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					Half Year Results
     2007-08
Mark Rennison, Finance Director
Fionnuala Earley, Chief Economist


       22 November 2007
Nationwide Half Year Results


Agenda

• Half Year Results



• Housing Market Outlook



• Q&A




                               2
Overview




• Exceptionally busy and challenging six months
    – Portman merger
    – “Credit crunch”


• Strong results


• Robust balance sheet




                                                  3
Highlights

Underlying Pre-Tax Profit       £394.4m   29%

    - Reported Pre-Tax Profit   £338.3m   1%


Margin income                   £835.9m   23%


Underlying cost:income          53.5%     5%

Total assets                    £166 bn   21%

Net residential lending         £3.6bn    39%

Net retail receipts             £4.1bn    96%




                                                4
Income

               Margin income     Non-margin income           Ave total assets           Net interest margin
  £m                                                   £bn                                   1.18
                                                                  1.11          1.16
  1200                         1043       1044                                                        1.2
                                                       140
  1000             880                                                                                1.0
                               243        208          120
   800             201                                 100                                            0.8
   600                                                  80                                            0.6
                                                                                134.7        145.3
                                                        60       124.7
   400                         800        836                                                         0.4
                   679                                  40
   200                                                  20                                            0.2
           0                                             0                                            0.0
                H1 06/07    H2 06/07    H1 07/08               H1 06/07 H2 06/07 H1 07/08



• Total Income                                       • Margin
       –       Up 19% vs H1 06/07                        –     Up 7bps vs H1 06/07
       –       In line with H2 06/07                     –     Unusually high LIBOR rates

• Non-Margin Income                                      (Base:LIBOR differential +27bps vs H1
       –       Up 4% vs H1 06/07                            06/07)




                                                                                                              5
Income
Total income analysis for Half Year 2007/8

       Treasury &                                                H1 06/07       H1 07/08        Growth
                                  Mortgages
         Group
                                                                   £m       %     £m       %        %

                                                        Retail    638   73       684       66        7
 Specialist
  lending                                               Non-
                                             Banking              152   17       161       15        6
                                                        Retail

                                                        Group      90   10       199       19      121
Commercial
                                                        Total     880           1,044               19


    Insurance &
    Investments                    Savings
                                                •      2/3rds of Income from Retail
         Personal
          loans
                                                • Base:LIBOR benefit included in Group
                    Credit Card




                                                                                                         6
Underlying Cost:Income

   %

  64
  62
  60
  58
  56
  54
  52
             64.1         61.9         60.6         56.6         53.5
  50
           FY 04 (UK      FY 05        FY 06        FY 07    FY 08 Forecast
             GAAP)


       • Underlying CIR continues to improve
       • Down 5% vs H1 06/07 – income driven improvement
       • FY CIR slightly higher due to increased investment spend in H2



                                                                              7
Impairment Losses



                         H1 06/07   H2 06/07   H1 07/08
                              £m         £m         £m
                                                          • Very low/negative
                                                            secured provision charge
  Secured lending             1.1      (0.6)      (8.1)   • Unsecured charge up
                                                            24% vs H1 06/07, down
  Unsecured lending          55.2       77.9       68.6     12% on H2 06/07
                                                          • Small release of
  Total                      56.3       77.3       60.5     provision re endowment
                                                            claims and MEAFs
  Customer redress            4.9       31.6      (4.8)
                                                          • Treasury investments -
                                                            NAV position adopted on
  Treasury investments      (3.5)      (1.4)       35.1     SIVs




                                                                                       8
Unsecured Loan Loss Provisions

£m                                       • Current account charge
 40                                          –   Up 15% vs H1 06/07
                                             –   In line with H2 06/07
 35
 30
 25                                      • Credit card charge
                                             –   Down 8% vs H1 06/07
 20                                          –   Down 16% vs H2 06/07
 15
 10
                                         • Personal loans charge
 5                                           –   Up 61% vs H1 06/07
                                                 Down 19% vs H2 06/07
 0
       H1 06/07    H2 06/07   H1 07/08

      Current accounts   Credit cards
      Personal loans




                                                                         9
Unsecured Loan Loss Provisions – Current Accounts

£m                                       • Current account charge
 40                                          –   Up 15% vs H1 06/07
                                             –   In line with H2 06/07
 35
 30
 25                                      • Credit quality remains strong
 20
 15                                      • Delinquent balances as % of
 10                                        assets 16.5% (H1 06/07 17.2%)
 5
 0
       H1 06/07    H2 06/07   H1 07/08

      Current accounts   Credit cards
      Personal loans




                                                                           10
Unsecured Loan Loss Provisions – Credit Cards

£m                                       • Credit card charge
 40                                            –    Down 8% vs H1 06/07
                                               –    Down 16% vs H2 06/07
 35
                                         • Delinquent balances 4.71%
 30                                        (Industry 8.05%)
 25                                      %
                                         10              Delinquent Balances
 20
                                           8
 15
                                           6
 10                                        4
  5                                        2
  0                                        0
       H1 06/07    H2 06/07   H1 07/08             H1 06/07   H2 06/07     H1 07/08
      Current accounts   Credit cards                    Industry              NBS
      Personal loans




