TIDMNOTP
RNS Number : 5715F
Nottingham Building Society
22 February 2018
Nottingham Building Society
Results for the year ended 31 December 2017
Nottingham Building Society has today announced its results for
the year ended 31 December 2017 reporting further good progress in
the development of its 'all under one roof' advice and service
proposition.
Below are some of the key achievements and financial highlights
of 2017:
-- Record gross mortgage lending of over GBP1 billion for the
first time, resulting in overall mortgage book growth of 11.6%;
-- Strong retail franchise growth - total branch savings
balances of GBP2.1bn, up 8% in the year, which have more than
doubled in the last five years;
-- The Society has opened seven new branch locations in 2017 and
welcomed over 25,500 new customers;
-- Achieved a Customer Net Promoter Score of 79%;
-- Total assets of GBP3.9 billion;
-- Net interest margin at 1.29%;
-- Group pre-tax profit of GBP14.5m, a small improvement on the prior year;
-- Arrears levels remain very low, below a quarter of the
industry average (2017: 0.15% v industry at average of 0.82%);
representing 40 accounts out of a total mortgage base of almost
26,000 accounts; and
-- Strong capital ratios with Common Equity Tier 1 at 14.6% and leverage of 4.9%.
Commenting David Marlow, Chief Executive said:
"Despite continuing uncertainty facing the UK economy, I am
pleased to report a year of strong progress in the development of
our 'all under one roof' strategy which is focused on supporting
and rewarding our members for doing the right thing to plan for and
protect their financial futures.
At the beginning of 2017 we set a number of objectives seeking
to continue to grow the membership of the Society, look at ways in
which we could reward membership through the delivery of our unique
advice and service proposition, continue to invest in the
infrastructure and capability of the Society, maintain our world
class level of service and continue to support our communities
under our Doing Good Together initiative. I am pleased to report
that we have made excellent progress against all of these key
objectives during the year.
In mortgage lending it has been a record year. We have processed
mortgage applications of GBP1.4 billion, an increase of 29% over
the previous record achieved in 2016, and delivered gross lending
of over GBP1.0bn for the first time, a 28% increase on performance
in 2016. The number of customers choosing to remain with the
Society at the end of their mortgage deal is still at high levels
with almost two out of every three choosing to do so, representing
GBP601m an 8% increase on 2016. Overall this enabled us to increase
our mortgage assets by 11.6% - a strong performance.
One area that has clearly set us apart is the role of the branch
network in delivering our strategy. We are committed to branches as
they are the ideal place to most effectively deliver our 'all under
one roof' advice and service proposition. The continuing popularity
of our branches is supported by the fact that our branch savings
balances continued to grow, increasing by a further 8% in 2017. I
am also pleased that we have been able to add a further seven new
locations to our branch network at the end of 2017, which takes our
branch network to 67 branches spanning 11 counties. We are now
trading on the high street in Norfolk for the first time in the
Society's history.
Whilst branches are vital to our strategy, increasing and
improving our digital offering to existing and prospective new
members will also be important in the years ahead. As technology
improves, we believe that we can develop our unique proposition to
work seamlessly between the world of face-to-face and digital
service. 2017 saw us commit to a multi-million pound investment to
develop our digital capability to complement our growing physical
presence. Customers and members will see the first step in this
journey in 2018 as we replace our current web portals for
intermediary mortgage business and online savings with
significantly improved offerings.
Serving and rewarding membership
In a crowded marketplace, not only is it vital to have a
differentiated proposition but as a mutual to clearly demonstrate
the benefits and value of membership. We were delighted therefore
to have launched our member rewards scheme in 2017. As we laid out
last year we want to be able to highlight the benefits of
membership through our unique advice and service proposition.
'Member Rewards' achieves this by offering a range of discounts on
our services to members who have saved more than GBP500 with us and
have been a member for longer than 12 months (mortgage customers
saving more than GBP500 qualify immediately).
These exclusive offers are designed to reward our loyal members
for doing the right thing to plan for and protect their financial
futures including GBP500 off estate agency fees, GBP25 cashback on
home insurance, GBP120 cashback on funeral plans, free
whole-of-market mortgage advice (GBP249 otherwise) and access to
exclusive savings offers during the year. These represent genuine
savings on a number of important services designed to reward
members for planning ahead as well as for their loyalty to the
Society.
Whilst the scheme was only launched in May, we have returned
over GBP250,000 of rewards to members in the first few months of
operating the scheme, an encouraging start. Members are clearly
attracted to the concept as the numbers of eligible members has
increased by approximately 10%. We expect 'Member Rewards' to be a
consistent and enduring feature of membership of the Society in the
future, constantly reflecting its benefit and value.
