Nationwide Building Society · LSE:NBS
Nationwide Building Society — Q2 2023 Earnings Presentation
29 slides from Nationwide Building Society's earnings presentation, Nov 11, 2022
Slide 1: Interim Results Presentation
Interim Results Presentation For the 6 months ended 30 September 2022
Slide 2: 2022/23 interim period highlights
2022/23 interim period highlights 2 We enter a new Gross mortgage Member deposit Underlying profit chapter, building on Strong trading performance lending £19.7bn growth £3.2bn £980m our strengths as a mutual and trusted UK’s most 1st for customer 16 million satisfaction brand, supported members tru
Slide 3: We remain committed to our mutual model
We remain committed to our mutual model 3 We will continue in our purpose of “building society, Nationwide”, with the following key elements: Member value first Our members are our most important stakeholders Compelling banking propositions We deliver competitive products with leading service Recogn
Slide 4: Our strategic framework will set us up for further success in the future
Our strategic framework will set us up for further success in the future 4 SERVICE EXCELLENCE Offer differentiated services focusing on what matters most to our members, and supported by a mobile-first strategy MEMBER VALUE OPERATIONAL EXCELLENCE Be the ‘bank’ of choice with Streamline business oper
Slide 5: Financials
Financials Building Society
Slide 6: Net interest income growth has led to an increase in profit
Net interest income growth has led to an increase in profit 6 ▪ Net interest income increased by £349m supported by the £ million H1 2021/22 H1 2022/23 benefit arising from increases in base rate. Net interest income 1,706 2,055 ▪ Net other income reduced by £53m, predominantly due to a non-repeat o
Slide 7: We maintain a low risk, strongly capitalised balance sheet
We maintain a low risk, strongly capitalised balance sheet 7 £ billion 04 Apr 22 30 Sep 22 % ▪ Balance sheet growth was driven by mortgage lending Residential mortgages 197.9 203.4 73 and higher liquidity balances as a result of increases in wholesale funding and retail deposits. Retail unsecured 4.
Slide 8: Net interest margin driven by improved retail funding margins
Net interest margin driven by improved retail funding margins 8 Net interest income drivers (£m) Net interest income (£bn) & net interest margin (%) 2.5 1.48 1.26 1.24 1.29 1.60 1.15 1.40 2.0 1.20 1.5 1.00 0.80 1.0 0.60 0.5 0.40 0.20 0.0 0.00 2 1 H1 20/21 H2 20/21 H1 21/22 H2 21/22 H1 22/23 Net Inte
Slide 9: Mortgage market competition persists, though rate rises support deposit margins
Mortgage market competition persists, though rate rises support deposit margins 9 Residential mortgage book Retail deposit book Average balances (£bn) & gross margin (%) Average balances (£bn) & gross margin (%) 0.57% 300 1.80% 1.90% 0.50% 1.73% (0.01%) (0.04%) 0.09% 1.71% 200 (0.13%) (0.15%) (0.09%
Slide 10: Costs increase due to the inflationary environment and targeted investment spend
Costs increase due to the inflationary environment and targeted investment spend 10 £ million H1 2021/22 H1 2022/23 YoY Movement ▪ Costs excluding restructuring were 6% higher, predominantly reflecting decisions taken to Business as usual 643 691 48 support members and colleagues in the current econ
Slide 11: Greater economic uncertainty has increased provisions in the period
11 Greater economic uncertainty has increased provisions in the period Evolution of Total Lending Book (%, LHS) & Cost of Risk (bps, RHS)1 Impairment charge / (release) (£m) 100 50 209 190 95 40 30 113 90 105 108 (27) 20 85 10 80 - 75 -10 FY 17/18 FY 18/19 FY 19/20 FY 20/21 FY 21/22 H1 22/23 Residen
Slide 12: Strong asset quality sustained over the period
Strong asset quality sustained over the period 12 Residential Unsecured Mortgage accounts in 3m+ arrears (%) Retail lending 04 Apr 22 30 Sep 22 04 Apr 22 30 Sep 22 3.0 Total balances (£m) 198,120 203,633 4,638 4,640 2.5 Provision balances (£m) 187 256 529 530 2.0 UK Finance industry average 3m+ arre
Slide 13: Mortgage refinancing profile
Mortgage refinancing profile 13 Prime Portfolio1 ▪ 22% of fixed rate mortgage balances2 in the prime and BTL £10.0bn 8% portfolios1 contractually mature in the 12 months from 30 £8.0bn 6% September 2022; 43% contractually mature in the 24 £6.0bn months from 30 September 2022. 4% £4.0bn ▪ Within the
Slide 14: The economic environment has deteriorated, with the outlook uncertain
