Principality to invest in the long-term after profit falls

Ryan Bembridge

February 7, 2019

Principality Building Society has pledged to invest in the long-term health of the business after pre-tax profit fell from £53.4m in 2017 to £43.8m in 2018.

Owing to difficult market conditions the society acknowledged that profitability is likely to worsen in the next few years, though it pledged to continue investing in technology to prepare for the future.

Net mortgage lending also dropped from £917.2m in 2017 to £718.7m in 2018.

Steve Hughes (pictured), chief executive at Principality, said: “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.

“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.”

He added: “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.

“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.”

The society helped over 6,400 first-time buyers in the past year.

Principality’s commercial team achieved new lending of £124m, while Hughes said that its second charge loan business, Nemo, made a meaningful contribution.

The society is currently in the middle of an investment programme, with 100 members of staff working to improve its technology.

Principality has invested in its mortgage service to speed up mortgage offers, while its video conference service, Principality Connected, was rolled out in the past year.

As a result, Hughes said the society has seen a significant rise in the number of mortgage applications in branch.

Going against a UK trend, the society pledged to make high street branches the bedrock of its offering.

Hughes said: “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.”

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