TIDMNOTP
RNS Number : 5134U
Nottingham Building Society
30 July 2020
Nottingham Building Society
Results for the period ended 30 June 2020
The Nottingham presents its results for the six months ended
30 June 2020, which shows our mutual ownership ethos coming
to the fore as we continue to show progress in the delivery
of our strategy, despite the exceptional and uncertain environment
in the wake of the COVID-19 pandemic.
Key performance highlights include:
* Total assets of GBP3.9 bn;
* Gross lending of GBP232m;
* Strong liquidity position with liquid assets ratio of
18.6%;
* Strong retail franchise - branch savings membership
continues to increase;
* Sector-leading customer advocacy with a net promoter
score of 78%; and
* Strong capital ratios with Common Equity Tier 1 ratio
of 15.0% and leverage ratio of 5.0%;
David Marlow, Chief Executive of The Nottingham, commenting
on the results said
"The first half of 2020 has been dominated by the COVID-19
pandemic which has brought significant impacts to our nation's
health, how we live our daily lives and the economy; with the
strong likelihood that the UK will suffer the deepest recession
since the Great Frost of 1709.
In unprecedented periods of national challenge such as this,
organisations and firms come under pressure and scrutiny and
it is where we as a mutual, owned by our members, can bring
our financial strength to bear to support our members, stakeholders
and the communities that we serve. That is what we have focussed
on, ensuring that we play our full part in tackling this national
crisis.
Supporting members
The initial phase of the crisis was focussed on providing continuity
of service to members as the country went into total lockdown,
providing access to their money and support for those in need
at a very difficult time, through our branch network and contact
centre. We were happy to fulfil this by remaining open in over
60 branches throughout the period of lockdown.
We then turned our attention to how we could best support both
our savings and borrowing members. We began by making a commitment
to all our savers, that despite the Bank of England's decision
to reduce Bank Base Rate to a record low of 0.1%, we would
not reduce any savings rates for at least three months. We
believed that this was the right thing to do, when the nation
was effectively locked down and facing enormous uncertainty.
We have subsequently extended this for our branch savings members,
who represent the vast majority of our savers, for a further
three months until the end of September.
For mortgage customers, we swiftly put in arrangements to allow
borrowers to take a three month deferral on their mortgage
if required; knowing that, in the vast majority of cases, a
mortgage payment is the largest monthly outgoing. Furthermore,
in appropriate circumstances, we have enabled borrowers facing
significant challenges, the opportunity to extend that deferral
for a further three months. Although a very small number each
year, we also took the decision to introduce a moratorium on
possession action for those facing payment difficulties due
to the pandemic , until the end of October, to keep people
in their homes even if they are unable to repay their mortgage.
This strong and rapid response to support members would not
have been possible without the tremendous commitment and hard
work of our team members. They responded brilliantly to their
designation as key workers, ensuring we remained open and operational
throughout, with hundreds of team members also making the significant
adjustment to working from home. This required our support
teams to ensure there was a safe and secure working environment
in place, whether that has been in branch, at our Head Office,
or at home. In response to those fantastic efforts, we committed
to pay all our team members in full throughout the period of
lockdown, irrespective of their personal situation or circumstances,
providing certainty for all through the initial period.
In addition to supporting our members and colleagues, we have
also taken our broader community responsibilities seriously,
making significant contributions to key charities at the outset
of the lockdown period. Those benefitting include Framework
- our charity partner tackling homelessness; the Trussell Trust
- a network of foodbanks who operate across our heartland;
and The Silverline, a national charity providing mental wellbeing
counselling and support for the elderly and isolated.
We believe these changes and support options were the right
thing to do to be there for our stakeholders and communities
at this most difficult time, irrespective of the cost.
Our mutual ethos and financial strength, in the shape of our
capital which has been built up over 160 years plus, means
that we could deliver that. Because of this, we decided not
to take available government support of furlough payments,
as we are fortunate enough to be able to finance and support
ourselves and members - the mutual benefit. A demonstration
of how well received this has been by our members, is reflected
in our Net Promoter Score. Despite all the difficulties in
2020, our NPS stands at an incredible 78% - a resounding vote
of confidence from our members.
Building a relevant vibrant society for the future
More recently, we turned our attention to how we ensure that
the Society can operate in a relevant and sustainable way in
the new world that is rapidly emerging. Following a review
of our strategy and priorities for the next three to five years,
we concluded that it was important for us to accelerate the
plans we had highlighted in the 2019 Report and Accounts; namely
that we;
* Should continue to manage our balance sheet carefully
to balance the needs of our savings and borrowing
members;
* Review our range of services to ensure our members
receive the right blend of expert advice and service
from carefully selected partners; and
* Continue to invest in the use of digital
technologies.
