Last checked at 31 Jul 2015 07:30
Nottingham Building Society
Results for the period ended 30 June 2015
We are pleased to present the results for the six months ended 30 June 2015 as we continue to develop our unique proposition combining service, advice, value and choice to an increasing number of customers across our heartland. This has resulted in continued strong financial performance for the first half of the financial year, increasing our membership and heartland presence, whilst further investing in our Society for the future.
Key performance highlights include:
o Group pre-tax profit at £9.3 million, up from £8.9m at June 2014, and resulting in profit after tax ratio of 0.40%; o Branch retail balances up by 7% to £1.6 billion; o Gross mortgage lending of £268m; o Arrears levels remain low at 0.34% of total mortgage book; o Net interest margin of 1.49%; o Strong capital ratios with a common equity tier 1 ratio of 15.9% and leverage ratio at 5.1%; o Cost to income ratio of 62.2%; o Net promoter score of 74%; o Opening of 4 new branch locations. o Society's credit rating with Moody's upgraded to Baa1 from Baa2.
A key feature of our strategy is to provide our members with access to first class building society services, whole of market mortgage and financial advice and estate agency services all under one roof from a source that they can trust; something that is increasingly hard to find today on high streets across our heartland.
This unique proposition from a UK building society makes us increasingly relevant to a much broader proportion of our heartland population and has played a key part in increasing our heartland based membership. This progress is best demonstrated by the popularity of our four newest locations: Ashbourne, Matlock, Harpenden and St. Albans, which have all opened in the first six months of this year. In fact over the past two years we have increased our number of high street building society locations by over 30% and now have 45 branches offering building society services with whole of market mortgage and financial planning advice to our members and new customers, with a further 11 locations currently offering estate agency services only.
In the first half of this year, the level of branch based retail savings balances have increased by a further 7% and are now in excess of £1.6 billion; an increase of more than 50% since the beginning of 2013, when we began increasing our heartland footprint. Our unique proposition and brand of service is valued by our customers and this is not only demonstrated in the rising savings balances, increased membership and activity levels in our branches but also in our independently run customer satisfaction programme which looks specifically at the levels of advocacy amongst our customers. This is best demonstrated by our net promoter score in 2015, which currently stands at 74% and is more than double the average for the financial services sector overall at 30%.
Since 2010, the Group has successfully grown its balance sheet by more than 35%, one of the largest levels of growth in the sector. This has been achieved whilst ensuring that we effectively balance the conflicting needs of our savings and mortgage customers and to only lend if we achieve our required risk adjusted return on capital, within our risk appetite. As we entered 2015, the Board assessed that in the current market environment, with a large number of mortgage products priced below 2%, it was not appropriate to continue our sector leading growth performance and whilst we do expect to further increase our balance sheet in 2015, at the half year point it is broadly similar in size to that at the end of 2014. However in a further demonstration of the effectiveness of our strategy to be more relevant to more heartland customers, we have provided mortgage advice and support to over 30% more customers in the first six months of this year, compared to the same period in 2014.
If we are to meet the increasing demands of our customers and attract new ones to the Group, it is essential that as we grow and expand we continue to invest in our systems, people and capability. Reflecting this, our capital expenditure continues to be relatively high at £1.5 million, or 9% of our total expenditure. In the second half of the year we expect to continue to develop and invest in our infrastructure, as well as implement a number of staff development initiatives as we work hard to make The Nottingham an employer of choice in our trading area.
The Board takes very seriously its responsibility to ensure the Group operates in a safe and secure manner, meeting all of its regulatory requirements and acting in line with our mutual ethos. We are happy therefore to report strong pre-tax profits of £9.3m in the first six months of this year, a level of post-tax profitability at 0.40% of mean assets which is towards the top range of our appetite. Our resultant strong capital base enables us to continue to invest accordingly to strengthen the Society's offering and make us more relevant to more potential members now and in the future. This strong performance has also been reflected in The Nottingham's credit rating. Following a review of the UK banking sector by Moody's The Nottingham was one of only 3 institutions to have their credit rating upgraded with the rating now one notch up at Baa1.
