The society’s profits also saw a drop, which was attributed to competition in the mortgage market and Principality warned any reductions in interest rates would lead to “further pressure” on its margins.
The society ended the half-year with retail mortgage balances of £7.8bn, showing an increase on its 2018 full year retail mortgage balance from £7.5bn.
Its net retail mortgage lending increased by £285.6m in the first six months of this year, bringing total assets to more than £10bn for the first time in the building society’s history.
Underlying profit before tax dropped to £21.2m compared with £27.4m for the six months to June 2018 which the mutual said was in line with its expectation.
This reduction was planned and is driven by higher interest costs, the run-off of the secured loans portfolio as Principality deploys capital into retail mortgage lending and investment into the modernisation of mortgage and savings technology and branches, it said.
Statutory profit before tax was £19.8m, a decline from last year’s £24.9m.
Steve Hughes, chief executive of Principality Building Society, said: “We will continue to seek to grow and invest in our business in a safe and sustainable way for our members and to make sure we are in a strong position for current and future generations of members.
“We expect economic and political uncertainty to continue over the next six months and price competition in the mortgage and savings markets to remain high. Any reduction in the UK base rate would also cause further pressure on margins and could result in changes to rates offered to our members.
“Despite these challenges, our profitability and balance sheet position remains robust and our performance in recent years has built a solid foundation for us to invest for the future.”
