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Principality Bld Soc (89VX)

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Wednesday 07 February, 2007

Principality Bld Soc

Final Results

Principality Building Society
07 February 2007

                           Wednesday 7 February 2007



Principality, Wales' largest building society, today posted a strong set of
results for the 2006 financial year.

Highlights included:-

  • Group assets increased by £445.9m to £4,830.2m

  • Profit before tax increased from £22.6m in 2005 to £29.0m

  • Net profit after tax was £20.2m, equivalent to 0.44% of mean assets

  • Mortgage balances increased by 10.4% to £3,887.9m

  • Retained earnings increased by 9.0% to £257.8m

  • Members' savings increased by 5.6% to £3,406.1m

  • Awarded the National Business Awards 'Employer of the Year' for Wales and
    the West Country and a top ten UK finalist in the same category.

Commenting on the Society's performance, Principality's chief executive, Peter
Griffiths, said: 'In 2006 we made further progress with our strategy to develop
additional income generating businesses. This strategy is now paying dividends
and against a background of fierce competition we have achieved good growth and
record profits which will enable us to continue to deliver a wide range of
competitive savings and mortgage products to our members.

'We have seen mortgage balances increase by over 10% to £3.9 billion and savings
balances up by almost 6% to £3.4 billion. The core building society business
continues to operate within a highly competitive market place, particularly for
mortgages. We remain focussed in our ambition to increase our Welsh market
share, balancing the need to remain a prudent lender in a more sensitive
interest rate environment. Our strong balance sheet and record profits which
increased to £29.0 million, will underpin stronger growth in 2007 and beyond.
Profitability levels will also allow us to deliver further value to our members
through a new range of loyalty products which will be rolled out in the year

'Whilst the core business has been operating in a testing environment the
subsidiary businesses have experienced record growth. Peter Alan celebrated 20
years as a Principality Group company and delivered an outstanding performance
almost doubling its previous best profit. We have exciting expansion plans to
diversify that business to sustain future profitability and the lettings arm
which now has offices in Cardiff and Swansea plans to further expand in 2007.

'The commercial lending book grew to almost £700m delivering a record level of
income on a very high quality portfolio. We are extremely well placed to further
grow this business in the years ahead.

'Nemo Personal Finance has also performed well in a tough market place and the
loan book has grown strongly. The brand has become well positioned within the UK
and we are delighted with performance to date.

'We have launched and the initial period of trading has been
successful with excellent customer feedback on the quality and transparency of
financial advice given via the telephone and web. This innovative business will
be further developed in 2007.'

Looking towards the year ahead Peter Griffiths said: 'This has been a tough year
with record results. We remain in business to deliver value to our members and
the profits generated by the subsidiary businesses are passed back to the
building society, to enhance our capital position and support the 'member
dividend'. Our diversification strategy has allowed us to go from strength to
strength and will enable us to make appropriate investments in the business in
the year ahead. We will continue to look at new subsidiary company opportunities
for additional income, we will grow the core business, invest in our staff, our
branches and other distribution channels including the web and telephone to
deliver real member value.'

Peter Griffiths added: 'We continually seek the views of our customers and our
directors meet with a representative group of our members - the Member Forum -
twice a year. The Forum has been of significant benefit giving us a greater
insight into the needs and requirements of our customers and these views help
with the future design of both products and services.

'Our commitment to the community is undiminished. Our sponsorship of the Welsh
Rugby Union Premiership continues and we have now added sponsorship of the
Football Association of Wales' Welsh Premier League which reinforces our
commitment to sport across Wales. We also continue to sponsor David Davies our
Olympic medallist as he progresses towards his aim of Gold at the Beijing
Olympics in 2008.'

David Williams, Chairman of Principality Building Society, said: 'Given our
strong financial performance together with the pricing and service benefits we
are able to deliver to members, the Board continues to believe that retaining
our mutual status is in the best interest of our members. We move into 2007
confident of further success for the Society. Our focus will continue to be on
developing new income streams to support and maintain our position as the
leading Welsh provider of mortgages, savings and financial services.'

The Principality Group employs more than 1,000 members of staff throughout Wales
and the borders.

Financial information follows below on three pages.


Notes to editors

  • Formed in 1860, Principality is Wales's largest building society.

  • With more branches (50) in Wales than any other building society,
    Principality is the 12th largest building society in the UK.

  • The Society has assets of over £4.8 billion.

  • The Society is committed to supporting the communities of Wales and to
    remaining a mutual organisation.

  • The Society continues to reinforce this intention by providing competitive
    investment and mortgage products for existing and future members alike.

  • Peter Alan is Principality's wholly owned estate agent subsidiary with 25
    branches throughout south Wales.

  • Late in 2004, the Society acquired Loan Link Limited and formed a new
    subsidiary, Nemo Personal Finance.

For more information, contact:

Llio Penri, PR Officer, Principality Building Society.

