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Nationwide B.S. (NAWI)

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Thursday 20 February, 2014

Nationwide B.S.

Interim Management Statement

RNS Number : 4920A
Nationwide Building Society
20 February 2014


20 February 2014


Nationwide Building Society

Interim Management Statement



Nationwide Building Society today publishes its Interim Management Statement covering the nine month period from 5 April 2013 to 31 December 2013 ("Q3 2013/14"). The comparative period is the nine months from 5 April 2012 to 31 December 2012 ("Q3 2012/13").



Graham Beale, Nationwide's Chief Executive said:


"Our performance in the nine months to 31 December 2013 reflects a continuation of the trends disclosed in our interim results. In particular we have continued to play a leading role in the housing market - our gross mortgage lending increased by 34% to £21.6 billion and net lending grew by 58% to £8.4 billion. In addition, we continued to support saving members, with an increase in balances of £5.7 billion and our strategy to grow our market share of current accounts made further progress with a 20% increase in new openings.


This trading performance translates into a strong set of financial results with underlying profit up 105% to £539 million. Retained earnings, together with the successful issuance of capital in December 2013, have further strengthened our capital ratios and we are significantly ahead of the plans agreed with the PRA last year."



Key Highlights


  • Gross mortgage lending up 34% to £21.6 billion (Q3 2012/13: £16.1 billion), a market share of 15%
  • Net lending up 58% to £8.4 billion (Q3 2012/13: £5.3 billion)
  • Over 316,000 new current accounts opened, up 20% on the comparative period
  • A  strong  financial performance  reflecting continued growth in income with underlying profit up 105% to £539 million (Q3 2012/13: £263 million) and statutory profit up 378% to £344 million (Q3 2012/13: £72 million)
  • Successful issuance of £550 million Core Capital Deferred Shares (CCDS) in December 2013 contributing to good progress towards our leverage ratio target and improvement in our CET1 ratio



Trading Update




As the UK's largest building society, and third largest mortgage provider, we have continued to play a leading role in the mortgage market and provide support for first time buyers. Gross lending for the nine months to 31 December 2013 was £21.6 billion, up 34% on the comparative period, with net lending of £8.4 billion, 58% higher than the comparative period. Our market shares of gross and net lending were 15% and 75% respectively and we continue to account for over 20% of all new first time buyer mortgages.


We have maintained the strong overall quality of lending with the average loan to value (LTV) of new business for the nine months to 31 December 2013 at 69%, in line with that reported at the half year, and the average LTV of the residential mortgage book remains unchanged at 49%. Arrears ratios remain stable and significantly below the industry average.




Savings balances have increased by £5.7 billion and loyalty savings products remain popular, with over 675,000 members benefiting from higher interest rates according to length of membership.


Current Accounts


In the nine months to 31 December 2013 we opened 316,700 new current accounts, an increase of 20% on the comparative period, maintaining our market share of main standard and packaged accounts at 6.0%. During the last quarter we were a net beneficiary of the new account switching service.


The growth in our current account performance has been matched by external recognition of our products; our FlexPlus account was rated as the number one packaged account by Which Magazine, and 'Best packaged Current Account 2014' by Moneynet. Nationwide also won the Moneyfacts 'Current Account Provider of the Year 2014' award.




As a mutual building society, customer satisfaction remains a key priority. We continue to be independently ranked number 1 for combined product service satisfaction within our high street peer group.[1]


[1]  © GfK NOP Ltd, Financial Research Survey (FRS), 9 months of interviews conducted between April 2013 and December 2013, 53,784 adults interviewed, proportion of extremely/very satisfied customers minus proportion of extremely/very/fairly dissatisfied customers summed across current account, mortgage and savings, high street peer group defined as Barclays, Halifax, HSBC, Lloyds TSB, NatWest and Santander.


Financial Performance


Net interest margin has continued to strengthen, increasing to 1.17% for the nine months to 31 December 2013 (Q3 2012/13: 0.93%). Costs for the nine months reflect higher depreciation and running costs attributable to investments in our technology infrastructure as described in the half year results. Income growth continues to run substantially ahead of cost growth resulting in a positive trend in the Group's cost/income ratio (CIR) supporting our medium term target of an underlying CIR below 50%. Statutory profit for the third quarter incorporates the estimated full year charge for the FSCS levy of £100 million (Q3 2012/13: £55 million). Underlying profitability to 31 December is up 105% to £539 million (Q3 2012/13: £263 million) and statutory profit is up 378% to £344 million (Q3 2012/13 £72 million).



Asset quality and provisions


Retail asset quality remains strong with residential mortgage arrears reducing to 0.67% at 31 December 2013 (September 2013: 0.70%) compared with the Council of Mortgage Lenders (CML) industry average of 1.68%. Retail provisions are benefiting from positive House Price Index (HPI) trends which have strengthened in recent months, and repayment performance across our unsecured portfolios has remained stable such that the overall impairment charge for retail balances to 31 December 2013 is lower than for Q3 2012/13.


