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Interim results announcement for the six months ended June 30 2007

Fair-minded Britannia on target with strong results

• Profits up 8% at £81.7 million
• Strong balance sheet and liquidity
• 67,000 new ISA accounts opened
• Industry-leading levels of employee engagement

Britannia, the UK's number two building society, announced pre-tax profit for the six months to 30 June 2007 up eight per cent at £81.7 million (2006: £75.8 million).

Total mortgage lending of £3.7 billion was down on last year's record £4.1 billion as the Group continued to focus on prudent and sustainable lending. Net lending totalled £500 million.

The Group continued to see low levels of mortgage arrears and repossessions, which it attributed to its continuing prudent lending policy and an approach that put customers at the heart of the business.

This underlying financial strength was also demonstrated by the Group's strong capitalisation and robust and varied portfolio, as a result of which it has avoided significant impact from the recent 'credit crunch'.

Recent base rate rises appear to have slowed the mortgage market, with parts of the country seeing a halt to house price inflation and industry arrears and possessions ticking up – trends Britannia expects to see continue for the rest of 2007 and into 2008.

The Group continued to develop lending streams in response to market changes. The member business moved into buy to let with an offer aimed at parents with children at university. And Britannia Commercial Lending continued its move to more profitable residential, commercial and retail investments, including a £44 million deal to finance student accommodation in Manchester.

The Group maintained tight control of costs, with the cost to assets ratio improving to 0.73% (2006:0.82%) – partly attributable to the successful integration of the Bristol & West savings and branch business during 2006.

As a building society, Britannia raises most of its funds from its 2.5 million UK savers; further retail funds come from Isle of Man-based Britannia International. Other funds are accessed from a variety of markets and sources, including Asia, Australia, Canada, Europe and the USA.

Savings flows were healthy. A rising interest rate environment favours savers, who make up the large majority of Britannia members. The society had a very successful ISA season, attracting more than £700 million in more than 67,000 new accounts.

A market-leading rate on the Child Trust Fund and a summer campaign that saw a tree planted for every new children's account opened were successful in attracting more than 10,000 new customers. Sales of guaranteed equity bonds were tougher, as investors chose the certainty of one and two-year fixed rate bonds offering similar returns.

"Our commitment to fairness means we won't lend customers more than they can afford to repay or offer loans worth more than the house they are buying," explained Britannia group chief executive Neville Richardson. "We’re also writing to all of our borrowers with interest-only loans to remind them of the need to have a repayment vehicle in place - customer feedback has been very positive.

"Fairness also means we offer savers consistently good rates, and won't give new customers unsustainably high rates at the expense of loyal savers."

The Group's business performance was underpinned by continued industry-leading levels of people engagement, with 94% saying they’re satisfied or very satisfied with Britannia as an employer. Britannia is recognised as one of the top 100 companies to work for in the annual Sunday Times survey. The Group also won the overall national Opportunity Now award, recognising outstanding best practice in gender equality, diversity and inclusion.

With highly-engaged employees making for happy customers, the Group saw continued strong customer satisfaction scores and improving cross-sales among its loyal customer base.

The Society shared £51 million with its most loyal members earlier this year through its annual profit sharing scheme, bringing the total returned to members in the 11 years the scheme has been running to over £470 million.

For further information, please contact Graham Leftwich or Emma Taynton-Young in the Britannia group communications team on 01538 393883 or e-mail corp.comms@britannia.co.uk

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