Principality celebrates as its assets reach £10bn for first time
Principality Building Society has seen its total assets reach £10bn for the first time in its history. However, following planned investment and increasing interest rates on saving products to attract customers, it experienced a slight fall in its pre-tax profit for the first of half of its financial year.
Net retail mortgage lending increased by £285.6m in the six months to June, bringing total assets to more than £10bn for the first time since being established in 1860.
To support the growth in its lending, the society raised £315m of wholesale funding and grew retail savings by £176m.
Total assets include its lending book as well as its own property assets.
Underlying profit before tax was £21.2m compared with £27.4m for the six months to June 2018, which it said it was in line with internal expectation.
The mutual, which has 53 branches and 17 agencies across Wales and the borders, said the fall was driven by:
■ Significant investment in the modernisation of mortgage and savings technology and branches;
■ Interest costs from continuing to pay better than average savings and the cost of securing longer-term wholesale funding;
■ The run-off of the secured loans portfolio as Principality deploys capital into retail mortgage lending.
Statutory profit before tax was £19.8m (June 2018: £24.9m) which has been impacted by the above factors, together with fair value movements in derivatives.
Chief executive Steve Hughes said: “I am proud of the performance of my colleagues in the first six months as our excellent customer service once again makes us stand out from our competitors.
“We have delivered growth against a backdrop of a highly competitive mortgage and savings market, uncertainty over potential base rate changes and Brexit negotiations.
“We remain committed to the high street in Wales and the borders, while major banks have withdrawn. For us to maintain our presence, it is important our members continue to use and value their local branches and recommend us to family and friends so we continue to grow our society.
“We have actually seen branch transactions increase in the first six months of the year and we know our members value our great personal service.”
The mutual’s commercial team made £50m available in loans to help smaller housing developers build homes across Wales.
Mr Hughes said: “In light of increasing demand, we have topped up the fund committed to housing associations in Wales and now have £75m available, which will enable them to press ahead with creating much-needed affordable homes.”
On the outlook for the rest of the financial year, Mr Hughes said: “We expect economic and political uncertainty to continue over the next six months and price competition in the mortgage and savings markets to remain high.
“Any reduction in the UK base rate would also cause further pressure on margins and could result in changes to rates offered to our members.
“Despite these challenges, our profitability and balance sheet position remains robust and our performance in recent years has built a solid foundation for us to invest for the future.”