I) Business Overview
- Skipton (SBS) is the fourth-largest building society in the UK and has more than one million customers, with total assets amounting to GBP37.2bn as of YE23. SBS has a market share in domestic mortgages and savings of around 1% and its pricing power is small compared to larger UK banks.
- One of the main differences between SBS and its peers is its estate agency subsidiary, Connells Group, which is the largest estate agency in the UK with an estimated market share of 10%.
II) Covered Bonds
- The company’s loan book comprises residential mortgages in the UK, with c.75% owner occupied, c.15% buy-to-let and the remainder shared ownership and specialist mortgages.
- Skipton has a mortgage collateral score of 4%, in line with all the other covered bond issuers in the UK and at the low end of the range (i.e., higher underlying quality of the mortgages in the cover pool) of the covered bond programmes rated by Moody’s on a global basis. The average LTV of the cover pool stood at 49.5% at YE23.
- UK covered bonds are LCR 1B for UK regulated investors, while the EUR-denominated covered bonds are LCR 2A and ECB-repo eligible (UK is a G10 country) for EU regulated investors, in line with the Canadian covered bonds.
III) Performance Metrics
- SBS’s capitalisation is solid, with a Common Equity Tier 1 ratio of 26.3% at YE23 (25.8% in 2022), which is much higher than required (10.1%). This growth was driven by the increase in total regulatory capital.
- The Liquidity Coverage Ratio at YE23 was 173%, down from 175% in 2022, reflecting a large buffer of high-quality liquid assets.