Nationwide Building Society · LSE:NBS
Nationwide Building Society — Q4 2023 Earnings Presentation
31 slides from Nationwide Building Society's earnings presentation, May 19, 2023
Slide 1: Annual Results Presentation
Annual Results Presentation For the 12 months ended 4 April 2023
Slide 2: The Society's performance highlights
The Society’s performance highlights 2 No. 1 £100 million £9.6 million Committed to a net-zero carbon for customer satisfaction invested in cost of living committed to charitable among our peer group support and supermarket activities future for the 11th year running1 shopping cashback2 by setting s
Slide 3: Our difference is our mutual ownership model
Our difference is our mutual ownership model 3 Nationwide holds a unique position in UK financial services. As the largest building society, we can deliver the value, service and mutual good to our customers and members that others cannot. OUR PURPOSE OUR STRATEGY OUR MEMBERS As a modern mutual, we
Slide 4: Financials
Financials
Slide 5: Net interest income growth led to an increase in profit
Net interest income growth led to an increase in profit 5 £ million FY 2021/22 FY 2022/23 § Net interest income increased by £936m supported by the benefit arising from increases in base rate. Net interest income 3,562 4,498 § Net other income reduced by £130m, predominantly due to value returned to
Slide 6: We maintain a low risk, strongly capitalised balance sheet
We maintain a low risk, strongly capitalised balance sheet 6 § Balance sheet growth from mortgage lending was offset £ billion 04 Apr 22 04 Apr 23 % by reduced liquidity balances as a result of decreases in Residential mortgages 197.9 201.4 74 wholesale funding including early repayment of £4.5bn TF
Slide 7: Net interest income supported by robust trading volumes
Net interest income supported by robust trading volumes 7 Net interest margin drivers (%)1 Net interest income (£bn) & net interest margin (%) 0.05 1.57 3.0 2.00 0.28 1.66 1.26 2.5 1.48 0.19 1.29 1.26 1.24 1.50 2.0 1.15 (0.22) 1.5 1.00 1.0 0.50 0.5 FY 2021/22 Retail Retail Retail Other FY 2022/23 le
Slide 8: Mortgage market competition persists; base rate rises support deposit margins
Mortgage market competition persists; base rate rises support deposit margins 8 Residential mortgage book1 Retail deposit book2 Average balances (£bn) & gross margin(%) Average balances (£bn) & gross margin (%) 300 3.00% 300 2.00% 1.12% 1.71% 1.80% 1.73% 1.57% 1.57% 1.60% 1.51% 2.00% 0.52% 1.00% 250
Slide 9: Costs increase due to the inflationary environment and targeted investment spend
Costs increase due to the inflationary environment and targeted investment spend 9 § Total costs were 4% higher. Costs excluding £ million FY 2021/22 FY 2022/23 YoY change restructuring were £125m (6%) higher, predominantly reflecting: Business as usual 1,376 1,485 109 – decisions taken to support m
Slide 10: Stable credit performance amidst continued economic uncertainty
10 Stable credit performance amidst continued economic uncertainty Evolution of Loan Book (%, LHS) and Cost of Risk (bps, RHS) Impairment charge / (release) (£m) 100 50 209 190 95 40 30 113 126 90 105 (27) 20 85 10 80 - 75 -10 13 11 10 16 19 20 18 17 15 12 22 14 23 21 09 20 20 20 20 20 20 20 20 20 2
Slide 11: Strong asset quality sustained over the period
Strong asset quality sustained over the period 11 Residential Unsecured Mortgage accounts in 3m+ arrears (%) Retail lending 04 Apr 22 04 Apr 23 04 Apr 22 04 Apr 23 3.0 Total balances (£m) 198,120 201,662 4,638 4,408 2.5 2.0 Provision balances (£m) 187 280 529 469 UK Finance 1 1.5 industry average 3m
Slide 12: The economic environment has deteriorated, with the outlook uncertain
The economic environment has deteriorated, with the outlook uncertain 12 Scenario & weighting Variable (%) 2023 2024 2025 5-year average1 Peak2 Trough2 Unemployment rate (%) 12 GDP growth 1.3 2.0 1.8 1.7 8.6 0.2 Base rate 4.0 3.0 3.0 3.3 4.25 3.0 10 Upside 10% HPI growth 0.4 3.7 3.8 3.1 16.2 (1.0) (
Slide 13: IFRS 9 staging and provisioning by portfolio
IFRS 9 staging and provisioning by portfolio 13 1 Prime mortgages Buy-to-let & legacy mortgages Unsecured 04 Apr 22 04 Apr 23 04 Apr 22 04 Apr 23 04 Apr 22 04 Apr 23 Share of Provision Share of Provision Share of Provision Share of Provision Share of Provision Share of Provision Balance Balance Bala
Slide 14: Analysis of liquidity and investment portfolio
Analysis of liquidity and investment portfolio 14 Liquidity & investment portfolio (£bn) Liquid assets by asset type (£bn) Liquid assets by credit rating (% total) 58.8 56.1 0.2 0.0 0.9 0.8 3.1 0.9 2.9 2.6 6% 6% 0.9 2.9 1.3 2.8 19.6 20.1 75% 72% 54.6 52.2 30.2 25.6 19% 22% 04-Apr-22 04-Apr-23 04-Apr
Slide 15: Breakdown of deposits and liquidity balances
