Nationwide Ccds Regulatory News (NBS)

14 September 2018

NATIONWIDE BUILDING SOCIETY (THE "SOCIETY")

Redefining service for a digital world

The Board of Nationwide is pleased to announce today an additional technology investment of £1.3 billion, taking its overall investment plans to £4.1 billion over the next five years.

This investment will enable the Society to simplify its technology estate and build new technology platforms to enable growth and diversification, and drive forward digital, data and analytic strategies. At the same time, we will continue to transform member experience on the high street through investment in branches and other channels. Through this programme, the Society will make the most of the opportunities ahead, growing membership and revenue in existing and new propositions, further enhancing service, simplifying operations and building new skills for the future.

"Nationwide is in a position of financial strength with capital levels at an all-time high. At a time when customer expectations of service are rapidly changing in a digital world, we are investing to ensure that we continue to provide leading service. We believe that our members want a combination of human service on the high street, as well as digital convenience. As a building society, we are able to deliver both - continuing to invest in our branches alongside this significant investment in our technology and operational capabilities. As part of this overall investment, we anticipate creating an additional technology hub in the UK and employing between 750 and 1000 people over time."

Nationwide Building Society Chief Executive, Joe Garner.

Key strategic priorities for our five-year investment plan:

· Continue to build thriving membership by growing membership and revenues in new and existing propositions

· Ensure we are built to last by simplifying our operations and increasing our efficiency - supporting £500 million of sustainable saves by 2023, extending our previous target by a further £200 million

· Build legendary service capability for a digital age, combining digital convenience with a human touch - targeting 60% of active current account members using mobile and launching new member propositions enabled by the introduction of Open Banking in the UK

· Build new skills and talent for the future, remaining true to our PRIDE values which define our member-focused culture - creating an additional technology hub employing between 750 and 1,000 people

· Continue in our aspirations to be recognised as a national treasure by remaining true to our core purpose of 'building society, nationwide'

Key financial highlights

· Aggregate total investment of £4.1 billion over next five years, of which £1.3 billion is over previous plans

· Expect to recognise an additional charge of between £200 million to £250 million in the current financial year in light of the incremental investment we are announcing today, approximately half of which will be recognised in H1. This full year range represents a reasonable estimate for the ongoing annualised impact on profits over the period to 2023 as we deliver the programme

· Remain committed to our Financial Performance Framework and expect to continue our recent track record of improving capital ratios over the period, excluding the impact of any capital calls we choose to make and proposed regulatory changes

· Our investment strategy will enable greater efficiencies; sustainable saves target extended from £300 million by 2021 to £500 million by 2023

· We have delivered over £1 billion in member financial benefit over the last two years and remain committed to delivering long-term good value to our members

· The Board reaffirms its commitment to existing Core Capital Deferred Shares distribution policy and does not envisage any impact on its approach to, or level of, distributions as a result of this announcement

Investing from a position of strength

In 2016, the Nationwide strategy refresh focused on core purpose with mutuality and members at the centre. 'Building society, nationwide', is underpinned by five cornerstones: built to last, building thriving membership, building legendary service, building PRIDE and building a national treasure.

The strategy is working and Nationwide is operating from a platform of strength being named Which? Best Banking Brand for the second year running. Our focus on trust, service and value has driven record membership of 15 million and we enjoy leading customer service levels among our high street peer group1. Capital strength is at an all-time high and we have delivered record current account growth and gross mortgage lending.

Demand for digital services is increasing. Nationwide saw 200 million more mobile app log-ins last year and the app now has two million active members - more than on internet, and double the number two years ago. At the same time, people will always want the human touch to help with more challenging or complex financial affairs so we remain committed to our branch network.

We have a simple business model and a single integrated strategy and organisational structure and our long history of innovation means we are well placed to execute the plan.

A pre-recorded webcast will be available from 10:30am (UK) on Friday 14th September 2018.

Please click on the link below to access the webcast.

https://webcast.merchantcantoscdn.com/webcaster/dyn/4000/7464/16532/106873/Lobby/default.htm

For further information please contact:

Investor queries: Alex Wall, 020 72616568 or 07917 093632, alexander.wall@nationwide.co.uk

Media contact: Tanya Joseph, 020 72616503 or 07826 922102, tanya.joseph@nationwide.co.uk

Sara Batchelor, 01793 657770 or 07785 344137, sara.batchelor@nationwide.co.uk

 1© GfK 2018, Financial Research Survey (FRS), 12 months ending 31 March 2018, proportion of extremely/very satisfied customers minus proportion of extremely/very/fairly dissatisfied customers summed across current account, mortgage and savings. High street peer group defined as providers with main current account market share >4% (Barclays, Halifax, HSBC, Lloyds Bank (inc C&G), NatWest, Santander and TSB).

Financial Performance Framework

Nationwide has developed a financial performance framework based on the fundamental principle of maintaining its capital at a prudent level in excess of regulatory requirements. The framework provides parameters which allow it to calibrate future performance and help ensure that it achieves the right balance between distributing value to members, investing in the business and maintaining financial strength. The most important of these parameters is underlying profit which is a key component of Nationwide's capital. We believe that a level of underlying profit of approximately £0.9 billion to £1.3 billion per annum over the medium-term would meet the Board's objective for sustainable capital strength. This range, will vary from time to time, and whether our profitability falls within or outside this range in any given financial year or period will depend on a number of external and internal factors, including a conscious decision to return value to members or to make investments in the business. It should not be construed as a forecast of the likely level of Nationwide's underlying profit for any financial year or period within a financial year. 

Forward looking statements

Certain statements in this document are forward looking with respect to plans, goals and expectations relating to the future financial position, business performance and results of Nationwide. Although Nationwide believes that the expectations reflected in these forward-looking statements are reasonable, Nationwide can give no assurance that these expectations will prove to be an accurate reflection of actual results. By their nature, all forward looking statements involve risk and uncertainty because they relate to future events and circumstances that are beyond the control of

Nationwide including, amongst other things, UK domestic and global economic and business conditions, market related risks such as fluctuation in interest rates and exchange rates, inflation/deflation, the impact of competition, changes in customer preferences, risks concerning borrower credit quality, delays in implementing proposals, the timing, impact and other uncertainties of future acquisitions or other combinations within relevant industries, the policies and actions of regulatory authorities, the impact of tax or other legislation and other regulations in the jurisdictions in which Nationwide operates. As a result, Nationwide's actual future financial condition, business performance and results may differ materially from the plans, goals and expectations expressed or implied in these forward-looking statements. Due to such risks and uncertainties Nationwide cautions readers not to place undue reliance on such forward-looking statements.

Nationwide undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

This document does not constitute or form part of an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration. Any public offering to be made in the United States will be made by means of a prospectus that may be obtained from Nationwide and will contain detailed information about Nationwide and management as well as financial statements.