Annual Report & Accounts 2020

Leeds Building Society Annual Report & Accounts 2020 & Accounts Annual Report Leeds Building Society Annual Report & Accounts 2020 2020: How we performed Gross residential lending of Total assets of Get in touch £2.5bn(2019: £3.5bn) £20.6bn(2019: £20.8bn) We helped 26,250 more Find your nearest branch people have the home they want www.leedsbuildingsociety.co.uk/branch Savings balances Paid an average interest rate of 1.19%to our savers £14.2bn(2019: £14.5bn) compared to the rest of the market average of 0.60%¹ We helped 23,000 more people save An annual bene�t to all for their future our savers of £82.8m Pro�t before tax Common Equity Tier 1 Capital (2019: £88.0m) £80.7m (2019:36.3% 33.6%) Reserves available to protect us from future problems Member satisfaction2 Colleague engagement3 93%(2019: 91%) 86%(2019: 82%) We have an ongoing We’re committed commitment to be to being a great customer focused in everything we do place to work 1. CACI’s CSDB, Stock, December 2019 to November 2020, latest data available. 2. Overall member satisfaction in a survey of 3,391 members from January to December 2020. 3. Your Voice colleague survey, 1,225 respondents in October 2020. Contents Strategic Report 2 Chair’s Welcome 2 Chief Executive Officer’s Highlights 4 Business Model and Strategy 8 Corporate Responsibility 27 Principal Risks 39 Viability Statement 49 Financial Review 51 Governance 61 The Board of Directors 61 The Executive Committee 65 Corporate Governance Report 66 Nominations Committee Report 84 Audit Committee Report 90 Risk Management Report 98 Directors’ Remuneration Report 104 Directors’ Report 123 Financial Statements 126 Independent Auditor’s Report 126 Income Statements 136 Statements of Comprehensive Income 137 Statements of Financial Position 138 Statements of Changes in Members’ Interest 139 Statements of Cash Flows 140 Notes to the Accounts 141 Other Information 204 Annual Business Statement 204 Country by Country Reporting 206 Glossary of Terms 207 LeedsAnnual Building Report Society Annual & Accounts 2014 Report & Accounts 2020 1 Strategic Report Governance Financial Statements Other Information Strategic Report Chair’s Welcome Year ended 31 December 2020 Introduction will remain a significant focus for the Board in I was privileged to succeed Robin Ashton the future. as Chair last April. I would like to begin my Performance first report to members by paying tribute The Board considers that the Society to my colleagues throughout the Society responded extremely well to the operational and acknowledge their supreme efforts challenges of the pandemic. The rapid on behalf of members during this period deployment of technology allowed as many of professional and personal challenge, staff as possible to work from home, while unique in recent history. all our premises were made COVID-secure This was a genuine team effort but, as an to ensure colleagues and members were essential service provider, we kept the vast kept safe in branches and essential office majority of our branches open throughout the locations. Our employee engagement periods of lockdown, and I would particularly programme demonstrated high levels of like to thank our frontline colleagues who have colleague engagement, and confidence in continued to attend our branches, contact the leadership of the Society and the support and administration centres. that has been provided to them. This is not something we take for granted, however, and The operation of the Board we have worked hard to maintain our culture It is the role of your Board to ensure that the during this extended period of dispersed Society protects the long term interests of working. current and future members. The pandemic has presented numerous challenges in this From an economic perspective, we regard. experienced a rapid initial large-scale shrinkage in the economy, followed by an From the onset of the first lockdown in March, element of recovery, the Government’s we immediately adapted how the Board would introduction of support for the economy, and operate, holding virtual meetings at least a fall in interest rates to virtually zero. weekly. This subsequently reduced as the situation began to stabilise. In navigating this environment, we have sought to protect savers as far as is The Board’s objective during this period was practicable, to continue to serve borrowers to ensure our priorities adapted appropriately by lending, where it remains prudent to do so, to the emerging circumstances, while also and in offering as much support as possible maintaining focus on the long term. We to individual borrowers impacted by the crisis. ensured management were supported in We have, of course, had to moderate our navigating the business through a period of original plans for the year and the growth of exceptional uncertainty and turbulence. the business has been deliberately slowed as The guiding principles of the Board during a sensible response to the uncertain outlook. this period have been rooted in our mutuality The Board decided not to furlough