TIDMNBSR
RNS Number : 4476U
Newcastle Building Society
29 July 2020
Announcement of half-year results for the six months ended 30
June 2020
It would be difficult to begin any summary of the last six
months without starting with Covid-19.
The global impact of the pandemic on loved ones, on personal and
working lives, and on individual opportunities has been painful and
profound. This is an intensely human crisis.
We have also witnessed an economic contraction the like of which
has not been experienced for decades. While we remain optimistic
that over time economies will recover, it would be unrealistic to
think this can happen as quickly as we might hope.
Economic uncertainty and lack of confidence has played out
globally due to the worldwide nature and impact of the crisis. Lack
of clarity on the scope and length of the impact has eroded
confidence and created a climate that has seen stock market falls,
wider investment programmes delayed or cancelled, and employment
uncertainty.
In these challenging times, our Society's focus on Members and
our communities, driven from a purpose-led strategy, appears more
relevant and more important than ever.
The UK went into lockdown on 23rd March.
As providers of an essential service, all but one of our
branches remained open. We moved quickly to enable the vast
majority of our office based colleagues to work remotely from home,
maintaining continuity of service while following Government
guidelines as the whole country responded to the emerging
crisis.
Although Covid-19 has negatively impacted our Society's trading,
our underlying business is still performing well, reflecting our
resilient core. Our operating profit has seen a reduction of
GBP1.2m to GBP7.3m (from GBP8.5m in the first half of last
year).
The knock on effects of the exceptional deterioration in the
macro-economic environment has resulted in a significant increase
in our credit and legacy provisions resulting in a pre-tax profit
of GBP2.2m, compared to GBP8.2m for the same period in 2019. We
remain strongly capitalised and continue to operate with
appropriate levels of liquidity.
We have been proud to be able to maintain our tradition of
strong support for our local communities throughout the lock down,
including being a launch donor giving GBP100,000 to the region's
Coronavirus Response and Recovery Fund, established by The
Community Foundation for Tyne & Wear and Northumberland.
While the UK lockdown is now being eased, with businesses being
allowed to re-open, the economy being re-started and the lock down
of the housing market being reversed, we are mindful that the
pandemic is not yet resolved. Any recovery is likely to be both
fragile and much slower than the contraction.
Some highlights of the first half of 2020 are:
-- Operating profit before impairment and provisions decreased
by GBP1.2m to GBP7.3m (2019: GBP8.5m);
-- Profit before tax was GBP2.2m (2019: GBP8.2m);
-- Gross lending was GBP357m (2019: 380m);
-- Net core residential lending for the first half of the year
was GBP178m, despite the extremely challenging economic conditions
(Full year 2019: GBP575m);
-- Highest ever engagement score for our colleagues of +37;
-- Record new account openings in April and May in our Solutions business;
-- Customer Net Promoter Score 81 (84 for Full Year 2019);
-- Mortgage arrears remain at low levels at 0.36% (31 December 2019: 0.34%);
-- Capital ratios remain robust with Total Capital Ratio
(Solvency) at 15.0%, Tier 1 Ratio at 13.9%, Common Equity Tier 1
Ratio at 13.7% and Leverage Ratio at 4.6%; and
-- Liquidity as a percentage of shares, deposits and liabilities
(excluding encumbered assets) was 12.0%.
Purpose-led strategy
Our purpose, 'Connecting Communities with a better Financial
Future', and our purpose-led strategy are as important as ever.
They give real meaning to the organisation and the difference we
can make, inform our decision making, and reinforce our commitment
that 'doing the right thing' will support our delivery of a robust,
long term business for the benefit of our Members.
As an essential service we have remained open for business
throughout lockdown. We have continued supporting our communities
and we strive to maintain this important focus as we also seek to
play our part in enabling recovery in our region and across our
communities.
Open for business
As a designated 'essential service' we have remained open for
business throughout lockdown. We have continued our sensible
lending and the provision of mortgages; we have maintained
convenient, local access to our savings service for our customers,
and continued to provide financial advice, delivering our services
in different ways to meet the challenges of our changed
context.
Throughout, our priority has been to keep our customers and
colleagues safe and we implemented a range of changes to effect
this across our operations.
Saving and financial advice:
Our branch network across the North East, Cumbria and North
Yorkshire has maintained essential transactions and services for
customers and the otherwise financially excluded. Safety measures
were implemented for colleagues and customers, whose essential
needs necessitated a branch visit. These included a one in one out
policy; social distancing; safety screens; face coverings and masks
for colleagues; colleagues working in small bubble teams; and
reduced branch opening hours. These actions protected customers'
access to cash and other key services and were reinforced by a
partnership with the Post Office to provide local cash access to
vulnerable customers in the event of an unavoidable branch
closure.
Our branch network has remained resilient and open throughout
the crisis, with the exception of our Yarm Library Branch, which
was closed as part of a wider council decision to close library
locations.
Just prior to lockdown, we had been delighted to formally open
two exciting and innovative new branches in partnership with
communities in the rural towns of Hawes in North Yorkshire and
Wooler in Northumberland, both of which had been left isolated
after the last bank had left their towns. It has been good to see
that in both of these locations, our new branches have been able to
continue operations throughout the crisis, providing their
essential service to their local communities.
We supplemented our location-based services with online and
phone transaction capability and launched a mobile savings app,
which enables easy access to accounts from a mobile device
utilising fingerprint and facial recognition technology.
The Bank of England reduced base rates during the crisis to
record low levels of just 0.1%. As always, we are mindful of the
impact that very low rates will have on returns for Members,
particularly in these difficult times, but reluctantly, we
concluded that it was necessary to pass on a corresponding rate
reduction to our variable rate savings products.
As some of our savings products have financial penalties if they
are closed ahead of the agreed term end, we ensured customers could
access their savings quickly and without penalty where health
issues, or difficulties caused by Covid-19, made this
necessary.
This commitment was applied across all our savings products,
with the exception of the Lifetime ISA which has a separately
applied Government penalty.
In order to safely continue the provision of financial advice,
the Society's Newcastle Financial Advisers Limited subsidiary
introduced a telephone and video financial advice service.
Delivered by its network of experienced advisers, they continue to
provide reassurance and help define plans for customers who may
otherwise feel lost and afraid without this professional support
and insight.
Continuing a strategy for growth and a desire to increase the
local accessibility of financial advice, ahead of the virus
lockdown Newcastle Financial Advisers Limited acquired Carter
James, a North Yorkshire financial advice firm.
