Principality Building Society Interim Results Announcement for the six months to 30 June 2020
Principality supports customers and communities through pandemic
Principality Building Society focused all its efforts on supporting members, customers and colleagues during a challenging first half of the year. The building society has granted more than 15,000 homeowners a mortgage payment deferral, helping them to cope with the financial uncertainty created by the COVID-19 pandemic and supported communities by keeping its branches open throughout the lockdown period.
Mike Jones, Interim Chief Executive at Principality, said: "In the face of significant disruption and uncertainty we have maintained our award-winning customer service. During the first half of the year we've had to deal with a number of operational challenges, not least enabling 700 colleagues from our head office to work effectively from home. At the same time, 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. We've launched an app for those looking to save for their first home and have improved our online functionality and security meaning customers and members can access more services in this way."
For the third year running Principality has won the What Mortgage award for Best Building Society Customer Service. This is reflected in the Society's Net Promoter Score which is well above the sector average at 81.2%, meaning eight out of 10 of members say they would recommend Principality to family or friends based on their level of satisfaction.
Given the detrimental impact COVID-19 has had on charities, Principality colleagues still found a way to raise money. With match funding, a total of £105,000 has been donated so far this year, split equally between Principality's two charity partners Teenage Cancer Trust Cymru and Alzheimer's Society Cymru.
Principality has also partnered with Young Money for their Fiver Challenge which encourages the development of entrepreneurial skills for children, while raising money for local causes. More than 6,000 children have already signed up for this digital challenge through their schools and we hope to see many more joining them by the end of the year.
Mike said: "I am very proud of the efforts our colleagues have made to improve the lives of others. As a purpose led business, we will continue to work hard to help our communities deal with the many challenges they face. This has included helping communities during the floods across Wales in February and providing support to projects during the pandemic crisis.
"Our people are our greatest asset and we strive to create a friendly, open and inclusive culture. It was wonderful to be acknowledged once again as one of the best places to work in the UK by Great Place to Work®. Our colleagues continue to make us stand out in the sector and are renowned for their warmth, personal approach and empathy."
Principality had signposted an expected reduction in profits in 2020 due to continued investment in technology to transform its core mortgage and savings operations. However, in addition, and in response to the economic downturn, provisions of £17.9m have been put aside for potential loan losses that may arise. Whilst no significant credit losses have been incurred to date, it is recognised that some customers may experience financial difficulties over the next few years. Current accounting standards require estimated losses to be provided for at an early stage, taking into account economic forecasts of factors including unemployment levels and residential and commercial property prices.
Principality remains very well capitalised but this prudent approach has had a significant impact on results for this interim period, resulting in an underlying loss before tax of £3.5m (six months to 30 June 2019: profit of £21.2m) and statutory loss before tax of £6.4m (six months to 30 June 2019: profit of £19.8m).
Mike explained: "As a mutual, member-owned building society, our aim has never been to maximise profit but to focus on the long-term future of the Society. We have taken a cautious approach in setting what we consider to be an appropriate level of provision against possible future loan losses, and have done so in the knowledge that our underlying financial strength means we are well equipped to respond to any further economic challenges we are likely to face in the months and years ahead. Our capital and liquidity remain strong and provide a solid platform for growth and future investment in our business.
"Overall trading performance has been broadly in line with our expectations, notwithstanding the significant impact of the pandemic on the markets in which we operate. Our retail mortgage lending increased by £118.7m in the first six months of this year, taking total retail lending over £8bn for the first time, despite the UK housing market coming to a standstill for the best part of four months.
"We have successfully weathered many financial crises in our 160-year history. We have always supported our members and will continue to do so as we navigate our way through these current unprecedented circumstances. But we have also looked to the future and continued our programme of investment in technology to further improve our award-winning service and broaden the range of products we are able to offer to our members. Providing a safe and secure home for our members' savings is fundamental to the ongoing success of our business and our aim is to continue to build scale, strength and resilience for the future, notwithstanding the fact that short-term profitability will be impacted."
Looking to the second half of the year Mike added: "We expect the economic environment to remain challenging through the remainder of 2020 and beyond as the impact of the coronavirus pandemic continues to be felt. In these difficult circumstances, I want to assure members that Principality remains a safe home for their savings, and has the strength and resilience to withstand the turbulence we are all presently facing. Our long term priorities remain unchanged and, while our immediate focus remains on helping members through these uncertain times, we remain committed to developing and growing our business in a safe and secure way."
KEY PERFORMANCE INDICATORS
· Total assets of £10.5bn (31 December 2019: £10.7bn)
· Retail mortgage balances of £8,112.3m (31 December 2019: £7,993.5m)
· Savings balances have remained consistent at £7.6bn (31 December 2019: £7.6bn)
· Net retail mortgage lending for the first six months of the year of £118.7m (30 June 2019: £285.6m)
· Statutory loss before tax of £6.4m (30 June 2019: profit of £19.8m)
· Underlying loss before tax of £3.5m (30 June 2019: profit of £21.2m)
· Strong capital with a Common Equity Tier 1 ratio of 24.48% (30 June 2019: 24.73%)
· Customer Service Net Promoter Score of 81.2% (30 June 2019: 80.8%)
· Net interest margin of 0.99% (30 June 2019: 1.15%)
Notes to Editors
The full interim report can be viewed via the following link: https://www.principality.co.uk/about-us/your-principality/financial-reports
About Principality Building Society
· 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 £10.5 billion.
· Principality is committed to remaining a mutual organisation.
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