We have therefore, been taking appropriate decisions to accelerate
our activity and plans in these areas.
Notwithstanding the fact that our interest payable to savers
will be higher than it might otherwise have been due to our
commitment not to lower rates, we are beginning to see some
encouraging signs in our refocussed approach to mortgage lending
and on our investment decisions of the past 12 months. Our
mortgage lending to June 2020 is up 24% on the same period
last year, despite the disruption of the pandemic and our balance
sheet is growing again, albeit by a small amount. We are also
earning improved yields on this lending, hence why we are happy
to increase our activity levels. We are also seeing good reductions
in the number of borrowers leaving us, with redemptions down
by 30% compared to the first half of 2019.
Our branch savings balances also continue to grow and are 4%
up on a year ago with that growth spread evenly over the year.
In addition, we now have almost 20,000 LISA members, saving
to buy their first home with the Society, and this number is
increasing every week. This demonstrates that our core savings
and mortgage franchises are in good health despite the challenging
macro-economic conditions.
In terms of reviewing our services, earlier this month, we
announced a strategic alliance with Belvoir Property Management
to provide estate agency and lettings services to our members.
Having operated our own estate agency for many years, we concluded
that now was the right time to transfer most of those operations
to a national expert, based in the East Midlands, who are better
placed to deliver these services to our members. The alliance
will also bring benefits to members in the shape of nationally
available discounts on estate agency and letting fees, along
with a unique premises share arrangement that should enable
both parties to continue to offer and extend High Street services
in a more flexible and cost efficient way.
We also took this opportunity to review our branch network,
which over recent years has doubled in size to over 60 locations
across nine counties. The vast majority of our locations, both
established and new, achieved their commercial requirements
and demonstrated that they deliver significant value to members.
However, a relatively small number did not and we have taken
the sad decision to close these locations. Apart from those
locations directly impacted by our new strategic alliance,
the vast majority of branches selected for closure are in very
close proximity to each other. For example, in the greater
Nottingham area, we currently have 13 branches within a five
mile radius of our Head Office. This will be reduced to eight
by the end of the year and should not significantly impact
choice and access to branches for our members in our home city.
Whilst it is always difficult to take decisions to close locations,
our actions will enable us to focus our efforts on continuing
to grow a vibrant branch network, which is now established
across a large geographical footprint.
Finally, over the past couple of years, we have successfully
invested in developing stronger digital capabilities for members
and brokers. One of the key societal changes we have seen as
a consequence of the pandemic is a significant increase in
consumer usage of digital channels and the increased resilience
of firms able to serve customers in a digital, as well as face
to face format. We have therefore decided to double down on
our digital investment and plan to launch a new unique savings
proposition for digital savers in the first quarter of 2021.
This will enable the Society to serve a broader age range and
demographic of members in the years ahead.
There is no doubt that 2020 will stand out as a unique and
challenging year. As a mutual we are clear that when confronted
with such significant challenges that we should deploy our
financial strength built up over more than 160 years to benefit
our members.
Our decision and actions to support members, continue to invest
significantly in the Society ready for the new world emerging
and the additional costs of responding to the national crisis
will mean that we are expecting to report a full year loss
in 2020, as reflected in our statutory loss reported in the
first half of the year. However we are able to demonstrate
that the underlying performance of the Society, net of the
one off costs and committed investments we are making in response
to the pandemic and subsequent economic stress, is robust.
We are able to do this not only because we have the financial
firepower and capital strength to do so, but also because we
are already seeing the returns on decisions we have previously
taken to effectively manage our balance sheet. Lending is increasing
with good demand for our products at improving yields and our
branch savings franchise continues to grow. We have taken some
difficult decisions, which are set to improve our offering
in estate agency and lettings and reduce the costs of running
the Society moving forward. Investing in our digital future
is something which we believe will enable us to grow membership
in the years ahead with a compelling savings proposition but
at a lower cost to serve.
We are also announcing today that our Chairman, John Edwards,
will be stepping down from the Board in September after almost
9 years, the vast majority of it as Chair. In line with our
succession plans, John will be succeeded, subject to regulatory
approval, by Andrew Neden who is currently the Senior Independent
Director and Vice-Chair. Andrew has been a member of The Nottingham's
Board since 2014 and has the ideal blend of experience, background
and knowledge of the Society to pick up its stewardship from
John and steer it into a post-pandemic world ensuring that
the Society remains relevant and vibrant. Andrew's appointment
was approved by the Board following a selection process with
external search support.
