Monmouthshire Building Society has announced record profits as it looks to deliver on the Welsh Government’s commitment of creating a new community bank.
The Newport-headquartered mutual posted profits after tax of £7.8m for its financial year to the end of April, 2022, compared to £1.57m in the previous year – underlying profits before tax were £5.16m compared to £1.3m previously.
A significant driver of profitability related to fair value hedging.
Related income of £4.5m (2021: £0.59m) was the result of a material increase in forecast interest rates over the medium term from almost 0% in late 2021 to over 2% by the year end.
Its profit position was also boosted by a combination of ongoing low borrowing costs and resilient pricing on new lending relative to swap costs during the year.
The difference between the interest and similar income it received to that paid out rose on the year from £14.8m to £20.1m.
Its total assets grew by £101m to £1.4bn, benefiting from a buoyant mortgage market and strong house prices
Its chair Debra Lewis said: “The society’s dynamic and innovative approach has been evident as we faced the challenges of a changing operating environment.
“Like many businesses we have had to navigate the ongoing impact of the Covid-19 pandemic, and significant inflationary pressures.
“However, we’ve continued to deliver exceptional member-led services, opening a new branch in Brecon and a second flagship branch scheduled to open in Cardiff this autumn.”
The society said it committed to maintaining a presence on the high street.
Its chief executive Will Carroll said: “Our strategic focus has enabled us to evaluate and respond to challenges with a robust approach.
“This has contributed to successes across our product range, including residential, commercial, buy-to-let and holiday let lending.
“As a member-led organisation, the society has also continued to deliver on its core purpose to help members, colleagues, and communities to thrive.
“Where we could, we delayed interest rates for borrowers and acted fast to pass on rate increases to our savers, who have remained loyal through the low interest rate environment we’ve been operating in for a number of years.”
Monmouthshire Building Society employs 200 across south Wales and south-west England.
In April, it gave a one-off payment of £1,000 to all staff to help with the cost of living and further agreed a 4% pay increase in June.
The mutual saw its headcount over the year rise from 195 to 205, with staffing costs rising from £7.75m to £9.3m.
It is also looking to deliver the Community Bank for Wales project – which was a manifesto commitment of the Welsh Government aimed at addressing declining banking services in communities across Wales.
At this stage the mutual said it couldn’t say how much the community bank would need to raise to provide the required financial reserves for a new bank operating and significant start-up costs.
However, as it will operate as a new brand of the Monmouthshire Building Society, it will be covered by its existing regulatory approvals from the Financial Conduct Authority and the Prudential Regulation Authority.
More details on its funding and business model will be revealed in the autumn, although the plan is to have up to 30 banking locations within the next decade.
Mr Carroll, whose total remuneration in the past financial year was £275,000, said: “We’ve had a phenomenal year and we’re really excited for the year ahead as we bring more of our strategic initiatives to life.
“2022 will see the society modernise and expand its premises portfolio with the launch of a second flagship branch and administrative hub in Cardiff, alongside a new, energy efficient head office in Newport.
“We’ll also move closer to delivering the society’s most innovative project in its 153-year history, a Community Bank for Wales.
“Our recent success is just the start of our ambition to be a modern mutual with the heart of a challenger bank.”
