Interim Results 2008
September 12 2008 - 2:00AM
UK Regulatory
RNS Number : 2874D
Principality Building Society
12 September 2008
**Strictly Embargoed until 7am, Friday 12th September 2008**
RECORD SAVINGS UNDERPIN SOLID PRINCIPALITY PERFORMANCE
Unaudited Group interim results for six months to 30 June 2008
Highlights include:
* Record retail savings balances increased by �446.7m to �4,251.0m
* 88% of loans funded by customer deposits
* Group assets increased by �437.0m to �6,289.5m
* Pre-tax profit for the Group was �8.4m
* Group arrears better than industry average
Commenting on the results, Peter Griffiths, Group Chief Executive of Principality, said: "The first half of 2008 has been a period of
considerable turbulence and uncertainty for the financial services sector.
Solid underlying business performance
However, against this backdrop the core Building Society business has continued to weather the financial storm by focusing on improving
quality and reducing cost.
High quality lending, funded by record retail savings inflows of �446.7m during the first half of the year has further strengthened the
Building Society's performance. Our trusted brand coupled with a new range of savings products in 2008 has boosted savings balances by 12%
and we are delighted to welcome 28,000 new members to the Society. We have worked extremely hard over a number of years to develop a
comprehensive range of savings products for our members."
Strong liquidity and funding position
At the end of June Principality had 88% of loans funded from customer savings, reducing its reliance on wholesale or money market
sources.
The Society does not have any exposure to the US related sub-prime mortgages and has grown organically rather than by acquiring mortgage
assets.
This good performance, delivered in a significantly more challenging environment, highlights the strength of the Principality brand.
Other Group Businesses
Market factors have continued to adversely affect income across the wider Principality Group businesses.
The housing market remains a key challenge with the UK domestic market facing a far more testing economic climate. In addition,
consumers continue to be impacted as household incomes come under increased pressure from rising costs.
In common with others, our estate agency subsidiary Peter Alan and Survey and Valuation business have seen significant declines in
volumes. Our embryonic broking arm, Moneypilot, has also experienced a fall in volumes and fee income leading to the closure of this
business earlier this month.
A deliberate tightening of lending criteria and a shift to lower loan to value assets in our secured loans business Nemo has
dramatically reduced volumes resulting in a decline in fees and commissions.
Our Commercial Lending business continues to perform strongly with a low level of arrears.
Management expenses have also decreased since year end, demonstrating the Society is successfully managing costs. This has been achieved
without compromising on operational efficiency, customer service or product quality."
Robust risk management
Group level arrears of more than three months were 1.51% and the average loan to current value across the Group remains below 50%.
The rapid slowdown in the wider economy and subsequent reduction in consumer confidence increases the risk that losses, as a result of
properties being taken into possession, may come about more quickly. The Group has continued to prudently provide against potential losses
in the future.
The Society remains committed to working with its borrowers to do all that it can to help through difficult and testing times.
Strong track record
Peter concluded: "After several years of record growth and record profits for the Society, uncertainty created by events in global
credit markets has resulted in slower growth during the first half.
However, whilst the outlook for the remainder of the year and into 2009 remains testing, we remain in good shape to deal with the
current market conditions.
These latest results continue to demonstrate that even in the most severe markets the Society can still generate solid profits whilst
providing excellent products and services for our members. This combined with a brand people trust, underpins Principality's position as the
leading provider of financial services in Wales."
- Ends -
Notes to editors
* Formed in 1860, Principality is Wales's largest building society.
* With more branches in Wales than any other building society, Principality is the 10th largest building society in the UK.
* The Society has assets of over �6.2 billion.
* Principality is committed to remaining a mutual organisation
* The Society is committed to supporting the communities of Wales.
Close involvement with the communities we serve remains a major element of Principality's business focus. As a large employer in Wales
and a mutual society reliant upon membership in our operational areas, we work hard to support a range of community causes.
