Nationwide Building Society
Interim Results
for the period ended 30 September 2021
Introduction
Unless otherwise stated, the income statement analysis compares the period from 5 April 2021 to 30 September 2021 to the corresponding six months of 2020 and balance sheet analysis compares the position at 30 September 2021 to the position at 4 April 2021.
Underlying profit
Profit before tax shown on a statutory and underlying basis is set out on page 10. The purpose of the underlying profit measure is to reflect management's view of the Group's underlying performance and to assist with like for like comparisons of performance across periods. Underlying profit is not designed to measure sustainable levels of profitability as that potentially requires exclusion of non-recurring items even though they are closely related to (or even a direct consequence of) the Group's core business activities.
Forward-looking statements
Certain statements in this document are forward-looking with 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, Nationwide 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, risks relating to sustainability and climate change, the policies and actions of regulatory authorities, the impact of tax or other legislation and other regulations in the jurisdictions in which Nationwide operates. The economic outlook also remains unusually uncertain due to the impacts of the Covid-19 pandemic and the UK's exit from the EU. 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.
Nationwide undertakes 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 Nationwide and will contain detailed information about Nationwide and its management as well as financial statements.
Nationwide's mutual model delivers leading service and strong financial performance, enabling continued investment in its membership and wider society
Headlines
- Decisions we made early in the pandemic to protect long-term financial strength and to continue lending enabled us to deliver a very strong half year performance
- Continuing strong demand for mortgages, savings and current accounts
- Total mortgage lending higher on a gross and net basis
- Grew total market share of deposits
- First for customer satisfaction among our peer group for over nine years1
- Supported members with prize draw, scam checker service and Helping Hand mortgage
- Committed to achieving net zero by 20502 and continued to develop green propositions
Numbers at a glance
Financial highlights
Underlying profit increased to £850m (H1 2020: £305m) and statutory profit increased to £853m (H1 2020: £361m), benefiting from:
- Growth in net interest income to £1,706m (H1 2020: £1,448m), with higher margins on mortgages as we continued to lend in the early stages of the pandemic
- Net release of £34m of credit provisions (H1 2020: charge of £139m) as the economic outlook improved, while retaining provisions to reflect current uncertainty
- £133m increase in other income, reflecting higher income from banking products and supported by gains from investments
Net interest margin improved to 1.24% (H1 2020: 1.15%) and is broadly stable against H2 2020; this is expected to moderate in future
Strong focus on efficiency kept costs flat, even as we invested in, and grew, the business
Strengthened capital ratios: UK leverage ratio of 5.5% and CET1 ratio of 37.7% (4 April 2021: 5.4% and 36.4%)
Member financial benefit broadly stable at £145m (H1 2020: £140m), but tracking below our annual target
Trading highlights
- Gross mortgage lending grew by £5.5bn to £18.2bn (H1 2020: £12.7bn); our market share was 11.4% (H1 2020: 12.0%) in a buoyant and highly competitive market
- Lent over £5bn to first time buyers, supported by our new Helping Hand mortgage and return to 95% loan to value lending
- Deposit market share rose to 9.6% (4 April 2021: 9.4%) following strong deposit growth, supported by competitive products such as our Member Exclusive Fixed Rate ISA and Triple Access Online Saver, and growth in current account balances
- Switching incentives helped grow current accounts to 8.7m (4 April 2021: 8.5m), increasing our market share to 10.3% (February 2021: 10.2%)3
1 © Ipsos MORI 2021, Financial Research Survey (FRS), for the 12 months ending 31 March 2013 to the 12 months ending 30 September 2021. For more information, see footnote 7 on page 7.
2 We recognise that Nationwide alone cannot improve the energy efficiency of UK homes and we are working with
Government and industry to achieve this.
3 CACI's Current account and savings database stock volume (August 2021 and February 2021).
Joe Garner, Chief Executive, Nationwide Building Society, said:
“Early in the pandemic we made decisions to stand by our members and to protect our financial strength. This year we continued to support our members and have delivered a very strong half year performance, with capital reaching an all-time high. As a mutual, profits are retained to invest in the Society for the benefit of its members and wider society over the long term.
“Over the last six months we have focused on providing highly competitive products for our mortgage and savings members. These have been very popular, resulting in a successful ISA season, increased deposits, higher mortgage lending, and a larger share of the current account market. We continue to focus on providing the high-quality personal and digital service our members expect of us, and have led our peer group on satisfaction for over nine years1. We have delivered value to members through our member prize draw, the restarting of our current account switching incentive and the launch of a scam checker service.
“Our success is a testament to the strength of our mutual business model, to the hard work of our colleagues, and to the value we provide to our members. Given the level of uncertainty about the future, the strength of our finances gives us freedom to make choices, and confidence in continuing to support our members, colleagues and communities.”
Chris Rhodes, Chief Financial Officer, Nationwide Building Society, said:
“During the last six months, the Society has delivered strong performance across our three main product areas of mortgages, savings and current accounts. During the pandemic, strong demand for mortgages, coupled with macro-economic uncertainty, led to higher margins on mortgage lending. This resulted in significantly higher income, and a very strong overall financial performance. Net interest margin improved, but is unlikely to be sustained at this level in future due to intense competition in the mortgage market.
“We have continued to focus on efficiency and our costs remain flat despite further investment and growth of our business. While the improving economic outlook led us to release some of the credit provisions taken during the pandemic, there still remains significant economic uncertainty. Our balance sheet strength, as evidenced by our very strong CET1 and UK leverage ratios, means we are well positioned for what remains an uncertain period ahead.”