Nottingham Building Society Half-year Report (9215V)
27 Juli 2018 - 8:00AM
UK Regulatory
TIDMNOTP
RNS Number : 9215V
Nottingham Building Society
27 July 2018
Nottingham Building Society
Results for the period ended 30 June 2018
The Nottingham is pleased to present its results for the six
months ended 30 June 2018, in what was another period of good
progress and performance in the development of our unique 'all
under one roof' advice and service proposition for members.
Key performance highlights include:
* Total assets of almost GBP4.0 billion - a new
milestone for the Society;
* Gross lending of GBP465m and mortgage book growth of
3.7%;
* Strong retail franchise - 7.4% increase in branch
balances;
* Strong customer advocacy with a net promoter score of
79.1% and 13,000 new customers welcomed;
* Group pre-tax profit of GBP6.0m;
* Arrears levels remain at a historic low level; and
* Strong capital ratios with Common Equity Tier 1 ratio
of 14.7% and leverage ratio of 5.2%.
David Marlow, Chief Executive of The Nottingham, commenting
on the results said
"At the beginning of the year we undertook to move forward
from our firm foundations, focusing on the four key pillars
of growing and rewarding membership; strong financial adequacy;
operational excellence and people, culture and community.
At the half year point we are pleased to report good progress.
In terms of growing and rewarding membership we have welcomed
over 13,000 new members to the Society. The seven new branches,
which we added to our network at the end of 2017, have performed
ahead of expectations and are now fully embedded into our 67
branch network. The growth in popularity of our proposition
and franchise is further evidenced in our branch savings balances
which have continued their strong growth, rising 7.4% in the
period. We were also pleased to celebrate the first birthday
of the launch of our innovative members rewards scheme which
has been designed to deliver our strategy and reward our members
for planning for, and protecting, their financial futures.
So far we have rewarded over 7,000 members who have been rewarded
with discounts and cashbacks totalling almost GBP400,000, further
highlighting the benefits of membership of The Nottingham.
Whilst branches remain key to our strategy, we are acutely
aware of the significant societal changes taking place around
us which is reshaping the way in which customers and potential
members expect to receive their advice and service. This has
been underscored by the well-chronicled challenges being faced
in 2018 by retail businesses of all shapes, sizes and reputation.
We expect this shift to be fully reflected in financial services
in the months and years ahead and that is why it is essential
for us to continue to invest heavily in the Society's capability,
both for today and for the future.
In 2017, we announced our commitment to a multi-million pound
investment to develop our digital capability to complement
our growing physical presence. During 2018, we have been working
hard and investing to develop a digital platform capable of
delivering our unique advice and service proposition, which
will combine the best of face-to-face and digital service.
Customers and members will see the first step in this journey
in the second half of 2018 as we replace our current web portals
for online savings and intermediary mortgage business with
significantly improved functionality. The Society will launch
a cash Lifetime ISA later this summer, as one element of the
development of our savings proposition using our new capability.
Launching initially in branch, an online offering will be added
later in the year opening up The Nottingham to a large and
important group of potential new members. Furthermore, we continue
to deliver world class service to our members, which is reflected
in our Net Promoter Score which has now increased to 79.1%.
As the Group focuses on the delivery of its unique strategy,
it does so against a backdrop of good financial performance.
We have continued to grow the balance sheet delivering GBP465m
of gross lending which has contributed to mortgage asset growth
of 3.7% in the first six months of the year. As the eighth
largest Society, our total asset position at just shy of GBP4.0
billion is a new milestone for the Society.
One of our principal responsibilities is to balance effectively
the conflicting needs of our savers and borrowers, whilst maintaining
sufficient surplus to run the Society, meet our regulatory
capital requirements and continue our investment for the future.
This continues to be a challenge, particularly in the face
of the ultra-competitive low mortgage rate environment, where
we have seen average rates for 2 year fixed business below
75% LTV at 1.70% in the first half of the year. We have focused
particularly hard on this and are encouraged that the growth
in both mortgage and savings balances we are reporting demonstrates
that we are striking that balance for members, whilst broadly
maintaining our net interest margin at the same level as 2017
at 1.27% (2017:1.29%). This has enabled us to increase net
interest income by 4.6% compared to the same period last year.
A key element of delivering our strategic plan successfully
is to execute our spending plans carefully. This presents a
number of challenges to tackle as we grow both the operations
of the Society for members today and undertake one of the most
significant investments in the Society's history for the future.
