Annual Reports and Accounts 2020

ReportAnnual & Accounts 2020 Contents 1 Performance and Strategy 2020 Group Highlights 6 Chair’s Statement 8 Group Chief Executive’s Report 12 Strategic Report 16 Sustainability Report 40 Performance and Strategy 2 Governance The Board of Directors 46 Directors’ Report 52 Directors’ Report on Corporate Governance 56 Audit Committee Report 64 Governance Risk Management Report 69 Directors’ Remuneration Report 80 3 Financial Statements Independent Auditor’s Report 102 Income Statements 112 Statements of Comprehensive Income 113 Statements of Financial Position 114 Statements of Changes in Members’ Interests 115 Financial Statements Statements of Cash Flows 117 Notes to the Accounts 119 4 Other Information Country by Country Reporting 234 Annual Business Statement 236 Glossary 239 Other Information Annual Report & Accounts 2020 3 Performance 1 and Strategy 2020 Group Highlights 6 Chair’s Statement 8 Group Chief Executive’s Report 12 Strategic Report 16 Sustainability Report 40 2020 Group Highlights Key performance highlights Performance and Strategy 1,061,138 £18.7bn 90% 85% Society Membership Savings Balances Employee Engagement Customer Satisfaction Society membership increased by Savings balances grew by Society employee engagement Society net customer satisfaction 14,844 (1.4%) to 1,061,138 (2019: by £1.3bn to £18.7bn, an annual was 90% (2019: 89%) was 85% (2019: 86%) 35,868 (3.5%) to 1,046,294) growth rate of 7.7% (2019: 7.6%) £1.7bn £118.8m £124.0m 39.7% Mortgage Book Growth Total Group Profit Underlying Group PBT Group Common Equity The mortgage book grew by Total Group profit before tax (PBT) Underlying Group PBT (as defined £1.7bn to £21.8bn, an annual was £118.8m (2019: £153.2m) on page 29) was £124.0m (2019: £155.2m) Tier 1 Ratio growth rate of 8.6% (2019: 10.3%) The Group Common Equity Tier 1 ratio remained strong at 39.7% (2019: 39.1%) Awards won Winner of What Mortgage Winner of Moneyfacts Consumer Winner of Moneyfacts Consumer Awards 2020 for ‘Best National Awards 2020 for ‘First-Time Mortgage Awards 2020 for ‘High Street Savings Building Society’ Buyers’ Choice’ Provider of the Year’ 6 Skipton Building Society Annual Report & Accounts 2020 7 Chair’s Statement Purpose and culture said they were proud to work for Skipton. As we aim to deliver an outstanding colleague experience, our overall Our purpose is to help more people have homes, save for colleague engagement increased to 90% and this has a their life ahead and support their long term financial well- direct beneficial impact on the service we provide to our being. In 2020, we remained focused on delivering our customers. purpose and continuing to invest in opportunities which will most benefit members in the future. Very quickly after the lockdown in March, we were able to operate all key services provided to members, despite We have invested in refurbishing branches, our financial only very limited use of our Head Office in Skipton. advice business, and technology and capabilities All branches were fitted with new screens and PPE which make it easier for members and make us more provided to colleagues so that we could provide service Performance and Strategy efficient. We have enabled 24,557 people to buy a new and support safely to members. Many members initially home or remortgage, 15,206 younger people to save in reduced their use of branches and we saw significant a LISA which will help them buy a house in the future increases in the use of telephone, web, digital and video, or save for their retirement, provided financial advice all services which we have invested in during recent to 3,300 customers and helped arrange 38,864 house years. We offered emergency payment deferrals to 25,000 sales (exchanges) through our estate agency business, mortgage members to help with the financial pressures Connells. created by the pandemic. We measure regularly how Delivery of our purpose is enabled by our culture and members feel about the service we provide and what we values of trust, one team and ownership and by having a can do to make it better. We are pleased that net customer team of talented and diverse people. Our team and culture satisfaction remained high at 85%. have been created by investing in colleagues so that they As well as judging us by the standard of our service, can achieve their potential and deliver to members. We are members rightly focus on the interest we pay on savings. pleased to have retained the Investors in People Platinum In my report last year, I highlighted the challenge accreditation. across the world for central banks to raise interest rates We know that this culture is what makes Skipton special meaningfully given concerns about economic growth and and that building on it, when many colleagues have been low inflation. These challenges have been exacerbated by working from