...Moderate Risk Profile: Principality Building Society's (PBS) ratings reflect the society's overall modest risk profile, improved asset quality, solid capitalisation and sound funding and liquidity. The ratings also reflect the society's small franchise and the concentration of its business on the UK housing market. Sound Asset Quality: Asset quality is sound with impaired loans (Stage 3 loans reported under IFRS 9) equal to a low 0.8% of gross loans at end-1H18. The society's core prime owner-occupier and buy-to-let (BTL) portfolios are performing well, supported by low loan/values (LTVs) and a benign operating environment. Residential-Focused Business Model: PBS's business model is focused on its core residential mortgage loans and savings business. However, the society has an appetite for higher risk commercial real estate (CRE) loans, which formed 8% of end-1H18 gross loans. The society's legacy second-charge mortgage portfolio, which has been in run-off for some time, accounts for a...
