Nationwide Building Society · LSE:NBS
Nationwide Building Society — H1 2019/20 Earnings Presentation
35 slides from Nationwide Building Society's earnings presentation, November 2019
Slide 1: Interim Results Presentation
Interim Results Presentation For the 6 months ended 30 September 2019
Slide 2: Highlights
@ Nationwide
Slide 3: 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; Over 50% growth in Continued growth in mortgages almost 16m members current account balances Total membership (m) Current account credit balances (£bn) Residential mortgage balances (£bn) 15.99 22.9 180.96 186.012189 1
Slide 4: Short-term profits lower as we prioritise member value and service
Short-term profits lower as we prioritise member value and service Customer satisfaction score Underlying profit before tax (£m) Member financial benefit1 (£m) vs peer group average2 (%) 75 Nationwide 70 65 460 Peer group 307 365 60 330 55 H1 2018/19 H1 2019/20 H1 2018/19 H1 2019/20 Mar 2016 Mar 201
Slide 5: We are delivering on our commitments today as we invest for the future
We are delivering on our commitments today as we invest for the future Key performance indicators Investing for the future ▪ Service and proposition: reengineering our H1 19/20 Measure Target digital experiences, Later Life lending, performance Nationwide for Business FRS: 1st + 4.0%pts 1st + 5.8%pt
Slide 6: We have seen growth in mortgages, savings and current accounts
We have seen growth in mortgages, savings and current accounts Current account openings and Mortgage lending in line with expectations, Growth in member deposits switches remain robust as we continue to support FTBs maintains market share Current accounts opened (‘000) Gross mortgage lending (£bn) C
Slide 7: Financials
@ Nationwide
Slide 8: Our profits reflect expected sustained competition, investment and PPI
Our profits reflect expected sustained competition, investment and PPI ▪ Underlying income has reduced reflecting sustained competition £ million H1 2018/19 H1 2019/20 in our core markets Underlying income 1,590 1,541 ▪ Underlying costs have increased by £25m, in part reflecting our future technolog
Slide 9: Maintaining a low risk, strongly capitalised balance sheet
Maintaining a low risk, strongly capitalised balance sheet ▪ Balance sheet growth driven by net mortgage lending £ billion 04 Apr 19 30 Sept 19 % of £3bn and an increase in cash and collateral held Residential mortgages1 185.8 188.9 75 ▪ Capital position remains strong with our CET1 and UK leverage
Slide 10: Net interest margin has decreased due to a reduction in mortgage income
Net interest margin has decreased due to a reduction in mortgage income and growth in liquid assets Net interest income drivers1 (£m) Net interest income (£bn) & net interest margin (%)1 1.33 1.28 1.23 1.22 1.12 1.50 1.51 1.48 1.44 Average assets (£bn) 1.39 H1 17/18 H2 17/18 H1 18/19 H2 18/19 H1 19/
Slide 11: New business margins stabilise, as managed rate book runs off
New business margins stabilise, as managed rate book runs off Closed mortgage book Open mortgage book Average balances (£bn) & gross margin1 (%) Average balances (£bn) & gross margin1 (%) 180.0 1.90% 1.79% 65.0 2.24% 2.23% 2.30% 2.22% 2.22% 2.22% 1.63% 2.20% 170.0 1.49% 1.49% 55.0 1.50% 2.10% 160.0
Slide 12: Our cost profile reflects our investment in our future
Our cost profile reflects our investment in our future ▪ Administrative expenses have seen a £ million H1 16/17 H1 17/18 H1 18/19 H1 19/20 modest increase of £25m compared to Investment and Depreciation 271 287 398 396 the same period last year Nationwide for Business - - 2 22 ▪ The period-on-period
Slide 13: Low impairments reflect lending quality
Low impairments reflect lending quality Impairment charge (£m) 140 113 73 105 Residential Unsecured 57 Retail lending 45 04 Apr 19 30 Sep 19 04 Apr 19 30 Sep 19 Total balances (£m) 186,012 189,063 4,586 4,889 Provision balances (£m) 206 213 418 441 FY 15/16 FY 16/17 FY 17/18 FY 18/19 H1 18/19 H1 19/
Slide 14: IFRS9 staging and provisioning stable
IFRS9 staging and provisioning stable Residential mortgages1 Unsecured 04 Apr 19 30 Sep 19 04 Apr 19 30 Sep 19 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 (£m) book coverage (%) (
Slide 15: Customer redress charge driven by pre-deadline surge in PPI enquiries
Customer redress charge driven by pre-deadline surge in PPI enquiries ▪ The Group holds provisions of £168m (4 April 2019: £159m) in Customer redress charge respect of the potential costs of remediation and redress in relation to past sales of PPI, issues relating to administration of customer accou
