annual results presentation · 2016 . continued investment . 101 45 25 23 24 1,796 regulation other...

For the year ended 4 April 2016 Annual Results Presentation

Nationwide Annual Results 2016 2

2015/16 PERFORMANCE REVIEW

FINANCIAL REVIEW

AGENDA

Nationwide Annual Results 2016

PURPOSE OF A BUILDING SOCIETY

3

Social purpose

Service and innovation

Long term value

Financial resilience


HELPING MORE MEMBERS BUY THEIR OWN HOMES

4

Strong mortgage lending – gross market share 13.7%

36% market share of net advances over past 4 years

57,200 loans to first time buyers – 1 in 6 of all FTB mortgages

#2 BTL lender – criteria changes to maintain quality

Market Share of Stock

£27.1bn

+20%

2016

£32.6bn

2015 Gross Mortgage Lending

2016

12.6% 12.1%

2015


REWARDING LOYAL SAVERS

5

Strong growth in member deposits

Member value – Loyalty Bond – Flexclusive Regular Saver

Transparent approach – rates typically better than high

street peer group

2015

£1.9bn

2016

+232%

£6.3bn

Growth in Member Deposits

10.2%10.2%

2016 2015 Market Share of Stock


+12%

2016

525,000

2015

469,000

Current Account Sales

7.1%6.8%

2016 2015 Market Share of Stock

525,000 new accounts

12.5% share of switcher service

‘Recommend a friend’ extremely popular

– >54,000 new accounts through this promotion

Innovation

MORE PEOPLE CHOOSING A NATIONWIDE CURRENT ACCOUNT


1 © GfK 2016, Financial Research Survey (FRS) measure, as defined in the glossary (slide 31)

Number one for service satisfaction amongst our high street peer group1

Consistently strong

performance

Complaints only 2% of total industry

LEADING SERVICE SATISFACTION


BUILDING A FINANCIALLY STRONG SOCIETY

8

Underlying profit

£1,337m

£1,227m

+9%

2016 2015

Strong performance - within optimal range

Investment in the long term

Financial resilience

Statutory profit

£1,279m£1,044m

+23%

2016 2015

Nationwide Annual Results 2016 9 * Annual employee ViewPoint survey, independently conducted on Nationwide’s behalf by HayGroup

77%75%75%

68%70%

80%79%77%

68%69%

2013 2012 2016 2015 2014 2013 2012 2016 2015 2014

Engagement* Enablement*

Highly engaged and enabled

Sunday Times: 3rd best big company to work for

Growth of 500 FTE, of which 132 were on an entry talent scheme

DELIVERED THROUGH OUR PEOPLE

2015/16 Financial Review


STRONG PROFIT PERFORMANCE

INCOME1

COSTS

IMPAIRMENTS

OTHER ITEMS

STATUTORY PROFIT

£3,333m

£1,796m

£73m

£58m

£1,279m

+ 5%

+ 10%

- 71%

UNDERLYING PROFIT £1,337m +9%

-68%

+ 23%

OTHER PROVISIONS £127m 115%

1 Comparatives have been restated for the reclassification of foreign currency retranslation amounts from net interest income to gains/(losses) from derivatives and hedge accounting. 11

Other items (£m) 4 Apr 15 4 Apr 16

Bank levy (28) (41)

Transformation costs (52) (10)

FSCS costs (83) (46)

Gains/(losses) from derivatives and hedge accounting (20) 39

Total (183) (58)


LOW RISK BALANCE SHEET

Asset growth of 7% driven by growth in residential mortgage lending and prudent liquidity position

12

1 Treasury liquidity and investment portfolio (on balance sheet) 2 Shares (member deposits) and amounts due to customers on consolidated balance sheet 3 Total members’ interests and equity including subscribed capital (PIBS)

Key Ratios 4 Apr 15 4 Apr 16

Liquidity coverage ratio 119.3% 142.6%

Wholesale funding ratio 23.3% 24.8%

CET1 ratio 19.8% 23.2%

Leverage ratio 4.1% 4.2%

RESIDENTIAL MORTGAGES

LIQUIDITY1

OTHER LENDING

RETAIL DEPOSITS2

WHOLESALE FUNDING

£162.1bn

£23.1bn

£16.7bn

£208.9bn

£144.9bn

£45.8bn

+ 6%

+ 23%

-6%

+7%

+5%

+ 17%

OTHER ASSETS £7.0bn +13%

OTHER LIABILITIES £6.9bn -12 %

CAPITAL & RESERVES3 £11.3bn + 12%

£208.9bn + 7%


MARGIN EXPECTED TO MODERATE

3,0862,872

2,4311,981

1,602

1.52%

2015

1.47%

2014

1.27%

2013

1.02%

2012

0.82%

2016

13

Net Interest Income

Net Interest Margin

* Comparatives have been restated for the reclassification of foreign currency retranslation amounts from net interest income to gains/losses from derivatives and hedge accounting.

