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 are owned by and run for the benefit of our members who, unlike in the case of banks, are predominantly our customers. 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:

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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.

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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.

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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.

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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 4th April 2014, prime mortgage lending was £119.3m.

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. Reflecting the Group’s low risk profile, performance of the mortgage books has remained strong with the number of residential mortgages more than three months in arrears reducing in both the specialist and prime mortgage books. The Group’s overall arrears percentage of 0.63% compares favourably with the Council of Mortgage Lenders (CML) industry average of 1.59%.

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 4th April 2014 was 1.53%, compared to the industry average for all mortgage lending of 1.59%.

Commercial mortgage lending

Our commercial lending portfolio of £17.3bn (as at 4th April 2014) 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 £7.8bn secured on commercial property, £8.1bn advanced to Registered Social Landlords and £1.5 advanced under Project Finance, as at 4th April 2014.

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 46% of the commercial portfolio.

As at 4th April 2014, Commercial Lending represented 10.3% 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 £135.9bn at 4th April 2014.

Over 80% 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 sought to reward our existing members by offering our Loyalty Saver account, with balances now standing at £17.1bn (as at 4th April 2014).



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.

Our expansion has accelerated and over the past year we opened over 430,000 new current accounts, up 18% on last year. In addition, over 98,000 existing current account members upgraded to our new FlexPlus.

Consumer lending

Consumer lending

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

Our total gross lending of personal loans was £1.2 billion, representing a market share for the year of 4.8%.



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.

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 2013/14 share of the investment market as at 4th April 2014 was 1.3%, taking our assets under advice to £8,2907m.

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 around 700 branches and is a top three savings and mortgage provider in the UK.

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.

During 2013/14 we introduced a Loyalty Saver product which now has balances of £17.1 billion and delivers value to our members of around £130 million during the year.

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 a million members and is used on a daily basis by over 300,000 members. For further information, please visit our mobile banking page.

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.

We have been recognised as the strongest financial brand in the UK across a number of metrics. We have been voted the most reputable bank or building society; the best bank or building society to work for; first for customer satisfaction, trust and fairness in financial services and one of the top ten most ‘Human Brands’ in the UK.

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