Graeme Yorston

11 August 2014

Blog: Principality’s half year results 2014

Graeme Yorston, Principality Building Society’s CEO talks about the company’s half year results

As many have been out enjoying the warm weather and relaxing with their families, we’ve been busy assessing the business and pulling together our latest set of financial results. These results account for the first six months of the year and are designed to inform our Members and the wider business community of how the Society has been performing.

The half year results present an opportunity to reflect on the year to-date and they provide a barometer for the state of the business. These figures are part of our ongoing monitoring of the business and help us know where we’re doing well and identify any areas for improvement.

Thankfully yet not surprisingly, the figures show the Society is in great shape. We are well on track to meet our mortgage growth strategy by 2017 and against a backdrop of improving economic conditions we have managed to deliver record profits for the period, driven by a 7% year-on-year increase in mortgage lending.
In layman’s terms, this means we have lent 7% more in the first six months of 2014 than we did in the corresponding period of last year. This is significant and reflects the Society’s success in delivering products to cater for the widely reported pick-up in the UK property market.

It’s been a positive time for the housing market and we have been encouraged by the increase in first-time buyers joining the property ladder and existing homeowners moving up the chain. As a building society, we were established to support the people of Wales into home ownership and our latest figures demonstrate that we are doing just that.

We also announced the agreed sale of our estate agency Peter Alan and the outsourcing of our surveying business to the Connells Group for consideration of £16.4million. As the deal was completed in July profits from the sale will be reflected in Principality’s full year results for 2014.

This was a difficult decision to make but it will allow Peter Alan to build further on the fantastic business that it is, whilst also allowing Principality to focus on the Society’s core functions of saving and lending.
Mortgages remain a key priority for the business and our strategy to grow this part of the business has already increased our net residential mortgage lending by over £1 billion.

But our mortgage success would not be possible without the continued financial support of our savers as our savings balances currently account for almost 93% of our mortgage lending. This means that for every pound that we lend, 93% of it is provided by savers. This figure is high for the industry and it reflects our success in carefully balancing the demands of savers and borrowers.

There’s no denying it’s been a challenging time for savers as near-record low interest rates have made it difficult to reward savers as much as we would have liked. That said, we have consistently strived to satisfy our customers with attractive products and this has resulted in a £148 million growth in savings balances during the period. This growth has been fuelled by our commitment to customer service, which has resulted in the Society becoming Wales’ most recommended savings provider*.

The record profits of £30.6 million are important for Principality  as this money helps to underpin the future success of the Society. Different to a publicly owned company, where profits are often shared between shareholders, our profits are recycled back into the business and used to sustain our presence across Wales, invest in the business for the future  and ensure we can meet our increasing capital requirements from our regulators and wider European capital requirements.

This money also enables us to employ more than 1,000 people across Wales and the borders, to maintain our network of 70 branches and agencies, and to ensure the Society is being run as efficiently as possible for the benefit of our Members. It also enables us to continue to support the cultural and sporting events which matter most to our Members, such as the Principality Premiership, the Royal Welsh Show and the Eisteddfod.
Such is the nature of the global economy that it’s difficult to predict when the next economic turbulence may strike; that’s why it’s important for the Society to be in good financial health. These latest results tell us we’re going nicely and gives us confidence that we are well placed to continue to satisfy the needs of our 500,000 Members across Wales and its borders well into the future.

*Source: GfK NOP Financial Research Survey (FRS), 12 months ending June 2014, NPS score of savings customers in Wales, answering likelihood to recommend, c. 2,400 adults. Competitor list includes the following: Barclays, Halifax, HSBC, Lloyds TSB, NatWest, Nationwide, NS&I, Santander

Published: 11/08/2014