Last checked at 4 Mar 2022 07:00
Nottingham Building Society
The Nottingham announces robust financial performance against the backdrop of the challenges from the ongoing pandemic, with continued progress in the delivery of its unique member proposition and its journey into the digital world of financial services; whilst demonstrating its mutual ethos to members, colleagues and its communities.
The Nottingham is pleased to present its results for the year ended 31 December 2021. Below are some of the key achievements and financial highlights of 2021:
· Group pre-tax profit of £15.1m reported on a statutory basis, with underlying pre-tax profit of £7.4m; · Net interest margin of 1.24% - up 17 basis points from 1.07%; · Strong capital position with Common Equity Tier 1 at 16.5% and leverage of 5.6%; · Gross mortgage lending up 13% at over £550 million for 2021 resulting in total assets of £3.6 billion · Arrears levels remain very low, at a quarter of the industry average (2021: 0.21% v industry at average of 0.83%1); · New Beehive Money app launched looking after more than 55,000 Lifetime ISA customers; · Present in 48 locations across nine counties with a strong retail franchise - total branch savings balances of £2.5 billion; and · Achieved a customer Net Promoter Score of 71%; and · Employee engagement score of 80%.
Commenting David Marlow, Chief Executive, said:
"Entering 2021, we had a number of key areas on which to focus our energies: the ongoing Covid-19 pandemic; the significant economic uncertainty brought about by a combination of the pandemic and Brexit; our intent to reinvent the Society for the emerging new world; continue to act as a responsible society accepting our responsibilities to stakeholders, communities and the environment; and to continue to grow membership, whilst delivering a level of financial performance that would sustain us for the future.
Whilst the challenges of the pandemic remain, I am delighted to report good progress on the development and delivery of our strategy, as well as a return to strong financial performance providing the platform for continued investment and growth.
The ongoing pandemic Despite entering 2021 in national lockdown, I doubt many of us would have predicted that we would end the year under the same threat, due to the Omicron variant. We have become accustomed to living with varying degrees of restrictions and controls, whilst maintaining the priorities of keeping our team members safe and continuing to serve our members.
Through the amazing commitment of our team members and the enduring support and understanding of our members, we have managed this well and I am enormously proud of that achievement.
We have not been immune from the challenges and sadness that the virus has brought but we have responded strongly, focusing on ensuring that we continue to serve our members, helping them to save, plan and importantly protect their futures. Whatever the next phase of the pandemic brings in 2022, we will continue to face it with the same stoicism and purpose that we have done for the past 21 months.
Reinventing the Society The rapidly changing world, exacerbated by the pandemic, has required us to reinvent the Society for that newly emerging world. In 2021, we continued our efforts to ensure that we have a proposition that is relevant to a broader community, delivered in the manner which members expect.
In the early part of the year, we completed a number of previously announced branch closures. These were conducted in a professional and sympathetic manner. You may recall that the closures focused on our significant concentration of branches in and around greater Nottingham. Despite closures always being regrettable, I am pleased to confirm that as we end 2021, the vast majority of members have chosen to stay with us. We are very grateful for their understanding and loyalty.
A significant focus for 2021 was to relaunch our Beehive Money digital platform as an app-led savings capability for younger savers looking to take advantage of the government tax-free and Lifetime ISA (LISA) savings regime. Our vision is to offer a market leading savings app that helps younger savers achieve their goals through saving and enabling access to first class independent advice on matters that are important to them.
We were delighted to launch our app to existing members in September and to the whole market at the end of November. This is a first for a UK Building Society offering a 'FinTech' standard savings capability, with access to independent mortgage advice; essential as around 80% of Beehive members are saving with us to buy their first home. I am delighted to say that at the end of 2021, we have over 55,000 members saving with us in Beehive Money. We are excited at the new opportunities for growth and innovation that Beehive Money brings us, along with a completely new cohort of younger savings members. In 2019, 26% of savings members were under 40 years of age. That is now 39% and growing.
As we developed the Beehive Money platform and saw the significant rise in members, especially those saving with us to buy their first home, it prompted us to look at our capacity and capability to deliver digital-led independent mortgage advice at scale in the years ahead. Following a review of our group in-house capability, we launched a formal process to find a strong digital-led partner for our mortgage advice offering.
Following a competitive bid process, we were delighted to announce a new partnership with Mortgage Advice Bureau (MAB) and Belvoir. Combining MAB's market leading mortgage network and digital capability with Belvoir's national high street based advisors, we agreed to sell our own mortgage broking business (Nottingham Mortgage Services) to Belvoir and have entered a long-term distribution agreement with MAB/Belvoir for the provision of independent mortgage advice. Many of our members continue to be served by their existing advisor whilst also giving us access to digital capability and significant advisor capacity to serve the growing number of Beehive members. Beehive members can access the advice they need to find the right mortgage for their first home direct through the Beehive Money app - a modern approach for today's first-time home buyer.
