Principality Building Society Annual Financial Report (4795C)

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RNS Number : 4795C

Principality Building Society

23 February 2022

Principality Building Society Annual Results Announcement for the year ended 31 December 2021

Principality will reinvest strong profit in its branches and technology

Principality has posted strong annual results for 2021, as it focused all its efforts on supporting members, making a positive impact on society, and supporting its award-winning colleagues.

Thriving communities

CEO Julie-Ann Haines said: "It has been another challenging year for our colleagues, our customers, and our communities. Starting the year in national lockdown, I have been struck by how our colleagues have maintained their focus and commitment to make Principality a successful and welcoming Society. Our Society continues to look after our members' savings and mortgage needs, and we have made great progress as we continue to deliver on our strategic ambitions.

"It has been a very difficult period for the high street but as competitors continue to close their branches, I am proud that we have the largest physical branch presence of any financial services brand in Wales and the borders. Earlier this month we made a promise to maintain our branch presence in all of the towns and cities we currently operate in Wales and England until 2025 at least, giving our members, colleagues and communities certainty.

"As a major business in Wales, we want our towns to thrive and believe financial service organisations have a role to play in ensuring towns prosper, and consumers have access to cash. Our branches will remain open so long as members continue to value and use them so they will be there for our future generations."

Better Homes

Principality continued to help first-time-buyers with the number of applications rising, with 2,954 people able to get on to the property ladder despite a much more challenging housing market.

Julie-Ann commented: "As a result of the pandemic and government intervention, we have seen large increases in house prices and so we remain committed to ensuring we put more effort into helping people owning their own home. This included the launch of our First Home Steps app specifically online support for first time buyers, as well as offering a range of mortgages aimed at newly qualified professionals.

"Mortgage customers were given continued support with payment holidays, and we made sure the needs of our members were met during uncertain times for everyone."

For mutual benefit, helping to build a fairer society

In partnership with Young Enterprise, Principality proudly sponsored the Fiver Challenge across Wales for the second consecutive year and it was great to see over 3,000 Primary pupils set up their own businesses with GBP5 of investment, lots of learning, a big environmental focus and some great profits too. Since 2020, the building society has also supported 2,000 young people in Wales with financial education qualifications from the London Institute of Banking and Finance, and announced it will invest GBP100,000 to continue this support.

Julie-Ann said: "We want to ensure we continue to be a responsible, sustainable business, focused on the future. Whilst we will continue to invest in technology to benefit how your society is run, we will increase investment to help more first time buyers get a home, help more people to live in carbon neutral homes, ensure our members have a choice in how we run their building society, and create a much fairer society for the benefit of our customers, colleagues and communities.

"For example, we are focusing on our sustainability as an organisation, and have set an ambitious target to be carbon net zero by 2030. Our award-winning commercial team introduced a green loan fund to support developers who are building carbon neutral homes across Wales. We're also partnering with Sero, a Welsh-based fintech, to identify how we can support our members who want to improve the sustainability of their homes."

Secure Futures

In 2020 Principality increased its provisions for potential future loan losses because of the economic uncertainty caused by the pandemic. Over the last year the economic outlook has gradually improved, and is more optimistic for 2022. The housing market exceeded expectations during 2021 and employment is more stable than expected after furlough ended, which has resulted in a reduction in the overall level of provisioning. An underlying profit before tax of GBP54.4m (2020: GBP24.1m) and statutory profit before tax of GBP64.0m (GBP19.9m).

Julie-Ann said: " We have maintained our focus on an investment programme which will enable us to offer current and future members increased flexibility in managing their savings and mortgage needs. This year we have been busy implementing a new mortgage system that will benefit brokers and customers alike by improving the speed of our application process, and meet more of our customer needs through offering a wider range of products. Our profits are strong and will use this to invest in our technology, branches and colleagues to maintain our outstanding customer service. "

Outlook

On the outlook for 2022 Julie-Ann added: "The economic environment looks to be more optimistic next year and beyond, although there are financial pressures such as rising energy bills, the cost of living, and national insurance increases to for our members to contend with in the coming year. Our focus remains on helping members to get a home and stay in a home for longer, to become a much more purpose-led and sustainable business, and to honour our commitment to developing and growing our business in a safe and secure way. Our members' expectations of us are changing. So we will continue to adapt, invest and improve so that we remain relevant for the long term, and ready to face future challenges."

