About the business

About the business

Our strategy

Our strategy remains largely unchanged from previous years as we believe it is a successful and sustainable strategy that provides us with the ability to adapt to changing market conditions. Our success is based on our long term strategy of delivering value to our members through consistently excellent products and services.

We are committed to remaining a building society because we believe that this is in the best long-term interests of our current and future members. Our mutual status allows us to be different: we do not need to maximise our profits to pay shareholders; instead, we focus on supporting our members, generating sufficient profit to maintain our strong balance sheet and invest in the future development of the business.

Our core business is providing retail personal financial services. This includes residential mortgage lending, retail savings, general retail banking services, personal financial planning, insurance products and personal lending. We have also engaged in non-retail business activities, namely commercial lending and treasury operations to generate additional value for our members. Looking forward, our commercial lending activity will focus on high quality, lower value loans.

Our vision is to be the UK's leading retail financial services provider, offering a meaningful and unique alternative to the established banks. We aim to achieve this through three core pillars.

Our three core pillars

  • Being true to our Mutual Values: we provide long-term value to our membership through sustainable pricing and by adopting a low-risk appetite offering safety and security; and
  • Acting as a Challenger Brand in the interests of consumers: we are a national player with the size, scale and distribution capability and brand to compete with banks, together with a reputation of leading customer service, with industry leading infrastructure to support delivery;
  • Diversifying our Business Model: we are developing a diversification of revenue and profit to cross-subsidise the mutual business, broadening the range of our specialist lender and exploring the opportunity to offer SME banking.

Our focus is on organic growth, but inorganic growth opportunities will be considered if they add value to members.

Strategic focus

In addition to these broader strategic goals, we have adopted strategic plans that focus on defined medium-term objectives. The current such plan (which covers the years 2012/2013 to 2016/2017) is focused on the following objectives:


We intend to maintain a focus on customer satisfaction to ensure that our excellent customer service differentiates us from our banking competitors. We intend to also focus on delivering better long-term value to our customers. 

Our customer strategy seeks to deliver this long-term value via a cross-sales drive relationship strategy that rewards customers for the depth of their product holdings.

Market positioning

We will seek to maintain our top-three position in our core markets of savings and mortgages, whilst looking to significantly grow our share of other retail personal financial services markets, including current accounts.

We intend to build our market share of current accounts to 10%, with 5% share targets for our general insurance, protection and investments, credit cards and personal loans businesses. In addition, over the coming years we will develop and offer a full range a financial services to small and medium sized enterprises (SME), playing an increasing role in providing credit to an important part of the UK economy.


Our commercial drivers are the same as for public limited companies and we therefore need to be equally as efficient.

Inefficiencies will dilute the benefits arising from our mutual status and ultimately could undermine the mutual model.

We will focus on improving our sales performance and further income diversification as well as driving efficiency savings through operational change and technology improvements.

We will focus on driving down our cost income ratio and delivering positive non-margin income growth at a rate greater than cost growth.


We will seek to improve the diversity and quality of earnings and intend to target significant growth in non-margin income. This will be driven by greater contributions from current accounts, personal loans, credit cards, protection & investments and general insurance products and, in the coming years, from the provision of services to SMEs.

In support of our strategy, we will also continue to maximise revenues from our non-member businesses, using the profits to support our member proposition and our financial strength.

Capital and liquidity

We will seek to maintain a core tier 1 solvency ratio in the top quartile of our peer group and intend to target optimal profits that would allow us to become self-sufficient in generating capital for ongoing organic expansion.

We will seek to manage and maintain liquidity at an optimum level which will be determined as part of guidance received from the regulator about the quantity of our liquid asset buffer and funding profile (Individual Liquidity Guidance).

Residential mortgage lending

The vast majority of our lending portfolio consists of UK residential mortgage loans to individuals. Our policy is for all residential mortgage loans to individuals to be fully secured first priority loans.

We are the third largest mortgage provider in the UK. We have a national franchise which is geographically well spread across the UK. At 30 September 2013 the prime mortgage lending portfolio was £115.7bn.

We offer a wide range of fixed and variable rate mortgages that are typically for terms of twenty-five years. However, the average term of our residential mortgages is typically between five and seven years because of the high level of early redemptions typical in the UK residential mortgage market. To reduce the costs associated with early repayment of mortgages and to recover a portion of the costs of mortgage incentives, we impose early repayment charges on some products.

The high asset quality of our UK residential mortgage lending has been sustained through our continued low risk lending strategy. The overall proportion of mortgages 3 months+ in arrears as at 30 September 2013 for prime mortgage business was 0.51%, and group residential mortgage was 0.70%, significantly below CML (Council of Mortgage Lenders) industry average of 1.75% (all mortgage lending).

We have a specialist lending portfolio of predominantly buy to let mortgages which are conducted solely through our subsidiary The Mortgage Works (TMW). Specialist mortgages 3 months+ in arrears as at 30 September 2013 was 1.73%, compared to the industry average for all mortgage lending of 1.75%.