any and our culture. Our highest priorities were – colleagues, and there were no redundancies naturally – the health, safety and wellbeing of as a result of branch closures, nor did we take all our colleagues and members, the financial advantage of any taxpayer-funded support security of the Society and the maintenance schemes, although we have made use of of service to our members. the Bank of England’s funding schemes, The pandemic brought home just how implemented specifically to encourage the interconnected our world is, and the wider continued supply of credit to the economy obligations which organisations like ours have and to mitigate the worst economic impacts to society as a whole. During the year we have of the pandemic. While the interests of spent significant time further considering members have primacy, the Board has also our responsibilities to all our stakeholders, been mindful of our wider obligations to including our responsibilities in fighting society and the communities in which we climate change. There is extensive reporting operate, and these have been reflected in our on these matters in this document and they decision making. 2 Leeds Building Society Annual Report & Accounts 2020 Strategic Report Governance Financial Statements Other Information Despite the crisis dominating our agenda, there were It is unfortunate that coronavirus denied members the a number of important long term developments, most usual opportunity to meet the Board and raise questions notably the successful implementation of Mortgage Hub, at the AGM in 2020 and this will be the case again in 2021, our new online platform to automate the application although there will be an opportunity to submit questions process for mortgage intermediaries; the rapid creation in advance and themed frequently asked questions of online support tools for borrowers facing financial will be made available to members. Member feedback difficulties as a result of the pandemic; enhancements is vital to us and I would like to stress that if members to our online functionality for savers; and the near- have any questions or comments relating to Board completion of the Society’s new head office. matters at any time then they should email us at [email protected] and submit their Overall, the Board considers our financial performance questions or comments marked ‘For the attention of Iain has been extremely strong, given the circumstances Cornish’. of the year and that we have struck the right balance in supporting members through the pandemic, maintaining Outlook the exceptional financial strength of the Society and We still face a period of extreme uncertainty and, while the positioning it well for future success. coronavirus vaccination programme may provide light at the end of the tunnel as far as public health is concerned, Remuneration matters are covered separately in the the economic and societal impacts of the pandemic, Remuneration Report but I would draw to members’ compounded by the ending of the Brexit transition particular attention the decision to shift the emphasis process, mean the external environment will continue of its remuneration schemes for senior management to be highly uncertain, with risks largely skewed to the away from variable pay and more towards fixed pay. This downside. is consistent with our desired culture and the Board believes this decision is in the best long term interests of During this period, the Board will continue to adhere to the members. It is unrelated to the current circumstances. principles it has adopted throughout this crisis. However, we will not lose sight of the fact that the post-coronavirus Board changes world will undoubtedly also present opportunities and Robin Ashton retired from the Board in April after nine your Society can face the future, whatever it may hold, years’ service. We owe him a great debt of gratitude and confident in the strength of our position. he played an instrumental role in ensuring that we now find ourselves in such a strong financial position. Phil Finally, I would like to thank my Board colleagues for their Jenks also retired from the Board after eight years’ service commitment to the Society during such a demanding and we have benefitted greatly from his extensive industry year and their support for me in my first months as Chair. experience and wise counsel throughout that time. Iain Cornish John Hunt has announced his intention to retire at the Chair forthcoming Annual General Meeting having completed two full terms. His contribution over that time has been 25 February 2021 immensely valuable. I am delighted to report that Andy Conroy was appointed to the Board as Chief Financial Officer, having joined the Society on an interim basis in 2019. I am also delighted to report that Neil Fuller has joined the Board as a non executive director after more than 35 years in financial services, including 15 years at executive level, spent principally with Bank of Ireland, GE Capital, Royal Bank of Scotland and NatWest.

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