This has inevitably resulted in increased operating and strategic
investment costs, which has resulted in a three basis point
increase in cost income ratio to 78.1% and our management expense
ratio remaining flat at 1.10% at June 2018.
Overall we have delivered a surplus before tax of GBP6.0m.
Whilst a decrease in our performance of GBP1.6m over the same
period last year, it reflects not only a growing interest income
profile but significant investment in our operations today
and for the future and the fact that we are now rewarding our
members for their membership, as already highlighted. Notwithstanding
this, the Society remains well capitalised. This is enabling
us to progress our significant investment programme at the
current level of surplus, whilst meeting the Board's requirements
for capital sustainability, ensuring a strong independent future
for the Society and its members.
Market and Outlook
The current economic and political picture remains very uncertain
dictating that we must remain vigilant in how we manage the
Society and protect members' interests but also be cognisant
of the significant changes that lie ahead. It remains our intention
to continue to grow the membership of the Society and invest
in the future as we seek to deliver consistent financial performance
in line with what has been achieved in the first half of this
year.
We will continue to focus on our four strategic pillars of
growing and rewarding membership; delivering strength in financial
adequacy; striving to deliver first class service across our
operations; and continuing to support our communities through
our Doing Good Together initiative.
The Society remains strong with a clear strategy, which is
distinct and increasingly valued. Whilst headwinds and uncertainties
remain, the Board of The Nottingham has confidence in its delivery
and plans to continue to grow the Society in a safe and secure
way, through differentiating ourselves strongly from the big
banks and continuing to support and reward our growing membership."
David Marlow
Chief Executive
26 July 2018
Consolidated statement of comprehensive
income for the six months ended
30 June 2018
Period Period Year ended
to 30 June to 30 June 31 Dec
2018 2017 2017
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Interest receivable and similar
income 41.5 40.9 82.2
Interest payable and similar charges (16.5) (17.0) (33.9)
------------- ------------- -----------
Net interest income 25.0 23.9 48.3
Fees and commissions receivable 3.9 4.8 9.1
Fees and commissions payable (0.8) (0.8) (1.6)
Net (losses)/gains from derivative
financial instruments (0.3) 0.6 (0.2)
-------------
Total net income 27.8 28.5 55.6
Administrative expenses (20.1) (19.0) (38.3)
Depreciation and amortisation (1.6) (1.5) (3.0)
Finance cost - - (0.3)
Impairment (losses)/release on
loans and advances (0.1) - 1.3
Provisions for liabilities - FSCS
levy and other - (0.4) (0.8)
Profit before tax 6.0 7.6 14.5
Tax expense (1.2) (1.6) (3.0)
------------- ------------- -----------
Profit after tax for the financial
period 4.8 6.0 11.5
------------- ------------- -----------
Other comprehensive income:
Items that will not be re-classified
to the income statement
Remeasurement of defined benefit
obligation - - 2.1
Tax on items that will not be
re-classified - - (0.4)
Items that may subsequently be
re-classified to the income statement
Available-for-sale reserve
Valuation losses taken to reserves - (0.2) (0.4)
Tax on items that may subsequently
be re-classified - - 0.1
FVOCI reserve
Valuation losses taken to reserves (0.2) - -
Tax on items that may subsequently - - -
be re-classified
-------------
Other comprehensive (expense)/income
for the period net of income tax (0.2) (0.2) 1.4
------------- ------------- -----------
Total comprehensive income for
the period 4.6 5.8 12.9
------------- ------------- -----------
Consolidated statement of financial
position
as at 30 June 2018
30 June 30 June 31 Dec
2018 2017 2017
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Assets
Liquid assets 456.3 536.1 494.9
Derivative financial instruments 10.1 5.9 7.3
Loans and advances to customers 3,489.1 3,239.2 3,368.8
Fixed and other assets 33.3 29.5 29.4
------------- ------------- -----------
Total assets 3,988.8 3,810.7 3,900.4
------------- ------------- -----------
Liabilities
Shares 2,722.1 2,608.3 2,595.4
Borrowings 1,001.3 940.2 1,042.3
Derivative financial instruments 7.2 14.7 9.9
