Nationwide Building Society

I'm Debbie Crosby, the Chief Executive Officer, and joining me is Muir Matheson, our Chief Financial Officer. So, delighted to say that once again, we are number one for growth in mortgages and retail deposits, and we have sustained momentum in consumer lending and business banking. We remain number one for customer satisfaction with a growing lead and more people switch their personal current account to us than any other brand. All of this combined with the benefits of our acquisition of Virgin Money has led to an increase in underlying profit whilst delivering 1.2 billion of value back to our members. I'm also delighted that our successes have been recognised across the industry. Nationwide was named Witch Banking Brand of the Year and UK Brand of the Year by Kantar. Our long-standing approach to provide better value products aligned with outstanding service was once again demonstrated through strong growth despite persistent competitive pressures. Mortgage net lending exceeded 4.7 billion. That's the strongest performance across the UK banking sector in the six months period. This was led by our highly competitive mortgage pricing and an increased focus on supporting first-time buyers through our expanded helping hand proposition. We've also continued to enhance our leading digital mortgage journey combining new automated income verification and valuation tools to enable instant offers and delivering API integration with brokers to make the application process even more simple and straightforward. And our digital self-service mortgage manager platform is enabling over half of our customers to switch to our best rates at deal maturity in a matter of minutes, supporting market leading levels of retention. This was matched by market leading growth in retail deposit balances, notably through strong flows into ISA products and supported by deposit rates that were on average 31% higher than the market. Together with our competitive mortgage pricing, that contributed to 1.2 billion of value delivered to our members and that includes our fairer share payment that we announced in May. Momentum in current account continues. We comfortably achieved the highest volume switchers in the market and became the first provider to pass 1 million switchers since the launch of the current account switching service. We've had another standout performance in the student market, achieving a 46 market share of new openings, showing the broad appeal and reach that we have with the younger demographic as they start out their financial journeys. We're also seeing strong momentum in business banking. Our stock volume of business current account grew by 5% and that included our best quarter for sales on record. And the rate of growth in our business deposits was one of the strongest in the market. So alongside sustained growth in customer volumes, we continue to excel in service, delivering an outstanding experience irrespective of how customers are choosing to interact with us. As you all know, our branch network remains fundamental to support our customers, which is why we've extended our branch promise to the start of 2030. We continue to see tangible benefits and value from maintaining face-to-face service evidenced by more branch visits and an increase in new account openings compared to the same period last year. We've seen more than a 29% increase in current account openings where Nationwide is the last branch in town, underlining the value of a significant group of our customers placed on having access to physical touchpoints. We're also continuing to invest and enhance our digital services at pace, delivering 10 new mobile app features in the last six months alone. This includes app authentication to make identification on telephone banking slicker and a new digital hub providing a very flexible new tool within the app where we can give customers useful features. For example, access to their insurance policies and the Just Eat vouchers for our student accounts in a really easy to access single repository. In an industry first, we migrated payments processing to a dual cloud platform to increase resilience. We also became the first institution globally to adopt the Microsoft Sentinel Lake unified security data platform, which enables us to keep pace with evolving AI driven threats and reduce response times. We're carefully using AI solutions to help colleagues make non-customer facing tasks more efficient and more effective. And this is shown across our service metrics with some of our complaints and our response times at all time lows. Our continued technology innovation and delivery is not only improving experience and satisfaction with our customers, but it's also resulting in major productivity gains. Combined with market leading growth and record transaction volumes, we continue to meet our long-term strategic objective of containing business as usual cost growth below the rate of inflation. Alongside the strong momentum in the underlying business, I'm pleased to say our plans for integration with Virgin Money are progressing at pace and we're tracking ahead of expectations. Within 12 months, we've streamlined our governance and our management structures and taken significant steps to simplify our group capital structure through a liability management exercise. We've completed our strategic review and simplified the business by agreeing to dispose of Virgin Money investments. We're also trialing a customer journey to offer Virgin Money business banking to nationwide customers. In April next year, and subject to court approval, we will complete a part seven legal transfer of Clydesdale Bank's assets and liabilities into Nationwide Building Society. This is a key milestone that will enable us to move into the next and important stage of integration of customer and systems migration. We plan to complete most of the migration to end state platforms in the next two to three years following that part seven completion. As a result, you will see our expenditure on integration activities increase in the coming 18 months and thereafter you will see declining integration spend, all of which is faster and more cost efficient than our original business case assumptions. Whilst we've made good progress to date and have confidence in continued efficient delivery, we will continue to take a customer-first approach throughout with a focus on good customer experiences in order to maximise retention and enable future growth. And with that, I'm now going to hand over to Muir who's going to take you through the financials.

