Nationwide Building Society

Hello everyone and welcome to Nationwide's annual results call for investors. I'm Debbie Crosby, the Chief Executive and delighted to be joined this morning by Muir Matheson, our CFO. So, delighted to say it's been another outstanding year for Nationwide. We've delivered a standout year in personal current accounts with a record one million new openings as more people choose to switch to Nationwide than any other brand. In our core markets, we were once again number one for growth in mortgages, in retail deposits, and we have built strong momentum in business banking. We've had a record year for new business current account openings under our Virgin Money brand. We've also continued to set the pace on service, extending our lead over our peer group. And that matters because it really reflects that we're here to put members first and deliver consistently good outcomes. Taken together and supported by a larger, more diversified balance sheet following our acquisition of Virgin Money, this has increased underlying profit whilst delivering 1.8 billion of value back to our members. I'm delighted that our performance continues to be recognised. Forbes named Nationwide as the best bank in the UK and we led the retail banking sector in Britain's most admired companies in 2025. Our long-standing focus on better value products matched with outstanding service has once again translated into leading growth despite a very competitive market. Mortgage net lending exceeded 10.3 billion and that is the strongest performance across the UK banking sector over the 12-month period. That was driven by highly competitive pricing, targeted enhancements in our proposition including expansion into interest only, increased support for first-time buyers and higher income multiples. we've continued to enhance our leading digital mortgage journey, combining automated income verification and valuation tools to enable instant offers and delivering API integration with brokers to make applications simpler and more straightforward. Our digital self-service mortgage manager also enables over half of customers to switch to our best rates at deal maturity in minutes, supporting our market leading retention. We matched our market leading growth in mortgages with market leading growth in retail deposits, including strong flows into our ISA products. This was helped by deposit rates that were 28% higher than the market average, despite reductions in the Bank of England base rate. Together, our competitive mortgage pricing, this contributed to the £1.8 billion of value delivered to our members, which included the fairer share payment. And because of our strong financial performance, delighted to announce this morning we'll be making another £100 fairer share payment to eligible members in June. Our momentum in current accounts has continued. We've delivered the strongest growth in balances in the market, achieved over 1 million new openings and for the sixth consecutive quarter achieved the highest volume of net switchers in the market. In fact, our net switcher gains were more than four times higher than the rest of the market combined. So I think that's a really clear sign that our relationship proposition is resonating and delivers what our members want. We've also delivered standout performance in the student account market, doubling new account openings and achieving a 43% share of market. It shows that the appeal of Nationwide for younger people is as strong as it is in other demographics. We're seeing positive momentum in business banking with our best ever year for business current accounts under the Virgin Money brand with over 56,000 new openings and the rate of growth in business deposits was around the strongest in the market. Alongside this growth, we're continuing to excel in service, delivering outstanding experience where customers choose to interact with us digitally, by phone, through a broker or indeed in person in branch. Our continued investment in technology and innovation is improving the customer experience, supporting leading growth and delivering major productivity gains. We recently completed the migration of 18 million customer accounts to a fully modernised SAP platform within the nationwide group. It's been a significant multi-year undertaking that removes reliance on any outdated legacy technology and improves our ability to scale. And in an industry first, we migrated payments processing to a dual cloud platform to increase our overall resilience. Our modern technology infrastructure is accelerating how we use AI, helping customer-facing colleagues with real-time insight, including things like call summarisation and better personalisation across our channels. The results are showing up in service metrics, including a material increase in our customer experience scores. AI is helping us to accelerate integration-related change, including through AI-generated software. We now have over 2,000 of our engineers using AI for coding. And throughout, we've kept a relentless focus on doing the basics brilliantly and delivering consistently good outcomes for customers and members. We've committed to maintain our branch network until at least 2030, and our customers are continuing to value that choice. We saw more branch visits than ever, a 20% increase in new personal current account openings versus the same period last year. A brilliant fact is that out of those million current accounts, over 300,000 of them were opened in person in branch. So Nationwide alone was responsible for more than half of the entire markets branch based product opening last financial year. We've made a number of enhancements in our app, including our new digital hub. It provides a flexible space where customers can access useful features such as viewing their insurance policy in a single easy place to find all they need. And we're doing all of this while staying very disciplined on cost, consistent with our long term objective to keep business as usual cost growth below the rate of inflation. Alongside the momentum in our underlying business, we've also made some great strides in integrating Virgin Money. In November, I set out the progress we'd already made, that was streamlining our governance and management structure, aligning our group capital structure, and simplifying the business by disposing of Virgin Money investments. In April, we completed the part seven transfer of Virgin Money's banking assets and liabilities into Nationwide Building Society. This was a major milestone involving the legal transfer of customers, colleagues, alongside the integration and migration of key back office enterprise systems, including things like Treasury and all of our HR systems. So we're now moving into the next phase of integration and later this year we'll begin to migrate Virgin Money customers into the nationwide branded systems and processes. We also remain on track to launch a nationwide branded business banking proposition in 2027 combining Virgin Money's heritage and deep expertise with nationwide mutual ethos. And as I've said before, expenditure on migration activities will increase over the coming 12 months and after that we expect integration spend to decline and overall delivery remains faster and more cost efficient than our original business case assumptions. And while we're confident in continued efficiency delivery, we'll keep taking a customer first approach, prioritising good experiences at every stage to maximise our customer retention and drive further growth. So with that, I'm now going to hand over to Muir, who's going to take you through the financials in more detail.

