Annual Results 2016

In a year of “unexpected twists and turns”, Nottingham Building Society has strengthened its franchise and grown the society, delivering record mortgage lending performance, industry leading service levels as well as continuing to grow its branch network, welcoming 24,000 new customers and achieving record levels of branch savings balances.

Key achievements and financial highlights of 2016 include:

  • Strong retail franchise growth – total branch savings balances of £2bn, up 9% in the year and more than doubled in the last five years
  • The Society has opened seven new branch locations in 2016 and welcomed 24,000 new customers. Since 2012 it has increased the size of its branch network from 32 to 61 – almost double  
  • Achieved industry leading customer service levels with a customer Net Promoter Score of 78%; up from 74% in 2015 
  • Delivered gross mortgage lending of £798m up 24% on 2015, a record year for mortgage lending, whilst seeing mortgage redemptions fall. 
  • Increased total assets by 8.2% to £3.6billion
  • Announced Group pre-tax profit of £14.2m; down 29% in the year as the society consciously took decisions to protect savers from the full impact of the reduction in bank base rates in August
  • Arrears levels remain very low, below a quarter of the industry average (2016: 0.16% v Industry at average of 1.00%); representing 38 accounts out of a total mortgage base of over 24,000 accounts
  • Strong capital ratios with Common Equity Tier 1 at 14.7% and leverage of 4.6%
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David Marlow, Chief Executive of The Nottingham, said: “2016 has been a year of unexpected twists and turns in the UK and globally. However, despite this, we at The Nottingham have continued to focus on developing our strategy to deliver a unique brand of advice, choice, service and value ‘all-under-one-roof’, which continues to be well received by members across our heartland.

“Our responsibility is to differentiate ourselves from the big banks using our mutual ethos to deliver a proposition and service that is valued by our members and is also attractive to potential new ones. One area that truly marks us apart from the big banks is our approach to branches. As the UK continues to see large scale closures – the UK’s largest bank reducing its branch network by 25% in 2016 alone - we have continued to open new branches, adding seven new locations in the year, with great success.

“Without exception, existing members and new customers have welcomed us to new locations where in the past four years we have already built savings balances of more than £300m. However, it is not just our new locations that have proved so popular with customers, over the same five year period our total branch balances have more than doubled from £946 million at the beginning of 2012 to reach £2 billion for the first time in 2016.

“We believe that this is clear evidence that the role of branches remains important in the eyes of UK consumers and that new customers are attracted to our unique advice and service proposition. This is further underpinned by the continuing success of our whole-of-market mortgage advice offering; with the number of customers using this service increasing by a further 31% in 2016. In fact we are now helping 73% more people find the right mortgage than in 2013, the last year we advised purely on Nottingham Building Society mortgages.

 “We have worked hard in recent years to develop services and products that are relevant to, and valued by our members and customers, whether they are looking to save for the future, search the market for the most appropriate mortgage, rent, buy or sell a home, or plan and protect their families’ future. This focus along with our strong approach to marketing and community support has helped the level of awareness of The Nottingham and its strategy grow markedly. In fact during the year we have seen our brand recognition/awareness, as a result of activity in our heartland grow to 87% and our unprompted awareness at 51% places us as the most recognised building society in our heartland. This is an enormous jump from three or four years ago, where recognition was in the low to mid 20’s, placing us outside the top 10.

“In terms of mortgage lending the Society has delivered a performance in line with our plan.  We achieved gross lending of £798m, an increase of 24% on 2015 and a record for the Society in a single year. We have also processed over £1bn of applications in a year for the first time in the Society’s history. This good performance ensures that in addition to record lending in 2016, we entered 2017 with a very healthy pipeline of mortgages.

“Once again we have been very pleased with the number of mortgage customers electing to stay with us and take another product at the end of their term – our central mortgage team retained over £500m of business in the year for the first time, an increase of 16%. This excellent performance resulted in our mortgage redemptions falling by 3%.  All this meant that we exceeded £3bn of mortgage balances for the first time and have increased our assets by 8% in the year to £3.6bn.

“The most significant event of 2016, from our perspective, was the MPC’s decision to halve the bank base rate from 0.50% to 0.25% in August. Since March 2009, when base rates were taken to an all-time low of 0.50%, we have constantly strived to strike a fair and appropriate balance between the contrasting needs of our borrowers and savers. We believe that we are doing all we can for savers as reflected by the fact that our average saving rate at the end of 2016 is more than four times base rate; that over 50% of our current savings accounts pay a rate higher than base rate, with some regular savings accounts offering between eight times and twelve times base rate. Customers’ response to this approach during 2016 has been positive with our heartland based branch savings balances increasing by 10%.

 “Whilst we were expecting a reduction in profit in 2016, as trailed at the beginning of the year, the Board decided in response to the base rate cut that it was acceptable to reduce the profit made by the society further in 2016. We are therefore reporting a profit before tax of £14.2m, a reduction of 29% on 2015. However our profit after tax ratio of 0.32% per £100 assets is a strong level of profitability in historical terms and is more than sufficient to ensure that we can continue to grow, strengthen and develop the society. This is a further demonstration of delivering the member value through our mutual ownership.

“2017 will bring challenges and uncertainty, with the continuing ultra-low interest rate environment it will be essential that we focus even more strongly on how we build and reward loyal membership of The Nottingham, through the provision of our unique advice and service proposition, whilst maintaining our financial strength and strong mutual ethos.

“We have a unique business model that is becoming increasingly popular, one that seeks to build long-term relationships through the consistent delivery of advice, choice, service and value. In 2017 we expect to continue to grow the society, continue to invest in improving our offering and seek to maintain our world-class level of service. We will seek to do this whilst continuing to effectively balance the contrasting needs of our savings and mortgage customers, finding further ways to deliver value to our members.”


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