TIDMNOTP
RNS Number : 9291S
Nottingham Building Society
15 March 2019
Nottingham Building Society
The Nottingham announces robust financial performance and continued
progress in the delivery of its unique member proposition.
The Nottingham is pleased to present its results for the year
ended 31 December 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.
Below are some of the key achievements and financial highlights
of 2018:
* Gross mortgage lending of over GBP800 million,
resulting in overall mortgage book growth of 4%;
* Strong retail franchise growth - total branch savings
balances of GBP2.4 billion, up 13% in 2018;
* The Society welcomed over 25,000 new customers and is
now present in 67 locations across 11 counties;
* Achieved a customer Net Promoter Score of 79%;
* Total assets of GBP4.1 billion, an increase of 4%;
* Net interest margin at 1.26%;
* Group pre-tax profit of GBP11.8 million;
* Arrears levels remain very low, below a quarter of
the industry average (2018: 0.16% v industry at
average of 0.79%); representing 42 accounts out of a
total mortgage base of almost 26,000 accounts; and
* Strong capital ratios with Common Equity Tier 1 at
14.7% and leverage of 5.1%.
Commenting David Marlow, Chief Executive, said:
"As we headed into 2018, we undertook to focus on four key pillars
of serving and rewarding our growing membership, delivering operational
excellence, strong financial adequacy and developing a culture
which continually encourages our people to do the right thing
for members and supporting the communities that we operate in.
Over recent years we have championed the role of branches in
the delivery of our unique proposition and finished 2017 by opening
seven new branches in Cambridgeshire, Lincolnshire and Norfolk.
I am pleased to report that we have continued to see our members
taking advantage of our enlarged network. Savings balances in
branches increased in 2018 by 13% and have now reached almost
GBP2.4 billion; up from just over GBP1 billion in 2013. We have
been very pleased with the performance of our seven new branches
with balances achieved of almost GBP100 million and over 5,000
new members welcomed. This is ahead of our expectations. We now
have GBP0.5 billion of balances in our new branches which have
opened between 2013 and 2017. We continue to attract new members,
with over 25,000 joining us in 2018. This included new LISA customers,
as we became only the second provider to offer a Cash Lifetime
ISA, giving our members an opportunity to save for their first
home and receive up to a GBP1,000 bonus every year from the Government.
We are excited about the opportunity to grow a new section of
our membership in 2019, particularly when we offer our LISA account
online for the first time through our new innovative savings
platform.
Members continued to benefit from our unique member rewards scheme
which is designed to reward members, with cashback and discounts
for planning and protecting their financial futures - in 2018
members benefited to the tune of just under GBP0.5 million. Members
also continue to increase their use of our unique whole-of-market
mortgage advice service through Nottingham Mortgage Service (NMS),
with a record number benefiting from our advice in 2018. Over
the past five years we have helped almost 12,000 customers find
the right mortgage for them, from across the market. This is
set to grow further as increasing numbers of members remortgage
through the service - in fact in 2018, over 30% of our total
business was for existing NMS customers taking a new deal.
In December we were excited to launch our concept branch in new
premises at Newark. There are a number of new innovations which
we expect to be popular with members including individual seated
booths for transacting, no more standing at the counter and the
introduction of a new community area which provides facilities
and technology for community groups to take advantage of. We
will be reviewing the results and findings closely before commencing
a broader rollout of our new approach to branch advice and service.
Continued excellence in advice and service from our team members
has enabled us to continue to deliver world class levels of customer
service. as we have maintained our Net Promoter Score of 79%,
some way ahead of the financial service average of 49%. We were
also very pleased to note that The Nottingham was announced as
one of the firms with the lowest level of complaints across the
entire financial services industry, according to official FCA
figures, for the first half of 2018.
Our performance
We ended the year by growing our mortgage book by 4% to GBP3.5
billion; this was supported by gross lending of GBP834m and over
GBP600m of existing customers switching to new terms with us
at the end of their current deal. Whilst gross lending was not
at the record level of the previous year, our capability to retain
customers supported the good overall growth of the mortgage book.
