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Principality Bld Soc (89VX)

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Wednesday 06 February, 2008

Principality Bld Soc

Final Results

Principality Building Society
06 February 2008

                   ***EMBARGO: Wednesday 6th February 2008***


                          Thriving in turbulent times

Whilst the world of global financial services faces increasing turbulence the
Principality, Wales' largest building society, today bucked the trend and
delivered a very impressive set of results for the 2007 financial year.

Key trading highlights included two key milestones as the Society moved into the
top ten largest building societies in the UK for the first time in its history,
and also broke through the £5bn assets barrier. In addition:

Highlights include:

  • Group assets increased by £1,022.3m to £5,852.5m
  • The pre-tax profit for the Group was £30.6m
  • Net profit after tax was £20.5m, equivalent to 0.38% of mean assets
  • Mortgage assets increased by 17.9% to £4,584.0m
  • Members savings increased by 11.7% to 3,804.3m
  • Retained earnings increased by 7.6% to £277.3m

Commenting on the performance Principality Chief Executive Peter Griffiths said:
'I am delighted to report another very successful year for the Principality
Group.  We have made further progress with strong growth and increased profits.
Most importantly we have continued to deliver competitive savings and mortgage
products for our members - which is the true benchmark of success for a mutual
building society.'

Peter added: 'The challenge for the business was to continue to deliver a
certain future in an uncertain world for all its stakeholders, and there was
nowhere more uncertain right now than the world of financial services.  The
crisis in the US market, and its influence on the UK banking sector, has created
a significant liquidity challenge for a number of financial institutions.
However, Principality, with its traditional building society business model, has
been well placed to weather this storm with over 83% of our mortgages funded by
retail savings deposits from our members.  The strength of our balance sheet,
coupled with the good quality of our mortgage assets, has meant we have been
able to satisfy our relatively modest wholesale funding requirements.'

'In the retail savings market we have seen record inflows. We have continued our
policy of offering members a wide range of savings products with attractive
interest rates and broadened our distribution strategy with the launch of an
e-savings channel.'

'All businesses in the Group performed well in 2007. We have seen steady,
prudent growth in lending within the Society and also in our Commercial Lending
division and Nemo Personal Finance, our secured loan business. We have not
compromised on quality and arrears in the Society remain at historically low
levels whilst Commercial Lending and Nemo are also experiencing arrears below
their respective industry averages.'

David Williams, Chairman of Principality Building Society, said: 'We recognise
that current uncertainty in the financial markets may cause concern for our
members but we remain confident that our history, values, strategy and
performance during 2007 allow us to safely say that members can continue to
trust us with their financial affairs.  It is clear that over the recent past
there has been a flight to quality and return to trusted financial service
sector brands.  Research tells us that Principality is one of the most trusted
brands in Wales and we have no intention of compromising on that great legacy.
We move into 2008 confident of further success and our focus will continue to be
on maintaining our position as the leading Welsh provider of mortgages, savings
and financial services.'


For further information contact:

Jaime Falarczyk, PR Manager, Principality Building Society
Tel: 0292077 3208; email: [email protected]

Emma Stanford, Marketing Assistant, Principality Building Society
Tel 0292077 3788 email: [email protected]

Principality Building Society
Results for the year ended to 31 December 2007

Consolidated income and expenditure statement

                                                                                        2007              2006
                                                                                          £m                £m

Interest receivable and similar income                                                 327.4             252.7
Interest expense and similar charges                                                 (258.8)           (189.4)
Net interest income                                                                     68.6              63.3

Fee and commission income                                                               41.6              38.6
Fee and commission expense                                                             (6.3)             (5.7)
Other operating income                                                                   1.1               1.4
Other fair value gains and losses                                                      (0.3)               0.2
Total net income                                                                       104.7              97.8

Administrative expenses                                                               (62.0)            (58.5)
Depreciation and amortisation                                                          (5.6)             (5.1)
Impairment losses on loans and advances                                                (6.5)             (5.2)
Profit before taxation                                                                  30.6              29.0

Taxation                                                                              (10.1)             (8.8)

Profit for the year                                                                     20.5              20.2

Statement of recognised income and expense

Profit for the year                                                                     20.5              20.2
Actuarial gain/(loss) on retirement benefit obligations                                (1.5)               1.6
Movement in deferred tax relating to retirement benefit obligations                      0.5             (0.5)

Total recognised income for the year                                                    19.5              21.3

Consolidated balance sheet
                                                                                        2007               2006
Assets                                                                                    £m                 £m

Liquid assets                                                                        1,196.7              875.6
Derivative financial instruments                                                        10.8               11.4
Loans and advances to customers                                                      4,584.0            3,887.9
Fixed & other assets                                                                    61.0               55.3

Total assets                                                                         5,852.5            4,830.2


Customer accounts                                                                    3,804.3            3,406.1
Borrowings                                                                           1,540.0              946.3
Derivative financial instruments                                                         9.9                4.6
Other liabilities                                                                       43.0               38.9
Subordinated liabilities                                                               119.3              119.2
Subscribed capital                                                                      58.9               58.8
Fair value adjustment for hedged risk on capital                                         0.3              (1.0)

Total liabilities                                                                    5,575.7            4,572.9
Retained earnings                                                                      277.3              257.8
Other reserves                                                                         (0.5)              (0.5)

Total equity and liabilities                                                         5,852.5            4,830.2

Consolidated cashflow statement
                                                                                         2007             2006
                                                                                           £m               £m

Net cash inflow/(outflow) from operating activities                                     331.7          (119.2)
Capital expenditure and financial investment                                          (307.9)            (5.1)
Financing                                                                                   -            119.2
Increase/(decrease) in cash and cash equivalents                                         23.8            (5.1)

Cash and cash equivalents at beginning of year                                           47.1             52.2

Cash and cash equivalents at end of year                                                 70.9             47.1

Represented by:
Cash in hand and balances with the Bank of England                                        6.3              5.9
Loans and advances to credit institutions repayable on demand                            64.6             41.2
                                                                                         70.9             47.1

Net cash inflow/(outflow) from operating activities

Profit before taxation                                                                   30.6             29.0
Adjusted for:
    Depreciation and amortisation                                                         5.6              5.1
    Loss/(profit) on sale of property, plant and equipment                                0.3            (0.3)
     Increase in impairment losses on loans and advances to customers                     5.4              5.2
     Change in fair values                                                              (9.2)              6.3
     Other non cash movements                                                             0.1              0.6

Changes in net operating assets:
     Decrease/(increase) in loans and advances to credit institutions                     6.0           (80.5)
     Increase in loans and advances to customers                                      (692.9)          (383.5)
     Decrease/(increase) in derivative financial instruments                              5.9            (5.5)
     Increase in customer accounts                                                      397.8            181.1
     Increase in deposits and debt securities                                           586.3            131.6
     Other movements                                                                      2.2              0.7

Taxation                                                                                (6.4)            (9.0)

Net cash inflow/(outflow) from operating activities                                     331.7          (119.2)

Summary of key ratios                                                                    2007             2006
                                                                                            %                %

Gross capital as a percentage of shares and borrowings                                   8.53             9.99
Liquid assets as a percentage of shares and borrowings                                  22.39            20.12
Group profit for the year as a percentage of mean total assets                           0.38             0.44
Group management expenses as a percentage of mean total assets                           1.27             1.38
Society management expenses as a percentage of mean total assets                         0.80             0.93

                      This information is provided by RNS
            The company news service from the London Stock Exchange                                                                                                                                                  

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