TIDMCCDS TIDMNAWI
RNS Number : 8631O
Nationwide Building Society
12 February 2016
Nationwide Building Society
Interim Management Statement
Q3 2015/16
Underlying profit
Statutory profit before tax has been adjusted for a number of
items, consistent with prior periods, to derive an underlying
profit before tax figure. The purpose of this measure is to reflect
management's view of the Group's underlying performance and to
assist with like for like comparisons of performance across
periods. Underlying profit is not designed to measure sustainable
levels of profitability as that potentially requires exclusion of
non-recurring items even though they are closely related to (or
even a direct consequence of) the Group's core business
activities.
12 February 2016
Nationwide Building Society today publishes its Interim
Management Statement covering the nine-month period from 5 April
2015 to 31 December 2015 ("Q3 2015/16").
Graham Beale, Nationwide's Chief Executive, said:
"Nationwide has continued with the success reported at the half
year, with the third quarter performance demonstrating the strength
of our franchise and proposition across all of our principal
markets. In the nine months to 31 December 2015:
-- gross and net residential mortgage lending increased 16% and 18% respectively
-- growth in member deposits increased 29%
-- new current account openings increased 13%.
This success is the result of continued investment in our
products, our branches, our digital channels and our services. As a
building society, our primary focus is on our members, and
notwithstanding the continued low interest rate environment, we
will continue to invest in the Society and our member proposition
going forward. We continue to be ranked number one for customer
satisfaction amongst our high street peer group with a lead of
5.3%(1) .
(Our underlying profit increased 15% to GBP1,129 million and
statutory profit is up 19% to GBP1,123 million.) The financial
results have benefited from our success in key markets and a strong
margin, reflecting the higher market rates for mortgage loans
prevailing in recent years.
These results have further enhanced our capital strength, with
our Common Equity Tier 1 ratio now at 22.6%, the highest in our
peer group(2) . Our leverage ratio has also strengthened to 4.3%(2)
taking it to the likely maximum we will be required to hold based
on our interpretation of emerging guidance.
We recently announced that Joe Garner will succeed me as Chief
Executive from 5 April this year. I am proud to have led the
Society for the last nine years and to have played my part in
demonstrating that Nationwide is a compelling alternative to the
established banks. I remain confident and excited about what
Nationwide can offer in the future and I wish Joe every
success."
1 (c) GfK 2015 (FRS), Financial Research Survey (FRS), 3 months
ending 31 December 2015 vs 30 September 2015, proportion of
extremely/very satisfied customers minus proportion of
extremely/very/fairly dissatisfied customers summed across current
account, mortgage and savings, high street peer group defined as
providers with main current account market share >6% (Barclays,
Halifax, HSBC, Lloyds Bank (inc C&G), NatWest and
Santander).
2 The capital ratios provided have been calculated under CRD IV
on an end point basis. The leverage ratio is calculated using the
CRR definition of Tier 1 for the capital amount and the delegated
act definition of the exposure measure. Peer group defined as
Lloyds Banking Group, RBS, HSBC, Barclays and Santander.
Trading performance
9 months ended 9 months ended
31 December 2015 31 December
2014
GBPbn % GBPbn %
------------------------------------------- ------------ ------ ---------- ------
Gross residential mortgage lending/market
share 23.6 13.5 20.4 13.0
Net residential mortgage lending/market
share 6.7 22.3 5.7 29.5
Group net receipts 4.2 3.1
Member deposits balance movement(3)
/market share 4.9 9.3 3.8 8.7
------------ ------
Number of new current accounts opened 384,000 339,000
------------------------------------------- ------------ ------ ---------- ------
At 31 December
2015 At 4 April 2015
GBPbn % GBPbn %
------------ ------
Residential lending balances 159.8 152.9
Member deposit balances(3) 137.3 132.4
Current account market share(4) 6.9 6.8
------------------------------------------- ------------ ------ ---------- ------
Providing members with long term good value products and
innovative services is a priority. During the quarter we continued
to support first time buyers with a new Help to Buy ISA, rewarded
new and existing members with new Regular Saving products and
showed our commitment to offering inclusive banking for all with
the launch of the FlexBasic current account. We continued to expand
Nationwide Now, our innovative high speed video link which connects
branches to consultants based elsewhere, and during the quarter
completed our delivery of over 400 installations into the branch
network.
Gross mortgage lending for the nine months to 31 December 2015
was up 16% on the comparative period at GBP23.6 billion,
representing a market share of 13.5%. Our improved performance has
been supported by proposition changes aimed at increasing our
support for first time buyers.
The average LTV of new lending was consistent with the same
period last year at 69%.