We are pleased with our strategic progress and are confident that our good performance in the first six months of 2015 will allow us to continue to grow and expand the business and deliver sustainable value to our customers through the second half of the year and beyond. The low interest rate environment is likely to remain with us for some time yet and this will continue to challenge us to strike the appropriate balance between our savers and borrowers in an extremely competitive market, with mortgage rates now at an all time low. We remain committed to the belief that it is essential for the Society to differentiate strongly from the big banks through focusing on providing customers with expert advice on their financial affairs supported by a high customer service ethos.
David Marlow Chief Executive 31 July 2015
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Consolidated statement of comprehensive income for the six months ended 30 June 2015 | |||||
Period to 30 June 2015 (Unaudited) |
Period to 30 June 2014 (Unaudited) | Year ended 31 December 2014 (Audited) | |||
£m | £m | £m | |||
Interest receivable and similar income | 47.9 | 49.6 | 100.7 | ||
Interest payable and similar charges | (23.6) | (26.7) | (51.8) | ||
Net interest income | 24.3 | 22.9 | 48.9 | ||
Fees and commissions receivable | 4.5 | 5.4 | 10.7 | ||
Fees and commissions payable | (0.1) | (0.3) | (0.4) | ||
Net gains from derivative financial instruments | 0.2 | 0.5 | 0.2 | ||
Total net income | 28.9 | 28.5 | 59.4 | ||
Administrative expenses | (16.4) | (15.3) | (33.0) | ||
Depreciation and amortisation | (1.6) | (1.7) | (3.9) | ||
Finance cost | - | - | (0.2) | ||
Impairment losses on loans and advances | (0.1) | (0.1) | (1.3) | ||
Provisions for liabilities - FSCS levy | (1.5) | (1.8) | (1.8) | ||
Provisions for liabilities - Other | - | (0.7) | (1.2) | ||
Loss on disposal of property, plant and equipment | - | - | (0.6) | ||
Profit before tax | 9.3 | 8.9 | 17.4 | ||
Tax expense | (2.8) | (1.9) | (3.5) | ||
Profit after tax for the financial period | 6.5 | 7.0 | 13.9 | ||
Other comprehensive income: | |||||
Items that will not be re-classified to the income statement | |||||
Remeasurement of defined benefit obligation | - | - | (2.5) | ||
Tax on items that will not be re-classified to the income statement | - | - | 0.5 | ||
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Available-for-sale reserve | |||||
Valuation (losses)/gains taken to reserves | (0.2) | - | 0.8 | ||
Tax on items that may subsequently be re-classified to the income statement | - | - | (0.2) | ||
Other comprehensive (expense) for the period net of income tax | (0.2) | - | (1.4) | ||
Total comprehensive income for the period | 6.3 | 7.0 | 12.5 | ||
Consolidated statement of financial position as at 30 June 2015 | |||
30 June 2015 (Unaudited) |
30 June 2014 (Unaudited) |
31 Dec 2014 (Audited) | |
£m | £m | £m | |
Assets | |||
Liquid assets | 513.9 | 451.4 | 510.7 |
Derivative financial instruments | 8.1 | 22.1 | 9.9 |
Loans and advances to customers | 2,699.2 | 2,571.9 | 2,718.3 |
Fixed and other assets | 27.7 | 30.0 | 26.9 |
Total assets | 3,248.9 | 3,075.4 | 3,265.8 |
Liabilities | |||
Shares | 2,511.2 | 2,429.7 | 2,575.4 |
Borrowings | 501.6 | 427.3 | 456.9 |
Derivative financial instruments | 9.7 | 5.6 | 13.6 |
Other liabilities | 16.7 | 15.1 | 16.2 |
Subscribed capital | 26.3 | 26.1 | 26.6 |
Total liabilities | 3,065.5 | 2,903.8 | 3,088.7 |
Reserves | |||
General reserves | 183.2 | 171.8 | 176.7 |
Available-for-sale reserves | 0.2 | (0.2) | 0.4 |
Total reserves and liabilities | 3,248.9 | 3,075.4 | 3,265.8 |
