The Principality Building Society has posted a small increase in profits for the first half of the year compared to the same period in 2015.

Pre-tax profits to 30 June 2016 totalled £23.9m, as opposed to £23.2m to then end of June 2015.

Gross residential mortgage lending for the first six months of the year totalled £802.4m, compared to £554.7m during the first six months of 2015.

Meanwhile, net retail mortgage balances reached £5.6bn.

The percentage of first charge cases greater than three months in arrears remained at 0.62%.

Graeme Yorston, group chief executive at Principality Building Society, said: “I am delighted that our continued delivery of the strategy we set about implementing in 2012 has enabled us to deliver a very strong first half performance for the Principality Group. This strategy has been particularly important in creating a robust platform for further transformation and the ability to cope with some of the uncertainties we now face as we respond to the vote to leave the EU.

“The Group has delivered a very good trading performance in the first half of the year with profit before tax increasing to £23.9m. This means we have also been able to grow our capital base and have a solid balance sheet with net assets now of over £8bn.  This has been achieved by again increasing our lending to people to buy homes. In the first six months of this year Group net lending increased by £364.5m.

“The greatest uncertainty is interest rates. While the Governor of the Bank of England has indicated what steps he might have to take to protect sterling and the wider economy, we will continue to do all that we can to remain competitive in the savings market, which is the lifeblood of our lending programme. In order to support the growth of our lending we have attracted an additional £298.7m in savings and we are grateful to the loyalty shown by our existing members as well as welcoming many new savers to the Society.”

The Principality Group consists of three key businesses, Principality Building Society, Principality Commercial, its commercial lending arm, and Nemo Personal Finance, its secured loans business. 

Yorston said: “Although the commercial market has been improving steadily over the last year, the impact of the uncertainty around Brexit has the potential to cause a slowdown as we see market uncertainty cause decisions to be delayed, particularly in this sector. The division is very well placed to cater for this.”

“Our strategy of growing and transforming the Building Society has resulted in some difficult decisions.  One of which we announced with our 2015 results in February of this year was the decision to cease accepting new business into our subsidiary Nemo Personal Loans. This impacted on 67 people in the business but I am delighted to say that not only does the Nemo business continue to perform very well, but more importantly some 95% of the people affected by the decision have secured alternative employment, either in the Principality Group or outside. Our people are very important to us and I am delighted with the approach we have taken in supporting those impacted into new roles.

“I have indicated before that a slight reduction in headline numbers is to be expected over the coming years as we see continuing pressure on margins as well as increasing investment being made in the Principality business to transform it for the future. This is likely to start in 2017 with the outlook for the rest of 2016 remaining stable. This was always planned as part of our strategic direction. However, the recent decision to exit from the EU has added further challenges to this and we must, and will, be prepared to review our strategy in light of any emerging issues. The fact remains that the Principality balance sheet is strong and is more than able to withstand a severe downturn in the unlikely event that this should occur. 

“Overall Principality, is well placed to be able to cope with any potential downturns in markets and we will need to work through the challenges as they emerge over the coming months and years. We have already planned for a number of potential scenarios and remain vigilant and well placed to manage our way through this with an experienced executive team and board.”