Thank you, Debbie, and good morning, everyone. Our strong growth in the first half of the year was delivered alongside £977 million in underlying profit and a robust balance sheet. Income was better diversified and arrears remained low. Our financial strength means we have been able to return significant value to our members while continuing to lead on customer service. Underlying profit increased by 2% year on year to £977 million. Income, costs and impairments all increased, reflecting the larger group following acquisition. I will comment on each of these lines later. Member value totalled £1.2 billion in the period, including £409 million distributed through the fairer share payment announced in May 2025, and 780 million pounds from what we term member financial benefits, which principally reflects the positive rate differential between the rates our members enjoy and the average of the rest of the market. Our growth in mortgages and in retail deposits over the six month period was market leading, with mortgage net lending of £4.7 billion and an increase in retail deposit balances of £5.3 billion. Consumer lending grew comfortably over the period, despite our withdrawals from historic higher risk lending segments following the acquisition. and we were one of the fastest growing in the business deposit market over the six months. Business lending fell marginally as we chose not to participate in some segments where margin and criteria did not meet our appetite. Our balance sheet ratios remain highly robust. NIM reduced by two basis points on the prior six months, primarily due to lower completion margins on mortgages and balance sheet growth, partly offset by ongoing structural hedge tailwinds. Given the overall robust levels of profitability in the period, we once again chose to provide better rates for our members and sustain growth rather than maximise profits. Our strong mortgage performance was delivered through competitive new business pricing, differentiated first time buyer propositions and market leading levels of retention. New business completions in the period were written at 58 basis points over swap rates across the group, broadly in line with the guidance I provided in May. Competition in the retail deposit market has increased over the past six months. Despite this, the group recorded market-leading retail deposit growth, supported by competitively priced products, strong inflows into ISAs, and outperformance in personal current account balances. Business banking deposits also increased in the period, ahead of the overall market and supported by the 5% increase in business current accounts, as Debbie referenced. The average nationwide member rate for retail deposits was 272 basis points, 63 basis points higher than the market average, as we chose to continue to support our members despite the decline in the Bank of England base rate. Turning to NIM trajectory over the rest of the financial year, our expectation is that headwinds and tailwinds will remain broadly balanced. the mortgage market remains competitive with the blended margin on the pipeline today at circa 60 basis points. We expect deposit margins to continue to compress as base rate reduces with the broad expectation that the margin widening which occurred as rates increased will be reversed as rates fall. These headwinds, however, will be broadly mitigated by the continued repricing of our structural hedging. we continue to maintain strong cost discipline. The increase in underlying costs primarily reflects the larger business we now operate following the acquisition, as well as integration costs totaling 43 million pounds, which have been incurred in order to progress the part seven transfer work and back office systems migrations. The costs of running nationwide on a like-for-like basis grew by less than the rate of inflation, despite our market-leading growth. This has been delivered through ongoing productivity improvements, but not to the detriment of our members, as evidenced through our growing lead in customer service satisfaction. Below the line costs of 81 million pounds relate to acquisition specific items, most material of which is 56 million pounds for amortization of the intangible assets created as part of the purchase price allocation accounting process. This amortization is net neutral for our capital position, given the intangible assets are already fully deducted from capital resources. As indicated at our full year results, our expenditure on integration will rise in the coming period. Over the next 18 months, we will increase integration activity and associated spend as we progress systems and customer migration following completion of the Part 7 process. To date, overall integration-related spend has been lower than originally anticipated. Whilst progress is ahead of plan, and we now anticipate end-state