John has done a magnificent job steering the Society over the
past 9 years, a period in which it has significantly grown
its asset base, branch footprint and positioned the Society
strongly for the digital world.
Kerry Spooner, who has been on the Board since 2016 and chairs
the Remuneration Committee will, subject to regulatory approval,
become the Senior Independent Director (and whistleblowing
champion).
The Society also announced the appointment of Mike Brierley
as a Non- Executive Director and subject to regulatory approval,
will succeed Andrew as Chair of the Board Audit Committee.
Mike has over 35 years' experience in Chief Financial Officer
(CFO) roles within the financial services industry. Most recently
Mike was CFO of Metro Bank PLC between 2009 and 2018, where
he played a key role in helping lead the challenger bank from
start-up to listing. He has been a director of Barclaycard
responsible for business risk and, between 1999 and 2006, held
a variety of roles with Capital One Bank (Europe) PLC including
CFO Europe, CFO UK and Managing Vice President and Chief Enterprise
Risk Officer Europe. Mike is a Fellow of The Institute of Chartered
Accountants in England and Wales (FCA).
Since retiring as an executive, Mike has joined the board of
Admiral Group plc, the FTSE 100 general insurance company,
where he is a member of both the audit committee and the remuneration
committee. He also serves as Chair of their financial services
subsidiary. Mike brings a breadth of experience and deep knowledge
of financial management to the Board.
The next 12 months will continue to bring challenges as the
full economic impact of the pandemic takes its toll. We are
however well placed to absorb these factors while investing
in developing a modern building society that can fulfil its
purpose of serving a growing membership - to save, plan for
and protect their financial futures, whatever the economic
conditions."
David Marlow
Chief Executive
30 July 2020
Consolidated income statement for
the six months ended 30 June 2020
Period to Period to Year ended
30 June 30 June 31 Dec
2020 2019 2019
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Interest receivable and similar income 36.2 41.9 84.0
Interest payable and similar charges (15.7) (18.7) (37.9)
------------- ------------- -----------
Net interest income 20.5 23.2 46.1
Fees and commissions receivable 2.5 3.1 6.2
Fees and commissions payable (0.3) (0.5) (1.1)
Other income - - 0.2
Net losses from derivative financial
instruments (3.3) (1.7) (0.6)
-------------
Total net income 19.4 24.1 50.8
Administrative expenses (18.2) (18.8) (36.5)
Depreciation and amortisation (3.1) (2.6) (5.5)
Pension finance cost - - (0.1)
------------- ------------- -----------
Operating (loss)/profit before impairment
and change in EIR accounting estimate (1.9) 2.7 8.7
Impairment charge - loans and advances (2.7) - (0.4)
Impairment charge - goodwill - - (4.0)
Change in EIR accounting estimate - - (12.3)
(Loss)/profit before tax (4.6) 2.7 (8.0)
Tax credit/(expense) 0.8 (0.6) 0.8
------------- ------------- -----------
(Loss)/profit after tax for the financial
period (3.8) 2.1 (7.2)
------------- ------------- -----------
Reconciliation of statutory (loss)/profit before taxation
Period to Period to Year ended
30 June 30 June 31 Dec
2020 2019 2019
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Statutory (loss)/profit before taxation (4.6) 2.7 (8.0)
Adjusted for:
Losses from derivative financial
instruments 3.3 1.7 0.6
Other income - - (0.2)
Strategic investment costs - 0.5 1.3
Impairment - goodwill - - 4.0
Change in accounting estimate - - 12.3
------------- ------------- -----------
Underlying (loss)/profit before taxation (1.3) 4.9 10.0
------------- ------------- -----------
Impairment charges - loans & advances 2.7 - -
------------- ------------- -----------
Underlying profit before impairment
charges on loans & advances 1.4 4.9 10.0
------------- ------------- -----------
Consolidated statement of comprehensive
income for the six months ended 30
June 2020
Period to Period to Year ended
30 June 30 June 31 Dec
2020 2019 2019
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
(Loss)/profit for the period (3.8) 2.1 (7.2)
Items that will not be re-classified
to the income statement
Remeasurement of defined benefit - - -
obligation
Tax on items that will not be re-classified (0.1) (0.1) -
Items that may subsequently be re-classified
to the income statement
FVOCI reserve