home and juggling other priorities, such the pandemic with support being increased to businesses as home schooling or other caring responsibilities, is and individuals through increases in government spending challenging and will require different styles of leadership and support. In the UK, this involved a reduction in Bank in the future. I am very grateful to all of our colleagues Base Rate from 0.75% to 0.1%. As a result of this, overall for their hard work and commitment in difficult and interest rates paid to members have reduced but we challenging circumstances for them and our members. paid savers on average interest rates of 0.38% above the industry average for the 11 months to 30 November Our stakeholders 2020, being the latest period for which comparable data is We are acutely aware of the impact the pandemic has available. had on our stakeholders. Our priority at the onset of the Skipton relies on suppliers to support the service we pandemic was to ensure the safety, health and well-being offer to members. Recognising that some small and of our colleagues whilst continuing to serve safely the medium enterprise suppliers may have been facing cash needs of members. Every year, we conduct a survey to flow challenges as a result of the pandemic, we decided understand employee engagement, listen to perspectives to accelerate payments due to them so, on average, The onset of the COVID-19 pandemic has been an unprecedented challenge and learn how we can improve their working experience. payments were made within 10 days of invoices being This was even more important in 2020 as everyone submitted. Through Skipton Business Finance, we for many people, communities and businesses across the world. At this adapted to new ways of working often from home, except also helped businesses by enabling the use of various challenging time, Skipton has been able to rely on the resilience and for those in branches and certain head office roles. We government-backed financing schemes. adaptability of our colleagues as they supported our 1.1 million members, are pleased with the results and 94% of colleagues many of whom have experienced very difficult times during the pandemic. The progress made with vaccines is encouraging and provides hope for the future, but the future path and economic consequences of the pandemic will undoubtedly take time to work through. The negotiation of the UK’s departure from the EU was a further challenge “ We have enabled 24,557 people to buy a new home or remortgage, and source of uncertainty in 2020. The outcome of the trade agreement 15,206 younger people to save in a LISA which will help them buy a reached in December, which will result in the UK charting a future as a country independent of the EU, will also be an important influence on house in the future or save for their retirement, provided financial future economic growth. advice to 3,300 customers and helped arrange 38,864 house sales Our strong capital position and diversified business enabled us to continue (exchanges) through our estate agency business, Connells.” to deliver to members and invest in the future. 8 Skipton Building Society Annual Report & Accounts 2020 9 Chair’s Statement (continued) The communities where we operate, and the charities months, and increased impairments on mortgages as Looking ahead we work with through the Skipton Charitable Foundation the economic outlook deteriorated. At the onset of the and other schemes, are important stakeholders. Our pandemic, we took swift and decisive action across all Skipton’s capital strength, diversified portfolio of partnership with Mental Health UK was created before the businesses which included moving many colleagues to businesses, and focus on colleague engagement and high pandemic started to impact our lives. The lockdown and work from home and furloughing colleagues in our estate levels of member satisfaction provide a solid foundation social distancing have created mental health challenges agency division but preparing it to re-open as soon as that will enable us to adapt to the pandemic and post for many. practical in a COVID secure way. This allowed us to take Brexit ‘new normals’. These factors do make it more advantage of the post-lockdown housing market. difficult than most years to forecast the likely outcomes In recognition of the challenging times faced by many for unemployment and house prices, both of which are parts of society, Skipton, its Board and colleagues These actions, combined with the foundations created by material factors for the performance of our businesses, but donated £200,000 to support the work of its charity investments made in recent years, enabled us to deliver we are confident that Skipton is well placed to respond to Performance and Strategy partner Mental Health UK.

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