Final Results

 

TIDM89VX 
 
RNS Number : 8259N 
Principality Building Society 
25 February 2009 
 
**Strictly Embargoed until 7am, Wednesday 25th February 2009** 
 
 
PROFITABLE PRINCIPALITY PUTS SAFETY FIRST 
 
 
 
 
Commenting on Principality's business performance, Peter Griffiths, Group Chief 
Executive, said: "In a year of unprecedented financial market conditions, I am 
pleased to report a robust business performance as Principality Group continues 
to successfully navigate the financial storm. 
 
 
Our members are entitled to take for granted the simple fact that we can keep 
their money safe, that has been our key objective and we have achieved that aim. 
 
 
We continue to be profitable, our balance sheet is strong and recruitment of new 
members is at an all time high.  We have continued to safely invest our reserves 
and the Society has not been hit by direct losses from exposures to defaulting 
UK and overseas banks. Despite the pace, depth and ferocity of problems in the 
financial services sector, I believe the Principality brand and franchise has 
been strengthened during these testing times." 
 
 
Key performance highlights: 
 
 
  *  Record retail savings balances increased by GBP822.1m to GBP4,626.5m 
  *  Recruitment of over 76,000 new Society members 
  *  95% of loans funded by customer deposits 
  *  Group assets increased by GBP546.2m to GBP6,398.7m 
  *  Pre-tax profit before Financial Services Compensation Scheme levy (FSCS) for the 
  Group was GBP14.5m 
  *  Reserves increased to GBP285.0m 
 
 
 
Solid Performance 
Principality delivered a solid GBP14.5m profit performance before charging an 
FSCS levy of GBP5.2m towards the cost of rescuing failed financial institutions. 
 
 
The core Society continued to deliver its promise to provide attractively priced 
savings and investments for both new and existing customers. This, coupled with 
the appeal of Principality's trusted brand, led to record retail savings inflows 
of GBP822.1m and the recruitment of over 76,000 new members. 
 
 
Keeping Members Money Safe 
Anticipating the economic slowdown Principality took early decisions to curtail 
lending growth, especially in its secured loans subsidiary business, Nemo 
Personal Finance. Growth plans for traditional Society mortgage lending were 
also trimmed back and Commercial Lending volumes reduced. 
 
 
95% of loans are now funded by retail Society savings balances, ensuring high 
levels of liquidity for the business and enhanced returns for savers. The 
Society has successfully provided safety and security for our members by 
deliberately reducing reliance on wholesale and money market funding. 
 
 
Wider Group Challenges 
The slow down in the housing market posed significant challenges, particularly 
in secured loan subsidiary Nemo and Estate Agency Peter Alan. The businesses 
responded promptly to changed market conditions taking decisive action and 
sometimes difficult measures to contain costs and drive efficiencies. 
Principality's Commercial business performed well during the year with arrears 
levels well below industry benchmarks. 
 
 
The economic downturn has resulted in increased provisions during 2008 
particularly in the Nemo business.  The Group continues to ensure these are 
maintained at a prudent level to accurately cover potential losses across the 
Group. 
 
 
Facing the Future with Confidence 
Peter continued, "Demands to build up capital, hold record levels of liquidity, 
pay savers attractive rates and provide adequate lines of finance for borrowers 
posed some real challenges during 2008. However, I believe we have achieved a 
good balance. Our approach to the challenges has been proactive and prudent and 
as a result our performance has been robust." 
 
David Williams, Principality Chairman added, "Looking forward we do not 
underestimate the pressures we can expect to face in 2009. The restricted 
availability of credit looks set to continue and economic conditions are not 
forecast to improve in the short term. However with a strong capital position, 
high levels of liquidity and realistic impairment provisions across the Group we 
are well placed to deal with these challenges. We will continue to attract 
retail savings as our main source of funding and to look to drive operational 
efficiency, customer service and credit quality across our operations. 
 
 
These priorities will ensure we continue to provide our members with the 
security, fairness and success they look for in a mutual building society. The 
mutual business model, now more than ever before, resonates more strongly with 
savers and borrowers alike. This plays to Principality's strengths and we 
continue to face the future with confidence." 
 
 
-ends- 
Notes to editors 
 
 
  *  Formed in 1860, Principality is Wales's largest building society. 
  *  The Society is committed to supporting the communities of Wales. 
  *  With more branches (50) in Wales than any other building society, Principality 
  is the 9th largest building society in the UK. 
  *  The Society has assets of over GBP6 billion. 
  *  Principality is committed to remaining a mutual organisation. 
 
