Commenting on the Society’s strong half year performance for the last time before handing the reins over to Graeme Yorston; Peter Griffiths, outgoing Group Chief Executive, said: “I am pleased to report that the Society continues to thrive in a tough market and is benefitting from an ongoing shift in social sentiment. The negative view consumers’ hold of the major banks has helped our business as savers look to place their money with a trusted brand. In a highly competitive market we are seeing strong savings inflows, increasing savings balances to an all time high of £5.18 bn. This in turn has strengthened our funding position and further ensures that we can continue with our strategy to deliver long term value and security to our Members, customers, staff and local communities.”
“While the economic environment has continued to present new challenges for both our customers and our sector, Principality has emerged fitter, stronger and even more resilient, attracting over 28,000 new customers to the Society in the last six months.”
Key Performance Highlights:
o Savings growth of £167.8m
o Total mortgage assets increased 4.3%
o Strong half year pre-tax profits of £14.0m
o Over 28,000 new customers
o General reserves increased by £9.0m
o A robust net interest margin of 1.54%
o Overall balance sheet impairment provisions of £65.1m
Peter added: “We have continued to strike the balance between acceptable profits, fair returns for savers, and appropriate pricing for borrowers by managing the business prudently.
“We have delivered controlled levels of growth, strong levels of profitability boosted by our subsidiary businesses and a continued strengthening of our balance sheet. Impairment provisions for losses in our business remain at lower than budgeted levels, providing a level of reassurance and confidence for the future.
“We have also remained committed to our investment programme to further improve customer service, enhance our product offerings and deliver a multi-channel experience to our 500,000 Members and customers.
“Despite the proliferation of banking technology, research tells us that conveniently-
Peter explained that the Society’s strong funding position had further helped to facilitate increased lending: “With credit conditions remaining tight, we have increased mortgage advances by 43.4% on the same period last year with total mortgage assets now 4.3% up since the end of last year.”
The Society recently picked up the overall five star award for best mortgage lender and packager in a national survey of UK mortgage providers.
Commenting on the Society’s arrears position: “We continue to support Members and customers who are experiencing financial difficulties offering a range of temporary actions to help keep people in their homes. Arrears and repossessions at the Society have remained flat at well below the industry average .”
Keen to support both the social justice and economic recovery agenda, Peter said: “The Society has continued to work closely with Welsh Government to support the housing agenda in Wales. We have strong management capability, a field of expertise and a long history of helping people to buy homes for themselves and we have effectively used these skills to develop a new financial model to deliver new and affordable homes to the Ely Mill site in Cardiff, Wales. We firmly believe that the successful delivery of this type of model could be replicated on future sites elsewhere in Wales.”
Commenting on the Society’s diversified model, Peter said: “Our subsidiary businesses have thrived in a low interest rate environment and whilst we recognise the pressure a low base rate environment places on savers, it has enhanced our overall earnings capability benefitting the core building society. With rates predicted to remain lower for longer we remain confident about our future prospects.”
“Strong profits in Nemo have helped to offset rising funding costs in the core Society. Meanwhile, an active housing market over the first half of the year has resulted in a strong performance at Peter Alan for both lettings and estate agency with overall income 21.2% ahead of the same period last year. Peter Alan picked up the Sunday Times Best Welsh Letting Agent of the year in April and will open a further branch at Cathays in Cardiff later this year.
“The commercial lending market has remained challenging and while many competitors have seen losses in this area our book remains resilient. Lending has remained flat, with the team focussing on local deals. Business savings deposits have increased 3.5% on last year following the development of a new range of products for Charities Aid Foundation.
In conclusion, Peter said: “It has been a positive half year with the business remaining buoyant. I leave the Society in the safe and capable hands of my successor, Graeme Yorston. All that remains is for me to say a big thank you to those who have supported the Society over the last decade including past and current Chairmen, my Board, a loyal and dedicated team and a supportive set of Members.
Commenting on the future of the Society, new Group Chief Executive, Graeme Yorston, said: “Against a backdrop of increasing volatility in the economy, tightening credit conditions and an uncertain regulatory agenda, we remain confident in our ability to deliver the range of products and services our Members expect from us. We have strength in depth in our executive and senior management team and we continue to attract the skills needed to run the business and deal with the significant challenges thrown up by current trading conditions. I believe there exists an unequivocal opportunity for the mutual sector to deliver a differentiated service in the current climate and today’s figures are evidence that this belief is shared by the wider population.”
Principality Building Society was founded in 1860 and is the most trusted Bank or Building Society on the Welsh high street, and is the UK's 7th largest building society that offers services in buildings insurance, buy to let mortgages and savings accounts.