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Principality sees pre-tax profit of £8.4m

Principality has revealed a pre-tax profit of £8.4m for the six months to 30 June 2008, compared to £16.2m over the same period last year.

Its unaudited group interim results also show group assets have increased by £437.0m to £6,289.5m.

The mutual has put its results partly down to its retail savings balances increasing by £446.7m to £4,251.0m, and 88% of loans being funded by customer deposits.

Peter Griffiths, group chief executive of Principality, says: “The first half of 2008 has been a period of considerable turbulence and uncertainty for the financial services sector.

“However, against this backdrop the core society business has continued to weather the financial storm by focusing on improving quality and reducing cost.

“High quality lending, funded by record retail savings inflows of £446.7m during the first half of the year has further strengthened society’s performance.

“Our trusted brand coupled with a new range of savings products in 2008 has boosted savings balances by 12% and we are delighted to welcome 28,000 new members to the society. We have worked extremely hard over a number of years to develop a comprehensive range of savings products for our members.”

At the end of June Principality had 88% of loans funded from customer savings, reducing its reliance on wholesale or money market sources.

The society does not have any exposure to the US related sub-prime mortgages and has grown organically rather than by acquiring mortgage assets.

Griffiths adds: “In common with others, our estate agency subsidiary Peter Alan and Survey and Valuation business have seen significant declines in volumes. Our embryonic broking arm, Moneypilot, has also experienced a fall in volumes and fee income leading to the closure of this business earlier this month.

“A deliberate tightening of lending criteria and a shift to lower loan to value assets in our secured loans business Nemo has dramatically reduced volumes resulting in a decline in fees and commissions.

“Our Commercial Lending business continues to perform strongly with a low level of arrears.

“Management expenses have also decreased since year end, demonstrating the society is successfully managing costs. This has been achieved without compromising on operational efficiency, customer service or product quality.”

Group level arrears of more than three months were 1.51% and the average loan to current value across the group remains below 50%.

He adds: ‘After several years of record growth and record profits for the society, uncertainty created by events in global credit markets has resulted in slower growth during the first half.

‘However, whilst the outlook for the remainder of the year and into 2009 remains testing, we remain in good shape to deal with the current market conditions.

“These latest results continue to demonstrate that even in the most severe markets the Society can still generate solid profits whilst providing excellent products and services for our members. This combined with a brand people trust, underpins Principality’s position as the leading provider of financial services in Wales.”

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