Queen Street Branch

5 August 2015

Principality lending to home owners exceeds £5bn

Principality Building Society has today announced that its lending to home owners has exceeded £5bn for the first time.

This increased mortgage lending has also been strengthened by Wales’ largest building society helping more than 1,100 first-time buyers get on to the property ladder in the first six months of the year.

As it reports its half year performance to 30 June 2015, Graeme Yorston, Group Chief Executive of Principality Building Society, said: “I am delighted to report another very strong set of results for the Principality Group for the first six months of 2015, where we have seen our strategy of growing the core business continuing to deliver.

“In the first half of the year we have once again grown our lending to customers buying their own home, contributing to the overall increase in lending to home owners which now exceeds £5bn for the first time in the Society’s 155 year history. Crucial to this and to the market as a whole, has been lending to first-time buyers where we have consistently supported people onto the housing ladder. As house prices have stabilised and low interest rates have been seen across the market a greater level of affordability has returned, enabling us to help over 1,100 first-time buyers move into their first home in the first six months of the year.”

Key Performance Highlights

  • Residential mortgage lending exceeds £5bn for the first time in the Society’s history
  • Continuous support to homeowners has led to a growth in residential mortgage lending in the first six months of the year of £233.4m (30 June 2014: £161.2m)
  • Principality was the recipient of Wales’ Responsible Large Business Award for 2015 in the Business in the Community Wales Responsible Business Awards 2015
  • 87.4% mortgages funded by savers (31 December 2014: 91.4%)
  • Pre-tax profits have increased by £2.7m to £23.2m compared to the same period last year (30 June 2014: £20.5m excluding the impact of the £10.1m one off benefit from a change in the pension inflation assumption)
  • Strong capital ratios with a Common Equity Tier 1 ratio of 19.0%1 (31 December 2014: 18.2%)
  • Net interest margin 1.84% (30 June 2014: 1.84%)
  • Arrears levels remain consistently low, with the percentage of cases currently standing at 0.53% (31 December 2014: 0.74%)2 

Graeme added: “The Group’s trading performance has been strong in the first half of the year. Excluding the impact of the pension changes last years3, profit before tax has increased by £2.7m. Our profit for the first six months of the year has meant that we have been able to continue to grow our capital base, which provides vital protection for our Members from any severe market downturns, as well as providing us with important funding for our investment programme as we seek to transform our business into an organisation that will be relevant for both current and future members.”

With savings rates continuing at a record low, Principality said that it remains committed to its savers, with 87.4% of funds that it lends to borrowers still coming from its savings customers.

Graeme continued: “Savers have continued to see interest rates fall which is an outcome of how the market is currently operating. Despite ongoing interest rate reductions from many of our competitors, we at Principality have done our best to try and support our loyal customers by minimising the impact of these wherever we can. Our lending programme continues to be funded by our savers and whilst we may have to take advantage of some of the wholesale funding opportunities that exist in the market to remain competitive, we do not envisage our model changing substantially.” 

Supporting our Communities

Commenting on the work that Principality has been doing to support its local communities around Wales and the borders, Graeme added: “Our attention remains on our people: our Members and our colleagues. We strive for the highest possible levels of service and in the first half of this year we have seen our highest customer satisfaction index score4 to date, which is testament to the fantastic personal levels of service that can be seen in our branches, agencies, call centre and head office.

“Throughout our history our local communities have been at the heart of Principality and we are extremely proud to have been named Wales’ Responsible Large Business 2015 for our volunteer and sponsorship projects around Wales and the borders this year. We have also been recognised at the Arts and Business Cymru Awards winning the Arts, Business & Brand Identity Award for the fifth year, this time for extending our partnership with Only Boys Aloud to North Wales. 

“I am proud of this recognition for our sponsorships, which provide substantial benefits to our Members and local communities as well as brand exposure, which benefits the Society. We have also volunteered hundreds of hours of employee time to help communities and we have invested over £20,000 in our local branch sponsorships to ensure our money is helping people in Wales and the borders.”

Group Performance

The Principality Group has three key businesses; the Building Society, which has 53 branches and 18 agencies around Wales and the borders, Nemo Personal Finance and Principality Commercial, its commercial lending division, which have continued to perform well.

Graeme said: “I am delighted that all three businesses have made significant contributions to the Group’s performance in 2015. The personal finance sector is seeing increased competition with new entrants and existing businesses competing for trade in a way that has not been previously experienced. Despite this, the Nemo business has performed well and delivered consistent growth in profits compared to the same period in 2014. Arrears levels remain low and the business is very well placed to respond to changes in regulation in the early part of 2016 with significant investment in technology, people and processes. We have strengthened the management team in the business and I have been delighted with the way that Nemo has responded to the challenges.

“Our Commercial lending division has also had a very successful first six months with improving profitability. This has been a challenging market for a number of years which we have weathered well and as the economy continues to show signs of recovery I would expect a good business outturn for the remainder of this year.”


Commenting on the current low rates of interest, Graeme added: “Everyone understands that the current low rates of interest are unlikely to continue. The impact is both positive and negative. The positive impact is being felt by borrowers who are benefitting from some of the lowest interest rates ever offered on mortgages and this in turn is ensuring that our need to put aside profit for potential bad debts has reduced significantly. We have, for a number of years, assessed borrowers on their ability to repay our loans in a higher interest rate environment and so we are confident that, even when interest rates do undoubtedly start to rise gradually, borrowers will be able to cope. 

“But the negative impact is being felt by savers who are seeing little return on their investment. The connectivity between the Bank of England Base Rate and savings rates has been well and truly broken and whilst increasing interest rates are likely to be good news for savers, it will take a number of years of rising interest rates to restore the relationship.

“At Principality we are committed to our well tested model of our savers being the principle funders of our lending programmes and we know that in order to achieve this we will have to ensure that not only do our rates remain competitive but that we continue to offer the outstanding level of service that our Members have come to expect and deserve to receive.”

Looking ahead to the next six months, Graeme added: “We still face many global uncertainties, as well as economic concerns in Europe, which have not completely gone away, and whilst we have no direct exposure we have to be mindful of the wider impact of these on the UK economy and the challenges that they may uncover along the way.

“Principality is well placed to deal with these issues and I am very confident in a continuing bright future for the organisation as we remain focussed on delivering strong results backed up with excellent service and an investment programme in the business that will ensure that it is relevant now and for many years to come.”

Click here for our Half Year Results 2015 Infographic

Click here to for our Consolidated Income Statement


  1. Excluding unaudited interim profits. The equivalent ratio including interim profits for June 2015 would be 19.9%.
  2. The percentage of retail lending cases fully secured by a first charge currently with arrears greater than 2.5% of the total outstanding balance.
  3. Changes to the inflation assumptions within the Group’s defined benefit pension scheme generated a one-off credit of £10.1m in the comparative period in 2014.
  4. Source: Score of 87.6 in The Leadership Factor survey of 506 customers. April-June 2015.

Published: 05/08/2015