Nationwide Building Society · LSE:NBS
Nationwide Building Society — FY2019/20 Earnings Presentation
41 slides from Nationwide Building Society's earnings presentation, Apr 4, 2020
Slide 1: Annual Results Presentation
Annual Results Presentation For the year ended 4 April 2020
Slide 2: Update on Covid-19
Update on Covid-19 Nationwide
Slide 3: Nationwide's response to Covid-19 is focused on mutual support
Nationwide’s response to Covid-19 is focused on mutual support Nationwide is financially strong and we are committed to supporting our members, employees and wider society through the challenging times ahead UK leverage ratio: Some of the ways we’re supporting our members, employees, suppliers and c
Slide 4: Highlights
@ Nationwide
Slide 5: Building society, nationwide
Building society, nationwide Building a National Treasure Building PRIDE Making a difference in our communities Creating the right culture where colleagues and being recognised as a responsible, can thrive, and building skills and talent for sustainable and caring provider of the future, to do the b
Slide 6: Our Society has grown strongly for the past three years
Our Society has grown strongly for the past three years More than 1m new members 35% growth in Continued growth in mortgages current account balances Total membership (m) Current account credit balances (£bn) Residential mortgage balances (£bn) 16.3 15.9 15.5 15.1 2017 2018 2019 2020 Around 15% grow
Slide 7: Last year, we chose to moderate the pace of growth in our core products
Last year, we chose to moderate the pace of growth in our core products Current account openings remain robust Mortgage lending in line with expectations, Growth in member deposits as we grow market share as we continue to support First Time Buyers maintains steady market share Current accounts open
Slide 8: We are delivering on our commitments today as we put members first
We are delivering on our commitments today as we put members first Key performance indicators How we’re supporting members FY19/20 Supporting members’ needs through propositions: Measure Target performance Pay Day Save Day campaign to encourage good FRS: 1st + 4.0%pts 1st + 5.4%pts1 savings habi
Slide 9: Profit decline, but we remain in a position of financial strength
Profit decline, but we remain in a position of financial strength Underlying profit before tax Underlying profit before tax of £469m reflects the UK leverage ratio1 impact of: active choices to deliver more value to members and invest in the long-term future of the Society, and additional costs re
Slide 10: Highlights
Highlights 1 © Ipsos MORI 2020, Financial Research Survey (FRS) measure (see slide 40). 2 Nationwide Brand Guidance Study (see slide 40). 3 Pay.UK monthly CASS data, 10 12 months to March 2020. 4 Member financial benefit defined on slide 40. 5 For more information, see slide 34. 6 For more informati
Slide 11: Financials
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Slide 12: Our profits reflect the impact of sustained competition, increased investment, PPI and Covid-19
Our profits reflect the impact of sustained competition, increased investment, PPI and the impact of Covid-19 Underlying income has reduced reflecting sustained competition £ million 2019 2020 in our core mortgage markets and the fall in the Bank base rate. Underlying costs increased by £58m (3%
Slide 13: Maintaining a low risk, strongly capitalised balance sheet
Maintaining a low risk, strongly capitalised balance sheet £ billion 04 Apr 19 04 Apr 20 % Balance sheet growth driven by net mortgage lending of £2.8bn and an increase in cash and collateral held. Residential mortgages1 185.8 188.6 76 Low risk balance sheet: 94% of lending secured on low Retail
Slide 14: Net interest margin has decreased as a result of continued competition
Net interest margin has decreased as a result of continued competition in core retail markets Net interest income drivers1 (£m) Net interest income (£bn) & net interest margin (%)1 4.0 1.50 1.32 1.31 1.22 1.13 3.0 2.0 1.0 0.0 2016 2017 2018 2019 2020 2.0 1.28 1.23 1.22 1.12 1.13 Average assets (£bn)
