Nationwide Building Society

once again attracting one in six of the overall market switchers. A key highlight this half is more than doubling openings of our refresh student proposition to achieve a 30% market share of student accounts. This demonstrates that our new brand and marketing strategy really resonates with younger customers. Despite the recent reductions in bank base rate, we have continued to prioritise value for our members. with average deposit rates over the past six months that were 30% higher than the market average. Our mortgages also remained well priced in a highly competitive market, helping to deliver record H1 growth and market-leading levels of retention. Our focus and value across core products has contributed to a record level of member financial benefit of just over 9.9 billion, representing the difference between the pricing of our members enjoyed compared to the average of the rest of the market. When also taking into account June fairer share payment of 385 million, this totals our record 1.3 billion of value for our members. As you will all know, our branch network remains fundamental to supporting our customers. Our branch promise means that we have committed to closing no branches until at least 2028. And we continue to see tangible benefits from investing in our branches. For example, we saw 35% of all new current account openings over the last six months taking place in a branch. Whilst we are committed to our face-to-face services, we are continuing to enhance and improve our digital services at pace to ensure that we really can deliver on giving our customers the choice of how they want to bank with us and simply brilliant service across all our touchpoints. Our digital service mortgage manager platform is used by over half of our customers at dual maturity to switch to our best rates in a matter of minutes. This supports market leading levels of retention. We're also continuing to enhance our digital capabilities, including the use of AI to streamline account openings and provide better customer support. Innovation and creating responsible solutions to help customers navigate long term challenges is at the heart of our mutual purpose. Our unique helping hand mortgage was extended to enable first-time buyers to borrow six times income, unlocking home ownership for many of those who could not otherwise achieve it. I'm delighted that this record of exceptional delivery in both product and service performance with appropriate focus investment has been achieved whilst maintaining strong cost discipline. And finally, we are very proud to have launched our new Fairer Futures social impact strategy, helping to tackle three of the biggest issues we see in society today. Youth homelessness, families living in poverty and people living with dementia. We're now the headline partner to three key charities, Centrepoint, Action for Children and Dementia UK, who will help us making a meaningful difference across these important causes. As part of this, we are also rolling out dementia clinics in 200 of our branches. Now, as you're all aware, we completed the acquisition of Virgin Money on the 1st of October. This was a unique opportunity underpinned by an exceptionally strong business case. And I'm pleased to say that this means the newly combined nationwide group is now the second largest retail banking institution in the UK. with significant scale across our core product offerings of mortgages, retail savings and current accounts. We now have a connection with one in three people in the UK. Our ambitions are not only to build around scale but also delivering the benefits of mutuality to more people, including to the business banking sector for the first time. Muir will provide more detail on the financial benefits of the transaction shortly, but I would emphasise the purchase price of £2.8 billion was significantly below the net asset value of Virgin Money. So we have booked a significant day one gain of £2.3 billion, much of which will flow directly through capital, ensuring that we maintain peer leading CT1 ratio. I believe this demonstrates the strength of the deal for the society's members and also for Virgin Money customers who will benefit because Virgin Money no longer have to serve as dividends and share buybacks and all profits remain within the group. I want to reiterate that our business case is not based on the realisation of aggressive cost synergies, so as previously outlined, we can and will take a measured, customer-first approach to integration, following the conclusion of a detailed 18-month strategic review. In the meantime, Virgin Money will continue as a separate legal entity with a separate board, management team and banking licence. Chris's appointment as CEO will ensure we benefit from his leadership and extensive banking experience, and we will continue to work closely together over the coming years. I'm now going to hand to Muir to run through the financials, including further detail on the acquisition.

