Principality continues strong growth despite tough market conditions

Welsh Building Society Principality has delivered another positive set of annual results, with net retail mortgage lending growing by £718m, and new savings balances increasing by £426m.

Total assets are £9.7bn, and underlying profits for the year were a healthy £43.8m in line with expectation, as the Society continues to deliver on its priority of being a strong and safe home for Members’ savings.

The Society also celebrated accolades for award-winning customer service, with consumer champion Which? naming Principality top scoring lender for customer satisfaction, as well as picking up national awards from What Mortgage for best building society for customer service, and Moneyfacts ISA Provider of the Year.

The Society’s savings products have maintained their position as one of the best and most competitive on the High Street. Despite a low savings rate environment in 2018 Principality still delivered an average rate to savers of 1.08%, compared with a market average over the same period of 0.70%[1].

Steve Hughes, Chief Executive at Principality Building Society, said:

“We have made great progress in delivering on our business growth strategy, despite increasing economic and political uncertainty, as well as a very competitive mortgage and savings environment which has caused downward pressure on margins. I’m very proud that we have been able to help over 6,400 first time buyers make their first steps on to the property ladder in the past year, helping people to prosper. People see the value in our products and that as a member-owned building society we are here to help them to secure the home they want.

“We have grown our lending by more than £700m and are reaping the benefits of our focused mortgage strategy which has built strong relationships with brokers across the UK and seen investment in our direct to consumer mortgage offering. In order to support the growth in our lending, we have attracted an additional £426m in savings. We have maintained our position as one of the best savings providers on the High Street.

“Our Commercial team have once again performed well, bringing in new lending worth £124m, and together with Nemo our second charge loans business, has again made a meaningful contribution. I am especially proud that the work we have done in Principality Commercial is benefitting communities where affordable housing is needed, such as their work at The Mill in Cardiff, and through our social housing lending. Our lending has supported some great initiatives in the residential, office and industrial sectors. 

“As a mutual, member-owned building society, our aim is not to maximise profit but to focus on the long-term future of the Society by ensuring we invest in the business whilst offering competitive rates to our savers and borrowers. Our profitability remains solid and we will continue to ensure we add to capital to protect our Members’ interests.


Customer service and colleagues

Steve Hughes continued:

“We have once again differentiated ourselves from our mortgage and savings competitors by providing outstanding customer service. Almost 80% of our Members said they would recommend Principality to other people based on their level of satisfaction. It is all great recognition for the work we do, not just with our Members but also the service we provide for our intermediary partners.

“We will continue to invest in our people who embody everything positive we stand for as a mutual business. Our colleagues live and work in the communities they serve and have developed a strong connection with them. We strive to be an inclusive business with colleagues who are passionate about doing the right thing for Members.

“The inclusive culture we have created led to us being named as one of the top employers in the UK by Great Place to Work®. It is testimony to the level of trust amongst our colleagues and the effort they put in to make sure Members get the best possible customer experience.”


Changes for the future

Principality is in the middle of an investment programme so it can offer current and future Members a flexible way of managing their savings and mortgage needs.

Steve said:

“Despite our excellent record on customer service, we know we have to keep pace with evolving technology and our Members will expect more of us. We have invested in our infrastructure to improve the flexibility of our services, with more than 100 colleagues working to move our technology forward. It is a challenging but exciting period in Principality’s history as we look to secure the future of the business for our next generation of savers and borrowers.

“We have been working with our Members by testing how we can tailor our digital services to their needs, and internally we have improved our mortgage service so customers receive quicker mortgage offers. Our video conference service Principality Connected has also been rolled out in the past year and as a result we have seen a significant rise in the number of mortgage applications in branch.

“Once our technology is firmly in place we will be able to offer everyone a service that suits their lifestyles, complementing the personal face-to-face branch service we offer Members, by giving them a choice of how they want to access their accounts, by phone, online or via mobile devices.  Our commitment to the High Street remains strong and we have seen footfall and demand rise in some areas, as other financial institutions have withdrawn their presence. This goes against the trend we are seeing across the rest of the UK and while our Members continue to use, value and recommend our branches, it will form the bedrock of our service offering.”


Supporting communities

Principality colleagues have yet again put in considerable effort with their community work, raising more than £220,000 in the past year for our three chosen charity partners, (Llamau, School of Hard Knocks and Cancer Research Wales), with a total of £504,000 raised, which includes match-funding by the Society, split evenly between each charity across the three-year relationship. The Society will raise cash for its new charity partners, Alzheimer’s Society Cymru and Teenage Cancer Trust Cymru, for the next three years.

More than 5,000 children and young people benefitted from Principality’s Business in the Community (BITC) Business Class Partnership, and its participation in Talk Money Week, run by the Money Advice Service. Principality also invested £76,000 in 89 community projects across Wales.

Steve said:

“Supporting our local communities and helping them prosper is what we do as a mutual building society.  I am very proud of the efforts our colleagues have made to improve the lives of others. We have some very exciting plans this year to help educate our young people and give them the financial knowledge to prepare them for adult life. Our work in this important area has been recognised with an award by BITC for education. We have ambitious plans to roll out a financial education qualification across Wales. This is currently being piloted with seven schools and 1,400 pupils in Carmarthenshire and will make a real difference to young people’s lives.”



Looking ahead to 2019, Steve added:

“There will continue to be significant political and economic uncertainty and we expect price competition in the mortgage market to remain fierce and for our margins to be squeezed further. Our profitability will continue to be robust but will be progressively lower in the next few years as we reshape and invest in our business for the long-term. We will continue our single minded focus on transforming our core mortgage and savings business. Our Society has resilience through its strong capital and liquidity base to deal with any headwinds that might emerge and ensure we protect our Members’ interests. Our performance in recent years in terms of growth and profitability have built a solid foundation to allow us to invest for the future. We will seek to grow our business in a safe and sustainable way for our Members and to make sure we are in a strong position for future generations.”


[1] Source: CACI’s CSDB, weighted UK average interest rates for fixed and variable rate Stock, Jan-October 2018 (latest data available).