The results also revealed growth in profits and new customers.
Key points:
· Total assets increased by 20% to over £21 billion;
· Record profit before tax of £93.7 million, £104.6 million underlying;
· 10th consecutive year of profit growth;
· New residential lending up 18% to £5 billion;
· Savings balances up 18% to over £13 billion;
· Some 70,000 new customers attracted to the Society, up 20%;
· Completion of the merger with Lambeth Building Society; and
· Announcement of a proposed merger with Nationwide Building Society.
Commenting on the Group’s performance, Portman chief executive Robert Sharpe said: “2006 has been a year of outstanding success. Total assets increased by an impressive 20% to £21.3 billion, whilst profits grew to record levels. In addition, we completed a merger with Lambeth Building Society, consolidating our position as the third largest building society in the UK. At the same time, we offered competitively priced products and maintained high levels of customer service and satisfaction, resulting in an exceptional year for attracting new customers.
“2006 represents Portman’s 10th successive year of profit growth, with underlying pre-tax profit reaching a record £104.6 million, up 23% on 2005. The Group’s specialist lending subsidiary, The Mortgage Works, delivered record pre-tax profit of £32.5 million, representing over 30% of the Group’s underlying pre-tax profit. The profits generated by this non-member specialist lending subsidiary enhance the Society’s ability to deliver the benefits of mutuality to members through attractive product pricing.
“The Society has recorded exceptional growth in both residential lending, with gross advances up 18% on the previous 2005 record, and retail savings, with balances up an outstanding 18% to £13.4 billion.
“We have also clearly answered those in the sector who have repeatedly questioned Portman’s ability to generate profitable and aggressive growth. Our strategy of ensuring sufficient scale to accommodate a consistently attractive customer proposition has been an undoubted success.
“The achievements of 2006 are a continuation of Portman’s outstanding track-record. Over the last five years the Society has achieved average annual growth of:
· 19% in total assets, with assets doubling in size since 2002;
· 15% in savings balances;
· 20% in residential mortgages; and
· 12% in underlying profit before tax.
“In September 2006, the Portman Board announced its decision to recommend to members a merger with Nationwide Building Society, which, if approved by Portman members at the Annual General Meeting on 23 April and confirmed by the Financial Services Authority, will be the largest building society merger ever undertaken, with a substantial distribution of reserves to qualifying Portman members. Once the two organisations have been integrated, the substantial economies of scale which the Portman Board expects to be achieved will support attractive product pricing for members, who will also have access to a wider range of distribution channels, including a greatly expanded branch network.
“2007 will be a challenging year for the Society, as we maintain our commitment to meeting the needs of members by delivering attractive products and excellent service, whilst carrying out the extensive planning and integration activity required to complete the proposed merger with Nationwide Building Society. I am confident that the Portman Group will rise to the challenge of ensuring that the merger, if approved, proceeds smoothly.”, Sharpe concluded.
Business highlights:
Mortgages
Supported by the unexpectedly buoyant housing market in 2006 and driven by market-leading pricing and innovative product design, gross mortgage lending increased 18% on 2005, reaching £5 billion. Residential mortgage balances increased by 19% to £16.1 billion. Portman was recognised for the quality of its mortgage offering through a number of industry awards.
Savings
Despite an intensely competitive retail savings market, the Society's savings balances growing 18% to £13.4 billion. The 15 day notice ISA and niche accounts, such as the age 50 plus fixed interest bond and the age 60 plus income bond, helped to attract new customers and benefited existing account holders. During the year, over 23,000 Portman members opened a Members’ Loyalty account, which offered a three year guaranteed link to the Bank of England base rate.
The Mortgage Works
The Mortgage Works had mortgage balances exceeding £4 billion at the end of 2006. The pre-tax profit contributed by the specialist lending subsidiary was up 30% on 2005, at £32.5 million. Since it was acquired by Portman in 2001, The Mortgage Works has achieved average profit growth of 24% per annum.
