9 August 2023

Principality Building Society Interim Results Announcement for the six months to 30 June 2023

Principality Building Society will continue to invest profits to support members, communities, and colleagues through turbulent economic times, after it announced a strong performance for the first half of 2023.

Better Homes 

Julie-Ann Haines, CEO at Principality Building Society said: “The first half of 2023 has been another challenging period for our members, colleagues, and communities. Core inflation has remained stubbornly high, leading to further Bank of England base rate rises, which has added to the cost-of-living pressure on people’s finances.  

“I am pleased to announce a strong performance for the first half of the year whilst we have  continued to support our members and communities through these turbulent economic times. Principality is a purpose-led, member owned organisation. Our ambition to have impact beyond our scale and to grow the business sustainably for future generations is making real progress. We have delivered mortgage and savings growth in the last six months, whilst improving our efficiency with better online and branch services. 

“Our member owned, sustainable business model, responsible approach to lending and conservative interest rate risk management have enabled us to balance the needs of savers and borrowers while also keeping the Society safe and secure for the long term. While others are closing branches, we remain committed to the high street, helping to provide increased choice and services for members, customers, colleagues, and our broker partners.”

The excellent support Principality has given to its members led to it being voted Best Building Society for Customer Service by What Mortgage for the sixth consecutive year. 

In February, the Commercial team issued a £50m loan to Pobl, one of the largest housing associations in Wales, to support the creation of more affordable housing across Wales. This led to the Commercial team winning the Funder of the Year award at the Insider Wales Property Awards.

Secure Futures - Society of savers

Julie-Ann said: “We want to provide our members with competitive savings rates so we can create a society of resilient savers. Savings performance has been strong; we have increased the number of savers we have to over 415,000 with over 75,000 customers saving regularly. This is the result of amazing commitment from all our colleagues who worked tirelessly to ensure we put savings members at the heart of our response to recent Bank of England rate increases.” 

Around 1% out of the 1.5% in BOE rate rises in the first half of the year were passed on to our savers and our average time to increase savings rates after a base rate increase has halved from a month to 15 days giving members value more quickly. 

On average we have paid savers 2.46% versus the market average of 1.87% for the first five months of 2023* resulting in the equivalent of an additional £10m in interest to our variable rate savers.
(*Source: CACI’s Current Account and Savings Database, Stock, Jan – May 2023)

Fairer Society - Greater social impact for communities

Principality has the ambition to set aside up to 3% of its annual profit for social purpose, and as part of that commitment, in the first half of this year, invested 1.4% (£569,000) of its underlying profits in community grants through our Future Generations Fund. 

Principality helped to financially educate almost 33,000 school children and young people in the past six months, whilst donating £86,000 to charity partners Ty Hafan and Hope House Ty Gobaith children’s hospices.

The Society is committed to diversity and inclusion, and its excellent colleague networks have made big strides in recent years. One example is how its Pride network has reached out to businesses across Wales, to demonstrate how it can work collaboratively in the private sector to help achieve Welsh Government’s LGBTQ+ Action Plan. 

Strong Financial Performance 

Underlying profit reached £39.1m (June 2022: £26.1m) whilst statutory profit before tax was £41.0m (June 2022: £31.0m). Mortgage balances are £8.7bn (December 2022: £8.2bn) and savings balances are now £8.5bn (December 2022: £8.1bn).

The rising interest rate environment underpinned improved net interest margin of 1.69% (June 2022: 1.32%). 

Julie-Ann added: “We have benefitted from our historic long-term interest rate risk management decisions which have allowed us to offer highly competitive rates to savers and protect variable rate mortgage customers from the full impact of the Bank of England Rate. 

“Our capital and liquidity remain strong and enable a platform for future growth and investment in our business. Providing a safe and secure home for our Members’ savings is fundamental to the ongoing success of our business.”

Outlook

Julie-Ann added: “There is no doubt that economic conditions will remain challenging for many people in the medium term, with some further interest rate rises expected from the Bank of England in its attempts to ease inflationary pressure. 

“However, our long term ambition remains unchanged; to create better homes for members, help members to secure their futures with competitive saving rates, as well as trying to create a fairer society for the communities we operate in.  In doing this, we will build more scale, strength, and resilience for the future.”

Key Performance Highlights 

• Total assets of £11.6bn (December 2022: £11.3bn)
• Retail mortgage balances of £8.7bn (December 2022: £8.2bn)
• Savings balances of £8.5bn (December 2022: £8.1bn)
• Net retail mortgage lending for the first six months of the year of £455.3m (June 2022: £99.3m)
• Statutory profit before tax of £41.0m (June 2022: £31.0m)
• Underlying profit before tax of £39.1m (June 2022: £26.1m)
• Strong capital with a Common Equity Tier 24.85% (June 2022: 32.01%)
• Net interest margin of 1.69% (June 2022: 1.32%)
• Net Promoter Score 83.1 (June 2022: 80.9)

To read our Interim Results Report in full, click here.

Published: 09/08/2023