Principality Building Society Annual Results: Principality performs well as it supports customers during pandemic

Principality has posted good annual results for 2020, as it focused all its efforts on supporting members, customers and colleagues during a challenging year. The building society 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 periods.

Wales’ largest building society saw its assets grow to more than £11bn for the first time in its history, as it saw retail mortgage lending increase by £182m this year (2019: £499m), 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 in the first half of the year.

Last year the business signposted an expected reduction in profits in 2020 due to continued investment in technology to transform its core mortgage and savings operations. In addition, it also increased provision levels by £9.1m (2019: release of £4.1m) to cover potential future losses arising from the economic downturn caused by the pandemic. Whilst no significant credit losses have been incurred to date, Principality recognises that some customers may experience financial difficulties over the next few years, and its conservative approach takes into account economic forecasts of factors including unemployment levels and property prices.

Principality has strong capital reserves but this prudent approach has had a significant impact on results for 2020, resulting in an underlying profit before tax of £24.1m (2019: £39.8m) and statutory profit before tax of £19.9m (2019: £39.6m).

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 79.8%, meaning almost eight out of 10 of members say they would recommend Principality to family or friends based on their level of satisfaction.

CEO Julie-Ann Haines said: “Despite facing significant disruption and uncertainty this year, we maintained our award-winning customer service and delivered essential service for our members when they needed us most.

“During the first half of the year we had to deal with a number of operational challenges, not least enabling around 800 colleagues from our head office to work effectively from home. The strength and resilience of our business has allowed us to keep everyone in employment and not to furlough anyone. We strive to create a friendly, open and inclusive culture, and our colleagues continue to make us stand out in the sector with their warmth, personal approach and empathy.

“As promised last year, we continued to invest previous profits back into the business to boost our technology so we could offer our members improvements to their customer service. Our enhanced online security has made members’ accounts more secure, and a new web chat function has been added to improve the customer experience. In response to customer feedback, we have also increased the range of products available to customers online.  Our ambition is to move at pace in the next few years and we will continue to invest in the Society to improve our proposition and offer greater flexibility to our members. This will be complemented by fantastic service through our branches in Wales and along the borders with England.”

Principality’s Commercial team once again contributed in helping communities, with work completed on the second phase of affordable homes at The Mill development in Cardiff. The team have now completed £55m of the £75m affordable housing fund established in 2018 and this has seen take-up from housing associations across all corners of Wales. It will continue to focus its efforts to make housing more environmentally sustainable and support house-builders through funding of solar powered and zero carbon homes.

Now more than ever, Principality has continued to invest in financial education by partnering with Young Money for their Fiver Challenge which encourages the development of entrepreneurial and financial education skills for children, while raising money for local causes. More than 8,000 children signed up for this digital challenge through their schools.

On the outlook for 2021 Julie-Ann added: “We expect the economic environment to remain challenging in 2021 and beyond as the impact of the 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 to resist the turbulence we are all facing. Our strategy and long term priorities remain unchanged and, while our immediate focus remains on helping members, colleagues and communities through these uncertain times, we are committed to developing and growing our business in a safe and sustainable way.”

KEY PERFORMANCE INDICATORS

• Total assets – £11.1bn (2019: £10.7bn)
• Underlying profit before tax – £24.1m (2019: £39.8m)
• Statutory profit before tax – £19.9m (2019: £39.6m)
• Net residential mortgage growth – £182.2m (2019: £499.3m)
• Residential mortgage balances – £8,175.7m (2019: £7,993.5m)
• Savings balances – £8.2bn (2019: £7.6bn)
• Saving balance – increase is £596.1m (2019: £598.7m)
• NPS – 79.8 (2019: 81.5)
• Capital (CET1 ratio) – 27.10% (2019: 26.20%)
• % of mortgages funded by savers – 88.9% (2019: 84.0%)
• Charity fundraising total – just over £152,000
• Employee engagement score – 86% (2019: 77%)