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Interim Results for the six months ended 30th June 2003

• Operating profit maintained at £63.1million
• Cost to assets under management ratio improved by 0.05% to 0.82%
• Platform and Verso mortgage subsidiaries merged to create a one stop shop for intermediaries
• New systems enable Society to offer daily interest, offset and on-line mortgages to members
• Savings inflows increase to £477 million

Britannia Building Society delivered on several strategic initiatives in the first half of 2003 as it continued its drive to fulfil its new corporate strategy to become known as Britain's best mutual.

The Society also ensured members benefited from low margins, and keen prices, while meeting the operating profit target of £63.1 million. (30 June 2002: £65.7 million). Of this, £32.4 million came from the Britannia Capital Investment Group (BCIG) companies (30 June 2002: £29.2 million).

Total lending for the six months was £2.1 billion - slightly lower than last year's record first half - as the Society continued to focus on high quality, low risk loans. Britannia restricted lending while new systems were brought online enabling significant improvements in customer service. Savings inflows totalled £477 million (30 June 2002 : £281 million).

Group interest margin was 1.07% (30 June 2002: 1.11%). Britannia is committed to deliver the best possible value to members, and accordingly the core Society margin was kept below 1%. This is among the lowest in the industry and is as a result of keen pricing for both savings and mortgages.

Costs remained under close control, with the cost to assets under management ratio (before amortisation of goodwill) reduced to 0.82% (30 June 2002: 0.87%) - as good as or better than most major competitors. Expenses were held flat, reflecting tight control of running costs. Depreciation charges rose due to the investment in the Society's core mortgage and savings systems.

Britannia Group Chief Executive Neville Richardson commented: "The significant progress and achievements in the first six months of 2003 are an excellent springboard for the Britannia of the future. We must continue to provide members and customers with real, sustainable value and our strategy is ensuring we do this. Even in a low margin environment, we are competing well in our chosen markets and we have featured in best buy tables every week for more than four years".

"We see low margins persisting but as a mutual we can cope better with this than PLCs. No shareholders stand between Britannia and its members."

Business performance

Total lending in the first six months was slightly lower than last year’s record first half, with gross lending totalling £2.1 billion (30 June 2002: £2.4 billion). Although the business maintained a highly competitive range of mortgages throughout the period, standard lending multiples were maintained at a prudent level. There is a strong pipeline of applications into the third quarter.

Branches remain key to sales and service strategy. In addition, customers are increasingly choosing to use Britannia's direct channels, the contact centre and website, with around half of all mortgage sales now made through these channels.

In January, Britannia launched an online mortgage application, which enables applicants to obtain a real-time, credit-scored online decision for their mortgage-all in 15 minutes. This is an industry first with most other major lenders only offering a "decision in principle" based on income multiples.

The launch of the new online mortgage application is one of many new developments Britannia has made. Other initiatives offer extended value to members and customers and ensure Britannia is fit for the future as a modern mutual.

Platform, the intermediary lender, formed from the merger of Platform Home Loans and Verso, has performed well, with applications and completions continuing to increase. BCIG-which includes Britannia Commercial Lending, Britannia International, Britannia Treasury Services, Platform and Western Mortgage Services - is delivering its profit target for the year.

Quality of lending remains high. Just 2 % of Group lending is at more than 95% LTV. Over 97% of lending is at standard lending multiples of 3.5 times salary or less, minimising the risk of bad debt.

Arrears remained at low levels at just £1million, only 0.01% of total advances, and bad debts were not significant.

We have seen strong inflows into our savings range, especially our innovative EasySaver account, which allows savers instant access to their cash 12 times a year, and our Secure Growth Plan, designed for customers who want to benefit from the potential returns of equities with low risk to their capital. However, it remains a difficult time for regulated sales, with few signs of savers regaining confidence in equities.

New Corporate Strategy

During the six months, Britannia's Directors undertook a major programme of roadshows presenting Britannia's new corporate strategy to all 3,500 group staff. The Strategy outlines the development of a membership business that offers market leading products at competitive prices supported by great service and an extensive branch network. Returns from BCIG are used to fund the Britannia Membership Reward.

In the 35 separate roadshow presentations countrywide, the directors and senior managers have had the opportunity to engage all staff in discussing strategy and sharing views on how to create a culture where all of our people are committed to Britannia's corporate vision - to be known as Britain's best mutual.

Commentary:

Neville Richardson, Britannia Group Chief Executive, said: "We aim to be efficient and easy to do business with, which is why we are controlling costs, investing in our people and our service."

"Our membership business maximises the value it provides to members by retaining only the profit necessary to fund future growth, while the Britannia Capital Investment Group companies are generating returns for our members. "

"With the housing market starting to cool, remortgaging will remain the biggest area of activity in the mortgage market. Our focus on quality lending will minimise the risk of increased arrears and bad debts should the economic outlook deteriorate."

"While we are pleased with the progress we have made in the first half, we will continue to keep a stringent control on costs as we invest in areas where we see potential for growth and member value."

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