As a mutual, we benefit from the ability to plan for the long
term in the best interests of the Society's members. As such
we do not need to strive to maximise profit, but continue to
operate and develop the Society in a sustainable manner. This
is well demonstrated in our financial performance for 2018, where
we have grown net interest income, in the year by 4%. However,
we have seen the anticipated impact of our investment plans for
the Society's future as we report a profit before tax of GBP11.8m,
which is down GBP2.7m or 19% on 2017. This is despite managing
administration expenses to an increase of just GBP1.7m (4%) over
the period. Overall this has enabled us to reduce our management
expense ratio, which has fallen slightly in 2018 to 1.09%. In
the coming period, we expect to need to continue to closely manage
our mix of investment and administrative expenses, to strike
the right balance for our members. We believe that this is the
right approach to secure the future capability and sustainability
of the Society, as we respond to significant shifts in customer
behaviour and expectations.
Operational excellence
If we are to maintain our current standards and develop our proposition
and service so that it remains relevant to existing and prospective
new members, we must continue to invest in, and develop, the
capability of the Society to ensure that we meet our members
needs now and in the future.
In 2018, we have embarked on an extensive programme of digital
development to ensure that in the future our members can benefit
from an engaging and innovative online offering, which seamlessly
integrates with our face-to-face service, ultimately offering
the best of both worlds.
In December, we were proud to announce the launch of 'Beehive
Money'; our first large scale implementation of our new internet
platform capability delivered in partnership with Salesforce
- a global leader in digital customer relationship management.
All existing online savers have now been moved over to Beehive
Money, which offers a speedier, simpler, and more intuitive way
to save money online.
In 2019 we aim to move our mortgage intermediary broker application
system onto the new platform and, in doing so, radically reduce
the time it takes to apply for, and receive, a decision in principle
from us. We will also introduce the opportunity for our LISA
savings customers to apply for and conduct their account online
as well as in branch, and ultimately offer all Society savings
customers the opportunity to operate their savings accounts online
in addition to in-branch. At present they must choose one or
the other.
In addition to launching our new concept branch in Newark, we
have also been investing in technology across our branch network
to provide quicker access to advice and support. We have installed
a high definition video capability across our branch network,
which enables us to offer customer interviews in branch with
one of our specialists wherever they may be across our branch
network or at our head office in Nottingham. Initial customer
reaction to this new innovation has been excellent and it has
significantly reduced the need to make an appointment with one
of our specialist mortgage advisers. This is another example
of how we can maximise the utilisation of our branch network
as an advice and service hub.
Quality and strength
As always, the Society has continued to maintain a high level
of financial strength underpinned by strong capital, liquidity
and high credit risk standards. Our performance in 2018 has sustained
our strong capital levels at a leverage ratio of 5.1% as well
as maintaining appropriate levels of high quality liquidity.
Despite increased competition, we have maintained our high standard
of credit assessment and this is reflected in our market leading
credit quality. Under new IFRS 9 provisioning methodology, we
have seen a small release of provisions for losses related to
our lending this year. This is underpinned by the fact that from
over 26,000 mortgage accounts, we only have 42 which are three
months or more in arrears, remaining at an almost de minimis
level for a book of this size. All evidencing the financial strength
of the Society.
People and culture
Our culture and values are driven by our vision to reward our
members for planning, protecting and saving for their future.
We deliver our 'all under one roof' advice and service offering
through enthusiastic expert team members. We strive to be easy
to deal with and to be known as a force for good in our heartland.
Over the past 18 months we have worked hard with colleagues to
live our values of being accountable and relevant to members
as our ultimate owners; that we are respectful, open and work
together as one team, whilst supporting our communities. It is
their hard work and commitment that has enabled us to make such
strong progress in the delivery of our member focused strategy.
Our people strategy and performance management approach are focused
on supporting our team members to deliver our vision in line
with our values, and in doing so create a positive open culture
which is focused on serving our membership fairly. In 2018 we
have focused hard on continuing to improve our leadership and
communication across our growing operations, as well as engaging
and encouraging all team members to speak up and for managers
and leaders to listen carefully, to ensure we remain aligned
with our stated vision and values. In 2018 our members have benefited
greatly from this as more of our colleagues have come forward
to highlight areas of opportunities or activities where we could
improve our proposition and service.