Valuation gains taken to reserves 0.4 0.9 0.7
Tax on items that may subsequently
be re-classified - - (0.1)
-------------
Other comprehensive income for the
period net of income tax 0.3 0.8 0.6
------------- ------------- -----------
Total comprehensive (expense)/income
for the period (3.5) 2.9 (6.6)
------------- ------------- -----------
Consolidated statement of financial
position
as at 30 June 2020
30 June 30 June 31 Dec
2020 2019 2019
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Assets
Liquid assets 666.2 580.9 615.1
Derivative financial instruments 1.5 1.5 2.0
Loans and advances to customers 3,152.1 3,339.3 3,161.4
Fixed and other assets 39.1 43.9 40.5
------------- ------------- -----------
Total assets 3,858.9 3,965.6 3,819.0
------------- ------------- -----------
Liabilities
Shares 2,809.1 2,834.4 2,781.1
Borrowings 764.8 849.7 771.3
Derivative financial instruments 35.8 14.4 12.8
Other liabilities 12.0 16.5 12.9
Subscribed capital 24.5 24.9 24.7
------------- ------------- -----------
Total liabilities 3,646.2 3,739.9 3,602.8
Reserves
General reserves 212.7 225.8 216.6
Fair value reserves - (0.1) (0.4)
------------- ------------- -----------
Total reserves and liabilities 3,858.9 3,965.6 3,819.0
------------- ------------- -----------
Consolidated statement of changes
in members' interests for the period
ended 30 June 2020
General FVOCI reserve
reserve Total
GBPm GBPm GBPm
Balance as at 1 January 2020 (Audited) 216.6 (0.4) 216.2
Loss for the period (3.8) - (3.8)
Other comprehensive (expense)/income
for the period (net of tax)
Net gains from changes in fair value - 0.4 0.4
Remeasurement of defined benefit obligation (0.1) - (0.1)
---------- ---------------- --------
Total comprehensive (expense)/income
for the period (3.9) 0.4 (3.5)
---------- ---------------- --------
Balance as at 30 June 2020 (Unaudited) 212.7 - 212.7
---------- ---------------- --------
Balance as at 1 January 2019 (Audited) 223.8 (1.0) 222.8
Profit for the period 2.1 - 2.1
Other comprehensive (expense)/income
for the period (net of tax)
Net gains from changes in fair value - 0.9 0.9
Remeasurement of defined benefit obligation (0.1) - (0.1)
---------- ---------------- --------
Total comprehensive income for the
period 2.0 0.9 2.9
---------- ---------------- --------
Balance as at 30 June 2019 (Unaudited) 225.8 (0.1) 225.7
---------- ---------------- --------
Balance as at 1 January 2019 (Audited) 223.8 (1.0) 222.8
Loss for the year (7.2) - (7.2)
Other comprehensive income for the
period (net of tax)
Net gains from changes in fair value - 0.6 0.6
Total comprehensive (expense)/income
for the period (7.2) 0.6 (6.6)
---------- ---------------- --------
Balance as at 31 December 2019 (Audited) 216.6 (0.4) 216.2
---------- ---------------- --------
Summary consolidated cash flow statement
for the period ended 30 June 2020
30 June 30 June 31 Dec
2020 2019 2019
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Cash flows from operating activities 2.2 6.5 4.5
Changes in operating assets and liabilities 26.9 59.8 109.0
------------- ------------- -----------
Net cash generated by operating activities 29.1 66.3 113.5
Cash flows from investing activities 124.2 7.1 (104.0)
Cash flows from financing activities (1.4) (1.4) (3.0)
Increase in cash and cash equivalents 151.9 72.0 6.5
Cash and cash equivalents at beginning
of period 272.6 266.1 266.1
------------- ------------- -----------
Cash and cash equivalents at end of
period 424.5 338.1 272.6
------------- ------------- -----------
Summary ratios
30 June 30 June 31 Dec
2020 2019 2019
% % %
Common Equity Tier 1 capital ratio 15.0 15.3 15.1
Liquid assets as a percentage of shares
and borrowings 18.64 15.77 17.32
Group profit for the year as a percentage
of mean total assets (0.20) 0.10 (0.18)
Group management expenses as a percentage
of mean total assets 1.11 1.07 1.07
Group interest margin as a percentage
of mean assets 1.07 1.16 1.17
Notes
* The financial information set out above, which was
approved by the Board of Directors on 29 July 2020,
does not constitute accounts within the meaning of
the Building Societies Act 1986.
* The financial information for the year ended 31
December 2019 has been extracted from the Annual
Report & Accounts for the year and on which the
auditors have given an unqualified opinion.
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contact rns@lseg.com or visit www.rns.com.
END
IR XKLFLBDLZBBK
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