Nationwide Building Society · LSE:NBS
Nationwide Building Society — FY2020/21 Earnings Presentation
41 slides from Nationwide Building Society's earnings presentation, 2021
Slide 1: Annual Results Presentation
Annual Results Presentation for the 12 months to 4 April 2021
Slide 2: As a mutual, we were founded in 1884 for a social purpose
As a mutual, we were founded in 1884 for a social purpose… Being a responsible business is part of our mutual heritage – we’ve been committed to doing business in a way that positively impacts our members, employees, communities and the environment for over 135 years, not in response to growing soci
Slide 3: ….which continues forward to today
….which continues forward to today Building Legendary Service Building Thriving Membership Doing our very best to serve our members Growing and serving our membership • Which? Banking Brand of the Year 2020 - for the • Helped 1 in 7 first time buyers into a home of their own fourth year running • He
Slide 4: …. building society, nationwide
…. building society, nationwide Building PRIDE Building a National Treasure Creating a healthy culture for our people Contributing to our wider community • Highest proportion of employees across all major • Announced 5 Mutual Good Commitments, focused peers surveyed who were proud of the way we on b
Slide 5: Our Mutual Good Commitments support our core purpose
Our Mutual Good Commitments support our core purpose We remain committed to building a stronger, kinder, greener society and have made five Mutual Good Commitments We believe that: …should have confidence …should have a place fit to call home …deserves to be treated with respect Everyone … in managi
Slide 6: Performance Update
Performance Update @ Nationwide
Slide 7: We focussed on supporting members and preserving our strong financial position
We focussed on supporting members and preserving our strong financial position Safe Supportive Secure Service Digital Protecting the health and safety of members Supporting members through financial hardship Remaining strong and secure • Over 90% of branches remained open with • Introduced a compreh
Slide 8: Strong business performance
Strong business performance Mortgages Savings/Deposits Current Accounts 2nd largest mortgage provider 5th largest savings provider 1 in 10 current accounts1 with us Total mortgage balances (£bn) Total deposit balances (£bn) Total number of current accounts (millions) 191 170 7.8 8.3 8.5 189 186 160
Slide 9: Our mutual difference means we measure our performance on what matters most
Our mutual difference means we measure our performance on what matters most to our members: great service, long-term value and financial strength Our performance against our targets has been impacted by the pandemic and in this new environment we have revised some of our near-term targets1 Key perfo
Slide 10: Further enhanced our financial resilience
Further enhanced our financial resilience Improved profitability Leverage ratio up 70bps Liquidity position remains strong Underlying profit before tax UK leverage ratio1 Liquidity Coverage Ratio (LCR)2 £790m 5.4% 159% 152% £469m 4.7% FY 19/20 FY 20/21 FY 19/20 FY 20/21 FY 19/20 FY 20/21 1 FY 20/21
Slide 11: Financials
@ Nationwide
Slide 12: Improving income and cost performance increases profit
Improving income and cost performance increases profit ▪ Net interest income increased by £336m, largely due to the market increase £ million 2019/20 2020/21 in new business mortgage margins and is supported by a reduction in retail funding costs Net interest income 2,810 3,146 ▪ Net other income re
Slide 13: We maintain a low risk, strongly capitalised balance sheet
We maintain a low risk, strongly capitalised balance sheet £ billion 04 Apr 20 04 Apr 21 % ▪ Balance sheet growth driven by an increase in liquidity as a result Residential mortgages 188.6 190.7 75 of an increase in retail deposits Retail unsecured 4.5 3.9 1.4 ▪ 94% of total lending secured on low r
Slide 14: Net interest margin driven by improved mortgage margins
Net interest margin driven by improved mortgage margins The net interest income impact of a 10bp and 25bp cut in Bank base rate is c£34m and c£100m per annum, respectively Net interest income (£bn) & net interest margin (%) Net interest income drivers (£m)1 4.0 1.32% 1.31% 1.22% 1.21% 1.13% 3.0 2.0