Net interest margin (NIM) Evolution*

(3bps)

(6bps)

8bps (10bps)

16bps

2015

147bps

2016

152bps

Consumer Finance &

Commercial

Group Mortgages

BMR run off Treasury, Other & one offs

Retail Savings

Movement in NIM*

Funding costs down

Lending margins down


CONTINUED INVESTMENT

101

45

2523 24 1,796

Other Regulation & Control

Business Volumes

Inflationary & Contractual

Impact of Strategic

Investment

2015

1,626

2016

Underlying Costs (£m)

14

COST INCOME RATIO 51.4% 53.9%


REDUCED IMPAIRMENTS

13995

147

247

493

30952

42

52

11460

-34

14

2016

383

251

2014 2015

-71%

591 3

2013

428

73

2012

-7

Retail Lending Commercial Lending Treasury & Other

Impairments (£m)

Retail Lending £m Residential Consumer

banking

2015 2016 2015 2016

Charge excl one-offs 14 (9) 89 67

Update to accounting estimates / model assumptions

44 27 - 29

Reported charge 58 18 89 96

15

Retail Lending Residential Unsecured

lending

2015 2016 2015 2016

Impaired loans (£m) 895 778 72 63

3 month+ arrears 0.49% 0.45%

CML industry average 1.30% 1.04%


CUSTOMER REDRESS

103

5320

9520

69 39

32

73

2015

127

2016 2013

59

2014

69

2012

103

2011

16

2010

9

Other PPI

Customer Redress (£m)

PPI (including Plevin) £m 2016

Additional provision in respect of customer redress payments 21

Associated cost of claims administration due to timebar, FCA communications campaign* 74

Reported charge 95

16

Total cumulative charge of £296m for PPI (including Plevin) to date

* Of which £44m relates to change in basis of accounting for refuted claims


Movements in CET1 Ratio

CRD IV CET1 AND LEVERAGE RATIO

1.3%

2.7%

Other

(0.6%)

RWAs Profit Mar-16

23.2%

Mar 15

19.8%

0.2%0.5%

Other Mar-16

4.2%

Exposure

(0.2%)

Profit Mar 15

4.1%

17

Peer Group Leverage ratio*

4.0%4.2%4.3%4.7%5.0%5.3%

Lloyds HSBC RBS Santander UK

Nationwide Barclays

11.3%11.6%11.9%12.8%14.6%

23.2%

Barclays RBS Nationwide Santander UK

HSBC Lloyds

Peer Group CET1 ratio*

*As of March 2016

Movements in end-point CRD IV Leverage Ratio


CET1 resources are greater than minimum leverage and risk based requirements

We maintain a prescribed PRA Capital Buffer and an internal management buffer above minimum regulatory capital requirements

The expected MDA threshold is below current minimum leverage ratio requirements and is expected to remain so

Buffer requirements reflect anticipated steady state CRD IV buffer implementation of 2.5% capital conservation buffer, 1% systemic risk buffer and 1% countercyclical capital buffer.

Capital Requirements

£0bn

£5bn

£10bn

£15bn

MREL

6% of leverage exposure

Buffers

CET1 Requirements

Buffers

End Point Capital Resources

CET1

AT1

Tier 2

Pillar 1

Pillar 2A

Buffers

Leverage Requirement

CET1

AT1

CAPITAL STRENGTH

18

% of RWA

18.6%

12.6%

26.1% 23.2%

13.9%

4.5% 8.1%

30.9%


SUCCESSFUL ISSUANCE ACROSS CORE MARKETS

1 Wholesale funding portfolio excluding FLS. ‘Short Term’ includes certificates of deposit, commercial paper, deposits, business savings and other deposits. ‘Other’ includes £1.9bn of PEB balances 2 Sterling equivalent 3 Including FLS drawings

19

Term wholesale funding issuance of £9.5bn with a weighted average life of 7 years Weighted average life of the wholesale funding portfolio is 50 months3

60.8% of wholesale funding has greater than one year to maturity3

NSFR of 127.9% (2015: 121.9%)

Wholesale funding portfolio (£bn)1 Long term wholesale funding issuance (£bn)2

10

8

6

4

2

0 2015 2016

13.8

3.2 14.2

9.9 4.7

MTNs

Short Term

Securitisation

Covered Bond

Other

Senior Unsecured Securitisation Covered Bond


ROBUST LIQUIDITY POSITION

1 Government bonds include supranational bonds and off-balance sheet liquidity (FLS treasury bills) 20

Sources of liquidity (£bn)