In the face of intense mortgage competition, we have continued to enhance and widen our mortgage offering. A series of improvements have been introduced, with several developments also in progress that include rewarding brokers for retaining Society mortgage customers, enhancements to make our Limited Company buy-to-let offering even more relevant to our customers, as well as plans to enter the growing holiday let market. These enhancements are viewed as initial attempts to broaden our appeal as a lender with more to come in 2022 and beyond.
A responsible society With the seismic global changes comes a stronger focus on being a responsible organisation which embraces our responsibilities to our employees and members, as well as the communities and the environment in which we operate. As a mutual organisation we feel that responsibility even more keenly. Throughout 2021 we have worked tirelessly to live up to this expectation.
Highlights include over £200,000 of donations made to worthy causes in our communities, over 1,000 hours of colleagues' time volunteered to make a difference and the launch of our Career Academy, in association with national partner Ever-Fi, to provide an employability programme for young people.
Towards the end of the year, we were delighted to launch the Samuel Fox Foundation, named after our founding Chairman and philanthropist. The foundation will focus on building skills and employability in our communities, with a particular focus on enabling young people to fulfil their potential and inspire their futures. We have already made several significant donations from the foundation. We are looking forward to the foundation playing a strong role in encouraging our communities to thrive in the years ahead.
COP26 brought the climate crisis into sharp focus during the year. This reaffirmed that the work we were carrying out to better understand our carbon footprint and then to reduce it, was essential. For the first time this year, we have outlined our approach to becoming a Net Carbon Zero organisation, which includes several commitments, not least to reduce our scope 1 and 2 emissions by at least 10% by the end of 2022. We will continue to work on our plans over the next year or two to fulfil our obligations towards ensuring our climate can sustain the planet as it was intended.
Financial performance Another priority in 2021 was to return to a strong level of financial performance that ensured we could continue to invest in and grow the Society in line with our long-term plans. Despite some significant headwinds, we have been very successful in meeting this objective.
In the face of intense competition and sub 1% mortgage pricing, we have managed the growth versus margin dynamic well. Overall, we increased our new mortgage applications by 22% over 2020 but by being selective in the areas we were active, and not being lulled into lending at rates we would not have been comfortable with, we increased our interest margin by 17bps to 1.24%. This has supported an increase in our net interest income of 13% to £45.9m. Overall, our underlying income in the year for the total Group, excluding gains from derivatives has risen 11% to £49m.
Despite the significant ongoing investment in the Society, we have continued to manage our costs well and have also benefitted from the unwinding of some headwinds we experienced in 2020. Our strong focus on good credit quality was rewarded with the robust performance of our lending book, enabling us to release £1.4m of the impairment charge we made on a prudent basis last year. We have also benefitted from the shift in market expectations of interest rates, which have moved from being potentially negative at the beginning of 2021 to an upward track, reflected in the Bank of England's MPC decision to increase rates in December and February to 0.5%.
Overall, this has delivered a total Group profit before tax of £15.1m and a profit after tax of £12.6m. A profit after tax ratio of 0.34% has returned us to a level that enables capital accretive growth and is a strong response to the deficit we ended up with last year.
Outlook Whilst we all hope that the pandemic will abate in the coming year, or at least shift to an endemic, which we learn to live with; nonetheless we also recognise a period of extreme uncertainty will continue as the economic, socio-political and behavioural impacts of Covid-19 continue to unwind and a new normal emerges over the years ahead. Despite this, we enter 2022 financially strong and confident that the changes we are making to reinvent the Society are the right ones ensuring that we have a relevant and vibrant future. We can therefore move forward with a strong sense of confidence.
Areas of focus, other than continuing to protect our colleagues and to serve members through the pandemic, will be to continue to fashion our new approach to mortgage lending to reflect the changing landscape and to ensure we can continue to increase levels of lending at a yield we are comfortable with.
Having successfully relaunched Beehive Money, there is much to achieve to build on our strong start and develop the proposition further so that an increasing number of younger savers see Beehive Money as their primary source of support and advice to help them save, plan for, and protect their futures.
We will also ensure that our branch network continues to meet the needs of our traditional passbook-based savers; helping them to save, plan and protect their future. It will be important therefore that we continue to work effectively with our network of partners who enable us to deliver our unique proposition to members.
David Marlow Chief Executive
4 March 2022
1UK Finance Arrears on mortgages, number of months measure, UK; over 3 months in arrears ratio Q4 2021
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The Board allocated resources and managed the business on a total Group basis during 2021. The mortgage broking business generated a £0.2m profit after tax in the year, until its disposal in July 2021.
Within the consolidated statutory financial statements, the mortgage broking business is reported as a discontinued operation.
