Continued growth, strong performance, the announcements of a multi-million pound investment in digital technology and a further seven new branch openings before the end of the year plus the launch of a reward scheme for members has marked the last six months of trading by the Nottingham Building Society (known as The Nottingham).
Key performance highlights include:
- Gross lending of £544m up 33% on the same period last year and mortgage book growth of 7.1%;
- Strong retail franchise – 3.9% increase in branch balances;
- Strong customer advocacy with a net promoter score of 78.4%;
- Net interest margin at 1.29%;
- Pre-tax profit of £7.6m, up 7%;
- Arrears levels remain at a historic low level;
- Strong capital ratios with Common Equity Tier 1 ratio of 14.4% and leverage ratio of 4.6%.
David Marlow, Chief Executive of The Nottingham, said: “At the beginning of the year we undertook to continue to grow the society, invest in improving our offering and service as well as look at how we could build and reward loyal membership of The Nottingham.
“At the half year point we are pleased to report good progress in all of these objectives. We have continued to grow the balance sheet and have delivered asset growth of 6.1% in the first six months of the year.
“We have achieved this whilst continuing to invest heavily in the society’s capability both for today and the future. Investment in our technology infrastructure is key to both enhancing our offering and developing our defences against the ever-increasing threat of cyber-crime.
“At The Nottingham we are well advanced in our project to house all of the society’s key systems in state-of-the-art dedicated data centres, as well as announcing a partnership with globally renowned technology and customer experience experts Salesforce. This will enable us to provide members with access to our unique advice and service proposition in a manner of their choosing; seamlessly combining phone, tablet, PC and face-to-face advice and service in our growing branch network. The scale of the investment required to achieve these important improvements highlights the society’s ambition, confidence and financial strength.
“We were also delighted to launch our member rewards programme in May. Central to our strategy is to support and reward our loyal members for doing the right thing to protect and plan for their family’s financial future, through providing our unique combination of advice and service all available under one roof.
“Our member rewards programme is designed to reward our loyal members for doing just that, through a range of unique discounts and offers. Benefits range from £500 off estate agency fees, to discounted fees for making a will, free access to whole-of-market mortgage advice against a standard advice fee of £249 and access to enhanced savings rates.
“This is very much the beginning of an ongoing programme to reward a growing membership for their loyalty to The Nottingham but also rewarding them for planning for their financial futures, something which we believe perfectly demonstrates our mutual ethos.
“As the Group focuses on the delivery of its unique strategy, it does so against a backdrop of good financial performance.
“This is highlighted by the continued growth of our balance sheet driven by gross lending of £544m, up 33% on the first six months of last year. In fact we have exceeded half a billion pounds of lending in a six month period for the first time. This combined with continued strong levels of existing customer retention has enabled us to increase our mortgage assets by 7.1% in the first half of the year.
“We have also sought to continue to build and develop our loyal savings base in branches, where despite a record low UK savings ratio in the first few months of 2017, our savings balances from our 60 branches have continued to grow, up by 3.9% over the period.
“One of our principal responsibilities is to effectively balance the conflicting needs of our savers and borrowers, whilst maintaining sufficient surplus to run the society, meet our regulatory capital requirements and continue to invest for the future. In the face of continuing reductions in mortgage market rates we feel we have achieved this balance well; attracting good levels of new mortgage lending whilst paying our savers an average rate of 1.0% (four times base rate) and delivering a margin of 1.29%, only a 0.03% point reduction from the 2016 average.
“Overall this has enabled us to deliver a surplus before tax of £7.6m – just above what we achieved in the first half of 2016. This outcome has resulted from an overall increase in our income of 3.5% compared to the first half of 2016, offset by a 9.8% increase in costs, as the society continues to invest heavily as outlined.
“The current economic and political picture remains very uncertain. Inflation remains above 2%, whilst real wages fall, personal indebtedness continues to increase and interest rates remain at ultra-low levels. This picture overlaid with the uncertainty regarding the potential outcome of Brexit means that we must remain vigilant in how we manage the Society and protect members’ interests.
“However, what is clear is that our members and new customers across our heartland want to be supported and rewarded for how they protect and plan for their family’s financial futures, by a trusted local source. We were therefore pleased to recently announce that following collaborative discussions with the Yorkshire Building Society, The Nottingham will be opening in a further seven new locations in Bourne, Spalding, Stamford, Huntingdon, Dereham, Fakenham and Thetford, following the closure of the Norwich and Peterborough Society branches in those locations before the end of the year and in doing so offer advice, choice, service and value to the residents of those towns, as well as alternative employment opportunities for staff being made redundant. The Nottingham believes that this unique announcement underscores the strength of our strategy and vibrancy of a regional building society model to offer the residents of towns across our heartland a strong, attractive alternative to the big banks that will help them plan for and protect their futures, whilst rewarding their loyalty.
“The society remains strong with a clear strategy for growing membership and a proposition which is distinct and valued. Whilst headwinds and uncertainties remain, the Board of The Nottingham has confidence in its plans to continue to grow the Society in a safe and secure way, through differentiating strongly from the big banks and continuing to support and reward our growing membership.”