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How your Society has performed in 2018/19
Your
Society
Strong today,
investing for tomorrow.
Highlights and introductions from your Chairman and CEO
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Jade, member since 2013 and
Sienna, member since 2016
How we’re
building
society,
nationwide
Who we are, what we do and what we’re investing in.
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Ian, member since 2003 and
Patty, member since 2016
Helping more
members
make more of their money
Helping our members buy their first home is just one of the reasons we were founded.
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Jay, member since 1999
Keeping our Society
and our
members'
money safe
We’re here to keep our members’ money exactly where it should be.
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Andreas, branch manager since 2005
Striving to serve our
members
better
every day
We think face-to-face service is still really important.
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Carl and Jacob, members since 2018
Creating
the right
culture
to do the best for
our members
Our employees are a big part of who we are and how we’re run.
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Elrich, IT Disaster Recovery Analyst since 2016
Supporting
communities and
making a
difference
We’re working with local communities to make sure everyone has a place fit to call home.
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Adam, Rock Trust project worker
How we’ve
performed
this year
See how we’ve been performing this year and whether we’ve hit our targets.
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Victoria, Member since 2003
All about
our finances
We’re here to offer the best long-term value possible to our members.
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Melissa, member since 2013
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A letter

from David Roberts

Your Society’s Chairman

Dear fellow member,

As a member of our building society you are also an owner, so this report is for you – to find out how we’ve done in the last year, and how the Board and management are leading the Society on your behalf.

From my perspective as your Chairman, I see a Society that is thriving. We’re attracting record numbers of members and doing more for them. Our service continues to be better than that of our peer group1.

And the strength of our finances means we can invest for the future, whilst maintaining strong capital reserves – the amount we set aside to protect ourselves and our members against unexpected events.

This makes our Society a point of stability in an uncertain world, where people appear to be more divided along political, social and economic lines than in generations. These divisions have been brought into sharp focus by Brexit.

While we cannot remove political uncertainties, we’ve worked hard to make sure our Society will be able to support members whatever the future brings. Our strong capital position and cautious approach to risk mean we can continue to deliver for our members – as we have through many turbulent times in our 135-year history – supporting more members to buy homes, save for the future and manage their finances.

Today we are also facing transformational changes in technology and financial services. The way we communicate, organise ourselves, work and play has changed hugely in the last decade. New competitors are emerging, and consumers have more choice than ever before over when, where and how they manage their money, and who they trust with it. While our Society is highly successful today, if we are to remain relevant, valued and competitive, we need to reassess how we serve our members. This is why last year we undertook a review of the Society’s plans and capabilities in light of these trends.

Our strong capital position and cautious approach to risk mean we can continue to deliver for our members

As a result, we have chosen to increase significantly the amount we are investing in technology, taking our planned five-year strategic investment to over £4 billion. The additional investment will allow us to develop new digital and branch technologies to serve the changing needs of our members, however they choose to interact with us, and to remain safe and secure.

This investment has reduced our profits in the short term, but they remain sufficiently strong. This was a deliberate decision we were able to make as a building society, where profitability is only one measure of success – alongside excellent service, long-term value, and financial strength.

The Society must be fit for the future and so must the Board. We evaluate the Board’s capabilities and performance annually, and in 2018 this took the form of an externally facilitated review. This found the Board to be operating effectively, with a strong focus on the interests of our members. The review identified some areas for us to prioritise, including preserving our culture and mutual values in a time of great change, and spending more time on strategic issues, as well as overseeing operational performance.

Our Society is financially strong and growing, and we look to the future with confidence

My fellow board members contribute a huge amount of expertise to the Society. We review regularly the balance of the Board’s skills, capabilities and independence. During the year we welcomed Albert Hitchcock, who brings a wealth of experience in technology transformation, to the Board. He has joined the Board’s IT & Resilience and Risk committees and will strengthen the Board’s oversight of the Society’s technology strategy. After eight years Mitchel Lenson will retire from the Board at our AGM in July 2019 and I would like to thank Mitchel on behalf of the Board for his valuable contribution over that time. On the management side, Tony Prestedge became Deputy Chief Executive Officer and we welcomed Patrick Eltridge to the Executive Committee as Chief Operating Officer. Our Chief Financial Officer, Mark Rennison, has discussed with the Board his intention to retire and the Board is actively considering succession planning.