Slide 15: New business margins outweighed the continued run-off of the closed book
New business margins outweighed the continued run-off of the closed book Closed residential mortgage book1 Open residential mortgage book Average balances (£bn) & gross margin2 (%) Average balances (£bn) & gross margin2 (%) 50 3.00% 250 2.00% 45 1.65% 2.22% 2.29% 2.31% 2.30% 2.50% 1.52% 40 2.22% 200
Slide 16: Costs reduce 4% as we continue to drive efficiencies
Costs reduce 4% as we continue to drive efficiencies £ million FY 19/20 FY 20/21 YoY Movement Business as usual 1,431 1,409 (22) ▪ Costs excluding restructuring and non-recurring items have reduced by £182m (8%), largely due to the re-prioritisation of our investment spend Investment & Depreciation
Slide 17: Continued focus on low-risk assets provides resilience against economic uncertainty
Continued focus on low-risk assets provides resilience against economic uncertainty Evolution of Loan Book (%) and Cost of Risk (bps)1 Impairment charge (£m) 100 50 209 190 95 40 140 90 30 113 105 85 20 80 10 75 - 2013 2014 2015 2016 2017 2018 2019 2020 2021 FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20
Slide 18: Strong asset quality sustained over the period
Strong asset quality sustained over the period Residential Unsecured ▪ Arrears rates have remained low and continue to Retail lending 04 Apr 20 04 Apr 21 04 Apr 20 04 Apr 21 outperform the industry average, however they will have Total balances (£m) 188,839 191,023 4,994 4,404 been suppressed by pay
Slide 19: Economic uncertainty is reflected in updated scenarios
Economic uncertainty is reflected in updated scenarios % 5-year average 1 Dec-20 to Peak 2 Dec-20 to Trough 2 14 Unemployment rate (%) 12 GDP Growth 10 Upside 3.7 20.0 (3.2) 8 Central 3.0 16.0 (4.0) 6 Downside 2.6 13.6 (6.2) 4 Severe Downside 1.2 6.3 (8.5) 2 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24
Slide 20: IFRS 9 staging and provisioning reflects continued uncertainty
IFRS 9 staging and provisioning reflects continued uncertainty Residential mortgages1 Unsecured 04 Apr 20 04 Apr 21 04 Apr 20 04 Apr 21 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 21: Prudent provisions for the range of outcomes following payment holidays
Prudent provisions for the range of outcomes following payment holidays Total payment Provision Status as at 4 April 2021 IFRS 9 staging holidays coverage ratio Resumed payment: 214,900 Stage 1: 89% 0.24% Stage 2: 11% (£30,133m) Interest only concession: 2,900 1.78% Stage 3: 100% Residential Expired
Slide 22: Prudent provisions for the range of outcomes following payment deferrals
Prudent provisions for the range of outcomes following payment deferrals Total payment Provision Status as at 4 April 2021 IFRS 9 Staging deferrals coverage ratio Stage 1: 68% Resumed payment: 48,600 (£308m) 16% Stage 2: 32% Unsecured1 Expired 55,600 Total (£359m) All concessions: 1,500 (£12m) 40% S
Slide 23: We remain strongly capitalised
We remain strongly capitalised Profits support lending growth ▪ Profits contributed strongly to capital growth with AT1 Movement in UK leverage ratio1 issuance also supporting the increase in the UK leverage ratio ▪ IFRS9 transitional relief continues to generally offset additional stage 1 and 2 pro
Slide 24: Continue to meet current and expected future regulatory capital requirements
Continue to meet current and expected future regulatory capital requirements Risk-Weighted Capitalisation UK Leverage Ratio MREL (% of RWAs) (% of Leverage Exposure) (% of Leverage Exposure) ▪ Our capital structure, as highlighted by surplus £16.2bn £6.5bn £9.7bn £8.9bn £21.2bn £17.0bn £4.2bn CET1 r
Slide 25: Regulatory change is expected to reduce CET1 ratio over the next 12 months
Regulatory change is expected to reduce CET1 ratio over the next 12 months Anticipated movement in CET1 ratio ▪ We are expecting a material decrease (approximately 1/3) in our reported CET1 ratio during the next 12 months, primarily as a result of 36.4% the implementation of new hybrid mortgage mode
Slide 26: Our liquidity and funding position supports our financial strength
