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.
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.
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.
Chief Executive Officer
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.
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.
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.
What have we done to build society this year?
- 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.