Principality Building Society, the largest mutual lender in Wales, has seen its profit nearly cut in half as mortgage price wars and looming interest rate cuts dragged on its lending margins.
The UK’s sixth-largest building society reported a pretax profit of £22.4m for the first six months of 2024, down from £41m during the same period last year.
On an underlying basis, Principality’s profit fell to £20.1m from £39.1m, which it said reflected an expected reduction in its margins.
UK banks and building societies have reported a decline in profit in recent months as the Bank of England moved closer to cutting interest rates. It cut rates for the first time since March 2020 at the end of July.
Principality’s net interest margin – the gap between interest received on loans and rates paid for deposits – fell to 1.21 per cent in June from 1.52 per cent last December.
Still, the 164-year-old lender reported an increase in the value of its mortgage book of £600m. The growth bought its mortgage balance to £9.9bn.
The society’s savings balance also grew some £800m to £9.9bn. The growth took Principality’s total assets to £13.5bn – roughly £1bn higher than last December.
Principality said that it had increased its number of savers to 427,085, with more than 72,519 customers saving regularly and savings through its branches up five per cent.
“There is significant investment underway to ensure the society is fit for the future, with our strong capital and liquidity positions providing a solid foundation for future growth and investment, all for the benefit of members as we seek to make it easier for them to do business with us,” said Julie-Ann Haines, Principality’s chief executive.
She added: “Living in the homes we desire and saving for the future we deserve is more difficult than ever before. However, as inflation pressures begin to ease and we anticipate a more stable political environment, the outlook is becoming more optimistic.
“I’m confident that Principality is well-positioned to leverage our strengths and meet our ambition to have an impact beyond our scale.”