Other liabilities 14.2 16.0 14.5
Subscribed capital 25.3 25.9 25.6
------------- ------------- -----------
Total liabilities 3,770.1 3,605.1 3,687.7
Reserves
General reserves 218.9 205.5 212.7
Fair value reserves (0.2) 0.1 -
------------- ------------- -----------
Total reserves and liabilities 3,988.8 3,810.7 3,900.4
------------- ------------- -----------
Consolidated statement of changes
in members' interests as at 30 June
2018
Available-for-sale
General FVOCI reserve
reserve reserve Total
GBPm GBPm GBPm GBPm
Balance as at 1 January 2018 (Audited) 212.7 - - 212.7
Change on initial recognition of
IFRS 9 1.4 - - 1.4
Profit for the period 4.8 - - 4.8
Other comprehensive expense for the
period (net of tax)
Net losses from changes in fair value - (0.2) - (0.2)
---------- ---------- ------------------- --------
Total other comprehensive expense - (0.2) - (0.2)
---------- ---------- ------------------- --------
Total comprehensive income/(expense)
for the period 6.2 (0.2) - 6.0
---------- ---------- ------------------- --------
Balance as at 30 June 2018 (Unaudited) 218.9 (0.2) - 218.7
---------- ---------- ------------------- --------
Balance as at 1 January 2017 (Audited) 199.5 - 0.3 199.8
Profit for the period 6.0 - - 6.0
Other comprehensive expense for the
period (net of tax)
Net losses from changes in fair value - - (0.2) (0.2)
Total other comprehensive expense - - (0.2) (0.2)
---------- ---------- ------------------- --------
Total comprehensive income/(expense)
for the period 6.0 - (0.2) 5.8
---------- ---------- ------------------- --------
Balance as at 30 June 2017 (Unaudited) 205.5 - 0.1 205.6
---------- ---------- ------------------- --------
Balance as at 1 January 2017 (Audited) 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 other comprehensive income/(expense) 1.7 - (0.3) 1.4
---------- ---------- ------------------- --------
Total comprehensive income/(expense)
for the period 13.2 - (0.3) 12.9
---------- ---------- ------------------- --------
Balance as at 31 December 2017 (Audited) 212.7 - - 212.7
---------- ---------- ------------------- --------
Consolidated cash flow statement
for the period ended 30 June 2018
30 June 30 June 31 Dec
2018 2017 2017
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Cash flows from operating activities
Profit before tax 6.0 7.6 14.5
Depreciation and amortisation 1.6 1.5 3.0
Interest on subscribed capital 1.0 1.0 2.0
Net gains on disposal and amortisation
of debt securities 0.3 0.3 0.7
(Increase)/decrease in impairment of
loans and advances (0.1) - 1.3
-------------
8.8 10.4 21.5
Changes in operating assets and liabilities
Increase in other assets (7.2) (1.7) (3.9)
Decrease in other liabilities (2.5) (6.0) (10.5)
(Increase)/decrease in loans and advances
to credit institutions (2.1) (1.1) 10.4
(Decrease)/increase in debt securities
in issue (16.9) (17.0) 54.8
Increase in loan and advances to customers (118.5) (206.6) (337.5)
Increase in shares 126.7 150.9 138.0
(Decrease)/increase in borrowings (24.1) 85.2 115.5
Taxation paid (1.6) (1.4) (2.6)
------------- ------------- -----------
(38.0) 12.7 (14.3)
Capital expenditure and financial investment (39.9) 2.1 (17.3)
Financing activities (1.0) (1.0) (1.9)
------------- ------------- -----------
(Decrease)/increase in cash and cash
equivalents (78.9) 13.8 (33.5)
Cash and cash equivalents at beginning
of year 360.3 393.8 393.8
------------- ------------- -----------
Cash and cash equivalents at end of
year 281.4 407.6 360.3
------------- ------------- -----------
Summary ratios
30 June 30 June 31 Dec
2018 2017 2017
% % %
Common Equity Tier 1 capital ratio 14.7 14.4 14.6
Liquid assets as a percentage of shares
and borrowings 12.25 15.11 13.60
Group profit for the year as a percentage
of mean total assets 0.24 0.32 0.31
Group management expenses as a percentage
of mean total assets 1.10 1.11 1.10
Group interest margin as a percentage
of mean assets 1.27 1.29 1.29
Notes
* The financial information set out above, which was
approved by the Board of Directors on 26 July 2018,
does not constitute accounts within the meaning of
the Building Societies Act 1986.
* The financial information for the year ended 31
December 2017 has been extracted from the Annual
Report & Accounts for the year and on which the
auditors have given an unqualified opinion.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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