Nottingham Building Society Half-year Report (1465U)
29 Juli 2022 - 8:00AM
UK Regulatory
TIDMNOTP
RNS Number : 1465U
Nottingham Building Society
29 July 2022
Nottingham Building Society
Results for the period ended 30 June 2022
The Nottingham delivers a positive financial performance for the
six months ended 30 June 2022 with digital savings balance growth
increasing, gross new mortgage lending holding strong and a larger
mortgage offer pipeline.
Key performance highlights include:
* Group pre-tax profit of GBP11.3m;
* Strong capital position with CET 1 ratio at 16.2% and
leverage ratio of 5.9%;
* Arrears levels remain very low with arrears ratio of
0.21%;
* Improving net interest margin of 1.52%; up from 1.24%
in 2021;
* Strong liquidity and funding position with liquidity
coverage ratio of 238%;
* Strong customer advocacy with a Net Promoter Score of
71%; and
* Strong retail franchise with over 60,000 digital
Lifetime ISA customers, alongside stable branch
savings balances.
Sue Hayes, Chief Executive of The Nottingham, commenting on the results
said
"This marks my first set of results as Chief Executive since joining
the Society earlier in the year and, as I settle into my new role,
the warm welcome I have received from everyone highlights the strength
of the team at The Nottingham. As outlined in the 2021 Annual Report
& Accounts, we entered 2022 financially strong. However extreme uncertainty
remains in the economy, and it is against this backdrop that these
results are reported.
The first half of 2022 has been dominated by the challenging external
economic picture. The conflict in Ukraine, supply chain issues and
soaring energy costs have led to an extreme inflationary environment.
We are very mindful of the impact that the cost of living crisis will
have on our members and our colleagues.
Whilst 90% of our borrowers are on fixed rate products, and therefore
protected against immediate rising interest costs, rising inflation
may create affordability pressures for our borrowers in the short-
to medium-term. Our level of arrears has remained very low across
2022 but we continue to monitor this closely and will continue to
support members experiencing difficulties.
As the bank base rate has increased over recent months, we have started
to pass these rate rises on to our variable rate savings products.
We expect this to continue as we balance the interest rates we pay
our savers against the interest we earn from our borrowers.
Trading and financial performance
Following the successful relaunch of the Beehive Money savings platform
last year we have put a significant focus onto our lending propositions
and products, as well as enhancing the Executive team and supporting
resource responsible for this area. This will allow us to enter new
segments in the market, which, in turn, will support our savings members.
During the first half of 2022, we helped nearly 2,000 borrowers purchase
a property and over 1,000 remortgage their properties. We achieved
gross lending of over GBP250m and have a strong pipeline of mortgage
offers standing at GBP189m as at 30 June 2022. We have streamlined
a number of our application requirements to make us easier to deal
with, as well as recently launching a holiday let proposition.
Our traditional mortgage markets remain extremely competitive, and
we have started to evaluate other more niche areas of lending where
we believe better risk adjusted returns exist.
Recognising the changes in demographic behaviours more generally,
we have continued to broaden our digital savings offering through
our Beehive Money platform. We successfully launched both fixed and
regular saving products through the digital platform during the period
and are proud to reach a milestone of 60,000 Lifetime ISA customers
now saving with us. This is helping more young people save for a first
home deposit in a time when it is becoming even more difficult to
get on the property ladder.
We were also pleased for our branches to return to pre-pandemic opening
hours. This in the context of some larger banks reducing theirs. We
are, however, continuing to see decreases in the volume of visits
to branches when compared to pre-pandemic levels, and it does appear
that behaviours have now changed forever.
We are pleased to see an improving picture on our customer satisfaction
scores, with highly satisfied customers standing at 83% and a Net
Promotor Score of 71%. Supporting our members with quality advice
and service remains a key priority for the Society.
The first half of 2022 has delivered a positive financial performance,
which enables the Society to invest and grow in line with longer-term
strategic priorities. This has resulted in an overall statutory profit
before tax of GBP11.3m, a profit after tax ratio of 0.52% and a steady
balance sheet. We have continued to see fair value gains in derivative
movements arise outside of underlying performance, which contributes
to the overall financial result. These gains, however, will unwind
in future periods. We will continue to evolve our proposition and
channels to respond to market conditions and contribute positively
to performance.
Strategic priorities and outlook
My key areas of focus for the remainder of the year ahead are to conclude
on a longer-term strategic review and deliver shorter-term actions
in the areas of mortgages and technology to enable us to achieve our
2022 plan.
Our strategic review is now well advanced as we focus on our plan
for the next three to five years and beyond in a post-pandemic society.
This includes the role and purpose of branches; how we can use data
and technology to be more relevant in the future; how do we help more
people to buy their own homes; and continued investment in our people
and our capability. This work will continue during the second half
of the year.
The remainder of 2022 is expected to be dominated by the challenging
external economic environment. Whilst the risks from the pandemic
seem to be abating, the uncertainty from the conflict in Ukraine and
pressures on individuals and businesses of high inflation and energy
costs will persist. Further bank rate rises are expected to counteract
inflation, and this will put further pressure on our borrowers. The
Society remains well placed to support its members and we continue
to move forward with our strategy with a strong sense of confidence
and sound financial base."
