Principality Building Society Final Results (6123Q)

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RNS Number : 6123Q

Principality Building Society

22 February 2023

Principality Building Society Annual Results Announcement for the year ended 31 December 2022

Principality has posted strong annual results for 2022, as it continued to support its members and customers through the cost-of-living crisis, making a difference in the communities it serves, and ensuring the wellbeing of its award-winning colleagues.

Julie-Ann Haines, CEO at Principality, said: "From the first moments I took over as CEO, I could see an urgent need to focus on being much more ambitious and clear about what Principality stands for, to help more people across the UK to own their own home and be more financially resilient. It is clear that the pressure of the current cost-of-living crisis has impacted our members, colleagues and communities through 2022.

"To give our members, colleagues, and communities more certainty, we made a promise in 2022 to keep open our branches across Wales and England until at least 2025, so that we will retain a presence on the high street. We have the biggest branch presence of any financial services provider on the high streets of Wales, whilst continuing to develop our technology to become easier to do business with, be quicker and more efficient. It is what we were set up to do more than 160 years ago and our purpose to help people find a home and protect their savings is stronger than ever before in these difficult times."

Helping members through tough economic times

As interest rates increased in 2022 Principality worked hard to balance the differing needs of its mortgage and savings customers, passing on just 2.05% of the Bank of England's then 3.25% base rate rises to its variable rate and discount mortgage members.

Almost 400,000 members benefited from improved savings rates, ensuring Principality offered competitive returns for its savers as interest rates rose. On average its savings rate paid to members has increased more than the market with an average savings rate of 1.03% compared with the market of 0.56% (Source: CACI's CSDB, Stock, Weighted Average Interest Rate for (December 2021 - November 2022).

It helped to support almost 76,000 homeowners, and gave mortgages to more than 4,500 first time buyers last year. Its commercial team helped fund the building of more than 200 homes, while it committed GBP19m to providing loans to housing associations for affordable homes across the country.

Fairer Society

Principality excelled in supporting communities across Wales and its borders, as GBP500,000 was distributed for positive social impact activities to community groups across Wales, and almost GBP200,000 to its charity partners Ty Hafan and Ty Gobaith Hope House children's hospices. More than 28,000 young people benefitted from financial education programmes. Principality also became Living Wage Employer accredited - meaning it pays colleagues the minimum of real living wage and helping it to retain its award-winning teams.

The sixth largest building society in the UK has also received carbon neutral status and has an ambition to be net zero in its operations. It received awards for being the best building society for mortgage customer services, as well as being a strong employer, ranking ninth in the UK as a Great Place to Work(R) in the super large business category, and number one in the UK as a Great Place to Work(R) for women.

Performance highlights

Principality's financial performance was strong in 2022, with underlying profit of GBP43.5m and statutory profit before tax of GBP49.3m. Its retail mortgage book grew by GBP209m in 2022 with its balance sheet now exceeding GBP11.3bn.

The ongoing economic uncertainty has created volatility within impairment provisions. This is the primary driver for the reduction in profit following a GBP14.8m impairment charge during the year, compared to a GBP15.4m provision release during 2021 as the Society takes a prudent view of the economy over the next 18 months.

Julie-Ann added: "Our members can be assured we have a strong balance sheet and capital to reinvest in the business for their benefit, to help us create better homes, help members to financially secure their futures through savings, as well as trying to create a fairer society by having a positive impact on our communities. With unfavourable economic conditions expected to last until at least 2024, our business remains resilient and able to endure these difficult times.

"Now more than ever, we need to be courageous in our decision making. The challenges facing our members, communities and colleagues in the face of the cost-of-living crisis means we need to strive to achieve more. I am so excited about the opportunities that lay before us and how we can start to make an even bigger difference."

KEY PERFORMANCE INDICATORS

   --    Total assets GBP11.3bn (2021: GBP10, 9bn) 
   --    Underlying profit before tax GBP43.5m (2021: GBP54.4m) 
   --    Retail mortgage balances - GBP8,241m (2021: GBP8,033m) 
   --    Savings balances - GBP8,114m (2021: GBP7,944m) 
   --    Capital (CET1 ratio) - 26.5% (2021: 34.0%) 
   --    NPS - 81.6 (2021: 80.5) 

-- 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 2022

 
                                                   2022         2021 
                                                   GBPm         GBPm 
 Continuing operations 
 
 Interest receivable and similar income           284.6        198.7 
 Interest payable and similar charges           (130.7)       (69.5) 
                                               --------  ----------- 
 Net interest income                              153.9        129.2 
 
 Fees and commission receivable                     3.9          3.9 
 Fees and commission payable                      (2.2)        (1.8) 
                                               --------  ----------- 
 Net fee and commission income                      1.7          2.1 
 
 Other operating income                             3.1          0.8 
 Other fair value gains                             5.8          9.6 
                                               --------  ----------- 
 Net operating income                             164.5        141.7 
                                               --------  ----------- 
 
 Administrative expenses                         (88.4)       (79.8) 
 Depreciation and amortisation                   (10.5)       (10.8) 
 Other impairment losses                          (1.3)        (2.5) 
                                               --------  ----------- 
 Operating expenses                             (100.2)       (93.1) 
 
 Impairment provision (charge)/release           (14.8)         15.4 
 Provision for liabilities                        (0.2)            - 
                                               --------  ----------- 
 Operating profit and profit before taxation       49.3         64.0 
                                               --------  ----------- 
 
 Taxation expense                                (11.6)       (15.2) 
 
 Profit for the year                               37.7         48.8 
                                               --------  ----------- 
 
 
 
 
 

Consolidated statement of financial position as at 31 December 2022

 
                                                    2022       2021 
                                                    GBPm       GBPm 
 Assets 
 Liquid assets                                    2004.2    1,887.9 
 Derivative financial instruments                  369.0       52.8 
 Loans and advances to customers                  8795.0    8,883.3 
 Fixed and other assets                             89.1       83.9 
 Total assets                                   11,257.3   10,907.9 
                                               ---------  --------- 
 
 Liabilities 
 Shares                                          8,113.6    7,943.8 
 Borrowings                                      2,361.2    2,262.3 
 Derivative financial instruments                   63.6       24.7 
 Other liabilities                                  40.1       30.8 
 Total liabilities                              10,578.5   10,261.6 
 
  General reserve                                  680.1      645.5 
  Other reserves                                   (1.3)        0.8 
                                               ---------  --------- 
 Total equity and liabilities                   11,257.3   10,907.9 
                                               ---------  --------- 
 
 
 
 Key results and ratios                             2022       2021 
                                                       %          % 
 
 Net interest margin                               1.39%      1.17% 
 Cost income ratio                                 62.7%      70.5% 
 Management expense ratio                          0.90%      0.84% 
 Common equity tier 1 capital ratio                26.5%      34.0% 
 Leverage ratio                                     6.5%       6.5% 
 Liquid assets as a percentage of shares and 
  borrowings                                       19.1%      18.5% 
 

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 16 agencies in Wales and the borders.

-- Principality is the 6th largest building society in the UK.

-- The Society has assets of GBP11.3 billion.

-- Principality is committed to remaining a mutual organisation.

-- www.principality.co.uk

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February 22, 2023 02:00 ET (07:00 GMT)