The economic environment has deteriorated, with the outlook uncertain 14 Scenario & weighting Variable (%) 2022 2023 2024 5-year average1 Peak2 Trough2 Unemployment rate (%) 12 GDP growth 1.5 2.0 2.0 1.7 9.0 0.7 Base rate 2.0 2.3 2.5 2.2 2.5 0.75 10 Upside 10% HPI growth 9.5 4.6 4.0 5.1 28.2 3.0 (4
Slide 15: IFRS 9 staging and provisioning
IFRS 9 staging and provisioning 15 Residential mortgages1 Unsecured 04 Apr 22 30 Sep 22 04 Apr 22 30 Sep 22 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 16: We meet current and expected regulatory capital requirements
We meet current and expected regulatory capital requirements 16 Risk-Weighted Capital Leverage Ratio MREL (% of RWAs) (% of Leverage Exposure) (% of Leverage Exposure) Leverage CET1 Surplus ratio ratio to MDA £16.3bn £8.6bn £7.7bn £14.3bn £8.9bn £5.4bn £21.9bn £17.0bn £4.9bn 5.8% 25.5% 14.4% 5.8% 32
Slide 17: Our liquidity and wholesale funding position supports our financial strength
Our liquidity and wholesale funding position supports our financial strength 17 High Quality Liquid Asset Buffer1 (£bn) Long Term Wholesale Funding Maturities 3 (£bn) HY 2022/23 Wholesale Issuance (£bn) 42.5 52.4 2.5 2.5 20 0.1 0.3 0.3 4.9 16 4.3 14.6 0.7 8.0 12 1.5 8 30.2 32.9 1.4 4 0.7 0 04-Apr-22
Slide 18: Questions
Questions »> G@ Nationwide Building Society
Slide 19: Contact information
Contact information 19 Sarah Abercrombie Head of Investor Relations, Credit Ratings & Treasury Sustainability Sarah.Abercrombie@nationwide.co.uk +44 (0)7587 886500 Vikas Sidhu Senior Manager, Investor Relations Vikas.Sidhu@nationwide.co.uk +44 (0)7501 093181 Investor Relations Mailbox nationwide.tre
Slide 20: Appendix
Appendix »> Building Society
Slide 21: Progress against our key performance indicators
Progress against our key performance indicators 21 2022/23 2022/23 interim Key performance indicators Measure FY target performance FRS: 1st + 4.0%pts 1st + 3.4%pts1 Outstanding service Customer satisfaction in our peer group UKCSI: 5th 37th2 Member financial benefit3 At least £400m p.a. £320m (six
Slide 22: We continue to disclose our scope 1, 2 and 3 financed carbon emissions
22 We continue to disclose our scope 1, 2 and 3 financed carbon emissions Over the past years we have been sustainably reducing our carbon footprint, achieving carbon neutrality for our business operations in 2020, and we are committed to reducing this further to meet the Paris Agreement. Upstream s
Slide 23: LTV distribution of residential mortgages
LTV distribution of residential mortgages 23 Loan book balances (by value) New business1 H1 2022/23 (by value) Prime BTL & legacy Total Prime BTL Total LTV band LTV band % of % of % of % of % of % of £bn £bn £bn £bn £bn £bn total total total total total total <50% 72.7 45 15.8 37 88.5 43 0-60% 4.5 2
Slide 24: Split of residential mortgages IFRS 9 staging and provisioning
Split of residential mortgages IFRS 9 staging and provisioning 24 Prime mortgages1 Buy to let and legacy 04 Apr 22 30 Sep 22 04 Apr 22 30 Sep 22 Balance Share of Provision Balance Share of Provision Balance Share of Provision Balance Share of Provision (£m) book coverage (£m) book coverage (£m) book
Slide 25: Structural hedge analysis & NII sensitivity
Structural hedge analysis & NII sensitivity 25 HY 2021/22 vs HY 2022/23 Income change (£m) Annualised NII sensitivity (£m) FY 2021/22 HY 2022/23 Reserves/CCDS structural hedge (64) +100bps shift in rates n/a1 (35) (incl. within ‘Other’ on slide 8) Current accounts structural hedge +50bps shift in ra
Slide 26: Strong credit ratings reflect prudent business model
Strong credit ratings reflect prudent business model 26 Senior Senior non- Credit ratings agency Short term Tier 2 AT1 Outlook Latest update preferred preferred Standard & Poor’s1 A+ A-1 BBB+ BBB BB+ Stable August 2022 Moody’s2 A1 P-1 A3 Baa1 Baa3 Stable October 2022 Fitch3 A+ F1 A BBB+ BBB- Stable
Slide 27: We are increasingly active in core term funding markets
We are increasingly active in core term funding markets 27 Wholesale Issuance by Product 1, 2 (£bn) Wholesale Issuance by Currency 1 10 H1 2022/23 FY 2020/21 FY 2021/22 8 GBP 6 15% 15% 34% 30% EUR 4 45% 14% 52% 33% USD 2 21% 41% 0 Other 19/20 20/21 21/22 H1 22/23 Covered Bond RMBS Senior Preferred S
Slide 28: Glossary
Glossary 28 Measure Definition © Ipsos 2022, Financial Research Survey (FRS), for the 12 months ending 31 March 2013 to the 12 months ending 30 September 2022. Results based on a sample of around 47,000 adults (aged 16+). The survey contacts around 51,000 adults (aged 16+) a year in total across Gre
Slide 29: Disclaimer
Disclaimer 29 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 (“Nationwid
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