Mortgages
Helping people own their own home is core to our Purpose. The
mortgage market reduced by 50% between January and May this year.
As a result we have seen a negative impact on our lending business
from the flow-through of the reduction in economic activity.
Following the announcement of the financial support package in
response to Covid-19 by the Government and set out by the Financial
Conduct Authority (FCA), the Society quickly responded to customer
concerns, to requests for mortgage payment holidays, and for
flexibility in repayments for those borrowers struggling to pay
their mortgages as a result of Covid-19.
Where customers can afford to re-start their mortgage payments
it is in their best interests to do so, but some may need
additional support and for longer. The FCA has extended the time to
apply for a payment holiday to the end of October.
During the lockdown, our focus moved to remortgages and mid loan
to value mortgage products as part of our sensible lending policy.
Our manual underwriting is frequently cited as a key benefit for
customers, and for our broker partners. Our continued presence in
the market saw us over perform against budgets and we helped 559
customers remortgage to a competitive deal.
We have begun to see some early shoots of regeneration in the
house purchase market, although we remain cautious as the economic
picture is yet to clarify.
We recognise that for some customers the time ahead may be
challenging for their finances in the short/medium term and we will
ensure we support them where we can.
Supporting our communities
Community lies at the heart of our Purpose and we have not lost
sight of our commitments to helping people deliver positive change
and support those who need a helping hand.
Early in the Covid-19 crisis the Society moved quickly to
provide a GBP100,000 donation to the North East region's
Coronavirus Response and Recovery Fund delivered through the
Community Foundation Tyne & Wear and Northumberland.
The Newcastle Building Society Community Fund has continued to
support local registered charities providing services for the most
vulnerable people in society; including many of those who will be
hardest hit by the economic effects of the pandemic.
This was supported by additional Covid-19 crisis focused grants
of GBP35,000 made through the Newcastle Building Society Community
Fund.
The Newcastle Building Society Community Fund is also helping
community groups and charities find digital solutions to their
challenges through its participation in the North East Social Tech
Fund - a grant from the Fund of GBP20,000 has contributed towards
GBP80,000 total awarded to nine North East-based charities and
social enterprises. The money is being reinvested directly into the
region's digital economy, driving collaboration between voluntary
organisations and tech SMEs.
The application of new technologies to bring people closer
together is an area of great interest to our Society, with our
particular focus on building lasting, authentic customer
relationships. One recent example is our partnership with the
National Innovation Centre for Ageing and tech for good company,
onHand. This Newcastle-based pilot is connecting volunteers from
our Society with older people needing support with minor tasks via
a mobile app. Whilst this initiative has been particularly relevant
during the pandemic, the potential is for it to help revolutionise
the approach to volunteering beyond the crisis and into the years
ahead. Early feedback has been very positive.
Our contribution to community happens in many small ways too, at
both a regional and local level. Collaborations include supporting
North East specialist medical cream manufacturer, Nursem, in its
quest to provide free hand cream to nurses at the frontline of
clinical care who suffer the drying effects of frequent hand
washing and sanitising. Or donating a vital supply of much needed,
hand sanitiser to communities in the Yorkshire Dales through
partnering with a local, Yorkshire Dales based distillery.
Supporting our colleagues
We employ more than 1200 people across our head office and
branch locations.
Maintaining essential financial services during Covid-19, while
keeping our colleagues safe, necessitated a significant change in
working practices as all but around 200 colleagues moved to work
remotely, from home. At the same time our branch locations were
adapted to ensure the safety of customers and colleagues while our
head office locations were adapted to ensure colleague social
distancing and the adoption of safety protocols to minimise the
risks of catching and spreading the virus.
Seamlessly revolutionising our working environments while
maintaining great service for our customers and clients is a
tribute to the hard work, flexibility, and personal commitment of
colleagues across our business.
Whilst working from home suits many colleagues, we are all
different, and it doesn't suit all. Some colleagues may experience
a heightened level of anxiety around Covid-19. The Society is
mindful of the potential challenges around mental health and
provides a regular flow of information, advice and resources to
assist colleagues and point them towards additional help provided
by our mental health first aiders and employee assistance
programme.
At the half year point we achieved a record high colleague eNPS
of +37, which positioned us in the top 25% of our survey provider's
global finance sector benchmark, a very positive indication that
throughout the crisis and in the current climate, our colleague
engagement has increased.
The Society's decision to participate in the Government's
Coronavirus Job Retention Scheme has helped to protect jobs while
we have orientated to a rapidly changing business environment and
re-planned in the absence of an, as yet, clearer view of business
in the next months and years of recovery.
The future is far from certain, but we are pleased to have
already returned some of our furloughed colleagues to full time
work as we have moved forward.
Enabling Recovery
One of our key priorities is to ensure that we play our part in
enabling recovery in our region and across our communities. We are
continuing to invest in our infrastructure and digital capabilities
to complement our face to face presence and deliver efficient
operations.
Many local businesses are financially challenged by the pandemic
and we continue to seek to work with them, being committed to
playing our part in bringing our communities back together. Whether
working with the North East of England Chamber of Commerce or local
chambers of trade, with councils and with the National Innovation
Centre for Ageing, we're focused on driving improvements and
benefits to our region and the people who live and work here.
Our lending business is reliant on strong relationships with our
broker community - we are listening to their concerns and needs
through this crisis and respond where we can to support them (and
their customers) with the right product mix for a recovering
housing market.
Our market leading savings management outsourcing business,
Newcastle Strategic Solutions limited (Solutions), has secured
record growth of account openings and balances under management
over the past six months as it responded to its clients' needs for
additional savings funding. The business has transformed how it
delivers for its clients as part of a 'safe working' shift to
remote working, whilst managing record numbers of account openings
and account balances. This has driven a regional recruitment drive
to secure additional technology skills to continue to deliver
ambitious plans for the years ahead.
The Solutions business has also developed and launched a mobile
savings app, which its parent company Newcastle Building Society
was the first client brand to adopt. It allows customers to check
their online savings accounts whilst on the go.
Financial Performance
Our Society has been well placed to meet the ongoing financial
challenges arising from the pandemic, with robust capital, good
levels of liquidity and a sound underlying business, further
supported with diversified income from our Newcastle Strategic
Solutions subsidiary.