Breakdown of deposits and liquidity balances 15 Deposits by product type (£bn) Retail deposits1 by access (£bn) LCR Pillar 1 % - 12m rolling average 2 4 220% 33 38 180% 26 140% 123 154 100% Mar-20 Sep-20 Mar-21 Sep-21 Mar-22 Sep-22 Mar-23 Retail savings Instant acces s Personal current accounts Limi
Slide 16: Our liquidity and wholesale funding position supports our financial strength
Our liquidity and wholesale funding position supports our financial strength 16 Long Term Wholesale Funding Maturities1 (£bn) 2022/23 Wholesale Issuance (£bn) Credit ratings 20 4.5 Senior Credit ratings Senior Short 0.7 3.5 non- Outlook 16 agency preferred term preferred 12 0.7 2.3 S&P2 A+ A-1 BBB+
Slide 17: We meet current and expected regulatory capital requirements
17 We meet current and expected regulatory capital requirements Risk-Weighted Capital Leverage Ratio MREL Leverage CET1 Surplus (% of RWAs) (% of Leverage Exposure) (% of Leverage Exposure) ratio ratio to MDA 6.0% 26.5% 15.0% £16.9bn £8.8bn £8.1bn £15.1bn £10.0bn £5.1bn £22.0bn £17.9bn £4.1bn 32.7%
Slide 18: Questions
Questions
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)7738 273287 Investor Relations Mailbox nationwide.tre
Slide 20: Appendix
Appendix
Slide 21: Progress against our key performance indicators
Progress against our key performance indicators 21 Key performance indicators Measure 2022/23 target 2022/23 performance Core products satisfaction FRS: 1st + 4.0%pts 1st + 3.8%pts1 Outstanding service in our peer group Customer satisfaction UKCSI: 5th Joint 28th 2 Member financial benefit3 At least
Slide 22: Mortgage portfolio refinancing profile
Mortgage portfolio refinancing profile 22 Prime portfolio £10bn 8% § 22% of fixed rate mortgage balances1 in the prime £8bn and BTL portfolios contractually mature in the next 12 6% months2; 44% contractually mature in the next 24 £6bn 4% months2. £4bn £2bn 2% § Within the prime portfolio, members a
Slide 23: LTV distribution of residential mortgages
LTV distribution of residential mortgages 23 Loan book balances (by value) – 4 April 2023 New business1 (by value) – 2022/23 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% 63.1 41 13.7 32 76.8
Slide 24: Structural hedge and NII/EVE sensitivity analysis
Structural hedge and NII/EVE sensitivity analysis 24 Structural hedging programme Structural hedge 50 1.40% § We undertake structural hedging of our CCDS, reserves and stable1 40 1.20% personal current account balances to smooth income volatility from short- 1.00% 30 0.80% term changes in interest r
Slide 25: We remain active in core wholesale term funding markets
We remain active in core wholesale term funding markets 25 Wholesale Issuance by product 1, 2 (£bn) Wholesale Issuance by currency 1 10 FY 2020/21 FY 2021/22 FY 2022/23 8 GBP 6 15% 19% 34% 36% EUR 4 45% 9% 52% 2 33% USD 21% 36% 0 Other 19-20 20-21 21-22 22-23 Covered Bond RMBS Senior Preferred SNP T
Slide 26: Nationwide is a responsible business
Nationwide is a responsible business 26 Beacon for mutual Having a meaningful impact on customers, communities and society, by being bigger and doing better good Our Mutual Good By 2025, we will help 250,000 people to buy their first home1 Reducing our Commitments By 2025, we will have provided £1 b
Slide 27: We have disclosed our emissions and science-based targets
We have disclosed our emissions and science-based targets 27 Scope 1 & 2 emissions Upstream scope 3 emissions (categories 1, 2 & 4) 2,361 & 12,774† (c.0.5%) 42% absolute emissions reduction target 156,000 (c.5%) for Scope 1; continue to source 100% 42% absolute emissions reduction renewable electric
Slide 28: Approach for reducing Scope 3 mortgage emissions
Approach for reducing Scope 3 mortgage emissions 28 Modelled impact of key carbon reducing activities on our scope 3 mortgage emissions † c. 80% of emissions are attributable to our residential mortgage lending. Reducing these emissions requires changes to policy and consumer behaviour. We are takin
Slide 29: We have continued to drive improvements in our ESG ratings
We have continued to drive improvements in our ESG ratings 29 Year-on-year ESG Assessment Score Scale Relative performance Date stamp trend AAA AAA to CCC December 2022 ESG Rating 1 10.2, 0 to 100 ‘low risk’ November 2022 Risk Rating 2 negligible to severe Moody’s Analytics 57 0 to 100 Industry aver
Slide 30: Glossary
Glossary 30 Measure Definition © Ipsos 2023, Financial Research Survey (FRS), for the 12 months ending 31 March 2013 to 12 months ending 31 March 2023. 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 Great Brita
Slide 31: Disclaimer
Disclaimer 31 This presentation has been prepared by and is the This communication must not be acted on or relied on It has no regard to the specific investment objectives, changes in business strategy, lending practices or property of Nationwide Building Society (“Nationwide”). by persons who are n
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