Thank you, Debbie, and good morning, everyone. Our strong growth in the year was delivered alongside £2bn in underlying profit and a highly robust balance sheet. Income is now more diversified than has ever been the case and arrears remain low. Our financial strength means we have been able to return significant value to our members whilst continuing to lead on customer service. Underlying profit increased by 9% year-on-year to £2 billion. Income, costs and impairments all increased, reflecting 12 months as an enlarged group following acquisition, compared to only six months in the previous year. Comparing the second half of this year to the same period last year, which followed the acquisition, underlying profit increased by 17%. Member value totalled £1.8 billion in the period, including £400 million distributed through the fairer share payment announced in May 2025, and £1.4 billion from what we term member financial benefit, which principally reflects the positive rate differential between the rates our members enjoy and the average of the rest of the market. As Debbie highlighted, performance in our core products was market leading, with mortgage net lending of over £10.3 billion and an increase in retail deposit balances of £10.1 billion, including strong growth in personal current account balances. Business deposits also increased by £1.7 billion, supported by those record business current account openings. our balance sheet ratios remain highly robust. Net interest margin in the second half increased by six basis points on the prior six months, primarily reflecting ongoing structural hedge tailwinds and the absence of any bank base rate cuts in the period. This was partly offset by lower new business margins on both mortgages and customer deposits in a highly competitive market. Year on year, NIM was higher principally due to the benefits of a larger and more diversified balance sheet following the acquisition. 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. As a reminder, structural hedging of our behaviourally rate insensitive liabilities is implemented to dampen net interest income volatility through the rate cycle. Since inception, Nationwide has followed a programmatic approach where one sixtieth of the maturing balance is reinvested at prevailing rates each month. The outstanding notional increased materially in the year, reflecting both organic growth in deposit balances and the impact of the acquisition, noting that our methodology is now fully aligned across the group. The overall structural hedge continued to provide an income tailwind in H2 with an average yield of 2.91% up from 2.49% in the prior six months as maturing balances were reinvested at higher rates. Our strong mortgage performance was delivered through competitive new business pricing, enhanced propositions and market-leading levels of retention. New business completions in the period were written at 55 basis points over swap rates, broadly unchanged from the prior six months. Pricing has been volatile in recent weeks, reflecting the uncertain market backdrop. The competition persists, with the pipeline circa 60 basis points over swaps. Business lending was down marginally year on year, reflecting both a number of specific redemptions and a highly competitive market, where we chose not to participate in some lending where margin and criteria did not meet our appetite. This was partly offset by growth in social housing balances, reflecting our longstanding relationship with the sector. The consumer lending portfolio continued to perform well, with modest growth in balances, led by our well-rounded credit card offering and an enhanced personal loans proposition. Despite heightened competition in retail deposits over the last year, we recorded market-leading growth, supported by competitively priced products, strong inflows into ISAs, and outperformance in personal current account balances. Business deposits also increased in the period, ahead of the market, including a record number of business current account openings in the Virgin Money brand, as Debbie mentioned earlier. The average nationwide member rate for retail deposits was 267 basis points, 58 basis points higher than the market average as we chose to continue to return value to our savings members despite the decline in bank base rate. Turning to our anticipated trajectory for NIM. Aligned with our base case economic assumption for unchanged bank base rate this year, our expectation is that the headwind from competition and the tailwind from structural hedging will remain broadly balanced over the next 6-12 months. We continue to maintain strong cost discipline. The increase in underlying costs primarily reflects 12 months of a larger business following the acquisition, as well as integration costs