KEY PERFORMANCE INDICATORS

   --    Total assets GBP10,907.9m (2020: GBP11,120.9m) 
   --    Underlying profit before tax GBP54.4m (2020: GBP24.1m) 
   --    Residential mortgage balances - GBP8,033.3m (2020: GBP8,175.7m) 
   --    Savings balances - GBP7,934.8m (2020: GBP8,187.4m) 
   --    NPS - 80.5% (2020: 79.8%) 
   --    Capital (CET1 ratio) - 33.99% (2020: 27.1%) 
   --      % of mortgages funded by savers - 89.4% (2020: 88.9%) 
   --      8(th) UK's Best Workplaces(TM) 2021 (11(th) 2020) 

-- The Society is committed to supporting the communities of Wales, with 53 branches and 14 agencies in Wales and the borders.

Consolidated income statement for the year ended 31 December 2021

 
                                                       2021         2020 
                                                       GBPm         GBPm 
 Continuing operations 
 
 Interest receivable and similar income               198.7        205.6 
 Interest payable and similar charges                (69.5)       (97.0) 
                                                  ---------  ----------- 
 Net interest income                                  129.2        108.6 
                                                  ---------  ----------- 
 
 Fees and commission receivable                         3.9          4.1 
 Fees and commission payable                          (1.8)        (2.1) 
                                                  ---------  ----------- 
 Net fee and commission income                          2.1          2.0 
 
 Other operating income                                 0.8          0.7 
 Other fair value losses                                9.6        (4.1) 
                                                  ---------  ----------- 
 Net operating income                                 141.7        107.2 
 
 Administrative expenses                             (79.8)       (70.9) 
 Depreciation and amortisation                       (10.8)     (9.0) 
  Other impairment losses                             (2.5)        - 
                                                  ---------  ----------- 
 Operating expenses                                  (93.1)       (79.9) 
 
 Impairment provision release/(charge)               15.4          (9.1) 
  Provision for liabilities                            -             1.7 
 
 Operating profit and profit before taxation           64.0         19.9 
 Taxation expense                                    (15.2)        (4.0) 
 Profit for the year                                   48.8         15.9 
                                                  ---------  ----------- 
 
 
 
   Consolidated statement of financial position 
   as at 31 December 2021 
                                                       2021         2020 
                                                       GBPm         GBPm 
 Assets 
 Liquid assets                                      1,887.9      1,807.9 
 Derivative financial instruments                      52.8         23.7 
 Loans and advances to customers                    8,883.3      9,204.9 
 Fixed and other assets                                83.9         84.4 
 Total assets                                      10,907.9     11,120.9 
                                                  ---------  ----------- 
 
 Liabilities 
 Shares                                             7,943.8      8,187.4 
 Borrowings                                         2,262.3      2,200.1 
 Derivative financial instruments                      24.7        106.2 
 Other liabilities                                     30.8         32.6 
 Total liabilities                                 10,261.6     10,526.3 
  General reserve                                     645.5        593.4 
  Other reserves                                        0.8          1.2 
                                                  ---------  ----------- 
 Total equity and liabilities                      10,907.9     11,120.9 
                                                  ---------  ----------- 
 
 
 Key results and ratios                                2021         2020 
                                                          %            % 
 

 Net interest margin                                  1.17%        1.00% 
 Cost income ratio                                    70.5%        71.8% 
 Management expense ratio                             0.84%        0.73% 
 Common equity tier 1 capital ratio                  33.99%       27.10% 
 Leverage ratio                                       5.56%        5.14% 
 Liquid assets as a percentage of shares and 
  borrowings                                          18.5%        17.4% 
 
 
 
 
 

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 53 branches and 14 agencies in Wales and the borders.

   --      Principality is the 6th largest building society in the UK. 
   --      The Society has assets of just under GBP11 billion. 
   --      Principality is committed to remaining a mutual organisation. 
   --      www.principality.co.uk 

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February 23, 2022 02:00 ET (07:00 GMT)