The society saw a pre-tax profit before the levy of £30m, compared to £63.2m in 2007,
Operating profit before impairment provisions was £68.6m (2007 £69.4m).
For the third successive year, its growth in lending has been entirely funded by retail investments.
Its average loan to value on 2008 advances was 52%, with the average LTV on all its residential mortgages only 49%.
Its assets rose by over £900m to £10.1bn, capital and reserves rose to a record level of £526m, compared to £511m in 2007.
Ian Ward, chief executive of Leeds, says: “Leeds Building Society delivered another set of good financial results for its members in the context of a market that has been characterised by uncertainty and declining confidence.
“Savings balances, which are a vital component of our traditional, mutual, building society business, rose by over £500m to a record £6.6bn. We attracted 44,000 new savings’ members in 2008, which was even higher than our 2007 total.
“This was particularly pleasing in a market where the competition for retail savings was very high. Retail savings through our national network of branches were particularly strong.
“Our new lending totalled £1.28bn in 2008 and with total repayments of £1.20bn, net lending was £80m. For the third successive year, our growth in lending has been entirely funded by retail investments.
“Our lending policies have consistently been very prudent and this is demonstrated by our average LTV on new lending in 2008 of 52% and an average LTV of only 49% on all our properties in mortgage.
“We attach great importance to our superior efficiency, as demonstrated by our very favourable cost ratios. Our cost income ratio, the lowest of any Society in 2007, remained at 40% in 2008. The cost asset ratio reduced to 48 pence per £100 of assets compared to 53 pence a year earlier.
“The security of our members’ savings was further strengthened by an increase in our capital and reserves of £15m to £526m. Liquid assets increased to £2.3bn from £1.9bn at 31st December 2008, representing 25% of total funds. We have absolutely no exposure to US sub-prime lending or any Collateralised Debt Obligations or Structured Investment Vehicle investments.
“We achieved another strong operating profit figure of £68.6m, this being similar to the 2007 total of £69.4m. There were, however, two significant items of unexpected expenditure in 2008.
“The first was a provision of £9.7m in respect of the full amount imposed under the Financial Services Compensation Scheme levy in order to compensate the investors in failed banks, including Bradford & Bingley, London Scottish and three Icelandic banks with UK subsidiaries.
“It is extremely galling for building societies, which run less risky business models, to meet these costs particularly as the scheme effectively imposes the highest levy on those organisations, such as building societies, which have the greatest proportion of savers’ balances. Pleasingly, this issue has been taken up by a number of MPs and political pressure is mounting to find a fairer solution.
“Secondly, we have made a £10m provision in respect of an exposure to Kaupthing Singer and Friedlander which was, until it went into administration in October 2008, a long-established UK bank (owned by an Icelandic Bank) and regulated by the UK authorities. We believe that there is a strong chance that we will recover some of this investment. In the meantime, however, we have taken the prudent action of making this level of provision.
“In addition, the deteriorating economic situation has resulted in a small, but inevitably growing, number of our borrowers having difficulty meeting their repayments. At 31 December 2008, only 0.83% (2007 0.28%) of mortgages were over 3 months in arrears, which is considerably lower than the Council of Mortgage Lenders average.
“We started the year with £17m of mortgage provisions and we increased this by £27m to £44m at 31st December 2008. Our total provisions for mortgage and liquidity losses, liabilities and charges at the end of the year rose to £65m from £22m at the end of 2007. We believe this to be consistent with the prudence which has been the watchword of the running of the Society over many years.