Net lending increased 18% and our market share of 22.3%
continues to be significantly greater than our 12.0% par share of
the mortgage market, driven by both strong gross lending and
retention.
Our net receipts for the period increased by 35% to GBP4.2
billion and member deposits(3) increased by GBP4.9 billion to
GBP137.3 billion. Our market share of balance growth was 9.3%,
driven by competitive savings and current account propositions
which offer long term good value and seek to support members in the
current low base rate environment.
Despite a very competitive market place we opened 384,000 new
current accounts and we were a net beneficiary of the current
account switching service, gaining 11.8% of gross switchers. Our
market share of main and standard packaged accounts was 6.9%(4)
.
3 Member deposits include current account credit balances.
4 Based on CACI market data as at 31 October 2015. Main standard
and packaged accounts exclude FlexOne accounts designed for the
youth market.
Financial performance
9 months ended 9 months ended
31 December 2015 31 December
2014
GBPm % GBPm %
-------------------------------------- ---------- -------- -------- --------
Underlying profit before tax(5) 1,129 980
Statutory profit before tax 1,123 946
-------------------------------------- ---------- -------- -------- --------
Net interest margin(5) 1.56 1.50
Underlying cost income ratio(5) 53.1 49.8
Statutory cost income ratio 53.3 51.4
-------------------------------------- ---------- -------- -------- --------
At 31 December
2015 At 4 April 2015
GBPbn % GBPbn %
---------- --------
Total assets 205.2 195.6
Loans and advances to customers 176.4 170.6
---------- --------
Common Equity Tier 1 (CET1) ratio(2) 22.6 19.8
Leverage ratio(2) 4.3 4.1
-------------------------------------- ---------- -------- -------- --------
Liquidity coverage ratio 135.3 119.3
Wholesale funding ratio 24.8 23.3
-------------------------------------- ---------- -------- -------- --------
Underlying profit before tax for the nine-month period ended 31
December 2015 was up 15% at GBP1,129 million (Q3 2014/15: GBP980
million(5) ) due to higher net interest income and lower impairment
provisions, offset by growth in underlying costs. Statutory profit
before tax was up 19% to GBP1,123 million.
Net interest margin of 1.56% increased 6bps when compared with
the same period last year (Q3 2014/15: 1.50%(5) ). This reflects
market trends of lower funding costs which have been only partly
offset by reducing asset margins as competition in the mortgage
market has become more sustained.
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The underlying cost income ratio has increased from 49.8%(5) to
53.1%. Cost growth has arisen from investment in new digital
technology and the modernisation of point of sales systems,
inflation and continued investment in our brand to broaden our
appeal and support business growth.
Our credit performance continues to be strong with impairments
down period on period. The improvements mostly reflect the
deleveraging of commercial real estate (CRE) and out of policy
treasury assets, together with stable performance in our retail
portfolios.
We continue to review compliance with ongoing and emerging
regulatory matters, including consumer credit legislation, and have
recognised a net provision charge of GBP55 million year to date in
respect of potential customer redress, of which GBP31 million was
raised in the quarter. Current provisions include latest experience
and information included in the FCA's consultation paper on PPI and
the Plevin case.
Our capital position has continued to improve with consolidated
CET1 and leverage ratios as at 31 December 2015 of 22.6% and 4.3%
respectively (4 April 2015: 19.8% and 4.1% respectively)(2) . This
further improvement has been driven by an increase in retained
earnings and lower risk weighted assets as a result of reduced CRE
exposures and improved buy to let asset quality. Further
information on our capital position can be found in Appendix 1.
At 4.3%(2) our leverage ratio is now in line with our
interpretation of emerging guidance including the recent
consultation on the Financial Policy Committee's framework for the
systemic risk buffer.
5 Comparatives have been restated to exclude foreign currency
retranslation amounts from net interest margin within underlying
profit, in line with presentational changes made in the Group's
Interim Results at 30 September 2015.
Outlook
As a building society, our objective is to optimise, rather than
maximise, profitability. In line with this approach we target
financial performance in a range which maintains our capital
strength, whilst funding growth and business investment for the
benefit of our members.
The profitability experienced this year has benefited from
unusually strong margins for lending over the last few years in
line with market trends. Looking forward, we expect the level of
profit to moderate as mortgage assets reprice to prevailing
rates.
Our latest results demonstrate the success of our strategy. Our
focus on doing the right thing for our members, combined with our
scale and financial strength, means we are well placed to continue
to show the real and refreshing difference that Nationwide can
make.