Slide 15: As the managed rate book runs off, margin optimisation sees new business margins stabilise
As the managed rate book runs off, margin optimisation in H2 sees new business margins stabilise Closed mortgage book Open mortgage book Average balances (£bn) & gross margin1 (%) Average balances (£bn) & gross margin1 (%) 50 2.29% 2.50% 250 2.00% 2.23% 2.22% 2.22% 2.22% 1.79% 45 1.63% 1.80% 40 2.00
Slide 16: Our cost profile reflects our investment in our future
Our cost profile reflects our investment in our future £ million FY 17/18 FY 18/19 FY 19/20 Growth in cost is attributable to the impact of Investment and Depreciation 593 769 880 strategic investment, including a charge of £124m Nationwide for Business - 13 88 1 for impairments and write-offs of
Slide 17: Pre-Covid-19 asset quality remains strong
Pre-Covid-19 asset quality remains strong Impairment charge (£m) 209 Residential Unsecured 140 101 113 Retail lending 105 04 Apr 19 04 Apr 20 04 Apr 19 04 Apr 20 Total balances (£m) 186,012 188,839 4,586 4,994 Provision balances (£m) 206 252 418 494 2017 2018 2019 2020 Residential lending Consumer b
Slide 18: £101m additional provision has been recognised as a result of Covid-19
£101m additional provision has been recognised as a result of Covid-19 650 GDP level (£bn) 600 We have used a Covid-19 central economic scenario 550 with a peak unemployment rate of 7.4%, a fall in house 500 prices of 13.8% and GDP fall of 9.6%. 450 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24
Slide 19: IFRS 9 staging and provisioning remained stable pre-Covid-19
IFRS 9 staging and provisioning remained stable pre-Covid-19 Residential mortgages1 Unsecured 04 Apr 19 04 Apr 20 04 Apr 19 04 Apr 20 Balance Share of Provision Balance Share of Provision Balance Share of Provision Balance Share of Provision (£m) book coverage (£m) book coverage (£m) book coverage (
Slide 20: A high level of support has been provided to our borrowers during Covid-19
A high level of support has been provided to our borrowers during Covid-19 Payment and Interest Holidays granted due to Covid-19 Used to calculate provision Received to 30 Apr 20 Volume Balance (£m) Share of book Weighted Volume Balance (£m) Share of book Weighted (‘000s) (%)2 Average LTV (%) (‘000s
Slide 21: Customer redress charge driven by pre-deadline surge in PPI enquiries
Customer redress charge driven by pre-deadline surge in PPI enquiries Provisions of £114m (4 April 2019: £159m) reflect PPI and other conduct Customer redress charge issues relating to administration of customer accounts, non-compliance with consumer credit legislation and other regulatory matters
Slide 22: We remain strongly capitalised
We remain strongly capitalised Profits support lending growth Continue to benchmark well against peers Movement in CET1 ratio1,2,3 (%) Peer group CET1 ratios4 (%) 31.9 16.6 14.4 14.2 13.1 Nationwide RBS Santander UK Lloyds Barclays Movement in UK leverage ratio1,3 (%) Peer group UK leverage ratios4
Slide 23: We meet all existing capital requirements
We meet all existing capital requirements Going concern capital (end point) MREL 8.4% of UK 33.7% of RWAs leverage exposure £20.2bn 6.85% of UK £11.3bn 3.6% of UK leverage exposure AT1 leverage exposure1 SNP £16.5bn £8.7bn Buffers 0.35% Buffers Tier 2 AT1 CET1 31.9% £4.1bn 6.5% of UK Minimum Leverag
Slide 24: Our liquidity position further supports our financial strength
Our liquidity position further supports our financial strength High quality liquid asset buffer1 (£bn) 31.6 Liquid assets increased during the period by £4.7bn to £31.6bn (4 April 26.9 3.5 2019: £26.9bn), a result of pre-funding wholesale maturities. 3.1 The LCR at 4 April increased to 163% (4 A
Slide 25: Summary
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Slide 26: Building society, nationwide
Building society, nationwide Building a National Treasure UK’s most trusted financial brand3 Building PRIDE £5.5m in grants to fund 135 housing projects Opened a dynamic workspace in Swindon, and in 2020 are due to open one in London, for in-house digital innovation Made a £1bn loan fund available t