 
 
For more information please contact: 
 
 
Jaime Falarczyk, Corporate Communications Manager: 02920 773208, 07792071669, 
[e-mail] 
 
 
Emma Stanford, External Affairs Co-ordinator: 02920 773788 
[e-mail] 
  Consolidated income and expenditure statement 
for the year ended 31 December 2008 
 
 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
|                                                                     |            |         2008 |         2007 | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
|                                                                     |            |         GBPm |         GBPm | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
|                                                                     |            |              |              | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
| Interest receivable and similar income                              |            |        388.6 |        327.4 | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
| Interest payable and similar charges                                |            |      (304.0) |      (258.8) | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
| Net interest income                                                 |            |         84.6 |         68.6 | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
|                                                                     |            |              |              | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
| Fees and commission receivable                                      |            |         24.5 |         41.6 | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
| Fees and commission payable                                         |            |        (2.8) |        (6.3) | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
| Net fee and commission income                                       |            |         21.7 |         35.3 | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
|                                                                     |            |              |              | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
| Other operating income                                              |            |          0.6 |          1.1 | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
| Other fair value gains/(losses)                                     |            |          3.2 |        (0.3) | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
| Net operating income                                                |            |        110.1 |        104.7 | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
|                                                                     |            |              |              | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
| Administrative expenses                                             |            |       (57.8) |       (62.0) | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
| Depreciation and amortisation                                       |            |        (6.1) |        (5.6) | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
| Operating expenses                                                  |            |       (63.9) |       (67.6) | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
|                                                                     |            |              |              | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
| Impairment losses on loans and advances                             |            |       (31.7) |        (6.5) | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
| Financial Services Compensation Scheme levy                         |            |        (5.2) |            - | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
| Operating profit and profit before taxation                         |            |          9.3 |         30.6 | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
|                                                                     |            |              |              | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
| Taxation expense                                                    |            |        (3.6) |       (10.1) | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
|                                                                     |            |              |              | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
| Profit for the year                                                 |            |          5.7 |         20.5 | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
|                                                                     |            |              |              | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
| Consolidated statement of total recognised income and expense                    |              |              | 
+----------------------------------------------------------------------------------+--------------+--------------+ 
|                                                                     |            |              |              | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
| Profit for the year                                                 |            |          5.7 |         20.5 | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
| Actuarial gain/(loss) on retirement benefit obligations             |            |          0.7 |        (1.5) | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
| Movement in deferred tax relating to retirement benefit obligations |            |        (0.2) |          0.5 | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
| Total recognised income for the year                                |            |          6.2 |         19.5 | 
+---------------------------------------------------------------------+------------+--------------+--------------+ 
 
 
 
 Consolidated balance sheet 
at 31 December 2008 
 
+-------------------------------------------------------------+------------+-----------------+---+------------------+ 
|                                                             |            |            2008 |   |             2007 | 
+-------------------------------------------------------------+------------+-----------------+---+------------------+ 
|                                                             |            |            GBPm |   |             GBPm | 
+-------------------------------------------------------------+------------+-----------------+---+------------------+ 
| Assets                                                      |            |                 |   |                  | 
+-------------------------------------------------------------+------------+-----------------+---+------------------+ 
| Liquid assets                                               |            |         1,390.0 |   |          1,196.7 | 
+-------------------------------------------------------------+------------+-----------------+---+------------------+ 
| Derivative financial instruments                            |            |            40.9 |   |             10.8 | 
+-------------------------------------------------------------+------------+-----------------+---+------------------+ 
| Loans and advances to customers                             |            |         4,884.3 |   |          4,584.0 | 
+-------------------------------------------------------------+------------+-----------------+---+------------------+ 
| Fixed and other assets                                      |            |            83.5 |   |             61.0 | 
+-------------------------------------------------------------+------------+-----------------+---+------------------+ 
| Total assets                                                |            |         6,398.7 |   |          5,852.5 | 
+-------------------------------------------------------------+------------+-----------------+---+------------------+ 
|                                                             |            |                 |   |                  | 
+-------------------------------------------------------------+------------+-----------------+---+------------------+ 
| Liabilities                                                 |            |                 |   |                  | 
+-------------------------------------------------------------+------------+-----------------+---+------------------+ 
|                                                             |            |                 |   |                  | 
+-------------------------------------------------------------+------------+-----------------+---+------------------+ 
| Shares                                                      |            |         4,626.4 |   |          3,804.3 | 
+-------------------------------------------------------------+------------+-----------------+---+------------------+ 
| Borrowings                                                  |            |         1,186.0 |   |          1,540.0 | 
+-------------------------------------------------------------+------------+-----------------+---+------------------+ 
| Derivative financial instruments                            |            |            70.5 |   |              9.9 | 
+-------------------------------------------------------------+------------+-----------------+---+------------------+ 
| Other liabilities                                           |            |            36.0 |   |             43.0 | 
+-------------------------------------------------------------+------------+-----------------+---+------------------+ 
| Subordinated liabilities                                    |            |           125.9 |   |            120.9 | 
+-------------------------------------------------------------+------------+-----------------+---+------------------+ 
| Subscribed capital                                          |            |            68.9 |   |             57.6 | 
+-------------------------------------------------------------+------------+-----------------+---+------------------+ 
| Total liabilities                                           |            |         6,113.7 |   |          5,575.7 | 
+-------------------------------------------------------------+------------+-----------------+---+------------------+ 
| General reserve                                             |            |           283.5 |   |            277.3 | 
+-------------------------------------------------------------+------------+-----------------+---+------------------+ 
| Other reserves                                              |            |             1.5 |   |            (0.5) | 
+-------------------------------------------------------------+------------+-----------------+---+------------------+ 
| Total equity and liabilities                                |            |         6,398.7 |   |          5,852.5 | 
+-------------------------------------------------------------+------------+-----------------+---+------------------+ 
 
 
 
 
 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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