Profitability
Operating profit before impairment and provisions decreased by
GBP1.2m to GBP7.3m from GBP8.5m at half year 2019. Profit before
tax was GBP2.2m for the six months ended 30 June 2020 compared to
GBP8.2m for the first half of 2019. The reduction largely reflects
the GBP5.1m increase in provisions as a result of the potential
impact of the Covid-19 pandemic and the associated economic
downturn.
Net interest income was GBP19.1m and our net interest margin
reduced to 86bps at 30 June 2020 (30 June 2019: 97bps and 31
December 2019: 95bps). The lower margin is driven by a bigger fall
in mortgage yields than the fall in savings rates, this reflects
the competitive nature of the mortgage market over the past few
years and the reductions in the Bank of England base rate.
Other income and charges increased by GBP1.2m to GBP18.7m (30
June 2019: GBP17.5m) through increased income from Newcastle
Strategic Solutions, our savings management and IT subsidiary.
Member income, which includes our financial services subsidiary,
remained in line with our budget expectations, with Newcastle
Financial Advisers Limited, our financial advice subsidiary
reporting strong performance in a difficult UK and global economic
environment .
Our cost to income ratio increased to 80.8% (30 June 2019:
76.4%) and management expenses (comprising administration expenses
and depreciation) increased by GBP2.9m from GBP27.6m to GBP30.5m.
The increase in costs is due to the investment in our business from
2019 being reflected into our 2020 cost base, with these costs
incurred in relation to increased business volumes and ongoing
strategic investment for the long term in our people, including the
creation of additional roles throughout the Society. The increase
also includes specific costs relating to our Covid-19 response.
Credit Risk
Impairment charges on loans and advances to customers were
GBP5.1m (30 June 2019: GBP0.3m). The increase in the charges are
due to the potential impact of the Covid-19 pandemic on the UK
economy and therefore the likely impact on our borrowers and the
ability to make their mortgage payments.
Covid-19 has had a severe impact on the economic activity in the
UK and worldwide, with the pandemic's full economic impact still
difficult to forecast.
The Group's credit risk in relation to its prime residential
mortgage portfolios is closely correlated with significant rises in
unemployment rates and falls in property values. The increase in
provisions against residential exposures is based on the Society's
provisioning model, using economic scenarios assuming significant
downsides, including the increased potential for rising
unemployment and reduced property values.
The Society had made significant progress in winding down its
legacy commercial lending exposures. Credit risk for the remaining
exposure depends primarily on the sectors which the tenants operate
in and to what extent the commercial properties are likely to be
attractive for businesses after the pandemic.
Provisions for these exposures have been calculated on an
individual basis, taking into account all information the Society
have on individual customers.
Credit risk in the Society's legacy lifetime lending is most
sensitive to assumptions on longer term house price rises. As these
may be impacted by the economic changes due to Covid-19, provisions
for this exposure have been based on reduced levels of assumed
house price inflation.
The percentage of mortgages in arrears by 3 months or more
remain at low levels at 0.36% (30 June 2019: 0.36% and 31 December
2019: 0.34%). Possession cases remain at very low levels. Gross
lending for the first half of the year was GBP357m (first half of
2019: GBP380m). Total lending for the first half of 2020 was
GBP163m (first half of 2019: GBP208m) which includes a GBP15m
reduction in our exposure to the legacy lending book (first half of
2019: GBP12m). The Society's core residential mortgage book grew by
GBP178m during the first half of 2020 (first half of 2019:
GBP220m).
Liquidity
We continue to manage our liquidity levels efficiently and
comfortably within our regulatory limits. Liquid assets as a
percentage of Shares, Deposits and Liabilities at 30 June 2020 were
19.1% (30 June 2019: 22.5%). Excluding encumbered liquid assets the
ratio was 12.0% at 30 June 2020 (15.5% at 30 June 2019). The
quality of liquidity continues to be excellent, comprising assets
held in cash or that can easily be converted to cash through
treasury markets (repo) or via the various Bank of England
liquidity schemes.
Capital
Capital ratios remain robust. Total Capital Ratio (Solvency)
decreased to 15.0% (31 December 2019: 15.3%). The Tier 1 ratio was
13.9% (31 December 2019: 14.3%) and Common Equity Tier 1 ratio was
13.7% (31 December 2019: 13.9%). The Society's Basel III leverage
ratio (transitional basis) was 4.6% at 30 June 2020 (31 December
2019: 4.7%). Capital ratios disclosed include half year retained
profits.
The UK countercyclical capital buffer (CCyB), is expected to
fall away in times of economic stress and rather than an expected
increase by 1% to 2% in 2020, the CCyB was reduced to 0% in March
2020 due to the economic stress caused by Covid-19. This has
improved the Society's capital headroom against the 2020 budgeted
position, with the buffer not expected to increase to previous
levels until 2022.
Board changes
We were very pleased to welcome Stuart Lynn to the Board as a
non-executive director. An experienced business leader,
specialising in technology, Stuart originally joined the Board of
Newcastle Building Society's technology subsidiary, Newcastle
Strategic Solutions, last year. His appointment to the main Board
will enable him to contribute to the wider Group's ambitions.
Summary and Look Ahead
There is no doubt we face challenging times to the end of the
year and beyond. At this time, with no vaccine for the Covid-19
virus, we must remain vigilant to the fact that there are many
scenarios in which, despite the best efforts of Government and the
wider population, the outlook both on the pandemic and the economy
could become increasingly challenging. While we all hope that will
not be the case and that recovery continues on a steady course,
whatever happens we will continue to be there for our customers and
Members and seek to deliver a Society that supports and makes a
positive contribution to our communities in the North East, Cumbria
and North Yorkshire.
While we must remain cautious about the outlook and prospects
for the months and even years ahead, when we look at our business
there is much to take heart from. We remain very strong with
considerable capital, liquidity and resources to withstand even the
worst forecast economic scenario. I have been impressed beyond
words by the dedication, resourcefulness and determination of
colleagues across our Society to meet the challenges of this
pandemic and continue to offer an outstanding service to our
customers, clients and partners. My heartfelt thanks and
appreciation go out to all for their service to date and ongoing
commitment in addressing the considerable and ever changing demands
presented in these unique and difficult times.
We remain confident in our purpose and strategy, and convinced
of our role in the region as the North East's largest building
society. We continue to invest in people, systems and
infrastructure for the long term, enabling us to achieve our
purpose in changed conditions, strengthen our business and
ultimately our contribution to 'Connecting our Communities with a
better Financial Future.'