Another key initiative undertaken in 2017 is how we organise
ourselves to deliver our unique proposition in branch to enable
more customers access to our entire range of services in a
consistent manner. Whilst this will take some time to complete we
have made significant progress in the last year which has included
reorganising every job in our branch network, affecting 300+ team
members, with roles that are now more appropriately aligned to
delivering our broad range of services consistently. We have
reviewed opening hours, which means some branches will now open
earlier and close later in line with customer demand, and in 2018
we will begin adding estate agency and building society services to
some branches that currently do not offer these services.
Another commitment we made this year was to maintain our world
class level of service. Despite the extensive and rapid rate of
change across the Society's operations, we are pleased to have
achieved this with a Net Promoter Score of 79% for the year, which
places us amongst the best organisations in the world.
Financial performance
Whilst it is important to grow the Society and its balance
sheet, this must be achieved whilst balancing the conflicting needs
of both our mortgage and savings members. We have therefore ensured
that the mortgage yield we accrue is sufficient to pay our savings
members a competitive return, cover the costs of running the
organisation, make sufficient profit to enable us to cover our
regulatory capital requirements and continue to invest in the
Society for the future. This has been challenging at times when
assessed against the high number of sub 1% mortgage rates that were
available on the market throughout the year and our average savings
rate of 1.0% over the period. We chose to avoid this aggressive
level of mortgage pricing and managed to achieve record lending
whilst not compromising on our credit quality. We believe the fact
that we achieved this, whilst increasing our branch savings
balances and delivering an average interest margin of 1.29%, only
3bps lower than in 2016 strongly demonstrates our mutual
credentials of striking the right balance for members. Overall this
enabled us to report a profit before tax of GBP14.5m a small
improvement on 2016, equating to a profit after tax ratio of 0.31%
per GBP100 of assets - in line with our plan.
A crucial element in our financial performance is to execute our
spending plans carefully, ensuring that costs are at an appropriate
level whilst having the capability to deliver our proposition and
invest effectively for the future. It is also important that with a
higher than average cost model we see continued cost efficiencies
being achieved. Again, in 2017 we have made good progress with our
management expense ratio dropping by 2 basis points to 1.10% for
the year. Good evidence that we are targeting our expenditure
effectively.
Quality & strength
The Society continues to maintain its very high level of
financial strength, whether viewed from a capital, liquidity or
credit risk perspective. Our capital levels remains significantly
ahead of our regulatory requirements and our leverage ratio at 4.9%
demonstrates the strength of our balance sheet for what is a
relatively low risk model. Our liquidity position also remains
strong and well controlled; backed up by rising branch retail
savings balances and an increasing number of options available to
our Treasury team, including Bank of England market facilities and
secured bilateral wholesale lending.
We continue to maintain the highest standards of credit
assessment and quality. Despite increasing the mortgage book to
almost 26,000 accounts we only have 40 accounts three months or
more in arrears and have taken a total of eight properties into
possession during the entire year.
Supporting the communities
Our Doing Good Together initiative continued to go from strength
to strength in 2017. Staff have continued to generously give their
time volunteering to support a whole range of worthy causes from
financial education workshops to gardening projects.
Our Grants for Good programme saw 14 charities receiving
valuable financial support to fund work in the areas of financial
education, tackling homelessness and improving employability - our
key themes for community support.
We have also continued to work with our key partners throughout
the year. With Young Enterprise, we supported 24 schools across the
East Midlands in running their Company Programmes, providing
invaluable experience in commerce and entrepreneurship to young
people. We extended our programme with SportsAid, supporting 50
budding local athletes in their quest to achieve Olympic
stardom.
We also passed a milestone with our charity partner Framework -
with GBP50,000 of fundraising raised to tackle homelessness across
the East Midlands since our partnership began. With some of the
money raised we have provided 5,000 hours of tuition for the
charity's Skills Plus programme to help build skills such as
budgeting and tenancy management to help avoid homelessness in the
future.
In recognition of our efforts to support our communities, the
Society was delighted to be invited to an event at 10 Downing
Street, organised to recognise contributions to civil society in
the Midlands. This gave us an excellent opportunity to showcase our
work to government officials and ministers.
Summary and outlook
After a year of strong progress and despite the continuing
uncertainty in the economic and political environment, we can be
confident that we can move forward on our firm foundations. In 2018
we will be focusing on four key pillars of growing and rewarding
membership; people, culture and community; operational excellence
and strong financial adequacy. This will involve continuing the
work of recent years; developing our nascent member reward
programme, bedding in our enlarged and reorganised branch network,
rolling out our plans to fuse digital and physical to create a
strong platform for our unique proposition and building on our
progress in mortgage lending.
As always we will strive to deliver first class service across
all of our customer facing operations, maintain our financial
strength and continue to support our communities through our Doing
Good Together initiative."