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Consolidated income statement for the year ended 31 December 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2021 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
£m | £m | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Continuing Operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest receivable and similar income | 64.4 | 68.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest payable and similar charges | (18.5) | (28.2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net interest income | 45.9 | 40.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fees and commissions receivable | 3.0 | 2.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fees and commissions payable | (0.9) | (1.0) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net gains/(losses) from derivative financial instruments | 7.9 | (2.7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total net income | 55.9 | 39.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Administrative expenses | (36.5) | (35.3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation and amortisation | (6.8) | (9.1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating profit/(loss) before impairment | 12.6 | (5.4) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impairment release/(charge) - loans and advances | 1.4 | (2.9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Profit on disposal of subsidiary undertaking | 0.5 | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Profit on disposal of property, plant and equipment | 0.4 | 0.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Profit/(loss) before tax | 14.9 | (8.2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tax (charge)/credit | (2.5) | 1.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Profit/(loss) after tax for the financial year for continuing operations | 12.4 | (7.0) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Profit/(loss) after tax for the financial year from discontinued operations | 0.2 | (0.2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Profit/(loss) after tax for the financial year | 12.6 | (7.2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Consolidated statement of comprehensive income for the year ended 31 December 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2021 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
£m | £m | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Profit/(loss) for the financial year | 12.6 | (7.2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Items that will not be re-classified to the income statement | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Remeasurements of defined benefit obligations | - | (3.9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tax on items that will not be re-classified | 0.3 | 0.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Items that may subsequently be re-classified to the income statement | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FVOCI reserve | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Valuation (losses)/gains taken to reserves | (0.3) | 0.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tax on items that may subsequently be re-classified | 0.2 | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income/(expense) for the period net of income tax | 0.2 | (2.7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total comprehensive income/(expense) for the year | 12.8 | (9.9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated statement of financial position as at 31 December 2021 | |||
2021 | 2020 | ||
£m | £m | ||
Assets | |||
Liquid assets | 562.5 | 592.2 | |
Derivative financial instruments | 26.1 | 0.8 | |
Loans and advances to customers | 3,010.9 | 3,128.0 | |
Fixed and other assets | 35.3 | 37.4 | |
Total assets | 3,634.8 | 3,758.4 | |
Liabilities | |||
Shares | 2,874.6 | 2,794.2 | |
Borrowings | 496.1 | 685.2 | |
Derivative financial instruments | 6.5 | 32.5 | |
Other liabilities | 14.5 | 16.0 | |
Subscribed capital | 24.0 | 24.2 | |
Total liabilities | 3,415.7 | 3,552.1 | |
Reserves | |||
General reserves | 219.2 | 206.3 | |
Fair value reserves | (0.1) | - | |
Total reserves attributable to members of the Society | 219.1 | 206.3 | |
Total reserves and liabilities | 3,634.8 | 3,758.4 |
Consolidated statement of changes in members' interests as at 31 December 2021 | General reserve | FVOCI reserve | Total | ||||
£m | £m | £m | |||||
Balance as at 1 January 2021 | 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 | 219.2 | (0.1) | 219.1 | ||||
Balance as at 1 January 2020 | 216.6 | (0.4) | 216.2 | ||||
Loss for the year | (7.2) | - | (7.2) | ||||
Other comprehensive (expense)/income for the period (net of tax) | |||||||
Net (losses)/gains from changes in fair value | (3.1) | 0.4 | (2.7) | ||||
Total comprehensive (expense)/income for the period | (10.3) | 0.4 | (9.9) | ||||
Balance as at 31 December 2020 | 206.3 | - | 206.3 | ||||
Summary consolidated cash flow statement for the year ended 31 December 2021 | |||
2021 | 2020 | ||
£m | £m | ||
Cash flows from operating activities | 22.0 | 5.6 | |
Changes in operating assets and liabilities | 3.2 | (46.0) | |
Net cash generated from/ (used in) operating activities | 25.2 | (40.4) | |
Cash flows from investing activities | (117.2) | 152.6 | |
Cash flows from financing activities | (2.8) | (2.8) | |
(Decrease)/ increase in cash and cash equivalents | (94.8) | 109.4 | |
Cash and cash equivalents at beginning of year | 382.0 | 272.6 | |
Cash and cash equivalents at end of year | 287.2 | 382.0 |
Summary ratios | |||
2021 | 2020 | ||
% | % | ||
Common Equity Tier 1 ratio | 16.5 | 15.0 | |
Liquid assets as a percentage of shares and borrowings | 16.69 | 17.02 | |
Group profit/(loss) for the year as a percentage of mean total assets | 0.34 | (0.19) | |
Total Group management expenses as a percentage of mean total assets | 1.19 | 1.25 | |
Group continuing management expenses as a percentage of mean total assets | 1.17 | 1.17 | |
Society management expenses as a percentage of mean total assets | 1.17 | 1.15 | |
Society interest margin as a percentage of mean assets | 1.24 | 1.07 | |
Notes · The financial information set out above, which was approved by the Board of Directors on 3 March 2022, does not constitute accounts within the meaning of the Building Societies Act 1986. · The financial information for the years ended 31 December 2021 and 31 December 2020 has been extracted from the Accounts for those years and on which the auditors have given an unqualified opinion. | |||