Andrew Haigh
Chief Executive
Forward-looking statements
Certain statements in this half-yearly information are
forward-looking. These statements are made in good faith based on
the information available up to the time of approval of this report
and such statements should be treated with caution due to the
inherent uncertainties, including both economic and business risk
factors, underlying any such forward-looking information. Therefore
actual results may differ materially from those expressed or
implied by these forward-looking statements. The Directors
undertake no obligation to update any forward-looking statements
whether as a result of new information, future events or
otherwise.
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
Summary Consolidated Income Statement
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 Jun 20 30 Jun 19 31 Dec 19
GBPm GBPm GBPm
Interest receivable and similar income 43.4 40.8 87.3
Interest payable and similar charges (24.3) (22.2) (48.7)
------------ ------------ -------------
Net interest income 19.1 18.6 38.6
Other income and charges 18.7 17.5 36.3
------------ ------------ -------------
Total operating income 37.8 36.1 74.9
Administrative expenses (28.2) (25.6) (54.4)
Depreciation (2.3) (2.0) (4.2)
------------ ------------ -------------
Operating profit before impairments and provisions 7.3 8.5 16.3
Impairment charges on loans and advances to customers (5.1) (0.3) (1.5)
Provisions for liabilities and charges - - (0.1)
------------ ------------ -------------
Profit before taxation 2.2 8.2 14.7
Taxation expense (0.4) (1.6) (3.3)
------------ ------------ -------------
Profit after taxation for the financial period 1.8 6.6 11.4
------------ ------------ -------------
The Notes on pages 12 to 20 form an integral part of this
condensed consolidated half-yearly financial information.
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
Summary Consolidated Statement of Comprehensive Income
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 Jun 20 30 Jun 19 31 Dec 19
GBPm GBPm GBPm
Profit for the period 1.8 6.6 11.4
------------ ------------ -------------
Other comprehensive income/(expense):
Items that may be reclassified to income statement
Movement on fair value through other comprehensive (expense)/income (0.5) 1.0 0.9
Income tax on items that may be reclassified to income statement 0.1 (0.1) (0.1)
------------ ------------ -------------
Total items that may be reclassified to income statement (0.4) 0.9 0.8
------------ ------------ -------------
Items that will not be reclassified to income statement
Derecognition of pension surplus (0.2) (0.4) (0.8)
------------ ------------ -------------
Total items that will not be reclassified to the income statement (0.2) (0.4) (0.8)
------------ ------------ -------------
Total other comprehensive (expense) / income (0.6) 0.5 -
------------ ------------ -------------
Total comprehensive income for the financial period 1.2 7.1 11.4
------------ ------------ -------------
The Notes on pages 12 to 20 form an integral part of this
condensed consolidated half-yearly financial information.
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
Summary Consolidated Balance Sheet
Unaudited Unaudited Audited
30 Jun 20 30 Jun 19 31 Dec 19
GBPm GBPm GBPm
ASSETS
Liquid assets 771.5 803.1 862.5
Derivative financial instruments 0.2 1.7 0.1
Loans and advances to customers 3,452.7 2,980.0 3,295.1
Fair value adjustments for hedged risk 228.6 192.1 186.6
Property, plant and equipment and other assets 68.3 59.8 67.8
---------- ---------- ----------
TOTAL ASSETS 4,521.3 4,036.7 4,412.1
---------- ---------- ----------
Unaudited Unaudited Audited
30 Jun 20 30 Jun 19 31 Dec 19
GBPm GBPm GBPm
LIABILITIES
Shares 3,489.9 2,925.6 3,400.9
Fair value adjustments for hedged risk - 0.1 -
Deposits and debt securities 557.1 651.6 579.4
Derivative financial instruments 228.4 192.9 185.9
Other liabilities 18.9 20.0 20.1
Subordinated liabilities - 25.0 -
Subscribed capital 20.0 20.0 20.0
Reserves 207.0 201.5 205.8
---------- ---------- ----------
TOTAL LIABILITIES 4,521.3 4,036.7 4,412.1
---------- ---------- ----------
The Notes on pages 12 to 20 form an integral part of this
condensed consolidated half-yearly financial information.
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
Summary Consolidated Statement of Movement in Members'
Interests
For the 6 months ended 30 June 2020
(unaudited)
Fair Value Total
General through Other
reserve Comprehensive
Income
GBPm GBPm GBPm
At 1 January 2020 204.4 1.4 205.8
Movement in the period 1.6 (0.4) 1.2
At 30 June 2020 206.0 1.0 207.0
---------- --------------- ------
For the 6 months ended 30 June 2019
(unaudited)
General Fair Value Total
reserve through Other
Comprehensive
Income
GBPm GBPm GBPm
At 1 January 2019 193.8 0.6 194.4
Movement in the period 6.2 0.9 7.1
At 30 June 2019 200.0 1.5 201.5
---------- --------------- ------
For the year ended 31 December 2019
(audited)
General Fair Value Total
reserve through Other
Comprehensive
Income
GBPm GBPm GBPm
At 1 January 2019 193.8 0.6 194.4
Movement in the year 10.6 0.8 11.4
At 31 December 2019 204.4 1.4 205.8
---------- --------------- ------
The Notes on pages 12 to 20 form an integral part of this
condensed consolidated half-yearly financial information.
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
Summary Consolidated Cash Flow Statement
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 Jun 20 30 Jun 19 31 Dec 19
GBPm GBPm GBPm
Net cash flows from operating activities (135.4) 80.8 186.8
Payment into defined benefit pension
scheme (0.2) (0.4) (0.8)
Net cash flows from investing activities 40.8 13.2 (94.5)
Net cash flows from financing activities (1.2) (2.0) (28.1)
---------- ---------- ----------
Net (decrease) / increase in cash
and cash equivalents (96.0) 91.6 63.4
Cash and cash equivalents at the start
of period 226.4 163.0 163.0
---------- ---------- ----------
Cash and cash equivalents at the end
of the period 130.4 254.6 226.4
---------- ---------- ----------
Other percentages
6 months 6 months 12 months
30 Jun 20 30 Jun 19 31 Dec 19
% % %
Gross capital as a % of shares and borrowings 5.6 6.9 5.7
Liquid assets as a % of shares and borrowings 19.1 22.5 21.7
Wholesale deposits as a % of shares and borrowings 13.8 18.2 14.6
Overall liquidity adequacy ratio 21.3 20.5 23.9
Liquid assets as a % of shares and borrowings excluding encumbered assets 12.0 15.5 15.8
Net interest receivable as a % of mean total assets ("NIM") 0.86 0.97 0.95
Cost to income ratio 80.8 76.4 78.0
Profit after tax as a % of mean total assets 0.08 0.34 0.28
Management expenses as a % of mean total assets* 1.38 1.44 1.45
Common Equity Tier 1 Ratio 13.7 15.1 13.9
Tier 1 Ratio 13.9 15.6 14.3
Total Capital Ratio (Solvency) 15.0 16.9 15.3
Leverage Ratio (Basel III - end point) 4.5 4.9 4.5
Leverage Ratio (Basel III - transitional) 4.6 5.0 4.7
* Expressed on an annualised basis
Capital ratios disclosed include half year retained profits. The
figures for the 12 months ended 31 December 2019 are extracted from
the audited 2019 accounts.