Another important part of the Board’s work is to ensure we pay our colleagues fairly. We don’t reward anyone for maximising profits. We pay the vast majority of our people at or above the market average and consciously pay our most senior executives less than most of our competitors, balancing this decision with the need to attract the right people to lead the Society now, and in the future. I’d encourage you to read more about this in our Remuneration report on nationwide.co.uk

Our Board benefits hugely from hearing the views of members and colleagues. We have a valuable dialogue with members through live TalkBack events and through our online forum, Member Connect. Colleagues are given lots of opportunities to hear from and, as importantly, have open conversations with the CEO and his leadership team. For example, our ‘People’s Choice’ leaders, who are chosen by their colleagues, represent the employee voice and share insights at Board meetings twice a year. We have also given non-executive director Mai Fyfield responsibility for ensuring the views of our employees are heard by the Board. Member and colleague views have a real impact on what we do: one example among many is that member feedback prompted us to develop a business banking proposition for small businesses.

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I’ve talked a lot about change, so I’d like to close by assuring you that some things will remain the same. Our values and aspirations are constant, allowing us all to thrive together, through thick and thin. In these uncertain times, what our Society stands for has become more important, not less: bringing people together; delivering for members; doing the right thing; supporting our communities.

Our Society is financially strong and growing, and we look to the future with confidence. There is no other member-owned financial business in the UK that can match our scale and reach, and we feel a real sense of responsibility to provide a service-and values-driven alternative to the big banks.

We have the strength, experience and values, as well as the steadfast support of our members and colleagues, to continue to succeed. Thank you all for your support for our Society.

David Roberts
Chairman

1 © Ipsos MORI 2019, Financial Research Survey (FRS), 12 months ending 31 March 2019, c.60,000 adults surveyed per annum, proportion of extremely/very satisfied customers minus proportion of extremely/very/fairly dissatisfied customers summed across main current account, mortgage and savings. Peer group defined as providers with main current account market share >4% (Barclays, Halifax, HSBC, Lloyds Bank, NatWest, Santander and TSB).
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A review

from Joe Garner

Your Society’s Chief Executive

Dear fellow member,

Nationwide is a building society, which means we are owned by you, our members. We have a deep and true member focus: we are here to serve your needs today and tomorrow.

We are committed to delivering great service, long-term value and a financially secure Society, run in the best interests of our members.

We have led our peer group on service for seven years running1. We are now also comparing our service against the best in the UK, not just in financial services, tracking our place in the all-sector UK Customer Satisfaction Index. We have achieved our long-term goal of breaking into the top five, being ranked joint fifth in 2019, up from joint seventh in 20182. A key part of our service proposition is our branch network which is why we are investing in our branches and have pledged to keep a branch in every town or city we are in today until at least 2021. See Building legendary service for more information.

Being member-owned means we can balance giving value to members, investing in our Society and maintaining our financial strength.

This year members benefited from £705 million (2018: £560 million) through better rates, fees and incentives compared with the market average. We kept our commitment to offer competitive mortgages and rewarded our loyal savers with special rates. Our leading service1 and long-term value products have, I believe, helped us to another year of record membership as more people chose Nationwide for their mortgages, savings and current accounts. See Building thriving membership for more information.

Financially, we are strong. Our key measure of financial strength, our UK leverage ratio, is above our target at 4.9% (2018: 4.9%). We continue to manage our risks very carefully in an uncertain environment.

Our Society is in good health today. However, we must also look to the future and ensure we are best able to serve the needs of our members in a world where technology is changing how people manage their money. That’s why we announced in September an investment of an extra £1.3 billion in technology, taking our total strategic investment, including investment in our branches, to £4.1 billion over five years. Our investment will make us more efficient, innovative and responsive, and help us address our members’ needs today and in the future. In addition, we have committed to launch a business current account for small firms.

As a building society, we were able to increase our investment in technology to meet the long-term needs of our members, even though this reduces profit in the short term. Our underlying profit is in line with expectations, reducing to £788 million (2018: £977 million) after recognising a charge from technology asset write-offs and additional technology investment made during the year. See Built to last for more information.

Our success is thanks to the hard work and commitment of our people, and I would like to thank them for their care and support for our members. I would also like to thank you, our loyal and growing membership, for your continued support for Nationwide.

Despite the economic uncertainties in the UK today, people still want to buy homes, save and manage their money, and we remain determined to support and serve our membership better every day.

Joe Garner
Chief Executive Officer

1 © Ipsos MORI 2019, Financial Research Survey (FRS), lead held over seven-year period covering 12 months ending 31 March 2013 to 12 months ending 31 March 2019, c.60,000 adults surveyed per annum, proportion of extremely/very satisfied customers minus proportion of extremely/very/fairly dissatisfied customers summed across main current account, mortgage and savings. Peer group defined as providers with main current account market share >4% (Barclays, Halifax, HSBC, Lloyds Bank, NatWest, Santander and TSB). Prior to April 2017, peer group defined as providers with main current account market share >6% (Barclays, Halifax, HSBC, Lloyds Bank (Lloyds TSB prior to 2015), NatWest and Santander).
2 Institute for Customer Service’s UK Customer Satisfaction Index, January 2019 and January 2018.

