Principality Building Society Principality Building Society Annual Results (0849C)

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RNS Number : 0849C

Principality Building Society

06 February 2020

Principality Building Society Annual Results Announcement for the year ended 31 December 2019

Principality posts strong annual performance

Principality has posted strong annual results, with new net retail mortgage lending of GBP499m helping to take total assets to over GBP10bn for the first time in the Society's history (GBP10.7bn). To support the growth in lending the Society attracted an additional GBP596m of new savings. Underlying profits for the year were GBP39.8m and in line with expectations.

Principality once again provided award-winning customer service, with consumer champion Which? naming Principality the top scoring lender for customer satisfaction for the second year running. GFK Global named Principality the most recommended savings provider in Wales in each of the past two years. In 2019 the Society's Net Promoter Score, which measures the satisfaction of customers and brokers who recommend Principality to other people, improved to 81.5 per cent compared with 78.6 per cent in 2018.

The Society's savings products have maintained their position as one of the best on the High Street. In 2019 Principality delivered an average rate to savers of 1.18%, compared with a market average over the same period of 0.74% [1].

Mike Jones, Interim CEO at Principality Building Society, said:

"I am very proud of our performance and the excellent service we continue to deliver to our Members. Our aims are very much focused on securing the long term future of the Society and our underlying reported profits reflect the cost of the significant investment we are making in modernising the technology which supports our mortgage and savings businesses. This will make our mortgage application process simpler and more efficient for our customers and mortgage brokers to use. Our colleagues will also deliver a new savings platform which will improve our on-line service for Members.

"Our strong capital base, supported by our low risk business model, allows us to take a long term view when investing in the business. Being a safe and secure home for our Members' savings is crucial to the ongoing success of our business.

"This is an exciting period in Principality's history. Our goal is to secure the future of the business for our next generation of Members. While we are investing in technology, our commitment to the high street is undiminished. As bank branches on the high street in Wales continue to close, our presence is strong with 70 branches and agencies across Wales and the Borders. Our business continues to invest in branches while others are shutting theirs. As a major business in Wales, we want our towns to be thriving and financial service organisations have a role to play in ensuring towns and communities prosper."

Principality Commercial team has once again made an outstanding contribution in helping to build and invest in Welsh communities. This has included making GBP50m available in competitively priced loans to help smaller housing developers build homes across Wales, together with GBP75m of funding for housing associations to support the creation of affordable homes. Their efforts represent a significant contribution towards addressing the Welsh Housing Agenda.

Last year, Principality has provided financial education to more than 11,000 children. It invested GBP110,000 and helped thousands of school children to earn the equivalent of a GCSE. Colleagues also raised GBP156,000 to be shared equally between our charity partners Teenage Cancer Trust Cymru and Alzheimer's Society Cymru.

Mike added: "I expect the economic environment in 2020 to remain challenging and competitive. Nevertheless, our strong capital base means the business is able provide a safe and secure home for our Members' savings irrespective of the prevailing economic climate.

"The Society is built on strong foundations and we have consistently demonstrated our ability to thrive in challenging market conditions. Continuing to grow and invest in our business and in our colleagues, will ensure that we provide the outstanding service our existing Members have come to expect."

Notes to Editors

Key Performance Highlights

-- Underlying pre-tax profit, which reflects the true trading performance of the business - GBP39.8m (2018 - GBP43.8m)

   --      Statutory profit before tax - GBP39.6m (2018 - GBP40.7m) 
   --      Total assets rose to GBP10.7bn (2018 - GBP9.7bn) 

-- Savings balances grew strongly and now stand at - GBP7.6bn (up from GBP7.0bn at 31 December 2018)

   --      Helped more than 4,900 first time buyers get on to the property ladder 
   --      Net interest margin - 1.09% (2018 - 1.26%) 
   --      Net retail mortgage lending - GBP499.3m (2018 - GBP718.7m) 
   --      Strong capital ratios with a Common Equity Tier 1 ratio of 26.20% (2018: 27.06%) 

-- Customer service has once again delivered and our net promoter score stood at 81.5% (2018 - 78.6%)

   --      Colleagues have raised, with match-funding by Principality, GBP156k for charity 

Consolidated income statement for the year ended 31 December 2019

 
                                                   2019         2018 
                                                   GBPm         GBPm 
 Continuing operations 
 
 Interest receivable and similar income           233.9        226.0 
 Interest payable and similar charges           (122.5)      (106.4) 
                                               --------  ----------- 
 Net interest income                              111.4        119.6 
                                               --------  ----------- 
 
 Fees and commission receivable                     4.9          5.7 
 Fees and commission payable                      (1.5)        (1.6) 
                                               --------  ----------- 
 Net fee and commission income                      3.4          4.1 
 
 Other operating income                             1.0          1.5 
 Other fair value losses                          (0.2)        (2.4) 
                                               --------  ----------- 
 Net operating income                             115.6        122.8 
 
 Administrative expenses                         (72.8)       (75.7) 
 Depreciation and amortisation                    (7.3)        (5.8) 
                                               --------  ----------- 
 Operating expenses                              (80.1)       (81.5) 
 
 Impairment provision release/(charge)              4.1        (0.6) 
 
 Operating profit and profit before taxation       39.6         40.7 
 Taxation expense                                 (7.6)        (7.8) 
 Profit for the year                               32.0         32.9 
                                               --------  ----------- 
 
 
 
 
 
 
 

Consolidated statement of financial position as at 31 December 2019

 
                                                    2019      2018 
                                                    GBPm      GBPm 
 Assets 
 Liquid assets                                   1,569.6   1,112.5 
 Derivative financial instruments                   21.3      24.8 
 Loans and advances to customers                 9,033.1   8,498.7 
 Fixed and other assets                             71.8      51.4 
 Total assets                                   10,695.8   9,687.4 
                                               ---------  -------- 
 
 Liabilities 
 Shares                                          7,588.5   6,989.8 
 Borrowings                                      2,378.1   2,019.4 
 Derivative financial instruments                   50.4      31.6 
 Other liabilities                                  34.2      32.3 
 Subscribed capital                                 61.2      63.6 
                                               ---------  -------- 
 Total liabilities                              10,112.4   9,136.7 
  General reserve                                  582.1     550.1 
  Other reserves                                     1.3       0.6 
                                               ---------  -------- 
 Total equity and liabilities                   10,695.8   9,687.4 
                                               ---------  -------- 
 
 
 Key results and ratios                             2019      2018 
                                                       %         % 
 
 Net interest margin                               1.09%     1.26% 
 Cost income ratio                                 69.4%     66.4% 
 Management expense ratio                          0.79%     0.86% 
 Common equity tier 1 capital ratio               26.20%    27.06% 
 Leverage ratio                                    5.21%     5.60% 
 Liquid assets as a percentage of shares and 
  borrowings                                       15.8%     12.4% 
 
   --      Formed in 1860, Principality is Wales's largest building society. 

-- The Society is committed to supporting the communities of Wales, with 53 branches and 17 agencies in Wales and the borders.

   --      Principality is the 6th largest building society in the UK. 
   --      The Society has assets of GBP10.7 billion. 
   --      www.principality.co.uk 

[1] Source: CACI's CSDB, weighted UK average interest rates for fixed and variable rate stock, January - October 2019 (latest data available).

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February 06, 2020 02:00 ET (07:00 GMT)