Nationwide Building Society · LSE:NBS
Nationwide Building Society — FY2016/17 Earnings Presentation
32 slides from Nationwide Building Society's earnings presentation, June 2017
Slide 1: Annual Results Presentation
Annual Results Presentation For the year ended 4 April 2017
Slide 2: Highlights
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Slide 3: A Strong Society, Managing Profits for Members
A STRONG SOCIETY, MANAGING PROFITS FOR MEMBERS Maintaining our financial strength: 3rd year with profits over £1bn Balancing profitability with financial benefit for members £505m £1.34bn £1.03bn 125 £397m 2016 2017 Other 132 Underlying Profit Before Tax 380 23.2% 25.4% Savings Pricing 265 2016 2017
Slide 4: Membership at an All-Time High
MEMBERSHIP AT AN ALL-TIME HIGH Record membership Highest customer satisfaction amongst our high street peer group¹ +3% 15.1 million 14.8 million Nationwide 14.4 million 14.4 million 2014 2015 2016 2017 Total Members +5% Peer group average 7.8 million 7.4 million 6.9 million 7.1 million 2014 2015 201
Slide 5: More People Choosing Nationwide Than Ever Before
MORE PEOPLE CHOOSING NATIONWIDE THAN EVER BEFORE Top choice for current accounts Record mortgage lending +35% £32.6bn £33.7b n £28.1bn £27.1bn 795 590 462 505 2014 2015 2016 2017 2014 2015 2016 2017 Gross Mortgage Lending Current Account Openings (‘000) Protecting savers 14.7% £6.3bn £5.8bn 11.1% £4
Slide 6: Strategy
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Slide 7: Building Society, Nationwide
BUILDING SOCIETY, NATIONWIDE Shared values, shared culture, Leading by example and doing the right thing making a difference Providing a service that is genuinely different – Heartfelt, Easy, Lifelong and Personal Delivering real value to our members Being safe, secure, sustainable and dependable 7
Slide 8: Our Commitment to Our Members
OUR COMMITMENT TO OUR MEMBERS Cornerstone Measure Target Underlying Profit Before Tax £0.9bn - £1.3bn p.a. Built to Last Leverage Ratio >4% Above cross industry high performance Building PRIDE Employee engagement and enablement benchmark Building Legendary Service Service Satisfaction 1st + 2% in pe
Slide 9: Financials
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Slide 10: Balancing Profits in Line with Members' Interests
BALANCING PROFITS IN LINE WITH MEMBERS’ INTERESTS 2016 2017 % Change Balancing profits with strategic investment, £m £m capital generation and member financial benefit UNDERLYING INCOME 3,333 3,285 We managed the business within our financial COSTS (1,796) (1,979) performance framework and deliv
Slide 11: A Low Risk Balance Sheet
A LOW RISK BALANCE SHEET 4 Apr 16 4 Apr 17 £bn £bn % Change Asset growth of 6% driven by growth in RESIDENTIAL residential mortgage lending and prudent MORTGAGES 162.1 171.1 6% liquidity position OTHER LENDING 16.7 16.2 (3%) Prudent capital ratios with peer group leading LIQUIDITY¹ 23.1 25.4 10%
Slide 12: Stabilising Margin Performance
STABILISING MARGIN PERFORMANCE Net Interest Margin (NIM) Evolution Movement in NIM Net Interest Margin Net Interest Income 152bps 1.47% 1.52% 1.27% 1.33% 1.02% (11b p s) 2,872 3,086 2,960 (4b p s) 1,981 2,431 (3b p s) 133bps (2b p s) 1bps 2013 2014 2015 2016 2017 1.58% 1.46% 1.33% 1.33% 1,557 1,529
Slide 13: Investing in Service and Growth
INVESTING IN SERVICE AND GROWTH Underlying Costs (£m) +10% +5% 1,979 43 5 5 46 -27 1,890 34 29 48 1,796 2016 Impact of Inflation & Business Regulation Other Efficiencies Costs Excl. Asset Efficiency 2017 Strategic Contractual Volumes & Control One-Offs Impairment Investment Investment 13
Slide 14: Efficiency: £300m Sustainable Saves by 2022
EFFICIENCY: £300M SUSTAINABLE SAVES BY 2022 Costs (£m) 1% - 2% CAGR 8% CAGR 628 1,936 46 1,890 1,308 2012 Cost Increase 2017* Projected Increases Sustainable Saves 2022 Impact of Strategic Investment Business Volumes Regulation & Control Living Wage/Pension Other Inflation & Contractual * Excluding
Slide 15: Higher Retail Provision Driven by Increased Prudence
HIGHER RETAIL PROVISION DRIVEN BY INCREASED PRUDENCE Impairments (£m) Retail Lending Residential Unsecured lending 4 Apr 16 4 Apr 17 4 Apr 16 4 Apr 17 Treasury & Other Consumer Banking Commercial Lending Residential Lending Total balances 162,164 171,263 3,869 3,949 (£m) 591 Non performing 3,179 2,6
Slide 16: Primarily Prime
PRIMARILY PRIME Residential lending and new business by borrower type Retail Lending Prime Specialist 4 Apr 16 4 Apr 17 4 Apr 16 4 Apr 17 Self certified BTL remortgagers Buy to let (BTL) 1% BTL new purchases 11% Residential 3% Home movers 80% 81% 20% 19% 18% portfolio Other 30% 1% Distribution of 78