Consolidated statement of changes in members' interests as at 30 June 2015 | General reserve | Available-for-sale reserve | Total |
£m | £m | £m | |
Balance as at 1 January 2015 (Audited) | 176.7 | 0.4 | 177.1 |
Profit for the year | 6.5 | - | 6.5 |
Other comprehensive income 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 | 6.5 | (0.2) | 6.3 |
Balance as at 30 June 2015 (Unaudited) | 183.2 | 0.2 | 183.4 |
Balance as at 1 January 2014 (Audited) | 164.8 | (0.2) | 164.6 |
Profit for the year | 7.0 | - | 7.0 |
Other comprehensive income for the period (net of tax) | |||
Net (losses) from changes in fair value | - | - | - |
Remeasurement of defined benefit obligation | - | - | - |
Total other comprehensive income/(expense) | 7.0 | - | 7.0 |
Total comprehensive income for the period | 7.0 | - | 7.0 |
Balance as at 30 June 2014 (Unaudited) | 171.8 | (0.2) | 171.6 |
Balance as at 1 January 2014 (Audited) | 164.8 | (0.2) | 164.6 |
Profit for the year | 13.9 | - | 13.9 |
Other comprehensive income for the period (net of tax) | |||
Net gains from changes in fair value | - | 0.6 | 0.6 |
Remeasurement of defined benefit obligation | (2.0) | - | (2.0) |
Total other comprehensive (expense)/income | (2.0) | 0.6 | (1.4) |
Total comprehensive income/(expense) for the period | 11.9 | 0.6 | 12.5 |
Balance as at 31 December 2014 (Audited) | 176.7 | 0.4 | 177.1 |
Consolidated cash flow statement for the period ended 30 June 2015 | |||
30 June 2015 (Unaudited) |
30 June 2014 (Unaudited) |
31 Dec 2014 (Audited) | |
£m | £m | £m | |
Cash flows from operating activities | |||
Profit before tax | 9.3 | 8.9 | 17.4 |
Depreciation and amortisation | 1.6 | 1.7 | 3.9 |
Loss on disposal of property, plant and equipment | - | - | 0.6 |
Interest on subscribed capital | 1.0 | 1.0 | 2.0 |
Net losses on disposal and amortisation of debt securities | (0.3) | (0.6) | (1.2) |
Increase in impairment of loans and advances | 0.1 | 0.1 | 0.9 |
11.7 | 11.1 | 23.6 | |
Changes in operating assets and liabilities | |||
Decrease/ (increase) in other assets | 0.7 | (3.4) | (4.3) |
(Decrease)/ increase in other liabilities | (4.7) | (2.4) | 5.0 |
Decrease/ (increase) in liquid assets | 12.1 | 7.4 | (16.1) |
Decrease/ (increase) in loan and advances to customers | 19.0 | (100.6) | (234.0) |
(Decrease)/ increase in shares | (64.2) | 110.3 | 256.8 |
Increase/ (decrease) in borrowings | 44.7 | (56.0) | (25.8) |
Taxation paid | (1.5) | (1.3) | (3.8) |
17.8 | (34.9) | 1.4 | |
Capital expenditure and financial investment | 21.1 | 0.2 | (18.8) |
Financing activities | (1.0) | (1.0) | (1.9) |
Increase in cash and cash equivalents | 37.9 | (35.7) | (19.3) |
Cash and cash equivalents at beginning of year | 318.6 | 337.9 | 337.9 |
Cash and cash equivalents at end of year | 356.5 | 302.2 | 318.6 |
Summary ratios | ||||
30 June 2015 | 30 June 2014 | 31 Dec 2014 | ||
% | % | % | ||
Common Equity Tier 1 capital ratio | 15.9 | 14.1 | 15.1 | |
Liquid assets as a percentage of shares and borrowings | 17.06 | 15.80 | 16.84 | |
Group profit for the year as a percentage of mean total assets | 0.40 | 0.46 | 0.44 | |
Group management expenses as a percentage of mean total assets | 1.11 | 1.12 | 1.17 | |
Group interest margin as a percentage of mean assets | 1.49 | 1.50 | 1.56 | |
Notes · The financial information set out above, which was approved by the Board of Directors on 29 July 2015, does not constitute accounts within the meaning of the Building Societies Act 1986. · The financial information for the year ended 31 December 2014 has been extracted from the Accounts for the year and on which the auditors have given an unqualified opinion. |
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