Last checked at 27 Jul 2018 07:00
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 £4.0 billion - a new milestone for the Society; · Gross lending of £465m 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 £6.0m; · 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 £400,000, 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 £465m 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 £4.0 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 £6.0m. Whilst a decrease in our performance of £1.6m 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
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Consolidated statement of comprehensive income for the six months ended 30 June 2018 | |||||
Period to 30 June 2018 (Unaudited) | Period to 30 June 2017 (Unaudited) | Year ended 31 Dec 2017 (Audited) | |||
£m | £m | £m | |||
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 |
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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 2018 (Unaudited) | 30 June 2017 (Unaudited) | 31 Dec 2017 (Audited) | |
£m | £m | £m | |
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 | ||||
General reserve |
FVOCI reserve | Available-for-sale reserve |
Total | |
£m | £m | £m | £m | |
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 2018 (Unaudited) | 30 June 2017 (Unaudited) | 31 Dec 2017 (Audited) | |
£m | £m | £m | |
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 2018 | 30 June 2017 | 31 Dec 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. |
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