Nationwide full year results

Society lives up to mutual heritage: Excellent performance driven by continued support for savers, first time buyers and current account customers

28 May 2014

Nationwide today announces its 2013/14 full year results and is pleased to report an excellent performance as the Society’s members benefit from award-winning products and services consistent with its mutual heritage. Throughout Nationwide’s 168 year history, the Society has remained true to its core purpose of helping its savers and borrowers, underpinned by ongoing good value, exceptional service and the strength and security of its business.

Over the past twelve months, Nationwide has: helped 58,100 first time buyers, a 37% increase; grown member deposit balances by £4.9 billion, helped by the popularity of its member rewarding Loyalty Saver, and increased the number of current account openings by 18% driven by a range of award-winning products. This performance reflects the Society’s long-term strategy of safeguarding members’ interests, and has resulted in record underlying profits which have more than doubled. It has also exceeded the 3% leverage ratio set by the PRA some 20 months ahead of the December 2015 timeline and has grown its Common Equity Tier 1 ratio to 14.5%, the strongest amongst its peer group. Importantly, these results were achieved whilst maintaining the Society’s market leading customer service and today it is recognised as the number one financial brand for customer satisfaction, trust and fairness on the high street.

Key highlights:

Helping members buy their own homes, save and make the most of their money:

  • The Society played a major role in providing prudent and responsible lending to the UK housing market: Gross mortgage lending was up 31% at £28.1 billion, accounting for 14.9% of all residential mortgage lending
  • Net mortgage lending increased 52% at £9.9 billion
  • Increased support for first time buyers by 37%, helping 58,100 take their first steps into home ownership. Now account for around one in five first time buyer mortgages – a 20.3% market share
  • Nationwide’s Save to Buy proposition offers access to 95% LTV mortgages and has 45,000 signed up and saving. Higher LTV lending above 90% LTV remains low, representing 2.4% of the total value of Nationwide’s lending during the year
  • The Society’s prudent approach to mortgage lending is evident in its three month residential mortgage arrears ratio of 0.63%, well below the CML industry average of 1.59%
  • The average indexed Loan to Value of its residential mortgage book is 48%, down from 51% in 2013
  • It offered a range of competitive savings products and saw member deposit balances grow by £4.9 billion to £130.5 billion – a 12.1% share of the balance growth in the UK savings market
  • Over 810,000 members benefitted from the competitive rates offered by Loyalty Saver, which pays higher rates of interest according to length of membership and delivered value to members of around £130 million
  • Accelerated the drive to diversify business through the provision of personal banking services to new and existing members: opened over 430,000 new current accounts, an 18% increase. Nationwide’s market share of current accounts rose to 6.2%
  • The Society welcomed the drive to facilitate easier current account switching: Its monthly share of switching reached 10.8% in March 2014

Sustained focus on customer service is central to mutual heritage

  • Independently ranked first for customer satisfaction* on the high street for third year
  • Number one financial brand for trust** and fairness***
  • Ranked most reputable bank or building society according to the Reputation Institute’s RepTrak survey
  • Despite accounting for 10% of mortgages and savings market and 6% of the current account market, it accounted for only 3.55% of total industry complaints
  • Only 10% of Nationwide complaints made to the FOS are upheld, compared with 51% for the industry

Strong financial performance builds on success in growing the Society and delivering great service

  • Total underlying income up 16% to £2.9 billion
  • More than doubled underlying profit, a record at £924 million
  • Increased statutory profit four fold to £677 million
  • Cost income ratio fell to a new record low of 52.5%
  • The Business is supported by the strength of its balance sheet with 90% of business assets secured on UK residential property and 70% of funding from retail savings balances
  • Reduced exposure to commercial real estate by reducing balances by 24%: total exposure to £7.8 billion from £10.2 billion. Since the year end, reduced exposure by a further £0.7 billion
  • Commercial impairment charge reduced by 37% to £309 million
  • Total provision charges for all impairments have fallen by 35% to £383 million

Capital strength, securing the future of mutuality

  • Issued £550 million of pioneering, mutual friendly Core Capital Deferred Shares in December 2013 and £1 billion of Additional Tier 1 capital in March 2014 demonstrating ability to access capital in the market
  • Both were significantly oversubscribed, demonstrating widespread investor confidence and support for the underlying strength of Nationwide’s mutual business model
  • As a consequence of these issuances and the ongoing strength of Nationwide’s financial performance, the Society’s leverage ratio has now exceeded 3%, significantly ahead of the 31 December 2015 timetable originally agreed with the PRA
  • Nationwide’s Common Equity Tier 1 ratio has grown by 5.4 percentage points to 14.5% (2013 proforma: 9.1%), the strongest ratio amongst the Society’s peer group of UK banking competitors

Graham Beale, Nationwide’s Chief Executive, said: “Over the past year we have lived up to our mutual heritage as a building society, delivering real benefits to our members, while ensuring the strength and security of our business. We run the Society in a prudent manner which puts the needs of our members at the heart of everything we do. These results are proof that the mutual model can thrive."

“We have continued to help our members save, buy their own homes and make the most of their money while leading the way in service, satisfaction, trust and fairness. At the same time our excellent financial performance and the successful achievement of a 3% leverage ratio, well ahead of plan, shows Nationwide has emerged from the financial crisis in better shape than ever."

“Looking ahead we will maintain the strength of our business while investing to support future growth and changing consumer behaviours in an increasingly digital age. We will continue to provide our members with innovative and market leading products and services which together will reinforce Nationwide’s position as a clear and compelling alternative to the established banks."

Notes to Editors

*Gfk NOP Financial Research Survey 12 months ending March 2014. 59,935 interviews. Combined customer satisfaction for current accounts, mortgages and savings. High street defined as Barclays, Halifax, HSBC, Lloyds TSB, NatWest and Santander

**Nationwide Brand and Advertising tracker - compiled by Independent Research Agency, 12 months ending March 2014. Financial brands included Nationwide, Barclays, Co-operative Bank, First Direct, Halifax, HSBC, Lloyds, NatWest and Santander

***Gfk NOP Financial Research Survey 12 months ending March 2014. 59,935 interviews. Combined customer satisfaction for current accounts, mortgages and savings. High street defined as Barclays, Halifax, HSBC, Lloyds TSB, NatWest and Santander

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