Your questions answered

We regularly hear from members at our live TalkBack events and through our online forum, Member Connect. Here are some of the questions our members ask us.

Why are you launching a business current account?
Christopher, Andover, Hampshire
A. We estimate that up to a million members own a small business and our proposition will meet the straightforward needs of businesses, offering a fair value current account with market leading service. We have long believed we could bring a mutual alternative of scale to small firms, offering everyday great service and value. However, in the past, the costs of setting up were high and, at the time, we didn’t believe this was the optimal use of members’ money.

Now technology is making it more economical to enter the market, and we have also secured £50 million from the Capability and Innovation Fund to boost competition in business banking, which will allow us to develop our business banking proposition faster.
How far can you guarantee that you won’t close any branches?
Jill, Waltham Cross, Hertfordshire
A. While we can’t guarantee to keep every branch open, we’ve pledged to keep a branch in every town or city that has one today until at least May 2021. We are also adapting them to meet members’ changing needs.

Members make it very clear that branches are an important part of what we offer – they value the ability to have conversations about important financial decisions with people they know, and that comes through very clearly at Member TalkBacks and through our online member forum, Member Connect. We will continue to listen to members and adapt to their changing needs.
Why aren’t your savings rates higher?
Brian, Chelmsford, Essex
A. We’ve kept our average deposit rate more than 50% higher than the market average, meaning we’ve provided members with £515 million in extra interest. We can do this because we are member-owned and focused on their interests. However, in an environment where mortgage rates are low there are limits on how much we can pay to our savings members. But we always try our hardest to give great value to our membership as a whole.
What are you spending over £4 billion of the Society’s funds on?
Sharon, Market Harborough, Leicestershire
A. Technology is having a profound effect on every aspect of our lives, including how we manage our money. A significant part of our £4.1 billion five-year strategic investment will allow us to develop IT systems and infrastructure to enable us to address members’ changing needs. We are also investing in our branches. We strongly believe these are investments that will benefit our members over the long-term, both in terms of being able to access new services and exciting digital technologies, and in maintaining a resilient and secure Society.
How are you protecting your members’ money from fraud?
Mark, King's Lynn, Norfolk
A. Members need to be able to rely on us to keep their money safe. We constantly strengthen our fraud defences and invest in new technology. We recognise the impact fraud has on customers and are committed to raising awareness of scams, as well as working closely with regulators, law enforcement agencies and other providers to combat customer fraud. Our colleagues in our branches play an important role in educating members on the risks of fraud and providing help when needed. We also place prominent warnings on our mobile app and internet bank to encourage members to ‘Stop and Think’ before making a new payment.

What have we done to build society this year?

No. 1

for customer satisfaction amongst our peer group1

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UK's most trusted

financial brand2

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Banking Brand of the Year 2018

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15.9 million members

2018: 15.5 million

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77,000

first-time buyers helped into their own homes

2018: 76,000

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More than

1 in 5

current account switchers came to us3

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£788 million

underlying profit4

2018: £977 million

£833 million

statutory profit

2018: £977 million

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£705 million

member financial benefit5

2018: £560 million

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4.9%

UK leverage ratio

2018: 4.9%

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Our branch promise:

every town and city which has a branch today will still have one until at least May 2021

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Nationwide for Business:

our commitment to launch an everyday current account for small businesses

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We’re investing an extra

£1.3 billion

over five years in technology bringing our total strategic investment to £4.1 billion

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  • 1 Lead at March 2019: 4.8%, March 2018: 4.6%. © Ipsos MORI 2019, Financial Research Survey (FRS), 12 months ending 31 March 2019 and 12 months ending 31 March 2018, c 60,000 adults surveyed per annum, proportion of extremely/very satisfied customers minus proportion of extremely/very/fairly dissatisfied customers summed across main current account, mortgage and savings. Peer group defined as providers with main current account market share >4% (Barclays, Halifax, HSBC, Lloyds Bank, NatWest, Santander and TSB).
  • 2 Lead at March 2019: 2.3%, March 2018: 1.4%. Source: Nationwide Brand and Advertising tracker – compiled by Independent Research Agency, based on all consumer responses, 12 months ending March 2019 and 12 months ending March 2018. Financial brands included Nationwide, Barclays, Co-operative Bank, First Direct, Halifax, HSBC, Lloyds Bank, NatWest, TSB and Santander.
  • 3 Pay.UK monthly CASS data. 12 months to March 2019: 21.5%, 12 months to March 2018: 18.9%.
  • 4 2018 comparative has been restated to reflect a change in the components of underlying profit. See Financial review for more information.
  • 5 See Financial review for more information about member financial benefit.