Slide 17: Customer Redress Reflects Impact of Regulatory Proposals
CUSTOMER REDRESS REFLECTS IMPACT OF REGULATORY PROPOSALS Customer Redress (£m) PPI Other 136 127 103 73 69 59 2012 2013 2014 2015 2016 2017 17
Slide 18: High Quality Liquid Asset Buffer
HIGH QUALITY LIQUID ASSET BUFFER Liquid assets (£bn) Liquidity portfolio composition changed as £3.7bn FLS redemptions reduced treasury bills and £6.0bn TFS drawings -1% increased cash 27.9 27.5 Maintained term funding market presence - £6.4bn issued in Other securities 1 3.8 2.8 2016-17 11.7
Slide 19: Maintaining Financial Strength: Solvency
MAINTAINING FINANCIAL STRENGTH: SOLVENCY Movements in CET1 Ratio Peer Group CET1 Ratio¹ 25.4% 0.1% 2 5. 4% (0.7%) 0.6% 2.2% 14.3% 14.1% 12.5% 11.9% 23.2% Mar 16 Profit Pension RWAs Other Mar 17 Nationwide Lloyds RBS Barclays Santander UK Deficit Movements in end-point UK Leverage Ratio Peer Group UK
Slide 20: Capital Strength Driving Strong Ratings
CAPITAL STRENGTH DRIVING STRONG RATINGS FPC Stress Test – highest CET1 ratio Strong ratings position 2016 FPC stress test included a severe UK domestic stress, with a S&P’s RAC ratio projection for Nationwide is 9.7% to 10.7% over property price fall, rising unemployment and GDP contraction the
Slide 21: Well-Placed to Comply with MREL Requirements
WELL-PLACED TO COMPLY WITH MREL REQUIREMENTS Going concern capital MREL £15bn % of RWA £10bn Buffers AT1 28.4% 25.4% £8bn 24.1% Buffers £10bn 19.3% £6bn AT1 14.4% 6% of leverage Resources exposure £4bn CET1 12.7% Buffers £5bn CET1 8.2% £2bn Pillar 2A 4.5% Pillar 1 £0bn £0bn End point Tier 1 Leverage
Slide 22: Outlook & Summary
Outlook & Summary @ Nationwide
Slide 23: Well-Placed to Continue to Support Members in Uncertain Times
WELL-PLACED TO CONTINUE TO SUPPORT MEMBERS IN UNCERTAIN TIMES Economy Housing Strong economic performance since referendum has House price growth to cool to around 2% in 2017 supported confidence House prices expected to rise in line with earnings over Inflation and falling wages likely to c
Slide 24: Building Society, Nationwide
BUILDING SOCIETY, NATIONWIDE All employee engagement Most trusted brand among refreshed Society’s strategy financial services peer group and purpose Which? “Banking Brand of the 75% of employees involved in Year 2017” fundraising, volunteering or payroll giving No. 1 for customer satisfact
Slide 25: Nationwide
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Slide 26: Appendices
Appendices @ Nationwide
Slide 27: Market Environment: Macroeconomic Outlook
MARKET ENVIRONMENT: MACROECONOMIC OUTLOOK After expanding by a stronger than expected 1.8% in 2016, the UK GDP Growth pace of UK economic activity appears to have slowed. The 6.0% economy grew by 0.3% q/q in Q1 2017 – respectable, but 4.0% modestly below the UK’s trend growth rate. 2.0% 0.0% -2.0%
Slide 28: Market Environment: Housing Market
MARKET ENVIRONMENT: HOUSING MARKET Annual house price growth has been fairly stable, fluctuating in UK house prices Y/Y % a band between 3% and 6% for much of the past two years. 15% However, there were tentative signs of softening in April – annual house price growth slowed to 2.6% (from 3.5% in
Slide 29: Market Environment: Mortgage & Savings
MARKET ENVIRONMENT: MORTGAGE & SAVINGS Mortgage market gross lending has been broadly flat over the Mortgage Net Lending (£bn) past year, with purchase activity remaining relatively subdued. 44 The BTL market has softened following tax changes and changes in underwriting standards. 35 24 17 Mort
Slide 30: Contacts
CONTACTS Alex Wall Head of Investor Relations, Rating Agencies & Capital [email protected] 0845 602 9053 Nationwide Treasury Mailbox [email protected] 30
Slide 31: Glossary
GLOSSARY Definitions used are in line with the glossary in the Annual Report and Accounts 2017. In addition, further items included in the results presentation are defined below. Customer satisfaction measure Definition Net satisfaction in core products © GfK 2017, Financial Research Survey (FRS), 3
Slide 32: Disclaimer
DISCLAIMER This presentation has been prepared by and is the property of This communication must not be acted on or relied on by It has no regard to the specific investment objectives, financial Nationwide; changes in business strategy, lending practices or Nationwide Building Society (“Nationwide”)
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