Last checked at 29 Jul 2022 07:00
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 £11.3m; · 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 £250m and have a strong pipeline of mortgage offers standing at £189m 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 £11.3m, 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 |
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Period to 30 June 2022 (Unaudited) | Period to 30 June 2021 (Unaudited) |
| Year ended 31 Dec 2021 (Audited) |
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£m | £m |
| £m |
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Continuing operations |
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Interest receivable and similar income | 39.3 | 31.8 | 64.4 |
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Interest payable and similar charges | (11.1) | (9.6) | (18.5) |
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Net interest income | 28.2 | 22.2 | 45.9 |
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Fees and commissions receivable | 1.8 | 1.6 | 3.0 |
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Fees and commissions payable | (0.7) | (0.6) | (0.9) |
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Net gains from derivative financial instruments | 4.0 | 2.6 | 7.9 |
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Total net income | 33.3 | 25.8 | 55.9 |
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Administrative expenses | (18.2) | (18.0) | (36.5) |
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Depreciation and amortisation | (3.9) | (2.9) | (6.8) |
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Operating profit before impairment | 11.2 | 4.9 | 12.6 |
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Impairment release - loans and advances | 0.1 | 0.6 | 1.4 |
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Profit on disposal of subsidiary undertaking | - | - | 0.5 |
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Profit on disposal of property, plant & equipment | - | - | 0.4 |
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Profit before tax | 11.3 |
| 5.5 |
| 14.9 |
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Tax expense | (1.6) | (0.8) | (2.5) |
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Profit after tax for the financial period from continuing operations | 9.7 |
| 4.7 |
| 12.4 |
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Discontinued operations |
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Profit after tax for the financial period from discontinued operations | - |
| 0.2 |
| 0.2 |
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Profit after tax for the financial period | 9.7 |
| 4.9 |
| 12.6 |
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Consolidated statement of financial position as at 30 June 2022 | |||||
30 June 2022 (Unaudited) |
| 30 June 2021 (Unaudited) |
| 31 Dec 2021 (Audited) | |
£m |
| £m |
| £m | |
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 |
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General reserve |
FVOCI reserve |
Total | |
£m | £m | £m | |
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 |
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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 |
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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 2022 (Unaudited) | 30 June 2021 (Unaudited) | 31 Dec 2021 (Audited) |
£m | £m | £m | |
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 2022 | 30 June 2021 | 31 Dec 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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