Slide 16: We remain strongly capitalised
We remain strongly capitalised Profits support lending growth Continue to benchmark well against peers ▪ Revised residential mortgage IRB models and the finalised Basel III framework will increase RWAs significantly, but we expect our CET1 ratio to remain ahead of peers Movement in CET1 ratio1,2 (%)
Slide 17: We meet all existing and known future capital requirements
We meet all existing and known future capital requirements Going concern capital (end point) MREL Optimising credit ratings 33.3% of RWAs 8.2% of UK Estimated S&P RAC and ALAC3 4.0% of UK leverage 7.25% of UK leverage £11.1bn exposure leverage exposure1 AT1 exposure2 £9.6bn £19.7bn £19.6bn £19.2bn B
Slide 18: Well positioned to absorb impact of RWA reforms
Well positioned to absorb impact of RWA reforms Impact of future regulatory reform Proforma CET1 ratio impact ▪ The adoption of new IRB models for mortgage exposures1 is expected 31.5% by end 2020, and is forecast to reduce the CET1 ratio by approximately one third >20% ▪ Basel 3.1 regulatory reform
Slide 19: Continued strong liquidity position
Continued strong liquidity position High quality liquid asset buffer ▪ Liquid assets increased during the period by £3.9bn to £30.8bn (4 April 2019: £26.9bn) driven by an increase in short term Liquid assets1 (£ billion) funding balances and collateral inflows 30.8 ▪ The reported LCR reduced to 140.
Slide 20: Credit ratings reflect robust business model but macro uncertainty
Credit ratings reflect robust business model but macro uncertainty Senior Senior Non- Short term Tier 2 AT1 Outlook preferred Preferred Standard & Poor’s A A-1 BBB+ BBB BB+ Positive Moody’s Aa3 P-1 Baa1 Baa1 Baa3 Negative Fitch A+ F-1 A A- BB+ Rating Watch Negative ▪ S&P affirmed positive outlook in
Slide 21: Continue to develop our ESG ratings strategy
Continue to develop our ESG1 ratings strategy During the period, we: ▪ Engaged with ESG rating agencies to ensure our ratings better reflect our business model ▪ Published our Responsible Business Report, and we are committed to improving our disclosures ▪ Became a signatory to the UN Global Compact
Slide 22: Economic outlook
Economic outlook @ Nationwide
Slide 23: The UK economy has slowed, but households have proved relatively resilient
The UK economy has slowed, but households have proved relatively resilient 23
Slide 24: Housing market has remained broadly stable
Housing market has remained broadly stable 24
Slide 25: House price growth broadly flat, modest declines in London and SE
House price growth broadly flat, modest declines in London and SE 25
Slide 26: Recent developments in mortgage lending and household deposit markets
Recent developments in mortgage lending and household deposit markets 26
Slide 27: Summary
@ Nationwide
Slide 28: Building society, nationwide
Building society, nationwide UK’s most trusted financial brand2 £3m in grants to fund another 73 housing projects Premises secured for new in-house digital innovation centres in Swindon and London Planning permission secured for Oakfield housing project No. 1 for customer satisfaction amongst our Fi
Slide 29: @ Nationwide
@ Nationwide
Slide 30: Contacts
Contacts Alex Wall Head of Financial Risk & Resource Optimisation alexander.wall@nationwide.co.uk 0845 602 9053 Investor Relations Mailbox nationwide.treasury@nationwide.co.uk 30
Slide 31: Appendix
Appendix @ Nationwide
Slide 32: IFRS9 economic scenarios
IFRS9 economic scenarios Key economic variables used in the economic scenarios: average values over the first five years of the scenario Severe downside Economic variables (%) Central scenario Upside scenario Downside scenario scenario UK GDP growth 1.7 2.3 0.4 (0.1) Unemployment rate 4.1 3.8 5.5 8.
Slide 33: Diversified funding sources ahead of TFS refinancing
Diversified funding sources ahead of TFS refinancing Term wholesale funding redemptions1,2 (£bn) ▪ Over the period, wholesale funding increased by £6.0bn to £67.2bn, with issuance across all 14.9 TFS secured and unsecured platforms, in both public and private transactions 12.6 AT1 ▪ In September, we
Slide 34: Glossary
Glossary Measure Definition © Ipsos MORI 2019, Financial Research Survey (FRS), 12 month rolling data from March 2016 to September 2019, c.60,000 adults surveyed per annum, proportion of extremely/very satisfied customers minus proportion of Net satisfaction in core products extremely/very/fairly di
Slide 35: 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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