Principality. Where home matters.

Graeme Yorston, CEO of Principality Building Society

3 August 2016

Principality Delivers Very Strong Half Year Performance

Principality Building Society has announced today that it has delivered a very strong financial performance and excellent trading results for the first half of 2016.

Wales’ largest building society has exceeded £8bn in assets for the first time in the Society’s history, supporting the priority to be a strong, resilient and safe home for members.

Graeme Yorston, Group Chief Executive at Principality Building Society, said: “I am delighted that our continued delivery of the strategy we set about implementing in 2012 has enabled us to deliver a very strong first half performance for the Principality Group. This strategy has been particularly important in creating a robust platform for further transformation and the ability to cope with some of the uncertainties we now face as we respond to the vote to leave the EU.

“The strength of the Principality balance sheet puts us in a strong position and places us very well to cope with any downturn in markets that might follow the EU vote. We are in a stronger position than we were when we entered the last downturn in 2009 and, therefore, I remain confident about the future and our ability to protect and serve our loyal savers as well as continuing to support the housing market. The transformation of the core Building Society will continue as we reshape the business for the next generations while enhancing the service and products for our existing members.”

Click here for our Interim Results Infographic

Key Performance Highlights:

  • Group assets exceed £8bn at £8.2bn
  • Savings balances have increased by £298.7m
  • Net retail mortgage balances of £5.6bn (31 December 2015: £5.2bn)
  • Gross residential mortgage lending for the first six months of the year of £802.4m (30 June 2015: £554.7m)
  • Pre-tax profits of £23.9m (30 June 2015: £23.2m)
  • 85.7% of mortgages funded by savers (31 December 2015: 85.9%)
  • Strong capital with a Common Equity Tier 1 ratio of 20.3%* (31 December 2015: 21.0%)
  • Arrears levels remain consistently low, with the percentage of first charge cases greater than 3 months in arrears currently standing at 0.62% (31 December 2015: 0.62%)

Commenting on the trading performance, Graeme said: “The Group has delivered a very good trading performance in the first half of the year with profit before tax increasing to £23.9m. This means we have also been able to grow our capital base and have a solid balance sheet with net assets now of over £8bn. This has been achieved by again increasing our lending to people to buy homes. In the first six months of this year Group net lending increased by £364.5m.”

* Excluding unaudited interim profits. The equivalent ratio including interim profits to 30 June 2016 would be 21.2%.

Commenting on the current interest rate environment, Graeme added: “The greatest uncertainty is interest rates. While the Governor of the Bank of England has indicated what steps he might have to take to protect sterling and the wider economy, we will continue to do all that we can to remain competitive in the savings market, which is the lifeblood of our lending programme. In order to support the growth of our lending we have attracted an additional £298.7m in savings and we are grateful to the loyalty shown by our existing members as well as welcoming many new savers to the Society.”

Group businesses

The Principality Group consists of three key businesses, Principality Building Society, Principality Commercial, its commercial lending arm, and Nemo Personal Finance, its secured loans business.

Commenting on their performance, Graeme said: “Our Commercial lending division has delivered its strongest performance for several years, signing a number of high profile deals across Wales and in the South-East. Completions in the first half were £85.8m, up from £52.2m in 2015. Principality Commercial continues to support our mutual ethos of helping people into homes and often by adopting innovative approaches to funding is able to support the housing agenda in Wales and beyond. The team are working on some exciting projects including the continuation of the work at Ely Mill, bringing much needed affordable housing to Cardiff, a new age-restricted development in Dinas with Portabella Group, aimed at providing suitable new housing for older people, along with several projects with Waterstone Homes including the Bible College in Sketty and a new scheme on South Beach Tenby.

“Although the commercial market has been improving steadily over the last year, the impact of the uncertainty around Brexit has the potential to cause a slowdown as we see market uncertainty cause decisions to be delayed, particularly in this sector. The division is very well placed to cater for this.”

Following on from the decision to reshape the Nemo business earlier in 2016, Graeme added: “Our strategy of growing and transforming the Building Society has resulted in some difficult decisions. One of which we announced with our 2015 results in February of this year was the decision to cease accepting new business into our subsidiary Nemo Personal Loans. This impacted on 67 people in the business but I am delighted to say that not only does the Nemo business continue to perform very well, but more importantly some 95% of the people affected by the decision have secured alternative employment, either in the Principality Group or outside. Our people are very important to us and I am delighted with the approach we have taken in supporting those impacted into new roles.

“Nemo has again made a meaningful contribution to the overall results and I am very pleased to report this business is performing well and in line with our plans. The reshaping of Nemo has been executed to a very high standard as we focus the business on providing excellent customer service to its existing customers.”

Supporting our Members, Communities and Colleagues

Principality takes the role it plays in the Welsh economy very seriously. While the Building Society continues to grow its business both in Wales and beyond, Principality is aware of the challenges faced by the communities in Wales which may, given recent events, increase in the months and years ahead.

Graeme said: “We passionately believe in the cultural heritage of Wales and through our continued support of important areas such as the Eisteddfod, the Only Boys Aloud initiative and the Royal Welsh Show, we will do what we can to protect what is held so dear to many in Wales.

“Our communities will continue to receive our support through our Branch and Agency Network providing outstanding service to the majority of our savers and , continuing to support our teams in community volunteering where already they have given over 500 hours of their time working with over 70 local groups with more than £40,000 of support for this year.

“For the first time in Principality’s history, we have decided to support not one but three local charities, who will benefit from our teams’ charity fundraising activities. Our chosen charities, selected by our employees, are Llamau, a leading homelessness charity; School of Hard Knocks, a supporter of disadvantaged communities in Wales; and cancer prevention and treatment charity Cancer Research Wales.

“We have also reset our goals and ambitions for our Corporate Social Responsibility agenda, working and supporting three key areas in line with the challenges faced by many people in Wales today. We’ll be focusing more than ever on helping people get and, importantly with an ageing population, stay in their homes for longer; Health and Wellbeing; and Financial Education. 

“Finally we are committed to making Principality a great place to work and we know that in doing so the Business will be well positioned to support the whole of Wales to continue to prosper. “All of this work is equally as important as the financial results and I am grateful to all of our employees for their support in delivering this important yet challenging agenda as well as their day job. This is what makes Principality unique in financial services today.”


Looking ahead to the next six months, Graeme added: “I have indicated before that a slight reduction in headline numbers is to be expected over the coming years as we see continuing pressure on margins as well as increasing investment being made in the Principality business to transform it for the future. This is likely to start in 2017 with the outlook for the rest of 2016 remaining stable. This was always planned as part of our strategic direction. However, the recent decision to exit from the EU has added further challenges to this and we must, and will, be prepared to review our strategy in light of any emerging issues. The fact remains that the Principality balance sheet is strong and is more than able to withstand a severe downturn in the unlikely event that this should occur.

“Overall Principality, is well placed to be able to cope with any potential downturns in markets and we will need to work through the challenges as they emerge over the coming months and years. We have already planned for a number of potential scenarios and remain vigilant and well placed to manage our way through this with an experienced Executive team and Board.”

Consolidated income statement for the period ended 30 June 2016 (85.7 KB)

Published: 03/08/2016