David Marlow
Chief Executive
22 February 2018
Consolidated income statement for the year ended 31 December
2017
2017 2016
GBPm GBPm
Interest receivable and similar income 82.2 89.3
Interest payable and similar charges (33.9) (43.7)
Net interest income 48.3 45.6
Fees and commissions receivable 9.1 9.8
Fees and commissions payable (1.6) (1.2)
Other income - 0.3
Net losses from derivative financial instruments (0.2) (0.9)
Total net income 55.6 53.6
Administrative expenses (38.3) (35.4)
Depreciation and amortisation (3.0) (3.3)
Finance cost (0.3) (0.2)
Impairment release on loans and advances 1.3 -
Provisions for liabilities - FSCS levy and other (0.8) (0.4)
(Loss)/profit on disposal of property, plant and equipment -
(0.1)
Profit before tax 14.5 14.2
Tax expense (3.0) (3.2)
Profit for the financial year 11.5 11.0
Consolidated statement of comprehensive income
for the year ended 31 December 2017
2017 2016
GBPm GBPm
Profit for the financial year 11.5 11.0
Items that will not be re-classified to the income statement
Remeasurements of the defined benefit obligation 2.1 (4.5)
Tax on items that will not be re-classified (0.4) 0.7
Items that may subsequently be re-classified to the income
statement
Available-for-sale reserve
Valuation (losses)/gains taken to reserves (0.4) 0.2
Tax on items that may subsequently be re-classified 0.1
(0.1)
Other comprehensive income/(expense) for the period net of income tax 1.4 (3.7)
Total comprehensive income for the year 12.9 7.3
Consolidated statement of financial position
as at 31 December 2017
2017 2016
GBPm GBPm
Assets
Liquid assets 494.9 527.0
Derivative financial instruments 7.3 4.7
Loans and advances to customers 3,368.8 3,032.6
Fixed and other assets 29.4 27.1
Total assets 3,900.4 3,591.4
Liabilities
Shares 2,595.4 2,457.4
Borrowings 1,042.3 872.0
Derivative financial instruments 9.9 19.7
Other liabilities 14.5 16.3
Subscribed capital 25.6 26.2
Total liabilities 3,687.7 3,391.6
Reserves
General reserves 212.7 199.5
Available-for-sale reserves - 0.3
Total reserves and liabilities 3,900.4 3,591.4
Consolidated statement of changes in members' interests as at 31
December 2017 General reserve Available-for-sale reserve Total
GBPm GBPm GBPm
Balance as at 1 January 2017 199.5 0.3 199.8
Profit for the year 11.5 - 11.5
Other comprehensive income for the period (net of tax)
Net losses from changes in fair value - (0.3) (0.3)
Remeasurement of defined benefit obligation 1.7 - 1.7
Total comprehensive income/(expense) for the period 13.2 (0.3)
12.9
Balance as at 31 December 2017 212.7 - 212.7
Balance as at 1 January 2016 192.3 0.2 192.5
Profit for the year 11.0 - 11.0
Other comprehensive income for the period (net of tax)
Net gains from changes in fair value - 0.1 0.1
Remeasurement of defined benefit obligation (3.8) - (3.8)
Total comprehensive income for the period 7.2 0.1 7.3
Balance as at 31 December 2016 199.5 0.3 199.8
Consolidated cash flow statement
for the year ended 31 December 2017
2017 2016
GBPm GBPm
Cash flows from operating activities
Profit before tax 14.5 14.2
Depreciation and amortisation 3.0 3.3
Loss/(profit) on disposal of property, plant and equipment -
0.1
Interest on subscribed capital 2.0 2.0
Net gains on disposal and amortisation of debt securities 0.7
0.8
Decrease in impairment of loans and advances 1.3 -
21.5 20.4
Changes in operating assets and liabilities
(Increase)/decrease in other assets (3.9) (2.3)
(Decrease)/increase in other liabilities (10.5) 9.0
Decrease/(increase) in loans and advances to credit institutions 10.4
(15.7)
Increase in debt securities in issue 54.8 89.7
(Increase) in loan and advances to customers (337.5) (236.1)
Increase in shares 138.0 24.2
Increase in borrowings 115.5 139.3
Taxation paid (2.6) (3.9)
(14.3) 24.6
Capital expenditure and financial investment (17.3) 1.9
Financing activities (1.9) (1.9)
(Decrease)/ increase in cash and cash equivalents (33.5)
24.6
Cash and cash equivalents at beginning of year 393.8 369.2
Cash and cash equivalents at end of year 360.3 393.8
Summary ratios
2017 2016
% %
Common Equity Tier 1 ratio 14.6 14.7
Liquid assets as a percentage of shares and borrowings 13.60
15.83
Group profit for the year as a percentage of mean total assets 0.31
0.32
Group management expenses as a percentage of mean total assets 1.10 1.12
Society management expenses as a percentage of mean total assets 0.92 0.91
Society interest margin as a percentage of mean assets 1.29
1.32
Notes
-- The financial information set out above, which was approved
by the Board of Directors on 21 February 2018, does not constitute
accounts within the meaning of the Building Societies Act 1986.
-- The financial information for the years ended 31 December
2017 and 31 December 2016 has been extracted from the Accounts for
those years and on which the auditors have given an unqualified
opinion.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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