Economic environment
The pattern of economic recovery in the UK is now well
established with moderate levels of growth, increasing employment,
and the combination of low inflation and interest rates
underpinning a recovery in household spending. However, the broader
global picture looks less predictable with geo-political
instability and concerns over the prospects for some of the major
drivers of growth, including China and a number of major oil
producing nations. In a UK context, in the short term this
uncertainty may be compounded by the EU referendum.
Given this mixed picture, we expect the UK economy to continue
to grow but potentially at a slightly slower rate. Improving
household finances will continue to support both domestic demand
and a relatively stable outlook for the housing market. Concerns
over global growth will, however, tend to delay any move in
interest rates, and we now believe it is unlikely that the Monetary
Policy Committee will increase interest rates before late 2016 at
the earliest.
Additional information
The financial information on which this Interim Management
Statement is based is unaudited and has been prepared in accordance
with Nationwide's previously stated accounting policies described
in the 2014/15 Annual Report and Accounts, except for a voluntary
change in accounting policy to reclassify gains and losses arising
from the retranslation of foreign currency items, as described in
note 2 of the 2015/16 Interim Results.
For further information please contact:
Investor queries:
Sarah Hill: 0845 602 9053 or 07720 426 180,
sarah.hill@nationwide.co.uk
Media contact:
Stuart Williamson: 01793 654756 or 07545 740 195,
stuart.williamson@nationwide.co.uk
Alan Oliver: 01793 655287 or 07850 810 745,
alanm.oliver@nationwide.co.uk
Forward looking statements
Certain statements in this document are forward looking with
respect to plans, goals and expectations relating to the future
financial position, business performance and results of Nationwide.
Although Nationwide believes that the expectations reflected in
these forward looking statements are reasonable Nationwide can give
no assurance that these expectations will prove to be an accurate
reflection of actual results. By their nature, all forward looking
statements involve risk and uncertainty because they relate to
future events and circumstances that are beyond the control of
Nationwide including, amongst other things, UK domestic and global
economic and business conditions, market related risks such as
fluctuation in interest rates and exchange rates,
inflation/deflation, the impact of competition, changes in customer
preferences, risks concerning borrower credit quality, delays in
implementing proposals, the timing, impact and other uncertainties
of future acquisitions or other combinations within relevant
industries, the policies and actions of regulatory authorities, the
impact of tax or other legislation and other regulations in the
jurisdictions in which Nationwide operates. As a result,
Nationwide's actual future financial condition, business
performance and results may differ materially from the plans, goals
and expectations expressed or implied in these forward looking
statements. Due to such risks and uncertainties Nationwide cautions
readers not to place undue reliance on such forward looking
statements.
Nationwide undertakes no obligation to update any forward
looking statements whether as a result of new information, future
events or otherwise.
This document does not constitute or form part of an offer of
securities for sale in the United States. Securities may not be
offered or sold in the United States absent registration or an
exemption from registration. Any public offering to be made in the
United States will be made by means of a prospectus that may be
obtained from the Society and will contain detailed information
about the Society and management as well as financial
statements.
Appendix 1 - Capital position
Capital structure and ratios
Common Equity Tier 1 (CET1) capital resources have increased
over the period by approximately GBP0.7 billion. This is the result
of a strong trading performance, with GBP852 million of profit
after tax for the period, which was offset by an increase in
intangible assets driven by continuing investment in our
business.
31 December
2015 4 April 2015
GBPm GBPm
------------------------------------------------ ------------ -------------
Common Equity Tier 1 capital before regulatory
adjustments 9,420 8,620
Total regulatory adjustments to Common
Equity Tier 1 (1,432) (1,341)
------------------------------------------------ ------------ -------------
Common Equity Tier 1 capital 7,988 7,279
Additional Tier 1 capital before regulatory
adjustments 992 992
Total regulatory adjustments to Additional
Tier 1 capital - -
------------------------------------------------ ------------ -------------
Additional Tier 1 capital 992 992
------------------------------------------------ ------------ -------------
Total Tier 1 capital 8,980 8,271
------------------------------------------------ ------------ -------------
Tier 2 capital before regulatory adjustments 1,559 1,679
Total regulatory adjustments to Tier
2 capital - -
------------------------------------------------ ------------ -------------
Tier 2 capital 1,559 1,679
------------------------------------------------ ------------ -------------
Total capital 10,539 9,950
------------------------------------------------ ------------ -------------
% %
------------------------------------------------ ------------ -------------
Ratios:
Common Equity Tier 1 22.6 19.8
Tier 1 25.4 22.5
Total capital 29.8 27.0
------------------------------------------------ ------------ -------------
Note: Data in the table is reported under CRD IV on an end point
basis, being full implementation of Capital Requirements Directive
IV with no transitional provisions.
Capital adequacy
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