At a national level this includes the National Eisteddfod of Wales, the Royal Welsh Show, the Welsh Rugby Union (WRU) and the Football
Association of Wales (FAW). We also continue to sponsor Welsh swimming champion David Davies and were delighted to watch him bring home a
silver medal for Wales from the Beijing Olympics earlier this year.
Through our branch network we are committed to offering support to local ventures at the heart of our communities in Wales and the
borders, making a difference to schools, charitable groups and a range of projects.
Our Charity of the Year for 2008 is NSPCC Cymru.
For more information, contact:
Jaime Falarczyk, Corporate Communications Manager, 02920 773208 or Jaime.falarczyk@principality.co.uk
Consolidated income and expenditure statement
Group interim results for six months to 30 June 2008
6 months to 30.06.08 6 months to 30.06.07 Year ended 31.12.07
�m �m �m
(Unaudited) (Unaudited) (Audited)
Net interest income 38.0 33.0 68.6
Other operating income 12.3 17.7 36.4
Other fair value gains (2.6) 0.2 (0.3)
(losses)
Net operating income 47.7 50.9 104.7
Operating expenses (32.3) (32.3) (67.6)
Impairment losses on loans and (7.0) (2.4) (6.5)
advances
Profit before taxation 8.4 16.2 30.6
Taxation expense (2.4) (4.9) (10.1)
Profit for the period 6.0 11.3 20.5
Consolidated statement of total recognised income and expense
6 months to 30.06.08 6 months to 30.06.07 Year ended 31.12.07
�m �m �m
(Unaudited) (Unaudited) (Audited)
Profit for the year 6.0 11.3 20.5
Actuarial loss on retirement - - (1.5)
benefit obligations
Movement in deferred tax - - 0.5
relating to retirement benefit
obligations
Total recognised income for 6.0 11.3 19.5
the period
Consolidated balance sheet
As at 30 June 2008
As at30.06.08 As at30.06.07 As at31.12.07
(Unaudited) (Unaudited) (Audited)
Assets �m �m �m
Liquid assets 1,355.8 939.1 1,196.7
Loans and advances to customers 4,837.6 4,141.9 4,584.0
Derivative financial instruments 29.2 22.6 10.8
Investment in joint venture 1.8 1.3 1.3
Fixed assets and other assets 65.1 55.9 59.7
Total assets 6,289.5 5,160.8 5,852.5
Liabilities
Shares 4,251.0 3,493.3 3,804.3
Borrowings 1,537.3 1,179.3 1,540.0
Derivative financial instruments 12.5 10.7 9.9
Other liabilities 35.9 40.6 43.0
Subordinated liabilities 114.4 113.2 120.9
Subscribed capital 57.6 55.8 57.6
Reserves 280.8 267.9 276.8
Total reserves and liabilities 6,289.5 5,160.8 5,852.5
Consolidated cash flow statement
As at 30 June 2008
As at 30.06.08 As at 30.06.07 Year ended 31.12.07
(Unaudited) (Unaudited) (Audited)
�m �m �m
Net cash inflow from operating 233.2 102.4 331.7
activities
Cash flows from investing (269.8) (119.8) (307.9)
activities
Increase in cash and cash (36.6) (17.4) 23.8
equivalents
Cash and cash equivalents at 70.9 47.1 47.1
beginning of year
Cash and cash equivalents at 34.3 29.7 70.9
end of year
Represented by:
Cash and balances with the 6.6 5.7 6.3
Bank of England
Loans and advances to credit 27.7 24.0 64.6
institutions repayable on
demand
34.3 29.7 70.9
Key Results and Ratios As at 30.06.08 As at 30.06.07 Year ended 31.12.07
(Unaudited) (Unaudited) (Audited)
�m �m �m
Mortgage advances 719.0 751.0 1,564.8
Movement in share balances 446.7 86.2 89.0
Gross capital as a percentage 7.8% 9.4% 8.5%
of shares and borrowings
Liquid assets as a percentage 23.4% 20.1% 22.4%
of shares and borrowings
This information is provided by RNS
The company news service from the London Stock Exchange
END
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