LCR of 142.6% (2015: 119.3%)

Excludes non liquidity assets of £3.6bn relating to loans and advances to banks

2.62.3

15.3

4.3

1.32.5

15.3

8.8

2016 £27.9bn

2015 £24.5bn

Cash and reserves at central banks

Government bonds1 Other Central Bank eligible assets

Other securities


OUTLOOK

22

Short term uncertainty Long term strategic focus Great confidence in our future


Appendices

24


SUMMARY

£m 2015 2016 Total income 3,163 3,333 +5%

Administrative expenses (1,626) (1,796) +10%

Pre provision underlying profit 1,537 1,537 Impairment losses (251) (73) (71%)

Provisions for liabilities and charges (59) (127)

Underlying profit before tax 1,227 1,337 +9%

Bank levy (28) (41)

Transformation costs (52) (10)

FSCS costs (83) (46)

(Losses)/gains from derivatives and hedge accounting (20) 39

Statutory profit before tax 1,044 1,279 +23%

25


LIQUIDITY: OTHER TREASURY ASSETS

26

2016 £bn Total AAA AA A Other

Loans & advances to banks 3.6 0.9 0.7 1.1 0.9

Asset-backed securities 1.0 0.5 0.1 0.3 0.1

Other 0.3 - 0.1 0.2 -

Other portfolio total 4.9 1.4 0.9 1.6 1.0

% credit rating 100% 29% 18% 32% 21%

Asset backed securities have reduced as a result of ongoing portfolio deleveraging and natural paydown. This includes a reduction in out of policy assets of £200m


SUMMARY BALANCE SHEET: AS AT 4 APRIL 2016

Assets

£208.9bn

Prime Mortgages £129.9bn

Specialist Lending £32.1bn

Consumer Banking £3.6bn Commercial £11.8bn

Primary Liquidity £15.6bn Other Liquidity £7.5bn

Other Assets £8.4bn

Retail Savings (inc customer deposits)

£144.9bn

Wholesale Funding £45.8bn

Other Liabilities £5.1bn Subordinated Liabilities £1.8bn Capital and PIBS £11.3bn

Liabilities

£208.9bn

27


GLOSSARY

31

Definitions used are in line with the glossary in the Annual Report and Accounts 2016. In addition, further items included in the results presentation are defined below.

Customer satisfaction measure Definition Number one for service satisfaction

Slide 7

© GfK 2016, Financial Research Survey (FRS), 3 months ending 31 March 2016, proportion of extremely/very satisfied customers minus proportion of extremely/very/fairly dissatisfied customers summed across current account, mortgage and savings, high street peer group defined as providers with main current account market share >6% (Barclays, Halifax, HSBC, Lloyds Bank (inc C&G), NatWest and Santander). Prior to April 2015, Lloyds Bank and TSB combined as Lloyds TSB Group (including Lloyds Bank, TSB and C&G).


CONTACTS

32

Alex Wall Head of Investor Relations, Rating Agencies & Capital [email protected] 0845 602 9053 Sarah Gardiner Head of Investor Relations [email protected] 0845 602 9053 Nationwide Treasury Mailbox [email protected]


DISCLAIMER

33

This presentation has been prepared by and is the property of Nationwide Building Society (“Nationwide”). By attending this presentation or accepting this document you represent, warrant and agree that (i) you will not reproduce or transmit the contents (in whole or in part) of this presentation by any means; (ii) you have understood and agreed to the terms set out herein; (iii) you consent to delivery of this presentation by electronic transmission, if applicable; (iv) you are not a US Person, as defined below; (v) if you are in the United Kingdom, then you are a person who is (a) an investment professional within the meaning of Article 19 (5)of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (“FPO”) or (b) a high net worth entity falling with Article 49(2)(a) to (d) of the FPO; and (vi) if you are within the European Economic Area (“EEA”), then you are a person who is a “qualified investor” within the meaning of Article 2(1)(e) of EU Directive 2003/71/EC, as amended (the “Prospectus Directive”). This presentation shall not constitute or form part of any offer to sell or the solicitation of an offer to buy or subscribe for any securities. Any securities subsequently issued by Nationwide will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state or any other jurisdiction of the United States. Any securities subsequently issued by Nationwide may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. NOT FOR DISTRIBUTION TO ANY US PERSON (AS SUCH TERM IS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) OR TO ANY PERSON OR ADDRESS IN THE UNITED STATES. In the United Kingdom, this communication is directed only at persons who (i) have professional experience in matters relating to investments falling within Article 19 of the FPO, as amended; or (ii) are Professional Clients (as defined by FCA Rules), all such persons in (i) and (ii) together being referred to as “relevant persons”.