synergies which are above our original expectations. Our overarching ambition remains to contain like-for-like costs below the rate of inflation, and we continue to improve productivity across our business accordingly. Asset quality across all portfolios remains robust, with low and stable levels of arrears. The multiple economic scenarios used for IFRS 9 provisions remain broadly consistent with last year. The weightings applied to each scenario remain unchanged, with a 15% weighting applied to the severe downside scenario, reflecting both domestic and global uncertainties. The net underlying group impairment charge was 146 million pounds in the period, equivalent to a 10 basis point annualized cost of risk and broadly in line with the 11 basis points reported in H2 last year. It is materially higher than the one basis point cost of risk reported in H1 last year, which included a 40 million pounds reduction in model adjustments for borrower affordability challenges. Group mortgage three-month plus arrears fell to 42 basis points and were around half of the industry average. Mortgage forbearance balances were unchanged at £1.4 billion. The average LTV of new mortgage business was broadly stable at 72%, reflecting our ongoing support of first-time buyers. The average stock LTV is also broadly stable at 57%. Consumer lending three-month plus arrears continued to trend lower, decreasing from 111 basis points to 99 basis points. The 12-month average group LCR was 163%, slightly lower than the 174% reported at the end of the last year. The reduction reflects the lower average TF-SME drawings over the last 12 months compared with the 12-month period prior to year-end, with less than £1bn now left outstanding across the Group. On-Balance Group liquidity totals over £57bn, which comprises cash and high-quality liquid assets. In addition, we have over 100 billion pounds of drawdown capacity at the central bank, much of which can be drawn intraday with our facilities regularly tested. We have issued approximately 8 billion sterling equivalent of wholesale funding in mainly sterling, euros and US dollars in the financial year to date, including 900 million pounds of issuance in October Our expectation is that nationwide group issuance will total circa 10 billion sterling equivalent this financial year across our secured and unsecured programmes, which is at the upper end of the guidance I provided in May. All new funding and capital instruments continue to be issued from nationwide, with proceeds downstream to Virgin Money as required. Our issuance plans continue to take account of credit rating agency requirements for loss-absorbing capacity. Group capital resources remain comfortably above regulatory requirements, with substantial buffers across risk-based leverage and MREL frameworks. The group CET1 and leverage ratios were 18.4% and 5.2% respectively. The CET1 surplus to MDAs increased to 5.7 percentage points. The reduction in the CET1 ratio was driven by a one-off £3 billion increase in the temporary adjustment applied to Virgin Money's hybrid IRB mortgage modelled RWAs. following ongoing discussions and process with the PRA. As a result, Virgin Money's average mortgage risk weight density has increased by five percentage points to 21%. This is above the nationwide average density of 15%, noting that nationwide's hybrid IRB models were approved by the PRA in 2024. We do not anticipate any further material increases and we will continue to work with the regulator to transition and align legacy VM IRB models with nationwide's over the coming period. Absent the increase in the temporary adjustment, profits were sufficient to service both the fairer share payment and support our market leading growth. The new Basel 3.1 standardised output floor is anticipated to eventually bind over existing risk-based requirements, albeit towards the end of the transitional implementation period, which ends in 2030. However, leverage requirements are expected to endure as our binding Tier 1 constraint throughout. Given our significant progress in simplifying and aligning the group capital structure following the Virgin Money liability management exercise in June, we are in discussions with the PRA regarding the removal of the subconsolidation requirement that currently allows the two legacy Virgin Money 81 instruments to contribute to group capital requirements until December 2028. This would reduce the group leverage ratio by approximately five basis points. All legacy Virgin Money instruments will continue to contribute to the group's MREL requirements. For the avoidance of doubt, these instruments will not be included in the Part 7 legal transfer. Thank you and I will now pass back to Debbie.

Okay, so hopefully that's given you a helpful run through. I'm going to pass to Vikas now who will facilitate the question and answer session.