The Notes on pages 12 to 20 form an integral part of this
condensed consolidated half-yearly financial information.
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
Notes
1. General information
1.1. The half-yearly financial information set out above, which
was approved by the Board of Directors, does not constitute
accounts within the meaning of the Building Societies Act 1986.
1.2. The financial information for the 12 months to 31 December
2019 has been extracted from the financial statements for that
year, and on which the auditors gave an unqualified opinion, and
which have been filed with the Financial Conduct Authority and
Prudential Regulation Authority.
1.3. The half-yearly financial information for the 6 months to
30 June 2020 and the 6 months to 30 June 2019 is unaudited.
1.4. The announcement is available at www.newcastle.co.uk.
2. Basis of preparation
The condensed consolidated financial information for the
half-year ended 30 June 2020 has been prepared in accordance with
the Disclosure and Transparency Rules of the Financial Conduct
Authority and with IAS 34, 'Interim financial reporting' as adopted
by the European Union. The half-yearly financial information should
be read in conjunction with the annual financial statements for the
year ended 31 December 2019, which have been prepared in accordance
with International Financial Reporting Standards (IFRSs) as adopted
by the European Union.
The Directors have assessed whether the Group continues to be a
going concern, based on internal forecasts and stress testing,
taking into account all available information about the Group and
its trading environment.
The outbreak of Covid-19 has resulted in a severe economic
contraction, causing an increase in expected credit losses (see
note 12 for details), and the pandemic's full future economic
impact is still uncertain. However, based on their review, the
directors are satisfied that the Group is well placed to survive
even a sustained economic downturn, due to its robust underlying
profitability, in conjunction with a strong capital position and
liquidity buffers.
Based on the most recent formal review in July 2020, the
directors have concluded that the Group has adequate resources to
continue in business for the foreseeable future. Accordingly the
financial statements of the Group have been prepared on a going
concern basis with no material uncertainties that the going concern
basis of accounting is appropriate.
3. Accounting policies
The half-yearly financial information has been prepared on the
basis of the accounting policies adopted for the year ended 31
December 2019, as described in those financial statements, except
for capitalised development costs, see note 10 for details of the
new accounting policy adopted.
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
4. Accounting Estimates and Judgements in Applying Accounting Policies
The Group has to make judgements in applying its accounting
policies, which affect the amounts recognised in Half-yearly
Financial Information. These judgements are based on management's
best knowledge but the eventual outcome may differ from them. In
addition, estimates and assumptions are made that could affect the
reported amounts of assets and liabilities within the following
year. Whilst there have been no changes to the accounting areas
where the most significant estimates and judgements are applied, an
overview on the impact the changed economic situation has had on
these is provided below.
Pensions
The Group, through its pension accounting policy, does not
recognise IAS 19 pension surplus. Whilst the changed economic
conditions have had a negative impact upon the valuation of pension
assets, an update on the triennial valuation in May 2020 from the
group's actuaries indicated that the scheme was still in surplus on
an accounting basis. As part of the triennial valuation the
Trustees agreed to remove any future funding obligations to the
pension scheme.
Effective Interest Rate (EIR)
Management review regularly the assumptions in respect of the
expected lives of loans, used to determine the EIR adjustment. The
impact the pandemic and resulting economic downturn will have on
customer behaviour is still highly uncertain. As past behaviour
therefore may not be as reliable a guide to future behaviour as
previously, a small haircut to the EIR asset has been taken.
Impairment of Financial Assets
Management experience and judgement is required in using IFRS 9
impairment models to project historic performance into uncertain
future economic environments, in particular in economic
environments as unstable as the current one. Note 12 provides a
summary of management's most central estimates and judgements
applied in determining provisions as well as sensitivities relating
to these assumptions.
Fair Value of Derivatives and Financial Assets
Fair Values are determined by the three tier valuation hierarchy
as defined within IFRS 7. Please see note 12 for details. There
have been no significant changes to valuation methodologies applied
since the publication of the Group's 2019 Annual Report and
Accounts.
5. Principal Risks and Uncertainties
The Group's activities expose it to a variety of risks: market
risk (predominantly interest rate risk), credit risk, liquidity
risk and operational risk. There have been no changes in the
principal risks and uncertainties facing the Group and no
significant changes to these risks are currently expected in the
second half of the year.
The interim condensed consolidated financial information does
not include all risk management information and disclosures
required in the annual financial statements, and should be read in
conjunction with the Group's 2019 Annual Report and Accounts.
There have been no material changes to the Group's risk appetite
since publication of the Group's 2019 Annual Report and
Accounts.
The Group does not trade outside of the UK and Gibraltar and
does not rely on non-UK resident EU employees. As such, the direct
impact of the end of the transition period in which the UK is still
trading with the EU as if it was still part of the EU in December
2020 is expected to be limited with the Group continuing to monitor
the progress of the negotiations. Depending on the subsequent terms
of the relationship between the EU and the UK, the Group may be
impacted indirectly through, for example, the wider economic
impacts of property valuations, UK unemployment and interest rate
movements.
Further economic uncertainty relates to the economic effect of
Covid-19 and the related lockdown in the first half of 2020 as well
as the ongoing impact on business and consumers. As described in
note 4 above, management have carefully assessed the impact of the
pandemic on all aspects of the Group, including on judgements and
estimates relevant to the financial statements.
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
6. Taxation
The effective tax rate is 19% (2019:19.0%). The tax charge has
been calculated to approximate to the expected full year tax rate
and includes an adjustment to deferred tax assets, and to current
tax for changes in the enacted corporation tax rate.
