Annual Results

10 February 2016

Principality’s growth strategy continues to deliver

Principality Building Society has today announced record levels of lending to homeowners and a strong performance driven by a clear focus on its growth strategy.

In 2015 Wales’ largest building society increased its assets, underlying profit and lending, to support its new investment programme to futureproof the business for its members, its savers and borrowers.

Graeme Yorston, Group Chief Executive at Principality Building Society, said: “I am delighted to say that our member-focussed mutual model continues to be successful and we have had another strong 12 months. Since we launched our growth strategy in 2012, we have seen continued good performance with net retail mortgage growth of £1.6bn. We have a solid balance sheet with total assets of £7.6bn, and underlying profit has increased to £57.8m (2014: £51.9m). Statutory profit before tax for the year was £49.0m (2014: £53.5m).

“For the first time in our history our mortgage lending to homeowners has grown to over £5bn and we have increased our support to first-time buyers, helping 3,500 people get a foot onto the property ladder in 2015.”

Key Performance Highlights

  • Record customer satisfaction scores of 86.9% (2014: 86.8%) 
  • Supported 3,500 first-time buyers onto the housing ladder
  • Underlying profit of £57.8m (2014: £51.9m)
  • Retail mortgage balances of £5.2bn (2014: £4.8bn)
  • Strong capital ratios with a Common Equity Tier 1 ratio of 20.97% (2014: 18.20%)
  • Net interest margin 1.81% (2014: 1.87%)
  • Launched a ten year partnership with the WRU to invest in rugby at all levels, which will also see the national stadium of Wales renamed Principality Stadium
  • Raised a record £90,000 for Mind Cymru, its Charity of the Year for 2015
  • Entered into more than 100 local branch sponsorships

Graeme said: “Our strong profitability has further strengthened our capital position and our balance sheet remains in a strong position. This profit enables us to build a solid platform to increase investment in our people, processes and technology so that we can meet the demands of our members into the future and provide excellent service when and how they want it.” 

The need for change 

During 2015 Principality has introduced a number of measures to support the needs of its members, including rolling out mortgage interviews through Skype™ and online appointment booking. The Society is aware that the pace of technology and demands from consumers are increasing and Principality has launched an ambitious investment programme to ensure that the business meets the needs of its members in the future.

Graeme commented: “We are witnessing a period of change that is happening quicker than anyone could have predicted with new and innovative service and product offerings constantly emerging in the marketplace. Future-proofing our business is critical to ensure its stability over the long term and we must invest further to ensure the continued success of this business for our current and future members.

“This will include investment in a wider range of products that will meet our members’ needs, in updating branches and offices, marketing our brand and in new technology.

“These changes will not alter our core business values. We know we have a strong platform to build upon and I believe that our business model will enable us to meet the challenges of the new world and ensure the future is as successful as the past.”

Group businesses

Principality has three Group businesses: Principality Building Society, Principality Commercial, its commercial lending arm, and Nemo Personal Finance, a secured loans provider.

Graeme commented on their performance: “After some challenging years in the commercial sector the market is now more buoyant and a number of larger players have started to re-enter these markets. This positivity is something that is certainly reflected in the performance of Principality Commercial, which has seen a strengthened balance sheet and improvements in both asset quality and profitability, with profits of £6.2m in 2015 (2014: £1.2m). The team has been working on some exciting projects this year, and work at Ely Mill has begun; this is a fantastic project which will see much-needed affordable homes brought to Cardiff to meet the increasing demand as the Capital continues to grow. Principality Commercial continues to support our mutual ethos and goals of helping people into a home that is right for them and I am delighted with the performance of this business in 2015.”

Principality also announced that from 2016 it will be reshaping its Nemo business in order to support the Society’s aims for the future. 

“To ensure that we continue to deliver value for our members, we regularly review our operating model and over the last 12 months we undertook a thorough strategic review of our secured loans subsidiary Nemo. Nemo has had a very positive year with profits of £14.0m (2014: £13.9m) and a strong balance sheet reflected in reduced levels of impairment charges. Competition in the market has remained high. Nemo has defended its market share well and concentrated on providing excellent customer service and putting customer outcomes at the heart of its business.

“However the secured loans market continues to develop and expand away from its traditional base. We have carefully managed this business but, as a result of these developments, we do not want to increase our participation in this market.

“The Board has therefore taken the decision to cease new lending at Nemo and focus the Group’s investment on the core Building Society and commercial businesses. Nemo will continue to be a meaningful contributor to our Group as a refocused business which will continue to provide excellent service to its customers,” said Graeme.

Supporting our communities 

Principality has always played a key role in supporting its local communities and 2015 was no different, with the business winning Wales’ Responsible Large Business 2015 at the Business in the Community Cymru awards for its work in communities around Wales and the borders. 

The Society also raised a record £90,000 for its Charity of the Year, Mind Cymru, introduced a new corporate social responsibility policy to focus on the most important areas of citizenship and entered into 121 local branch sponsorships.

In 2015 Principality also launched an historic 10 year partnership with the Welsh Rugby Union to grow, foster and encourage Welsh rugby at all levels, which also sees the national stadium of Wales renamed Principality Stadium.

Graeme said: “Many organisations invest large sums of money in advertising on television or other mass media. We have instead built upon our partnership with the WRU to invest in a ten year deal to encourage, develop and grow Welsh rugby at all levels. This is a strategic decision that will provide mutual benefits for both parties. It will help us to enhance member value, with a range of member-exclusive special offers, discounts and competitions for this multi-purpose venue, whilst putting our brand onto a worldwide stage.”


Commenting on the year ahead, Graeme said: “The growth in the UK economy has continued positively in 2015 albeit at slightly lower levels than originally expected. However, there are a number of economic headwinds as we enter 2016 including slowing growth in China, falling oil prices and volatile worldwide equity markets, together with ongoing pressures on domestic public spending. These factors suggest that any rise in the official Bank of England base rate is not likely to occur until 2017 and when it does it is likely to be modest.”

Graeme added: “We are alert to future headwinds of increased competition, which will bring the risk of margin squeeze, reducing profitability at a time when we are seeking investment in our business. However, our strong balance sheet position and capital ratios will ensure we are able to meet these pressures.

“We will remain alert to the economic factors but will continue to focus on what is right for our business so that we continue to grow and invest in the Society to ensure its long-term success. We will invest in our products, services, people and systems to ensure that we can retain and attract members for many years to come and have a successful business of which our members and colleagues can be proud.”

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Published: 10/02/2016