This communication must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this communication relates is available only to relevant persons and will be engaged in only with relevant persons. In the EEA, this communication is only addressed to and directed at persons who are “qualified investors” within the meaning of Article 2(1)(e) of the Prospectus Directive. NEITHER THIS PRESENTATION NOR ANY COPY HEREOF MAY BE DISTRIBUTED IN ANY JURISDICTIONS WHERE ITS DISTRIBUTION MAY BE RESTRICTED BY LAW. PERSONS WHO RECEIVE THIS PRESENTATION SHOULD MAKE THEMSELVES AWARE OF AND ADHERE TO ANY SUCH RESTRICTIONS. Any failure to comply with these restrictions may constitute a violation of the laws of any such other jurisdictions. In particular, neither this presentation nor any copy of it nor the information contained in it is for distribution directly or indirectly in or into the United States, Canada, Australia or Japan. This presentation does not constitute an offering document. The information presented herein is an advertisement and does not comprise a prospectus for the purposes of the Prospectus Directive and/or Part VI of the Financial Services and Markets Act 2000. The information herein has not been reviewed or approved by any rating agency, government entity, regulatory body or listing authority and does not constitute listing particulars in compliance with the regulations or rules of any stock exchange. Any future potential transaction is qualified in its entirety by the information in the final form documentation relating to any such proposed transaction. Investors should not subscribe for any securities except on the basis of the information contained in the final form documentation relating to any such proposed issue of securities, in particular, each reader is directed to any section headed “Risk Factors” in any such documentation. This presentation is published solely for informational purposes and should not be treated as giving investment advice.

It has no regard to the specific investment objectives, financial situation or particular needs of any recipient. No representation or warranty, express or implied, is or will be made in relation to, and no responsibility is or will be accepted by Nationwide and its affiliates, agents, directors, partners and employees as to the accuracy or completeness of the information contained in this presentation and nothing in this presentation shall be deemed to constitute such a representation or warranty or to constitute a recommendation to any person to acquire any securities. Nationwide and its affiliates, agents, directors, partners and employees accept no liability whatsoever for any loss or damage howsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith. Although the statements of fact in this presentation have been obtained from and are based upon sources that are believed to be reliable, their accuracy is not guaranteed by Nationwide and any such information may be incomplete or condensed. All opinions and estimates included in this presentation are subject to change without notice. Nationwide is under no obligation to update or keep current the information contained herein. This presentation may contain statements that constitute forward-looking statements. Such forward-looking statements can be identified by the use of forward-looking terminology, such as the words “believes”, “expects”, “may”, “intends”, “should” or “anticipates”, or the negative or other variations of those terms. Such statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results and performance of securities, Nationwide or the UK residential mortgage industry to differ materially from any future results or performance expressed or implied in the forward-looking statements. These risks, uncertainties and other factors include, among others: general economic and business conditions in the United Kingdom; currency exchange and interest rate fluctuations; government, statutory, regulatory or administrative rules or initiatives affecting

Nationwide; changes in business strategy, lending practices or customer relationships; and other factors that may be referred to in the document. While such statements reflect projections prepared in good faith based upon methods and data that are believed to be reasonable and accurate as of the date thereof, Nationwide undertakes no obligation to revise these forward-looking statements to reflect subsequent events or circumstances. Recipients of this presentation should not place undue reliance on forward-looking statements and are advised to make their own independent analysis and determination with respect to the forecast periods, which reflect Nationwide’s view only as of the date hereof. Losses to investments may occur due to a variety of factors. Before purchasing any securities described in this presentation you should take steps to ensure that you understand and have made an independent assessment of the suitability and appropriateness thereof, and the nature and extent of your exposure to risk of loss in light of your own objectives, financial and operational resources and other relevant circumstances. You should take such independent investigations and such professional advice as you consider necessary or appropriate for such purpose. Furthermore, you should consult with your own legal, regulatory, tax, business, investment, financial and accounting advisers to the extent that you deem it necessary, and make your own investment, hedging and trading decisions (including decisions regarding the suitability of any transaction) based upon your own judgement and advice from such advisers as you deem necessary and not upon any view expressed in this presentation. Certain data in this presentation has been rounded. As a result of such rounding, the totals of data presented in this presentation may vary slightly from the arithmetic totals of such data. .

annual results presentation · 2016 . continued investment . 101 45 25 23 24 1,796 regulation other...

Documents