Nationwide Building Society. - Interim Management Statement 31 December 2018

Nationwide Building Society today publishes its Interim Management Statement covering the period from 5 April 2018 to 31 December 2018 ('Q3 2018/19').

Nationwide grows membership and leads on service1 as it attracts one in five current account switchers

Key highlights

·     No. 1 for customer satisfaction amongst our high street peer group, with a lead of 3.1% (March 2018: 4.6%)1, and no. 1 for consumer trust, with a lead of 2.7% (March 2018: 1.3%)2;

·     More than one in five current account switchers (21.6%; Q3 2017/18: 19.5%) chose Nationwide3 as we grew current accounts by 5% to 7.7m (4 April 2018: 7.3m);

·     Gross and net mortgage lending grew, to £26.8bn (Q3 2017/18: £24.1bn) and £6.1bn (Q3 2017/18: £3.9bn) respectively; and we helped 59,400 first-time buyers into their own homes;

·     Deposit balances up by £5.9bn (Q3 2017/18: £2.3bn) as members chose to save more with us;

·     Underlying profit of £691m (Q3 2017/18: £880m) and statutory profit of £703m (Q3 2017/18: £886m);

·     Profits are after a charge of £167m for asset write-offs and additional technology spend in line with the Society's September 2018 announcement of increased investment to meet members' future needs;

·     Capital further strengthened with CET1 ratio of 31.7% (4 April 2018: 30.5%) and UK leverage ratio of 5.0% (4 April 2018: 4.9%).

Nationwide Building Society Chief Executive, Joe Garner, said:

"Nationwide Building Society is owned and run for the benefit of our members - not shareholders. Our membership has grown this year, we've continued to lead on service1 and trust2, helped more people into a home, and seen more members trust us with their money. Our commitment to rewarding these members with great value products and prioritising long-term value has encouraged more people to switch their mortgages and current accounts to us, and save with our Single Access and Loyalty ISAs. We've also helped 59,400 first-time buyers into their first home.

"As a mutual we are different in having more scope to make decisions in the long-term interest of our members. In September we took the conscious decision to increase significantly our investment in the Society in the full knowledge that it would impact profitability in the short-to medium-term but would be of long-term benefit to our members. Underlying profit for the first nine months of the year, at £691 million, is broadly flat year on year, excluding a charge of £167 million relating to asset write-offs and additional technology spend. This investment is to ensure we can continue to meet our members' changing needs in an increasingly digital future. At the same time, consistent with member feedback, we remain committed to and are investing in our presence on the high street.

"Additionally, in November we announced our commitment to launch a small business current account and expect to submit a bid for £50 million from the RBS Alternative Remedies Package. Our service will combine an advanced digital offering that integrates with our UK-wide network of branches and people to meet the needs of the many small and micro businesses that are not currently being well-served by incumbent banks. We believe that a combination of new technology and traditional face-to-face service will bring to life our vision for business banking - one built on excellent levels of service, trust and value.

"Looking ahead to the fourth quarter, as consumers continue to benefit from considerable choice, we intend to remain competitive and thus expect that lending margins will continue to moderate. We are confident that the Society's financial strength means we can continue to support members, as we have always done."

Trading performance for the period has been strong with gross lending of £26.8 billion (Q3 2017/18: £24.1 billion), and growth in member deposit balances of £5.9 billion (Q3 2017/18: £2.3 billion).

Gross mortgage lending includes £23.4 billion of prime residential mortgages (Q3 2017/18: £21.6 billion), demonstrating our competitively priced products and the long-term value that we continue to offer members. Following enhancements to our buy to let (BTL) product range, the flow of advances has improved with gross BTL mortgage lending for the period of £3.4 billion (Q3 2017/18: £2.5 billion).

Net mortgage lending was £6.1 billion (Q3 2017/18: £3.9 billion), reflecting higher gross mortgage advances. Net lending for prime mortgages was £5.7 billion (Q3 2017/18: £4.3 billion), and for specialist mortgages was £0.4 billion (£0.4 billion net redemption).

Member deposits grew by £5.9 billion following the success of our Single Access and Loyalty ISAs, together with higher current account balances. This increased our market share of deposits to 10.1% (31 March 2018: 10.0%). Our stock of all current accounts continues to grow and now stands at 7.7 million and we've maintained our share of main standard and packaged current accounts of 7.9%. Our market share of switchers increased to 21.6% (Q3 2017/18: 19.5%) with 1 in 5 of all switchers1 moving to Nationwide.

Financial performance




9 months ended

31 December 2018

9 months ended

31 December 2017






Underlying profit before tax (note i)





Statutory profit before tax





Statutory profit after tax





Net interest margin





Underlying cost income ratio (note i)





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At 31 December 2018

At 5 April 2018


At 4 April 2018









Total assets







Loans and advances to customers







Common Equity Tier 1 (CET1) ratio8







UK leverage ratio9







CRR leverage ratio10







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Wholesale funding ratio








Underlying profit for the period has reduced, principally due to a charge of £167 million driven by asset write-offs and additional investment in technology, in line with our technology strategy announcement in September 2018. This has also impacted cost income ratios, increasing the underlying cost income ratio to 68.4%.


Net interest margin was 7 basis points lower than for the same period last year, and 5 basis points lower than for the 2017/18 full year. As consumers continue to benefit from considerable choice, we intend to remain competitive and thus expect that margins will continue to moderate in retail lending markets generally, and particularly in relation to both prime and buy to let mortgages. Attractive new business pricing, combined with a base rate change in the period, has encouraged product switching as well as refinancing with our legacy base mortgage rate (BMR) balances continuing to run off. BMR balances have fallen by 14% to £19.5 billion over the nine-month period.