7. Related Party Transactions
During the 6 months to 30 June 2020 the Society purchased
GBP2.9m of Business Support Services and Managed IT and Property
Services from Newcastle Strategic Solutions Limited (NSSL) a wholly
owned subsidiary. (In the same period in 2019, Business Support
Services of GBP2.3m were procured from NSSL, whereas Managed IT and
Property Services of GBP2.4m were sourced from Newcastle Systems
Management Limited (NSML), a subsidiary that was merged into NSSL
in the second half of 2019.) The Society received GBP3.0m from NSSL
in the 6 months to 30 June 2020 for the provision of Financial and
Administrative Services. (This compares to GBP4.7m from NSSL and
GBP0.5m from NSML for the same period in 2019.) For further detail
see Note 30 of the Group's 2019 Annual Report and Accounts.
8. Revenue from contracts with customers
In accordance with IFRS 8, 'Operating Segments', the Group
reports the following segments; Member business and Solutions
business. When the Group prepares financial information for
management, it disaggregates revenue by segment and service
type.
The table below illustrates the disaggregation of revenue in
scope of IFRS 15, 'Revenue from Contracts with Customers'. Revenue
from customers with contracts generated by the Solutions business
and the Member business is included in "Other income and charges"
within the Segment information note.
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 Jun 20 30 Jun 19 31 Dec 19
GBPm GBPm GBPm
Revenue from contracts with customers
Solutions business:
Savings management services 16.1 13.1 27.5
Savings management project and change
services 0.6 0.5 0.9
IT services 0.3 0.3 0.6
Member business:
Regulated advice services 2.5 2.1 4.5
Third party services 0.3 0.4 0.7
Total revenue from contracts with
customers 19.8 16.4 34.2
---------- ---------- ----------
9. Segment information
The chief operating decision maker has been identified as the
Board of Directors. The Board reviews the Group's internal
reporting in order to assess performance and allocate resources.
Management has determined the operating segments based on these
reports. Following the management approach of IFRS 8, operating
segments are reported in accordance with the internal reporting
provided to the Board of Directors. The operating segments used by
the Group meet the definition of a reportable segment under IFRS
8.
The 'Member business' segment provides mortgage, savings,
investment and insurance products to Members and customers. The
'Solutions business' segment (also referred to as Newcastle
Strategic Solutions Limited (NSSL)) provides business to business
services through people, processes and technology. The Board
assesses performance based on profit before tax after the
allocation of all central costs. Operating profit before
impairments and provisions is also assessed as this provides
information on underlying business performance.
Income and directly attributable costs are allocated to each
segment and support costs are apportioned, based on direct salary
costs and detailed allocations by budget holders.
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
6 months to 30 June 2020 Member Solutions
Business Business Total
GBPm GBPm GBPm
Net interest income 19.1 - 19.1
Other income and charges 1.7 17.0 18.7
Administrative expenses (16.1) (12.1) (28.2)
Depreciation (1.4) (0.9) (2.3)
--------- ---------- --------
Operating profit before impairments
and provisions 3.3 4.0 7.3
Impairment charges on loans and advances
to customers (5.1) - (5.1)
Provisions for liabilities and charges - - -
(Loss) / Profit before taxation (1.8) 4.0 2.2
Taxation expense (0.4)
--------
Profit after taxation for the financial
period 1.8
--------
6 months to 30 June 2019 Member Solutions
Business Business Total
GBPm GBPm GBPm
Net interest income 18.6 - 18.6
Other income and charges 2.4 15.1 17.5
Administrative expenses (14.7) (10.9) (25.6)
Depreciation (1.3) (0.7) (2.0)
--------- ---------- --------
Operating profit before impairments
and provisions 5.0 3.5 8.5
Impairment charges on loans and advances
to customers (0.3) - (0.3)
Provisions for liabilities and charges - - -
Profit before taxation 4.7 3.5 8.2
Taxation expense (1.6)
--------
Profit after taxation for the financial
period 6.6
--------
Year to 31 December 2019 Member Solutions
Business Business Total
GBPm GBPm GBPm
Net interest income 38.6 - 38.6
Other income and charges 5.8 30.5 36.3
Administrative expenses (31.4) (23.0) (54.4)
Depreciation (2.8) (1.4) (4.2)
--------- ---------- --------
Operating profit before impairments
and provisions 10.2 6.1 16.3
Impairment charges on loans and advances
to customers (1.5) - (1.5)
Provisions for liabilities and charges (0.1) - (0.1)
Profit before taxation 8.6 6.1 14.7
Taxation expense (3.3)
--------
Profit after taxation for the financial
period 11.4
--------
Total Assets 4,394.3 17.8 4,412.1
--------- ---------- --------
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
10. Capitalisation of Development Costs
Accounting Policy
Research expenditure is written-off to the income statement in
the period in which it is incurred. Development expenditure is also
written-off to the income statement, except where the Directors are
satisfied as to the technical, commercial and financial viability
of individual projects. Where all capitalisation criteria specified
in IAS 38 Intangible Assets are met, the expenditure directly
attributable to a project is capitalised and amortised over the
period in which the Society expects the project's economic
benefits.
Internally generated intangible assets with finite useful lives
are carried at cost less accumulated amortisation and any
impairment losses. Amortisation is recognised on a straight line
basis over their estimated useful lives. The estimated useful life
and amortisation method are reviewed at the end of each reporting
period, with the effect of any changes in estimate being accounted
for on a prospective basis. The useful economic life of internally
generated intangible assets is as follows:
-- Development costs: 4 years
At each balance sheet date, the Society reviews the carrying
value of its intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss. If
any such indication exists, the recoverable value of the asset is
estimated to determine the extent of the impairment loss (if any).
If the recoverable value of an asset is estimated to be less than
the current carrying value, the carrying value of the asset is
reduced to its recoverable value. Where an impairment loss
subsequently reverses, the carrying value of the asset is increased
to the revised estimate of its recoverable value.
Capitalised cost as at 30th June 2020
As at the 30th June 2020 the Group has capitalised the following
costs relating to internally generated intangible assets:
Unaudited Unaudited Audited
30 Jun 20 30 Jun 19 31 Dec 19
GBPm GBPm GBPm
Capitalised internal development 1.2 - -
costs
All projects remain ongoing and no amortisation will be charged
until completion.
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
11. Fair value measurement
The following table summarises the fair value measurement basis
used for assets and liabilities held on the Balance Sheet at fair
value at 30 June 2020.