Tel: 029 2077 3208; Mob: 07836 713343; email: [email protected]

Spokespeople are available for interviews in English and Welsh. The Principality
 is equipped with an ISDN system, suitable for both BBC and IR links, which is
 available on request for studio quality radio interviews. Please contact Llio
                     Penri direct to request an interview.

Principality Building Society
Results for the year ended to 31 December 2006

Consolidated income and expenditure statement

                                                                                          2006                  2005
                                                                                            £m                    £m

Interest receivable and similar income                                                   252.7                 228.4
Interest expense and similar charges                                                   (189.4)               (175.4)
Net interest income                                                                       63.3                  53.0

Fee and commission income                                                                 38.6                  24.8
Fee and commission expense                                                               (5.7)                 (3.1)
Other operating income                                                                     1.4                   1.7
Other fair value gains and losses                                                          0.2                   0.3
Net operating income                                                                      97.8                  76.7

Administrative expenses                                                                 (58.5)                (47.8)
Depreciation and amortisation                                                            (5.1)                 (4.3)
Impairment losses on loans and advances                                                  (5.2)                 (2.0)
Profit before taxation                                                                    29.0                  22.6

Taxation                                                                                 (8.8)                 (7.0)

Profit for the year                                                                       20.2                  15.6

Statement of recognised income and expense

Profit for the year                                                                       20.2                  15.6
Actuarial gain on retirement benefit obligations                                           1.6                   5.0
Movement in deferred tax relating to retirement benefit obligations                      (0.5)                 (1.5)

Total recognised income for the year                                                      21.3                  19.1

Principality Building Society
Results for the year ended to 31 December 2006

Consolidated balance sheet

                                                                                          2006                  2005
Assets                                                                                      £m                    £m

Liquid assets                                                                            875.6                 803.6
Derivative financial instruments                                                          11.4                   8.0
Loans and advances to customers                                                        3,887.9               3,522.2
Fixed & other assets                                                                      55.3                  50.5

Total assets                                                                           4,830.2               4,384.3


Customer accounts                                                                      3,406.1               3,225.0
Borrowings                                                                               946.3                 815.0
Derivative financial instruments                                                           4.6                   6.7
Other liabilities                                                                         38.9                  36.5
Subordinated liabilities                                                                 119.2
Subscribed capital                                                                        58.8                  58.7
Fair value adjustment for hedged risk on capital                                         (1.0)                   5.4

Total liabilities                                                                      4,572.9               4,147.3
Retained earnings                                                                        257.8                 236.5
Other reserves                                                                           (0.5)                   0.5

Total equity and liabilities                                                           4,830.2               4,384.3

Memorandum items
Irrevocable undrawn committed loan facilities                                            378.6                 268.8

Principality Building Society
Results for the year ended to 31 December 2006

Consolidated cashflow statement

                                                                                              2006                2005
                                                                                                £m                  £m

Net cash (outflow)/inflow from operating activities                                        (119.2)                43.5
Capital expenditure and financial investment                                                 (5.1)              (35.9)
Financing                                                                                    119.2
(Decrease)/increase in cash and cash equivalents                                             (5.1)                 7.6

Cash and cash equivalents at beginning of year                                                52.2                44.6

Cash and cash equivalents at beginning of year                                                47.1                52.2

Represented by:
Cash in hand and balances with the Bank of England                                             5.9                 5.5
Loans and advances to credit institutions repayable on demand
                                                                                         41.2                46.7
                                                                                              47.1                52.2

Net cash (outflow)/inflow from operating activities

Profit before taxation                                                                        29.0                22.6
Adjusted for:
    Depreciation and amortisation                                                              5.1                 4.3
    (Profit) on sale of property, plant and equipment                                        (0.3)               (0.5)
     Increase in impairment losses on loans and advances to customers                          5.2                 2.0
     Change in fair values                                                                     6.3               (5.5)
     Other non cash movements                                                                  0.6               (0.3)

Changes in net operating assets:
     (Increase) in loans and advances to credit institutions                                (80.5)               (2.1)
     Increase in loans and advances to customers                                           (383.5)             (258.3)
     (Increase)/decrease in derivative financial instruments                                 (5.5)                 3.1
     Increase in customer accounts                                                           181.1               211.9
     Increase in deposits and debt securities                                                131.6                76.0
     Other movements                                                                           0.7               (2.1)

Taxation                                                                                     (9.0)               (7.6)

Net cash (outflow)/inflow from operating activities                                        (119.2)                43.5

Summary of key ratios                                                                         2006                2005
                                                                                                 %                   %

Gross capital as a percentage of shares and borrowings                                        9.99                7.31
Liquid assets as a percentage of shares and borrowings                                       20.12               19.89
Group profit for the year as a percentage of mean total assets                                0.44                0.37
Group management expenses as a percentage of mean total assets                                1.38                1.23
Society management expenses as a percentage of mean total assets                              0.93                0.92

Note: The Annual Accounts 2006 have been prepared under International Financial
      Reporting Standards (IFRS).

                      This information is provided by RNS
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