad
moneyfacts awards
• best short term fixed rate mortgage provider
• best long term fixed rate mortgage provider
• best building society mortgage provider
moneywise mortgage awards
• best lender for fixed rates• innovator of the year
mortgage finance gazette
• customer service/treating customers fairly
• best overall lender• best national building society• best online lender
12
2The Net Promoter Score refers to the net percentage of customers who, when responding to the question “how likely is it that you would recommend us to a friend or colleague?” would either strongly recommend or strongly detract from the organisation. 3Source: Sametrix 2012 Net Promoter® Benchmark Study of Consumers in France, Germany and the UK. 4Source: Financial Ombudsman Service, latest
13
“we are proud of the customer experience we offer through all of our brands and channels.”
published complaints data for the six months to June 2012. The overturn rate is the percentage of resolved cases where the ombudsman service made a change in favour of the consumer. 5Source: Bank of England secured gross lending to individuals and housing associations as at 31 Dec 2012. 6Average rates based on Savings Stock from CACI’s Current Account and Savings Database (CSDB), currently covering 83% of retail savings market. Data as at last working day of November 2012. 7Source: Presswatch Financial from Kantar Media.
in person • by post • onlinefor you. owned by you. use your vote.
Thissuccesscomesfromalwayslisteningtoourmembersandtailoringourproductstomeetyourneeds.WehavesuccessfullyadoptedEgg’sleading-edgeinternetfacilitytobringextrabenefitstoourmembers.SecureMessagingandtheEggMoneyManagerfacilityarenowavailabletoallourcustomerswhotransactthroughtheYorkshire’swebsite.WehavealsoextendedourrelationshipwithLegal&Generalandtheyarenowthesoleproviderofthird-partyfinancialadvice,structureddepositsandprotectioninsuranceproductsacrosstheGroup.Wearecommittedtocontinuingtoofferawiderangeoffinancialservicestoourcustomersinthenew,postRetailDistributionReview,world.
WelistentoourmembersinavarietyofwaysincludingourongoingprogrammeofMemberPanelsurveys,ourMemberForum,MemberQuestionTimemeetingsandregularbranchvisits.Thesethingshelpustodevelopproductsandservicesthatmeetourcustomers’needs.
what is our main financial aim?Ouraimistodeliverasustainablefinancialperformancetoensurerealfinancialsecurityforourmembers.Weachievedthisin2012withanotherprofitableyearforourSociety.Thekeyhighlightsinclude:
• Statutoryprofitbeforetaxof£157m(2011:£130m).
• Coreoperatingprofitof£137m (2011:£163m).
• StrengtheningourcapitalbasewithaCoreTier1ratioof13.6%(2011:12.6%).
• Achievingpositivemortgagegrowth.
• Improvingourassetqualityandloweringarrearstowellbelowtheindustryaverage8.
• Maintainingprudentlevelsofliquiditywellabovetheregulatoryrequirement.
Ourstrengthhasalsobeenverifiedbyourexternalstakeholders.Ourpositionfromthethreeratingagencies-Moody’s,FitchandStandardandPoor’s-hasremainedstablethroughout2012.Wealsoachievedtwohighlysuccessfulwholesalefundingtransactionsviathesecuritisationandcoveredbondmarkets.
ThevariousprocessesthatweusetoperiodicallyassesstheGroup’sfinancialstrengththroughaseriesofseverestresstestshaveverifiedourviewthatwehavestrongcapitalandfundingpositionswithrobustoutcomes.
how are we improving our service?Inmyreportlastyear,Isetoutplansforsignificantinvestmentinmanyofoursystemsandprocesses.During2012thisincluded:
• ThesuccessfulintegrationofEggcustomersintotheGroup.
• ImprovingthemanagementofmortgagearrearsthroughourArrearsTransformationProgrammetohelpmemberswhofindthemselvesindifficulties.
• BeginingtheintegrationofN&Pprocessesandpoliciestostandardisethemacrossthebusiness.
• Continuedimprovementofourmobileande-commercetechnology.
WealsosoldthebusinessofoursubsidiaryNorwichandPeterboroughInsuranceBrokersLtd.Thissalewasaimedatsimplifyingourbusinesswhilstensuringourmemberscontinuetogetthebestpossibleproducts,serviceandvalueacrossallour
highstreetbrands.WebelievethattheyarenowgettingthisacrossthewholeGroupthroughourrelationshipswith Legal&GeneralandRSA.
Thiswasonlythestartofourtransformationjourneyandwehavenowembarkedonourmajorinvestmentprogrammeasmentionedearlier.Wearecontinuingtosimplifyourcoresystemstomakeiteasierforourmemberstodobusinesswithus.TheBoard’sdecisiontoapprovetheinvestmentplansshowsourcommitmenttomaintainthemomentumoftheGroup’sdevelopmentanddrivetowardsachievingourvisionandstrategyforthelongterm.
are we supporting our local communities?Asamutualbuildingsocietywegenuinelycareaboutthecommunitiesweliveandworkin,andwillcontinuetosupportandinvestinthem.Ourbranchrevitalisationprogrammehasbeenagreatsuccess,withlocalmarketingprogrammesincreasingawarenessofourservicesrightattheheartofthecommunitiesinwhichweoperate.
Wearetheemployerofchoiceformanywitharound2,400peopleinourheadofficesitesinBradford,CheltenhamandPeterborough.
Ourpeoplecontinuetobegoodcorporatecitizensandregularlyvolunteerintheirlocalcommunities.In2012,theyraisedover£170,000forbothnationalandlocalcharitiesandothergoodcauses.Wedonatedatotalof£721,000viatheSociety’sCharitableFoundation,takingtotaldonationstoover£5msinceitsestablishmentin1999.
Wecareabouttheenvironmentandnowrecyclearound90%ofourheadofficewasteandover80%fromourbranches.Wehaveinstalledsmartmetersacrossthebranch
networktomonitorourenergyuse,andareimprovingefficiencyaspartofourbranchrefurbishmentprogramme.
Aswellasourrecyclingandenergycommitments,wenowhaveathrivingbeecommunityinthegroundsofourheadofficeandproduceourownhoney!
WearealsosupportingthebroadercommunityfinanciallybyremaininganactiveplayerinthesocialhousingmarketaswellasprovidingcommercialmortgagestosmallandmediumenterprisesthroughourN&PCommercialLendingbusiness.
so what’s neXt?Withanumberofthemajorbanksstillincrisis,nowisthetimefortheYorkshiretoshowthatwearepartofanewgenerationofbetterfinancialserviceproviders.Withourheritageoffinancialstrength,passionforcustomersandourmutualheartbeat,weareperfectlyplacedtosucceedandbethemosttrustedproviderintheUK.
ChrisPillingChiefExecutive20February2013
14 15
8Source: Council of Mortgage Lenders as at end 2012.