Our liquidity and funding position supports our financial strength High quality liquid asset buffer1 (£bn) ▪ We maintain a strong liquidity position, with a Liquidity Coverage Ratio 31.6 33.3 of 165% (4 April 2020: 163%) 3.5 3.9 ▪ The Society has fully repaid all £17bn of TFS funding, primarily with
Slide 27: Closing Remarks
Closing Remarks @ Nationwide
Slide 28: In this exceptional year our mutual purpose has never been more important
In this exceptional year our mutual purpose has never been more important Safe Supportive Secure Service Digital Keeping members and colleagues safe Open for business and supporting members Enhancing our financial strength • Over 90% of branches remained • For those impacted by the • Strong profits
Slide 29: Questions
@ Nationwide
Slide 30: Contacts
Contacts Charlie Wood Head of Financial Risk Strategy & Investor Relations Charles.Wood@nationwide.co.uk +44 (0) 7500 999612 Carly Thomas Senior Manager, Investor Relations & Treasury Sustainable Finance Carly.Thomas@nationwide.co.uk +44 (0) 7464 491600 Investor Relations Mailbox nationwide.treasury
Slide 31: Appendix
Appendix @ Nationwide
Slide 32: Our carbon journey
Our carbon journey • Solar panels installed on • Achieved Carbon Trust • Started carbon offsetting • Signed a long-term solar • Signed up to green wind • More than 30 electric car • 100% carbon neutral from • Signed up to the United Nations our head office building Triple Standard for • Zero waste t
Slide 33: Climate-related financial disclosures align to the TCFD recommendations
Our climate-related financial disclosures align to the recommendations of the TCFD1 Nationwide’s climate change To lead the greening of UK homes, where at Our business operations, suppliers and We are working towards alignment to a net least 50% of homes in our mortgage portfolio commuting will be c
Slide 34: We have made significant enhancements to our climate-related metrics this year
We have made significant enhancements to our climate-related metrics this year Alongside our scope 1 and 2 carbon emissions metrics, we have calculated the scope 3 carbon emissions associated with our mortgage portfolio, aligned to the Partnership for Carbon Accounting Financials (PCAF) Global Green
Slide 35: Structural hedging and hedging for floored savings
Structural hedging and hedging for floored savings Structural Liabilities (£bn) ▪ We undertake structural hedging to smooth income 44 volatility due to short-term changes in interest rates 35 35 ▪ Structural reserves/CCDS and current accounts are hedged 30 with a duration of 2.5yrs ▪ The YoY income
Slide 36: Split of residential mortgages IFRS 9 staging and provisioning
Split of residential mortgages IFRS 9 staging and provisioning Prime mortgages1 Buy to let and legacy 04 Apr 20 04 Apr 21 04 Apr 20 04 Apr 21 Balance Share of Provision Balance Share of Provision Balance Share of Provision Balance Share of Provision (£m) book coverage (£m) book coverage (£m) book co
Slide 37: We continue to remain active in core term funding markets
We continue to remain active in core term funding markets Historical Public Issuance by Product 1 (£bn) ▪ We are committed to maintaining wholesale funding access in core currencies with further options via private placements 9 8 7 ▪ We repurchased c.£2bn of covered bond funding through a liability
Slide 38: 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 January 2021 Moody’s2 A1 P-1 Baa2 Baa2 Ba1 Stable July 2020 Fitch3 A+ F1 A BBB+ BB
Slide 39: Continue to improve our Environmental, Social and Governance (ESG) ratings
Continue to improve our Environmental, Social and Governance (ESG) ratings ESG Ratings Rating Scale Date MSCI A AAA to CCC March 20211 Vigeo Eiris (V.E) 58 0 to 100 January 20212 ISS ESG C+ A+ to D- July 20203 ▪ We continue to engage with a number of ESG rating agencies ▪ During the period we have r
Slide 40: Glossary
Glossary Measure Definition Lead at March 2021: 1.6%pts, March 2020: 5.4%pts. © Ipsos MORI 2021, Financial Research Survey (FRS), for the 12 months ending 31 March 2021 and 12 months ending 31 March 2020. Results based on a sample of around 47,000 adults (aged 16+). The survey contacts around 54,000
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”)
Nationwide Building Society — FY2020/21 Earnings Presentation on 6ix