Level Unaudited Unaudited Audited
30 Jun 30 Jun 31 Dec 19
20 19
GBPm GBPm GBPm
Financial assets
Debt securities - Fair value
through other Comprehensive income 1 372.1 316.5 416.3
Derivative financial instruments 1 0.2 1.7 0.1
Equity investments 1 0.2 0.3 0.3
Fair value adjustments for hedged
risk on underlying instruments 2 228.6 192.1 186.6
Equity investments 3 0.3 - 0.1
Financial liabilities
Derivative financial instruments 1 228.4 192.9 185.9
Fair value adjustments for hedged
risk on underlying instruments 2 - 0.1 -
Level 1: Quoted prices (unadjusted) in active markets for
identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1
that are observable for the asset or liability either directly
(i.e. as price) or indirectly (i.e. derived from prices).
Level 3: Inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
These definitions have been taken from the March 2009 amendment
to IFRS 13 'Improving Disclosures: Financial Instruments'.
There were no transfers between levels in the period.
12. Credit risk
Loans and advances to customers consist of the following
balances:
Product 30 Jun 2020 30 Jun 2019 31 Dec 2019
GBPm GBPm GBPm
Prime residential 2,504.0 2,048.1 2,346.6
Buy to let 315.8 242.4 295.5
Legacy buy to let 23.5 25.9 23.4
Commercial 28.9 38.4 30.0
Housing association 384.9 421.0 396.6
Serviced apartments 18.1 18.6 18.2
Policy loans 2.2 3.0 2.6
Equity release mortgages 185.4 195.0 187.2
Provisions (10.1) (12.4) (5.0)
------------ ------------ ------------
Total 3,452.7 2,980.0 3,295.1
------------ ------------ ------------
Loans and advances to customers are accounted for under IFRS 9:
Financial Instruments, with the exception of the equity release
portfolio which is accounted for under IFRS 4: Insurance
Contracts.
This note provides an overview of changes in credit risk since
December 2019, primarily due to the economic impact of
Covid-19.
Residential and retail Buy To Let portfolios
Under IFRS 9, scenario analysis is used to assess and provide
for expected credit losses. Please see the Group's 2019 Annual
Report and Accounts for details of the Society's methodology of
this assessment.
A number of changes have been made to enhance the methodology of
calculating expected credit losses for the active mortgage books
and to accommodate the economic impact of Covid-19.
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
Model enhancements
The Society's IFRS 9 model applies a flat forced sale discount,
but actual discounts vary. Using historic data, Monte-Carlo
Simulation was used to estimate the impact of this model limitation
on calculated expected credit losses. As a result, the provision
was increased by 13% in a post model adjustment.
Response to changes in the economic situation due to
Covid-19
The full economic impact of Covid-19 and the shape of its
recovery are still unknown and difficult to project, resulting in
significant uncertainty around future house price inflation,
unemployment and other factors used to determine expected credit
losses.
As a consequence of this uncertainly, the Society has refrained
from developing new economic scenarios for the interim accounts,
changing the weightings of the existing scenarios instead to
reflect the more negative economic outlook. During the second half
of 2020 and in advance of the 2020 annual accounts, once more
reliable estimates of the pandemic's economic impact are available,
a review of current scenarios will be undertaken.
The Society's IFRS 9 model is most sensitive to assumed house
price growth and unemployment, which are summarised below. Note
that, due to the time it takes for properties to be repossessed,
the model is not very sensitive to the economic parameters assumed
for the first two years.
Scenario Economic measure 2020 2021 2022 2023 2024
---------------- -------------------------- -------- -------- -------- ----- ------
Upside Unemployment rate, % 3.8 3.6 3.4 3.3 3.3
House price growth, % pa 2.6 3.5 3.5 3.5 3.5
Base Unemployment rate, % 4.0 3.8 3.6 3.5 3.5
House price growth, % pa 2.3 3.0 3.0 3.0 3.0
Downside Unemployment rate, % 4.6 5.9 6.5 6.5 6.5
House price growth, % pa (4.2) (9.6) (3.5) 3.0 3.0
Severe downside Unemployment rate, % 7.7 9.8 10.8 9.5 8.3
House price growth, % pa (15.0) (23.5) (11.2) 2.6 13.9
The risk weightings applied are:
30 Jun 2020 31 Dec 2019 30 Jun 2019
---------------------------------------------------------------------------- ------------ ------------ ------------
Upside scenario: a positively stressed variant to the base scenario 0% 10% 10%
---------------------------------------------------------------------------- ------------ ------------ ------------
Base scenario: calculated with reference to the Bank of England's quarterly
forecasts, and
in line with budgets 35% 60% 80%
---------------------------------------------------------------------------- ------------ ------------ ------------
Downside scenario: a negatively stressed variant to the base scenario 60% 29% 10%
---------------------------------------------------------------------------- ------------ ------------ ------------
Severe downside scenario: an acute once in one hundred year stress 5% 1% 0%
---------------------------------------------------------------------------- ------------ ------------ ------------
Treatment of Covid-19 related payment holidays
As a direct response to the lockdown imposed in March 2020,
customers facing a reduction in income due to the economic effects
of the pandemic were granted a 3 month mortgage payment holiday,
which they can apply to extend to up to 6 months.
Whilst it is not expected that long term credit risk has
increased for all customers who have been granted Covid-19 related
payment holidays, a portion of such customers is likely to face
difficulties continuing their mortgage payments after the end of
the payment holiday. The increase in credit risk was accounted for
in a post model adjustment. Factors such as account history,
employment type and industry, bureau data and other internally
available information were used to determine the stage 1 mortgages
on payment holidays most at risk of default following the payment
holiday. For these accounts, provisions were raised to the average
stage 2 coverage. The total impact of the post model overlay on the
provision was GBP554k on a balance of GBP90m.