Commercial mortgage lending

Our commercial lending portfolio of £19.1bn (as at 30th September 2013) is well diversified across a range of sectors including office, residential, industrial, retail and leisure. It supports the refinance and acquisition of properties predominantly located throughout the UK.

The commercial portfolio comprises £9.5bn secured on commercial property (Property Finance), £8.1bn advanced to Registered Social Landlords (RSL) and £1.5bn advanced under Project Finance, principally via the Private Finance Initiative (PFI) as at 30th September 2013.

We are one of the UK’s largest lenders to social housing providers. UK registered social landlords provide affordable housing supported by governmental grants. This portfolio historically has carried a lower risk than our other commercial lending activities, and to date we have sustained no losses or provisions against this portfolio. Lending to Registered Social Landlords represents over 42% of the commercial portfolio.

As at 30th September 2013, Commercial Lending represented 11.7% of total loans and advances to customers.


Retail savings

Retail savings

The great majority of our retail funding is in the form of UK retail member deposits. Nationwide has a strong retail funding franchise with member savings balances of £130.9bn at 30 September 2013, one of the largest savings providers in the UK.

Over 78% of the Group's funding remains from retail sources and we continue to be perceived as a safe harbour for savings.

As well as our core retail savings business within the UK Nationwide also has branches in the Isle of Man and the Republic of Ireland.

We provide a wide range of retail savings products which may be repayable on demand or notice and which may pay a variable or fixed rate of interest.

We have focused our efforts on providing our most attractive savings rates for our existing loyal members, with balances in our Loyalty Saver account now standing at £11.5 bn (as at 30 September 2013).



We offer current accounts and Nationwide branded Visa credit cards.

We also provide our customers with foreign currency exchange and equity dealing services. We act as an agent in providing these services and assume no foreign exchange or equity price risk.

In 2013 we launched two new personal current accounts and opened a further 214,000 new current accounts, up 16% from last half year (as at 30 September 2013).

We were named as the company with the most responsible credit card lending practices and our Select Card was recognised as the best new credit card (2013 Card and Payments Awards).

Consumer lending

Consumer lending

We offer three different forms of unsecured consumer lending: personal unsecured loans; credit card lending; and overdraft facilities.

During 2012/13 we continued to grow our loan book issuing 68,000 new loans, up 3% on the same period from last year.



In conjunction with our core business of providing residential mortgage loans and retail savings, we develop and sell insurance products branded with our name but underwritten by third-party insurers.

The main products we sell are buildings and contents insurance, travel insurance, motor insurance and personal accident insurance.

During 2012/2013 our sales of home insurance products have increased by 20% on 2012, driven by the launch of two new products aimed at providing members with greater flexibility over the level of cover which best suits their needs.

We also provide advice for life assurance and critical illness cover products supplied and administered by Legal & General.

Personal investment products

Personal investment products

We provide advice on a range of personal investment products, including Unit Trusts, OEICs, Stocks and Shares ISA’s and Investment Bonds, administered by Legal & General.

Our 2012-13 share of the investment market as at 4 April 2013 was 7.1%, taking our assets under advice to £7.3 billion.

In addition to offering a broad range of funds through our investment panel, our unique high street annuity service has helped almost 1,800 retirees boost their pensions by an average of 17% when compared to their existing pension providers.

We also provide offshore deposit savings through Nationwide International.

Our Distribution Network

Our integrated and diversified distribution network allows our customers to choose how and when to undertake their transactions with us and has enabled us to expand our business while controlling costs. Developments in the network have focused on cost efficiency and meeting the needs of customers, who are increasingly prepared to transact business by the internet, in our branches and by telephone.

Nationwide has over 775 branches and 15 million customers, meaning that Nationwide has a relationship with around one quarter of the population of the UK. (from page 111 of the CCDS prospectus)

We have made significant investment in transforming our products and delivery channels through the implementation of new systems and organisational structures.

We launched our first internet bank in 1997 and this has been updated in summer 2011. The new internet bank provides customers with enhanced service and functionality. Our website allows customers to transact on their accounts and apply for a broad range of our products online.

In addition we opened our first branch in the Republic of Ireland in March 2009. Nationwide UK (Ireland) provides the society with an extra outlet for attracting retail savings and also offers the society a way to access funding from the European Central Bank if required.

Our most notable achievement during 2012/13 has been the implementation of a completely new core banking system that provides greater stability and flexibility, and has allowed us to expand our banking product suite.

The launch of our mobile banking app in November 2012 has fulfilled a growing demand to be able to manage your current account while on the move. It has been downloaded by over half a million members and is used on a daily basis by over 100,000 members.

The Group has continued to invest in new cost reduction initiatives such as the ongoing changes to our sourcing arrangements and the integration of our Regional Brands as announced on 2 May 2013. This strategic integration programme will migrate the customers, products and distribution channels currently branded Dunfermline, Cheshire and Derbyshire into a single branded Nationwide organisation.

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