News Top News

Solid year for Swansea Building Society as new office makes bright start


SWANSEA BUILDING SOCIETY enjoyed a strong increase in its total assets and a modest increase in its profits in 2016, mainly driven by the success of its newest branch in Carmarthen, which generated increased retail savings and mortgage balances during the year.

The Building Society’s annual income was £5.7m in 2016, an increase of £300,000 or 6% on its income of £5.4m a year earlier. It was boosted by increased retail savings balances across all of its branches – but Carmarthen in particular, which opened in October 2015. This helped its total assets increase by 16.2% to reach a new record level of £268.6m.

The Society also increased its net profit to just over £2m, an increase of £12,000 in comparison to 2015, despite the appointment of additional staff at its Carmarthen branch and head office, and continued investment in its IT systems.

The Building Society’s total loan book increased to £185m in 2016, an increase of £15.2m or 8.9% on the £170 million outstanding in 2015. This helped generate an operating profit before impairment losses and Financial Services Compensation Scheme (FSCS) provisions of £2.7m, which, in turn, led to increased capital, which now stands at £17.8m.

Alun Williams, Chief Executive Officer of Swansea Building Society, said he was pleased with the results and the extent to which its investment in setting up a new branch has delivered results. But he also warned that some aspects of government policy that applies to building societies continues to make life difficult for niche players that do not use the wholesale money markets for funding.

Mr Williams said: “We are delighted with another strong set of results, particularly the contribution made by our newest office in Carmarthen. Despite the significant investments we have made in staff, infrastructure and IT systems last year, we have delivered an extremely pleasing set of results.

“That said, the economic landscape remains uncertain and we still face some challenges. Contributions to the Financial Services Compensation Scheme (FSCS) continue to weigh heavily on the Society and the costs are proportionately higher than that levied on the banks due to our reliance on retail depositors rather than wholesale funding.

“Following the United Kingdom’s vote to leave the European Union, the Bank of England base rate reduced to 0.25% with effect from August 4, 2016, having been at 0.50% since March 5, 2009. Most economic forecasters expect UK Economic growth to slow in 2017 and if that is the case then the bank base rate is likely to remain at 0.25%t well into 2017, and possibly beyond.”

Mr Williams explained that the Society has also benefitted from stimulus in the form of the Funding for Lending Scheme (FLS), which has served to depress both the retail and wholesale borrowing costs of the banking and building society sectors. But he added that while the resultant low interest rate environment benefits borrowers, savers lose out and Swansea Building Society must carefully manage inflows of funds in such an environment.

“In addition to the base rate reduction, the bank announced a package of measures including a new Term Funding Scheme (TFS) of up to £10b of UK Corporate Bonds and an expansion of the asset purchase scheme for UK Government bonds of up to £435b.

Unfortunately, whilst the above will reduce the borrowing costs for households and businesses, it has led to a further reduction in savings interest rates across the UK. We remain acutely aware of the negative impact that these very low interest rates are continuing to have on our savings members.

“We kept our savings interest rates as high as we could for as long as we could during 2016.
It is a measure of how competitive our current range of savings accounts are that our savings balances increased by £35.7m (16.6%) to £250.3million of savings balances under management during the year.”

The Society’s balance sheet is 100% funded by retail and business savings and retained profits, meaning it has no reliance on the wholesale money markets to fund either asset growth or mortgage lending.