Showcasing the Best of Welsh Business

Welsh Building Society Announces Strongest Year with Pre-tax Profits Over £50m

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Principality Building Society has today announced one of its strongest years ever, with record lending to homeowners and pre-tax profits of more than £50m.

In 2016 Wales’ largest building society exceeded £8bn in assets for the first time in its history, as its growth strategy continues to support the priority of being a strong, resilient and safe home for its Members.

19-07-16-mh-principality-hq-43Key Performance Highlights

  • Gross mortgage applications of £2bn for the first time in Principality’s history;
  • Net residential mortgage lending grew by over £600m;
  • Helped more than 3,500 first time buyers get on to the property ladder;
  • Savings balances also grew strongly and now stand at over £6.1bn (2015: £5.6bn)
  • Total assets grew to £8.3bn (2015: £7.6bn);
  • Customer service has once again delivered and our net promoter score stood at 72.7% for the year (2015: 65.9%)*;
  • Pre-tax profits for the year of £50.3m (2015: £49.0m);
  • Strong capital ratios with a Common Equity Tier 1 ratio of 23.47% (2015: 20.97%)
  • Colleagues raised a record £150,000 for charity

*Source: Based on internal survey data for 12 months ended December 2016

Graeme Yorston, Group Chief Executive at the Principality Building Society, said:

“I am delighted that the strength of the brand of Principality alongside the outstanding service and dedication of our teams across the business have helped deliver a very strong performance in 2016. The trusted model we introduced in 2012 continues to withstand difficult and sometimes uncertain periods. Despite a challenging interest rate environment for savers we have continued to grow savings balances which has been fundamental to supporting our growth in mortgage lending. This means that we have delivered on our promise to help more people own a home than ever before, which includes helping 3,500 first time buyers get on to the property ladder.

“The Group has delivered a very good trading performance with profit before tax increasing to £50.3m. This means we have also been able to grow our capital base and have a solid balance sheet with assets of £8.3bn.  This has been achieved by again increasing our lending to people to buy homes. Last year net residential mortgage lending increased by more than £600m.

“Delivering a strong performance is essential, both for our ability to withstand any downturn in the economy as well as providing investment in the business for the future. This will mean building on our current model and ensuring that we have digital capability across our business as well as a broader product set that will ensure the business is able to thrive for generations to come.”

Strong Performance and Resilient Business

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

Commenting on their performance, Graeme said:

“Each of our businesses continue to perform very well and I am particularly pleased with the performance of Nemo given that we took the difficult decision to cease accepting new business at the beginning of 2016 but Nemo went on to deliver a pre-tax profit of £11.6m.

“Our Commercial Lending Division has delivered one of the best performances for many years with a pre-tax profit of £12.5m. This part of our business plays an important role in supporting, amongst other things, local house builders, and this is very much in line with the core purpose of Principality.”

Investing in the business

As banks and building societies announce their withdrawal of branches from the high street in Wales, Principality has remained resolute in maintaining its presence with 53 branches and 18 agencies across Wales and its borders.

Graeme said:

“We remain committed to the high streets of Wales as being a place where our Members enjoy the great service delivered by our excellent teams. However, like the banks, we have seen the use of our branches decline although this has been much more gradual than perhaps some of the banks have seen.

“This more gradual decline does give us time to think about what the branch needs to be and what a sustainable network looks like. We need to reinvent the model and make sure that our branch network remains viable and relevant, and continues to be valued by our Members in the years ahead.

“I have indicated previously that we anticipate profits will reduce in the next few years. This was always planned as part of our strategic direction, as we continue the investment programme to improve and develop our capabilities, including digitally.

“It is important we focus on what is right for our business so that we continue to grow and invest 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. By doing so we will continue to have a successful business of which our Members can be proud. We are member-owned and our Members and their best interests must come first.”

Serving our Communities

Principality has always been a long-term supporter of community sport and cultural activities across Wales and in 2016 we helped 124 different community groups and projects through our local sponsorship programme, with a total investment of over £56,000, a record performance for our business.

Graeme said:

“We are very clear about why Principality exists, and that is to help people prosper in their homes at every stage of life. As our Members and communities face increasing challenges, which show no sign of diminishing, we understand the responsibility that this places on us and the increasingly important role we have to play in helping in these difficult times.

“For the first time in Principality’s history, we decided to support not one but three local charities, who will benefit from our teams’ charity fundraising activities. These charities, selected by our employees, were 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. Our colleagues raised a record £150,000 for these charities in 2016.

“We have also just celebrated the first anniversary of our 10-year partnership with the WRU, which includes the naming rights of the stadium as well as helping Welsh rugby especially at grassroots level, and has been a great success so far.

“It has benefitted the communities our members live in, with 15 community events being held in Principality Stadium. However, the benefits go beyond rugby and sport.  We have linked with our charity partners to raise cash for their charities via ticket auctions and have also given people, who might not otherwise have had it, the opportunity to watch major events at the stadium.  Importantly, as a business owned by its Members, we have also been able to give away almost a thousand tickets to our Members to reward them for their loyalty.”

Outlook

Looking ahead to the next few years Graeme added:

“We continue to live in uncertain times and 2016 has proved to be no exception to this with what some would say were unexpected political changes all of which served to destabilise markets and led to the Bank of England reducing interest rates to another historical low.

“Despite these uncertainties Principality is very well placed to be able to respond to all of the demands that will inevitably come its way, whether that be changes in economic conditions or in meeting the changing demands of consumers in the financial services marketplace. The business has a strong executive and leadership team who understand these demands and who also understand the value of the mutual model. I am delighted that our current Finance Director Stephen Hughes will take over as CEO in March 2017. I am confident that this appointment, together with the significant financial strength of the business, puts Principality in a position of being, rightly, optimistic about the future.”