The UK commercial property market continues to show tentative signs of improvement with modest rental and capital value growth predicted, supported by increased activity in the investment market. This has allowed us to reduce our gross commercial property exposure by a further £1.1 billion to £8.4 billion in the last quarter in line with our strategy of exiting non-performing loans; in total CRE exposures have reduced by £1.7 billion year to date, representing approximately 17% of gross balances at the start of the financial year. CRE impairment charges in the third quarter have accrued broadly in line with the run rate experienced in the first half of the year and our outlook for future impairments remains in line with that reported at the half year but with increased confidence that we will see an improvement in impairments in 2014/15 as the progressive impact of economic upturn on the portfolio becomes more evident.


PPI claims remain in line with experience at the half year and no increase in provisions has been recognised in the three month period.



Funding and liquidity


We continue to have a strong and well diversified funding base, with a wholesale funding ratio of 20.0% (30 September 2013: 21.6%). In the three months to 31 December 2013 there have been no new long term wholesale funding issuances.


Nationwide has continued to participate in the Funding for Lending Scheme (FLS) in line with our support of the UK housing market, drawing a further £2.0 billion in the 3 months to 31 December 2013 and a further £4.0 billion subsequent to the period end and ahead of the closure of the residential mortgage element of the scheme. This has helped to maintain our strong liquidity position and brings the total amount of the FLS facility used to £8.5 billion as at the date of this report with no further utilisation anticipated. The core liquidity ratio as at 31 December 2013 was 10.2% (September 2013: 11.1%) with the reduction primarily attributable to holding lower levels of wholesale funding balances.





At the half year we disclosed a CET 1 ratio of 11.0% and a leverage ratio of 2.3%. Since then we have issued £550 million of CCDS (Core Capital Deferred Shares) which, on a proforma basis, further improves these ratios by approximately 1.2% and 0.3% respectively. Our capital position is also improved by organic profitability and the ongoing reduction in commercial loan balances referred to above such that at 31 December 2013 our end state CET1 and leverage ratios were 13.1% and 2.6% respectively. Subsequent to the period end the PRA have reduced their capital adjustment with respect to CRE assets from £0.4 billion to £0.1 billion.


Overall the strong performance of the business and successful issuance of CCDS means that we have confidence that we will deliver the PRA leverage ratio target of 3% significantly in advance of the December 2015 deadline.



Additional Information


The financial information on which this Interim Management Statement is based is unaudited and has been prepared in accordance with Nationwide's previously stated accounting policies described in the 2013 Annual Report and Accounts.



For further information please contact:

Investor queries:

Sarah Hill: 0845 602 9053 or 07720 426180,


Media contact:

Stuart Williamson: 02072 616215 or 07545 740195, 

Clare Crowley: 02072 616252 or 07776 994058, 




Nine months ended

31 December 2013

Nine months ended

31 December 2012

Financial Performance



Underlying profit before tax



Statutory profit before tax



Lending Volume



Group residential - gross/gross market share





Group residential - net/net market share





Retail Savings Volumes (1)



Retail savings balance movement



Net receipts/(outflows) 






Net interest margin




31 December



4 April


Balance Sheet



Total assets



Loans and advances to customers



Member savings balances



Asset Quality



Proportion of residential mortgage accounts 3 months+ in arrears




Average indexed loan to value of residential mortgage book



Average loan to value of new residential lending



Key Ratios



Capital - CRD IV (end point)

Common Equity Tier 1 ratio



Leverage ratio




(1)  Savings volumes include current account credit balances


Forward Looking Statements

Statements in this document are forward lookingwith respect to plans, goals and expectations relating to the future financial position, business performance and results of Nationwide. Although Nationwide believes that the expectations reflected in these forward looking statements are reasonable, we can give no assurance that these expectations will prove to be an accurate reflection of actual results. By their nature, all forward looking statements involve risk and uncertainty because they relate to future events and circumstances that are beyond the control of Nationwide including, amongst other things, UK domestic and global economic and business conditions, market related risks such as fluctuation in interest rates and exchange rates, inflation/deflation, the impact of competition, changes in customer preferences, risks concerning borrower credit quality, delays in implementing proposals, the timing, impact and other uncertainties of future acquisitions or other combinations within relevant industries, the policies and actions of regulatory authorities, the impact of tax or other legislation and other regulations in the jurisdictions in which Nationwide operates. As a result, Nationwide's actual future financial condition, business performance and results may differ materially from the plans, goals and expectations expressed or implied in these forward looking statements. Due to such risks and uncertainties Nationwide cautions readers not to place undue reliance on such forward looking statements.


We undertake no obligation to update any forward looking statements whether as a result of new information, future events or otherwise.


This document does not constitute or form part of an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration. Any public offering to be made in the United States will be made by means of a prospectus that may be obtained from the Society and will contain detailed information about the Society and management as well as financial statements.

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