6 August 2024

Principality Building Society Announces Strong Growth and Continued Investment in Members and Communities

Principality Building Society has reported its financial results for the first half of 2024, showcasing continued strong growth driven by consistently providing good value to members, providing additional support for customers and communities, and delivering a strong financial performance in challenging macroeconomic conditions.

Julie-Ann Haines, Chief Executive Officer of Principality Building Society, said: “The first six months of 2024 have been another challenging period for our members, colleagues and communities as the cost-of-living crisis continues to bite and impact people’s finances.

I am pleased to announce a strong performance for the first half of the year whilst we have continued to support our members and communities through these turbulent economic times, building on two years of progress towards our strategy against a testing backdrop of macroeconomic pressures; higher inflation and political uncertainty.

Principality is a purpose-led, member-owned organisation. Our ambition to have impact beyond our scale and to grow the business sustainably for future generations is making real progress. We have delivered strong mortgage and savings growth in the last six months, whilst becoming more efficient through improving our online and branch customer experiences.

Our member-owned, sustainable business model, responsible approach to lending and conservative interest rate risk management have enabled us to balance the needs of savers and borrowers while also keeping the Society safe and secure for the long term. That’s why we remain committed to local communities in Wales, not just through having the largest high street branch presence of any bank or building society in Wales, but also through championing access to cash, providing good interest rates, volunteering, community engagement and sponsorships.”

Better Homes

Julie-Ann Haines, said: “Core to our purpose is trying to create a more accessible housing market, where there are more affordable homes and it’s easier for first-time buyers to get onto the property ladder.

In the first half of the year, we’ve helped more than 3,576 (June 2023: 3,304) first-time buyers purchase their first home, and our net retail mortgage lending was £0.6bn (June 2023: £0.5bn). This takes us well on our way to our ambition to support over 15,000 customers to buy their first home by 2030.”

The excellent support Principality has given to its members led to it being voted Best Building Society for Customer Service by What Mortgage for the seventh consecutive year, as well as the Best Medium Lender at the Legal & General Mortgage Club awards and the Best Business Outcome Experian award.

The final phase of the £100m Mill development in Ely, Cardiff, is about to complete. This project, spanning seven years, has built 800 homes, half of which offer discounted, intermediate, or social rents. Principality’s Commercial Lending team supports 18 out of 33 housing associations in Wales, most recently awarding £25m to Cardiff-based Hafod for 300 affordable homes over five years, part of £80m in commitments for 2024, in addition to a £50m loan to Pobl in 2023.

Secure Future - Society of Savers

Julie-Ann continued: “As the cost-of-living crisis continues, more people are struggling financially. Those on the lowest incomes have been affected the most and have the least in savings. We want to provide our members with competitive savings rates, so we can create a society of resilient savers. Savings performance has been strong; we have increased the number of savers we have to over 427,085 with over 72,519 customers saving regularly, with savings through our branches up 5%.

We continue to invest in providing a better experience for customers regardless of the channel customers choose and have made significant improvements to our digital savings journey and our new website will launch in the coming weeks.

As a building society and a mutual, we’re owned by our members, not shareholders, so I’m proud to say that on average, we’ve paid savers 4.00% versus the market average of 3.32%* for the first four months of 2024, resulting in the equivalent of an additional £21m (0.68%) in interest paid to our saving members.”

^{*Source: CACI's Current Account & Savings Database (CSDB), Weighted Average Interest Rate for January 2024 - April 2024.}

Fairer Society- greater social impact for communities

Julie-Anne continued: “Principality has the ambition to set aside up to 3% of its annual profit for social purpose, and as part of that commitment, I’m pleased to say we plan to issue the fourth iteration of our Future Generation Fund in the second half of the year, which will support local community groups in our heartland, with funding in excess of £0.5m. These funds create impact in communities ensuring that the most disadvantaged have more opportunities.

We also supported financial education for 24,567 school children and young people and donated £121,248 to our charity partners Ty Hafan and Hope House Ty Gobaith children’s hospices through colleague and member fundraising.

The Society’s commitment to diversity and inclusion continues to shine through, I’m delighted that as a result, Principality won the Financial Services Company of the Year Award – for the National Centre for Diversity.

Our excellent colleague networks have made big strides in helping the Society along on this journey. One example is how the Pride network hosted local small businesses, colleagues and their friends and family at Principality House ahead of the 25th annual PRIDE Cymru march, for which the Society was the headline sponsor for the second year in a row.”

Strong Financial Performance

Principality’s mortgage book growth of £0.6bn has brought the Society’s mortgage balance to £9.9bn (December 2023: £9.3bn). Savings balance has also grown £0.8bn to £9.9bn (December 2023: £9.1bn). This brings Principality’s total assets to £13.5bn, £1bn higher than December 2023 (£12.5bn).

Following an expected reduction in Net Interest Margin to 1.21% (December 2023: 1.52%), there was a corresponding decrease in Underlying Profit to £20.1m (June 2023: £39.1m), while statutory profit before tax was £22.4m (June 2023: £41.0m).

Julie-Ann added: “There is significant investment underway to ensure the Society is fit for the future, with our strong capital and liquidity positions providing a solid foundation for future growth and investment, all for the benefit of members as we seek to make it easier for them to do business with us.

Providing a safe and secure home for our Members’ savings is fundamental to the ongoing success of our business, just as it has been for the past 164 years.”

Outlook

Julie-Ann concluded: “Living in the homes we desire and saving for the future we deserve is more difficult than ever before. However, as inflation pressures begin to ease and we anticipate a more stable political environment, the outlook is becoming more optimistic. I’m confident that Principality is well-positioned to leverage our strengths and meet our ambition to have an impact beyond our scale.

Our long-term vision remains steadfast: to help build a society of savers where everyone has a place to call home. Our strong financial performance means we can continue to invest to protect the long-term relevance of the Society to better meet the needs of our customers, colleagues and communities.”

Key Performance Highlights:

• Total assets: £13.5bn (December 2023: £12.5bn)
• Retail mortgage balances: £9.9bn (December 2023: £9.3bn)
• Savings balances: £9.9bn (December 2023 : £9.1bn)
• Statutory profit before tax: £22.4m (June 2023: £41.0m)
• Underlying profit before tax: £20.1m (June 2023: £39.1m)
• Common Equity Tier 1 ratio: 19.65% (December 2023 21.77%)
• Net interest margin: 1.21% (December 2023: 1.52%)
• Statutory Management Expense Ratio: 0.91% (Dec-23 0.99%)

To read our Interim Results Report in full, click here.

Published: 06/08/2024