Thank you, Debbie, and good morning, everyone. We have delivered record H1 growth on both sides of the balance sheet, increasing market share in our core products of mortgages and retail deposits whilst increasing our lead in customer satisfaction over our peer group. I am pleased to say this has been delivered against another robust financial performance. We have continued to price competitively throughout the year, which means member financial benefit has increased to £950 million, a record H1 performance. When taking our fairer share payments into account, we delivered over £1.3 billion of value to our members over the last six months. Underlying profits reduced to £959 million compared to £1.26 billion in H1 last year, as anticipated, due to changes in bank base rates and our choice to offer competitive rates. Statutory profit is £391 million lower than underlying profit, primarily due to the £385 million fairer share payment which we announced in May and that was paid in June. Total income reduced by £320 million compared to H1 last year, with the net interest margin of 150 basis points ahead of the low to mid 140s guided at the full year. Underlying costs remain well controlled, with cost growth tracking below the 4% guidance we provided in May. Asset quality remains strong and better than the industry average. Balance sheet growth in the period primarily reflects record H1 growth in mortgage net lending of £6.3 billion and an increase in liquidity balances. Record H1 retail deposit growth of £8.3 billion reflects strong inflows into our competitively priced savings accounts and capitalised interest from higher pay rates. In light of recent market developments, I can confirm that Nationwide does not have any historic exposure to motor finance. Capital ratios remain strong, with the leverage ratio growing to 6.7% and the CET1 ratio increasing to 28.4%. Net interest margin has increased by four basis points compared to the H2 NIM for 23-24, supported by retail deposits and our structural hedge. NIM is lower than H1 last year, mainly because of the impact from changes in bank base rate and our choice of offering competitive rates. Mortgage market activity has shown signs of recovery through 2024, with mortgage approval volumes approaching the levels seen pre-pandemic, despite the higher interest rate environment. Mortgage book margins continued to decline, but at a decreasing pace. New business completions in the first half of the financial year were written at 76 basis points over swap rates above previous periods. The retail deposit market continues to grow in line with expectations, with the mix of balances between savings and personal current accounts broadly stable. Our average pay rate for deposits is 318 basis points, 74 basis points higher than the market average deposit rate. Despite recent bank-based rate cuts, our member financial benefit, which measures the value delivered to members through better pricing, increased to £950 million from £885 million in H1 last year. We expect deposit margins to continue to decrease as base rate reduces, with the broad expectation that the margin widening which occurred as rates increased will be reversed as rates fall. In addition, there will be a timing disbenefit because of the lag between base rate reductions and the feed through to customer rates. We continue to maintain cost discipline. Underlying costs increased by 3.5%, slightly below the 4% guidance provided in May, as inflationary increases were partially offset by efficiencies within strategic investment programmes and other cost items. We also incurred £26 million of one-off acquisition-related expenses in the period that are excluded from our underlying profit. The net impairment charge of £7 million is lower than the same period last year. The multiple economic scenarios are broadly consistent with the year end. The weightings applied to each scenario remain unchanged, with a 15% weighting applied to the severe downside scenario. Within our provisions, we continue to reflect modelled adjustments for borrower affordability challenges. We judge that this overlay remains appropriate and the methodology for determining the uplift remains unchanged. The total adjustment has decreased by £40 million, however, as a result of the improved economic conditions, including higher wages, lower mortgage rates and lower inflation. Coverage for the owner-occupied portfolio is unchanged compared to the end of the last financial year at 6 basis points. Buy-to-let coverage has decreased by 3 basis points to 50 basis points, reflecting the revised rate and inflation outlook. Unsecured coverage is lower by 70 basis points at 9.5 percentage points. Secured three-month plus arrears are almost unchanged at 42 basis points which is significantly below the industry average. The average LTV of new mortgage business increased to 73% from 71% in H1 last year, driven by our support of first-time buyers. The average stock LTV is stable at 55%, supported by our market-leading levels of retention. Forbearance balances have reduced slightly to £960 million. Mortgage charter interest only balances, the majority of which are excluded from forbearance, are £875 million compared to £1.4 billion at the last year end. Unsecured three month plus arrears have decreased from 136 basis points to 124 basis points, which is below the pre-pandemic level of 132 basis points. The 12-month average LCR was 186% compared to 191% at the end of the prior year, primarily driven by the repayment of £4bn of TF SME drawings. On-balance sheet liquidity totals £51 billion compared to £39 billion of deposit balances in excess of the £85,000 FSCS limit. In addition, we hold circa £87 billion of drawdown capacity at the central bank, much of which can be drawn intraday. We have issued approximately 4.8 billion sterling equivalent of wholesale funding financial year to date, including a £750 million 81 issuance in September. we will continue to be a regular issuer in benchmark size across the liability structure in our core currencies of sterling, euro and dollar. Our current expectation is that nationwide group issuance will total between three to five billion sterling equivalent over the rest of our financial year. Our issuance plans will continue to take account of credit rating agency requirements for loss absorbing capacity. On a pre-acquisition, stand-alone basis, our capital resources are well in excess of regulatory requirements, with substantial buffers across risk-based, leverage and MRAL frameworks. Following completion of the Virgin Money acquisition on 1st October, we can now confirm the key day one financial metrics for the combined group. The agreed acquisition price of £2.8 billion was significantly below the fair value of Virgin Money's net assets as of 1st October. This has resulted in a £2.3 billion gain on acquisition, £1.8 billion of which will flow into group capital resources. In line with the prevailing accounting standard, approximately £600 million of new intangibles were created through the transaction, representing the expected future value of site deposits and credit card relationships acquired from Virgin Money on day one. This is expected to unwind through the INE over circa seven years in line with the appropriate behavioural assumptions. Consistent with the guidance we provided earlier in the year, the combined group's CET1 ratio remains peer leading at 19.6%. The capital position reflects the day one net financial impact of acquiring the VM business and all transaction associated adjustments, including the cost of the amendments to the Virgin Enterprises Trademark Licence Agreement. The leverage ratio remains comfortably above regulatory requirements at 5.4% or 5.2% after accounting for the impact of exercising our option to call Nationwide 81 on 20 December as announced earlier this morning. Liquidity resources remain healthy with a group spot LCR of 153%. The first consolidated group accounts to the new reporting date of 31st March will be published in May 2025. Thank you and I will now pass back to Debbie.

So thank you Muir. So in summary, it's been another excellent six months for Nationwide. We've delivered record growth, record value back to members and great service underpinned by a robust financial performance. The benefits of acquiring Virgin money are significant. and we're looking forward to bringing the benefits of the UK's first mutual full-service banking provider to more people across society. So thank you, and we're now happy to go to questions.