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
IFRS 9 staging and loss provisioning
The impact of IFRS 9's staging and loss provisioning to the
Society's closing 30 June 2020 balance sheet was as follows
(payment holidays are not considered to be arrears):
IFRS 9 Gross Exposure
Stage 1 Stage 2 Stage 3 Total
Of which Months in Arrears Of which Months in Arrears Of which Months in Arrears
< 1 1-3 > 3 < 1 1-3 > 3 < 1 1-3 > 3
GBPm
Prime
residential 2,155.1 - - 300.5 29.3 - 7.2 1.4 10.5 2,504.0
Buy to Let 289.6 - - 23.3 2.8 - - - 0.1 315.8
Total 2,444.7 - - 323.8 32.1 - 7.2 1.4 10.6 2,819.8
--------------------- ----------------------------- ----------------------------- ---------------------- ------------------------ ----------------------------- ----------------------------- ----------------------------- --------------------------- --------------------
Expected Credit Losses
Stage 1 Stage 2 Stage 3 Total
Of which Months in Arrears Of which Months in Arrears Of which Months in Arrears
< 1 1-3 > 3 < 1 1-3 > 3 < 1 1-3 > 3
GBP000
Prime
residential 199 - - 1,712 181 - 528 21 580 3,221
Buy to Let 20 - - 100 27 - - - - 147
Total 219 - - 1,812 208 - 528 21 580 3,368
--------------------- ----------------------------- ----------------------------- ---------------------- ------------------------ ----------------------------- ----------------------------- ----------------------------- --------------------------- --------------------
Sensitivity
The 30 June 2020 provisions are sensitive to the likelihood
factor applied to the different scenarios. The analysis below
demonstrates the impact of changes to the scenario weightings. The
analysis also includes the post model overlays discussed above,
which had not been included in previous years.
Upside Base Downside Severe downside Provision
GBPm
--------------------------------- ------- ----- --------- ---------------- ----------
December 2019 likelihood factor 10% 60% 29% 1% 2,148
Sensitivity 1 2.5% 50% 45% 2.5% 2,675
June 2020 likelihood factor 0% 35% 60% 5% 3,368
Sensitivity 2 0% 0% 100% 0% 3,859
Commercial, Legacy Buy to Let and other legacy portfolios
Commercial and Legacy Buy to Let exposures are assessed
individually for indications of impairment, the probability of
default being estimated based on account history and knowledge of
the customer and property, as well as bureau data and the impact
the pandemic is likely to have on the tenants' sector. Loss given
default is estimated based on pre-Covid-19 vacant property values
after a sector specific hair-cut and taking into account sales and
other costs.
The resulting balances and corresponding provisions are as
follows:
Product 30 Jun 2020 30 Jun 2019 31 Dec 2019
GBPm GBPm GBPm
Legacy buy to let 23.5 25.9 23.4
Commercial 28.9 38.4 30.0
Provisions (4.3) (9.5) (1.7)
------------ ------------ ------------
Total 48.1 54.8 51.7
------------ ------------ ------------
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
An increase of the haircut to 50% of the pre-Covid-19 valuation
for sectors affected by Covid-19 would result in additional
provisions of GBP827k. A 10% decrease of the haircut for the same
sectors would result in a reduction of the provision by
GBP376k.
Other legacy portfolios
No losses are expected on exposures to housing associations,
loans secured on serviced apartments and policy loans, and
therefore no provisions are held against these.
Equity release mortgages
The exposure and corresponding insurance liability relating to
the equity release mortgage portfolio are as follows:
30 Jun 2020 30 Jun 2019 31 Dec 2019
GBPm GBPm GBPm
Gross mortgage balances 185.4 195.0 187.2
Insurance liability (2.4) (1.4) (1.5)
------------ ------------ ------------
Net position 183.0 193.6 185.7
------------ ------------ ------------
Since December 2019, there have been no changes to the
methodology of calculating insurance liabilities arising from the
equity release mortgage book. The valuation model has, however,
been updated to reduce the long term house price growth rate (HPI)
assumption to 2%. Whilst house price growth of 2% may not be
expected in the short term, the valuation is most sensitive to the
long term growth rate. As shown in the sensitivity analysis below,
an initial shock to house prices, followed by a period of no growth
before house prices start to grow again would result in a very
similar provision.
Scenario Description Insurance liability
GBP000
------------------------------------------------------- --------------------
The actual provision is based on perpetual HPI
growth of 2%, starting in December 2019 2,380
Assuming an initial shock to HPI of 4.2%, followed
by a 5 year period of no growth, after which HPI
resumes to a growth rate of 5% (just below the
average growth rate between 2000 and 2019) results
in significantly reduced provisions required 1,365
Assuming a significant shock to HPI of 10% followed
by a 4 year period of no growth, after which HPI
increases by 4% every year, yields a provision
very similar to the provision booked 2,259
Assuming a significant shock to HPI of 10% followed
by a year period of no growth, after which HPI
resumes at a rate of 3%, which is significantly
below long term average, would result in a provision
higher than actual 3,811
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
Statement of Directors' responsibilities
The Directors confirm that this condensed consolidated
half-yearly financial information has been prepared in accordance
with IAS 34 as adopted by the European Union, and that the
half-yearly management report herein includes a true and fair
review of the information required by the Disclosure and
Transparency Rules (DTR 4.2.4, DTR 4.2.7 and DTR 4.2.8).
The Society's Home Member State is the United Kingdom.
The Directors of Newcastle Building Society are listed in the
Annual Report for 2019, subject to the following changes: Stuart
Lynn joined the Board on 22 April 2020. There were no other changes
to the Board in the period.
On behalf of the Board
Andrew Haigh
Chief Executive
28(th) July 2020
NEWCASTLE BUILDING SOCIETY GROUP
HALF-YEARLY FINANCIAL INFORMATION
Independent review report to the Directors of Newcastle Building
Society
Report on the half yearly financial information
Our conclusion
We have reviewed Newcastle Building Society's half yearly
financial information (the "interim financial statements") for the
6 month period ended 30 June 2020. Based on our review, nothing has
come to our attention that causes us to believe that the interim
financial statements are not prepared, in all material respects, in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union.
What we have reviewed
The interim financial statements comprise:
-- the summary consolidated balance sheet as at 30 June 2020;
-- the summary consolidated income statement and summary
consolidated statement of comprehensive income for the period then
ended;
-- the summary consolidated cash flow statement for the period then ended;
-- the summary consolidated statement of movement in members'
interests for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the announcement of
half-year results for the six months ended 30 June 2020 have been
prepared in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European
Union.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The announcement of half-year results for the six months ended
30 June 2020, including the interim financial statements, is the
responsibility of, and has been approved by, the directors.
Our responsibility is to express a conclusion on the interim
financial statements based on our review. This report, including
the conclusion, has been prepared for and only for the directors of
the Society as a body, for management purposes, in connection with
our review of your half-yearly financial information and for no
other purpose. Our report may not be made available to any other
party without our prior written consent. We do not, in giving this
conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent
in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the announcement
of half-year results for the six months ended 30 June 2020 and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the interim
financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
Newcastle upon Tyne
28(th) July 2020
, 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.
IR GLGDRDGDDGGC
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July 29, 2020 02:07 ET (06:07 GMT)
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