Susan Hayes
Chief Executive
29 July 2022
Consolidated income statement
for the six months ended 30 June
2022
Period Period Year ended
to 30 June to 30 June 31 Dec 2021
2022 2021
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Continuing operations
Interest receivable and similar income 39.3 31.8 64.4
Interest payable and similar charges (11.1) (9.6) (18.5)
-------------- -------------- -------------
Net interest income 28.2 22.2 45.9
Fees and commissions receivable 1.8 1.6 3.0
Fees and commissions payable (0.7) (0.6) (0.9)
Net gains from derivative financial
instruments 4.0 2.6 7.9
--------------
Total net income 33.3 25.8 55.9
Administrative expenses (18.2) (18.0) (36.5)
Depreciation and amortisation (3.9) (2.9) (6.8)
Operating profit before impairment 11.2 4.9 12.6
Impairment release - loans and advances 0.1 0.6 1.4
Profit on disposal of subsidiary
undertaking - - 0.5
Profit on disposal of property, plant
& equipment - - 0.4
Profit before tax 11.3 5.5 14.9
Tax expense (1.6) (0.8) (2.5)
-------------- -------------- -------------
Profit after tax for the financial
period from continuing operations 9.7 4.7 12.4
Discontinued operations
Profit after tax for the financial
period from discontinued operations - 0.2 0.2
-------------- -------------- -------------
Profit after tax for the financial
period 9.7 4.9 12.6
-------------- -------------- -------------
Consolidated statement of financial
position
as at 30 June 2022
30 June 30 June 31 Dec
2022 2021 2021
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Assets
Liquid assets 773.0 561.7 562.5
Derivative financial instruments 83.6 4.5 26.1
Loans and advances to customers 2,876.1 3,045.9 3,010.9
Fixed and other assets 32.9 38.5 35.3
-------------- --- -------------- --- ------------
Total assets 3,765.6 3,650.6 3,634.8
-------------- --- -------------- --- ------------
Liabilities
Shares 2,984.6 2,891.0 2,874.6
Borrowings 511.1 491.0 496.1
Derivative financial instruments 6.4 17.8 6.5
Other liabilities 13.4 15.0 14.5
Subscribed capital 24.0 24.0 24.0
-------------- --- -------------- --- ------------
Total liabilities 3,539.5 3,438.8 3,415.7
Reserves
General reserves 228.8 211.1 219.2
Fair value reserves (2.7) 0.7 (0.1)
-------------- --- -------------- --- ------------
Total reserves attributable to members
of the Society 226.1 211.8 219.1
Total reserves and liabilities 3,765.6 3,650.6 3,634.8
-------------- --- -------------- --- ------------
Consolidated statement of changes
in members' interests for the period
ended 30 June 2022
General FVOCI
reserve reserve Total
GBPm GBPm GBPm
Balance as at 1 January 2022 (Audited) 219.2 (0.1) 219.1
Profit for the period 9.7 - 9.7
Other comprehensive expense for the
period (net of tax)
Net losses from changes in fair value (0.1) (2.6) (2.7)
Total comprehensive income/(expense)
for the period 9.6 (2.6) 7.0
---------- ---------- --------
Balance as at 30 June 2022 (Unaudited) 228.8 (2.7) 226.1
---------- ---------- --------
Balance as at 1 January 2021 (Audited) 206.3 - 206.3
Profit for the period 4.9 - 4.9
Other comprehensive (expense)/income
for the period (net of tax)
Net (losses)/gains from changes in
fair value (0.1) 0.7 0.6
Total comprehensive income for the
period 4.8 0.7 5.5
---------- ---------- --------
Balance as at 30 June 2021 (Unaudited) 211.1 0.7 211.8
---------- ---------- --------
Balance as at 1 January 2021 (Audited) 206.3 - 206.3
Profit for the year 12.6 - 12.6
Other comprehensive income/(expense)
for the period (net of tax)
Net gains/(losses) from changes in
fair value 0.3 (0.1) 0.2
Total comprehensive income/(expense)
for the period 12.9 (0.1) 12.8
---------- ---------- --------
Balance as at 31 December 2021 (Audited) 219.2 (0.1) 219.1
---------- ---------- --------
Summary consolidated cash flow statement
for the period ended 30 June 2022
30 June 30 June 31 Dec
2022 2021 2021
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Cash flows from operating activities 16.4 9.1 22.0
Changes in operating assets and liabilities 201.2 (25.8) 3.2
-------------- -------------- ------------
Net cash generated by/(used in) operating
activities 217.6 (16.7) 25.2
Cash flows from investing activities (112.6) (67.8) (117.2)
Cash flows from financing activities (1.4) (1.3) (2.8)
Increase/(decrease) in cash and cash
equivalents 103.6 (85.8) (94.8)
Cash and cash equivalents at beginning
of period 287.2 382.0 382.0
-------------- -------------- ------------
Cash and cash equivalents at end of
period 390.8 296.2 287.2
-------------- -------------- ------------
Summary ratios
30 June 30 June 31 Dec
2022 2021 2021
% % %
Common Equity Tier 1 ratio 16.2 15.7 16.5
Liquid assets as a percentage of shares
and borrowings 22.11 16.61 16.69
Group profit for the year as a percentage
of mean total assets 0.52 0.26 0.34
Group interest margin as a percentage
of mean assets 1.52 1.20 1.24
Total Group management expenses as
a percentage of mean total assets 1.19 1.16 1.19
Group continuing management expenses
as a percentage of mean total assets 1.19 1.13 1.17
Notes
* The financial information set out above, which was
approved by the Board of Directors on 28 July 2022,
does not constitute accounts within the meaning of
the Building Societies Act 1986.
* The financial information for the year ended 31
December 2021 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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