Supporting our communities
One of the four pillars upon which we base the Society is how
we support our communities through our Doing Good Together initiative.
I am pleased and proud that we have continued to do this through
a wide range of activities all aimed to support one of our charitable
themes of homelessness, employability and financial awareness.
Our Grants for Good scheme provided GBP32,000 to a whole range
of groups, supporting over 3,000 people across Nottinghamshire,
Leicestershire, Lincolnshire, Norfolk and South Yorkshire - our
grant programme has now distributed over GBP170,000 in the past
seven years.
We also continued to commit strongly to our charity partnership
in 2018. 250 students at more than 15 schools and colleges have
benefited from our support of the great work carried out by Young
Enterprise to ignite commercial and entrepreneurial skills in
teenagers. 300 students have also benefited from our Money Academy
sessions, designed to help with personal money management.
We have sponsored and participated in three Sleep Out events
in support of Framework this year - supporting 500 fundraisers
to fund the rough sleeper hotline and support the charity's off
the street campaign. We have also supported 50 local up and coming
athletes through our support of the charity SportsAid, some of
whom have gone on to represent Great Britain at a range of international
events.
Of course our staff continued to do fantastic things. Volunteering
for a whole range of charitable activities in support of our
charity partners and a significant amount of fundraising for
Macmillan, Help for Heroes, MND, Homestart, Stonebridge City
Farm and Second Helpings. As ever, my gratitude and immense respect
go to all our team members who selflessly gave their time and
financial support to such a wide range of deserving causes
Outlook
2019 will undoubtedly be a year of uncertainty for us all. We
continue to believe that our unique proposition, if delivered
brilliantly and continually evolving to match changing expectations,
will remain as popular as ever with our growing membership.
We have embarked on investing in and developing leading technology
for our members and expect to need to continue to do so for the
foreseeable future as we continue to successfully grow our membership
sustainably, both now and in the years ahead.
It is at times like these that our mutual ethos serves us well,
enabling us to continue to invest in the long term success of
the Society, despite short term market, economic and political
uncertainties. This has been made possible by our financial strength
and the progress we have achieved in recent years to grow the
Society and build our capability. Whilst we expect profitability
to reduce in the short term, the Board remains confident that
it is in the long term interests of our membership to continue
to deliver world class service, great value and invest for the
future, rather than pursue short term profit.
We are committed to creating the ideal hybrid of traditional
service and advice with digital accessibility and innovation.
That will enable us to help our growing membership plan for their
financial futures more effectively and efficiently. We aim to
do this by continuing to focus on serving and rewarding membership
and having strong financial adequacy, whilst being reputable
and resilient to all market conditions and supporting the communities
in which we serve."
David Marlow
Chief Executive
15 March 2019
Consolidated income statement
for the year ended 31 December 2018
2018 2017
GBPm GBPm
Interest receivable and similar income 85.4 82.2
Interest payable and similar charges (35.2) (33.9)
------- ------------
Net interest income 50.2 48.3
Fees and commissions receivable 7.5 9.1
Fees and commissions payable (1.4) (1.6)
Net losses from derivative financial
instruments (0.7) (0.2)
Total net income 55.6 55.6
Administrative expenses (40.0) (38.3)
Depreciation and amortisation (3.4) (3.0)
Finance cost (0.3) (0.3)
Impairment release - loans and advances 0.3 1.3
Impairment charge - goodwill (0.5) -
Provisions for liabilities - FSCS
levy and other 0.1 (0.8)
Profit before tax 11.8 14.5
Tax expense (2.4) (3.0)
------- ------------
Profit after tax for the financial
year 9.4 11.5
------- ------------
Consolidated statement of comprehensive
income
for the year ended 31 December 2018
2018 2017
GBPm GBPm
Profit for the financial year 9.4 11.5