totalling £127 million this year, which were incurred in order to progress the part seven transfer work and preparation for migration activity. However, on a like for like basis, costs grew by less than the rate of inflation, despite our market leading growth. This has been delivered through the ongoing productivity improvements that Debbie described earlier and not to the detriment of our members as evidenced through our growing lead in customer service satisfaction. Below the line costs of £138 million relate to acquisition specific items, most material of which is £113 million for amortisation of the intangible assets created as part of the purchase price allocation accounting process. This amortisation is net neutral for our capital position given intangible assets are already fully deducted from capital resources. As indicated previously, our expenditure on integration will peak over the next 12 months as we commence customer systems migrations. Overall, integration progress continues to track ahead of plan, as mentioned by Debbie earlier. with the Part 7 transfer and parallel activities now completed. Total integration spend is tracking lower than we originally expected, whilst end-state synergies are anticipated to be 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 aggregate 45% weighting applied to the two downside scenarios including 15% to the severe downside reflects the ongoing heightened level of geopolitical uncertainty. The net underlying impairment charge was £331 million in the period. This was equivalent to an 11 basis point cost of risk in line with our prior guidance and lower than the peer group average. It is unchanged from the circa 10 basis points, circa 10 to 11 basis points, annualised cost of risk reported in H2 last year. Mortgage three-month plus arrears fell slightly to 39 basis points and were around half 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 for first-time buyers. The average stock LTV was 58%. consumer lending three-month-plus arrears were almost unchanged year on year. The 12-month average LCR was 169%, marginally lower than the 174% reported at the end of last year. on-balance sheet liquidity totals £59 billion, which comprises cash and high-quality liquid assets. In addition, we have around £120 billion of estimated drawdown capacity at the central bank, much of which can be drawn intraday, with our facilities regularly tested. We issued 12.5 billion sterling equivalent of wholesale funding in the year across multiple currencies with a further 1.2 billion following the year end. Our expectation is that issuance will total 10 to 12 billion sterling equivalent this financial year across our secured and unsecured programmes. Our issuance plans continue to take account of credit rating agency requirements for loss-absorbing capacity. We have renewed our 12-month general prior permission to repurchase CCDS. And, as previously noted, we could also redistribute those already repurchased and held as Treasury shares on the balance sheet. Capital resources remain comfortably above regulatory requirements, with substantial buffers across risk-based, leverage and MREL frameworks. The CET1 and leverage ratios were stable over the year, at 19.1% and 5.3% respectively. The CET1 surplus to MDAs increased by 70 basis points to 6.3 percentage points, primarily due to lower P2A requirements. Across the year, retained earnings were sufficient to offset distributions including fairer share, balance sheet growth and the IRB temporary model adjustment highlighted at the interims. The new Basel 3.1 standardised output floor is anticipated to eventually bind over current risk-based requirements, albeit towards the end of the transitional implementation period, which ends in January 2030. However, leverage requirements are expected to endure as our binding Tier 1 constraint throughout. As a reminder, the small quantum of legacy Virgin Money instruments still outstanding are no longer eligible as group regulatory capital, but do continue to contribute towards MRAL requirements. Our performance in the 2025 Bank of England Capital Stress Test demonstrated the strength and resilience of the balance sheet in the first bank stress test exercise following the acquisition of Virgin Money. even at the low point of the stress, Nationwide retained a 450 basis point CET1 buffer to MDAs and we paid all capital distributions including CCDS throughout the exercise. Thank you and I will now pass back to Debbie.

Well, look, thank you, Muir. I hope that gives you a sense of the overarching performance. We're delighted. You know, we feel we've made great progress this year and we're continuing to focus on our customer members. And we now be delighted to take your questions. I'm going to hand over to Vikas, who's going to run the Q&A.