Slide 27: Nationwide
Nationwide
Slide 28: Contacts
Contacts Alex Wall Head of Financial Risk & Resource Optimisation [email protected] 0207 261 6568 Investor Relations Mailbox [email protected] 28
Slide 29: Appendix
Appendix Nationwide
Slide 30: Nationwide is extending its commitment to support people impacted by Covid-19
Nationwide is extending its commitment to support people impacted by Covid-19 We’re going even further in supporting people in financial difficulty due to Covid-19, extending our support package into 2021. Our Home Support Package commitments 1. We commit not to repossess the home of any mortgage me
Slide 31: Strong performance in the 2019 Bank of England stress test
Strong performance in the 2019 Bank of England stress test1 Nationwide remained profitable throughout the stressed period Projected low-point CET1 capital ratios in the stress scenario (%) and continued to pay full distributions on all Tier 1 capital instruments. 13.1 10.8 10.3 Low-point CET1 ra
Slide 32: Successful execution of term funding plan
Successful execution of term funding plan All figures are sterling equivalent. FY 19-20 Public Issuance by Product (£bn) Portfolio Maturity by Financial Year (£bn) Successful execution of 5 16 funding plan over the year. Covered Bond RMBS EUR GBP USD CHF 14 Senior Preferred SNP 4 12 Tier 2 Tier 1
Slide 33: Strong credit ratings reflect prudent business model but macro uncertainty
Strong credit ratings reflect prudent business model but macro uncertainty Senior Senior Non- Credit Ratings Short term Tier 2 AT1 Outlook Latest update preferred Preferred Standard & Poor’s1 A A-1 BBB+ BBB BB+ Stable April 2020 Moody’s2 A1 P-1 Baa2 Baa2 Ba1 Negative April 2020 Fitch3 A+ F-1 A BBB+
Slide 34: As a mutual, doing business responsibly has always been a part of our DNA
As a mutual, doing business responsibly has always been a part of our DNA During the year we launched our Responsible Business Committee, which focuses on the way we do business and the positive impact this can have on our members, employees, communities and the environment. As a signatory of the Un
Slide 35: Mortgage payment holiday Additional information
Mortgage payment holiday Additional information
Slide 36: Covid-19 Mortgage Payment Holidays
Covid-19 Mortgage Payment Holidays1 1. Residential mortgage gross balances by payment status Total Residential Mortgages of which subject to Covid-19 Mortgage Holiday Outstanding Balance % of Total Number of % of total Outstanding Balance % of Mortgage Number of % of Mortgage (£m) Balance properties
Slide 37: Covid-19 Mortgage Payment Holidays
Covid-19 Mortgage Payment Holidays1 3. Residential mortgage balances by indexed LTV Total Residential Mortgages of which subject to Covid-19 Mortgage Holiday Outstanding Balance % of Total Number of % of total Outstanding Balance % of Mortgage Number of % of Mortgage (£m) Balance properties properti
Slide 38: Covid-19 Mortgage Payment Holidays
Covid-19 Mortgage Payment Holidays1 5. Residential mortgage balances by indexed LTV and region Total Residential South East South West Greater London Central England Northern England Scotland Wales Northern Ireland Total Mortgages (£m) England England Up to 50% £23,524 £11,068 £7,885 £8,214 £5,843 £
Slide 39: Covid-19 Mortgage Payment Holidays
Covid-19 Mortgage Payment Holidays1 6. Residential mortgage balances by outstanding balance Total Residential Mortgages of which subject to Covid-19 Mortgage Holiday Outstanding Number of % of total Outstanding % of Mortgage Number of % of Mortgage % of Total Balance Balance (£m) properties properti
Slide 40: Glossary
Glossary Measure Definition LTV is calculated on an indexed basis such that the value of the property is updated on a regular basis to reflect Loan to Value (LTV) (slides 3, 13, 20) changes in the market using the House Price Index (HPI). Lead at March 2020: 5.4%pts, March 2019: 4.8%pts. © Ipsos MOR
Slide 41: 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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