Items that will not be re-classified
to the income statement
Remeasurements of the defined benefit
obligation 0.4 2.1
Tax on items that will not be re-classified (0.1) (0.4)
Items that may subsequently be re-classified
to the income statement
Available-for-sale reserve
Valuation losses taken to reserves - (0.4)
Tax on items that may subsequently
be re-classified - 0.1
FVOCI reserve
Valuation losses taken to reserves (1.2) -
Tax on items that may subsequently 0.2 -
be re-classified
Other comprehensive (expense)/income for the
period net of income tax (0.7) 1.4
------- ------------
Total comprehensive income for the
year 8.7 12.9
------- ------------
Consolidated statement of financial position
as at 31 December 2018
2018 2017
GBPm GBPm
Assets
Liquid assets 506.9 494.9
Derivative financial instruments 8.2 7.3
Loans and advances to customers 3,502.9 3,368.8
Fixed and other assets 35.6 29.4
-------- --------
Total assets 4,053.6 3,900.4
-------- --------
Liabilities
Shares 2,869.2 2,595.4
Borrowings 918.0 1,042.3
Derivative financial instruments 5.9 9.9
Other liabilities 12.6 14.5
Subscribed capital 25.1 25.6
-------- --------
Total liabilities 3,830.8 3,687.7
Reserves
General reserves 223.8 212.7
Fair value reserves (1.0) -
-------- --------
Total reserves attributable to members of the
Society 222.8 212.7
Total reserves and liabilities 4,053.6 3,900.4
-------- --------
Consolidated statement of changes General FVOCI Available-for-sale Total
in members' interests as at 31 December reserve reserve reserve
2018
GBPm GBPm GBPm GBPm
Balance as at 1 January 2018 212.7 - - 212.7
Change on initial recognition of
IFRS 9 1.4 - - 1.4
Profit for the year 9.4 - - 9.4
Other comprehensive income for the
period (net of tax)
Net losses from changes in fair
value - (1.0) - (1.0)
Remeasurement of defined benefit
obligation 0.3 - - 0.3
--------- --------- ------------------- ------
Total comprehensive income/(expense)
for the period 9.7 (1.0) - 8.7
--------- --------- ------------------- ------
Balance as at 31 December 2018 223.8 (1.0) - 222.8
--------- --------- ------------------- ------
Balance as at 1 January 2017 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 comprehensive income/(expense)
for the period 13.2 - (0.3) 12.9
--------- --------- ------------------- ------
Balance as at 31 December 2017 212.7 - - 212.7
--------- --------- ------------------- ------
Consolidated cash flow statement
for the year ended 31 December 2018
2018 2017
GBPm GBPm
Cash flows from operating activities
Profit before tax 11.8 14.5
Depreciation and amortisation 3.4 3.0
Interest on subscribed capital 2.0 2.0
Net gains on disposal and amortisation of debt
securities 0.6 0.7
Increase/(decrease) in impairment 0.2 1.3
18.0 21.5
Changes in operating assets and liabilities
Increase in other assets (5.2) (3.9)
Decrease in other liabilities (5.5) (10.5)
Decrease in loans and advances to credit institutions 0.7 10.4
(Decrease)/Increase in debt securities in issue (46.7) 54.8
Increase in loan and advances to customers (132.1) (337.5)
Increase in shares 273.8 138.0
(Decrease)/Increase in borrowings (77.6) 115.5
Taxation paid (2.9) (2.6)
-------- --------
22.5 (14.3)
Capital expenditure and financial investment (114.8) (17.3)
Financing activities (1.9) (1.9)
-------- --------
Decrease in cash and cash equivalents (94.2) (33.5)
Cash and cash equivalents at beginning of year 360.3 393.8
-------- --------
Cash and cash equivalents at end of year 266.1 360.3
-------- --------
Summary ratios
2018 2017
% %
Common Equity Tier 1 ratio 14.7 14.6
Liquid assets as a percentage of shares and borrowings 13.38 13.60
Group profit for the year as a percentage of mean total
assets 0.24 0.31
Group management expenses as a percentage of mean total
assets 1.09 1.10
Society management expenses as a percentage of mean total
assets 0.95 0.92
Society interest margin as a percentage of mean assets 1.26 1.29
Notes
* The financial information set out above, which was
approved by the Board of Directors on 14 March 2019,
does not constitute accounts within the meaning of
the Building Societies Act 1986.
* The financial information for the years ended 31
December 2018 and 31 December 2017 has been extracted
from the Accounts for those years and on which the
auditors have given an unqualified opinion.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR CKQDPQBKDPND
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