                                                                                      11
Unsecured Loan Loss Provisions – Personal Loans

£m                                       • Personal loans charge
 40                                            –    Up 61% vs H1 06/07
                                                    Down 19% vs H2 06/07
 35
                                         • Delinquent balances 5.92%
 30                                        (Industry 10.0%)
 25                                      %
                                         12              Delinquent Balances
 20
                                         10
 15                                        8
 10                                        6
                                           4
  5
                                           2
  0                                        0
       H1 06/07    H2 06/07   H1 07/08             H1 06/07   H2 06/07     H1 07/08
      Current accounts   Credit cards                    Industry              NBS
      Personal loans




                                                                                      12
Balance Sheet

£bn    Retail   Non Retail       Treasury      Other
 180                                        166.0         • 21% balance
                                                    3%
 160                                                        sheet growth
                                                    14%
                 137.4
 140                      3%
       120.6             13%                        19%
 120                                                      • £20bn of assets
                         18%
 100                                                        acquired through
                                                            Portman merger
  80
  60                                                64%
                         67%
  40                                                      • Organic growth
                                20.0                        of 6%
  20
   0
       2006      2007          Portman H1 07/08




                                                                               13
Lending Portfolios

              Specialist
               lending                      •   Prime mortgage lending
                 9%
                                                –   £104bn portfolio

 Commercial
   lending                                  •   Consumer lending
     14%
                                                –   £2.9bn portfolio
                                                –   64% personal loans, 28% credit
Consumer                                            cards, 8% current a/cs
 lending
   2%
                                            •   Commercial lending
                                                –   £18.7bn portfolio
                                                –   64% commercial property, 31%
                                                    social housing, 5% PFI


    Retail
                           Prime mortgage   •   Specialist lending
                               lending
                                 75%            •   £12.5bn portfolio
    Non Retail
                                                •   Buy to let, Self Cert, Near
                                                    Prime



                                                                                  14
Retail – Prime Mortgage Lending

• Cautious approach adopted in H1
                           H1 06/07                 H1 07/08
                         £m     Market %            £m     Market %
 Gross lending         13.5            7.6        11.9           6.3
 Principal Repaid        7.9           6.6          8.6          6.5
 Net lending             5.6           9.9          3.3          5.7

• Excellent Asset Quality
    –   39% average book LTV (H1 06/07: 38%)
    –   59% average new lending LTV (H1 06/07: 59%)
    –   No lending > 95% LTV
    –   Only 7% of book > 80% LTV


                 Conservative income multiples, rigorous affordability criteria
                           3+months arrears 0.31% (industry 1.06%)




                                                                                  15
Retail - Consumer Lending


Current Accounts
• Number of accounts up 6% to over 4.3m

                                 H1 06/07   YE 06/07   H1 07/08

   New accounts opened (000’s)        322        580        303

   Net new accounts (000’s)           248        440        230

   Number of accounts (000’s)       3,936      4,083      4,316

   Market share                      10%         9%         8%

   Total credit balances           £5.3bn     £5.5bn     £5.9bn

   Total overdrawn balances        £201m      £258m      £224m




                                                                  16
Retail - Consumer Lending

Current Accounts
• Number of accounts up 6% to over 4.3m

• Same product offering to new and existing customers
    –   Credit interest rate of 4.25%
    –   Authorised overdraft rate 9.9%


• No charge policy for overseas card transactions

• 49% customers regularly use internet banking

• Reduced exposure to fees and charges challenge




                                                        17
Retail - Consumer Lending

Credit Cards

• Balances up 9% to £812m

                                H1 06/07   YE 06/07   H1 07/08

  New accounts issued (000’s)        124        204        103

  Total accounts (000’s)           1,067      1,122      1,160

  Gross lending                   £1.3bn     £2.7bn     £1.5bn

  Balances outstanding            £741m      £746m      £812m


 • No charge for international card transactions
 • Positive order of payments




                                                                 18
Retail - Consumer Lending


Personal Loans

Focus on credit quality in H1

• Gross personal lending £0.3bn (H1 06/07 £0.6bn)

• Prudent lending criteria employing use of credit scoring, affordability
  and indebtedness rules

• 3 in 5 unsecured loan applications declined

• Total balances reduced to £1.9bn (4 April 07 £2.0bn)




                                                                            19
Non Retail - Commercial Lending

£bn              Gross Lending          Balances   £bn
                                 17.9      18.7
 6         16.3                                     20
 5
                                                    15
 4
 3                                                  10
 2
                                                    5
 1         3.6                   3.8       2.8
 0                                                  0
         H1 06/07           H2 06/07    H1 07/08


•     100% secured loans
•     Focus on quality lending supported by strong tenant cash flows
•     Gross lending contained at £2.8bn (H1 06/07 £3.6bn)
•     Net lending £0.9bn (H1 06/07 £1.8bn)
•     Strong asset quality with just 67 accounts (0.55%) 3 or more months in
      arrears (4 April 2007 – 84 accounts /0.66%)



                                                                               20
Non Retail - Specialist Lending Balances

£bn     Buy to Let   Self Cert         Prime/Near prime/Adverse

 8

 6                                              4.4
                                               TMW    1.2
 4                                                    TMW


 2           4.1                 3.8            3.1   3.5
       2.2               2.7                    UCB   UCB   0.3
                                                            TMW
 0
         H1 06/07          H2 06/07               H1 07/08


•     Comprises UCB Home Loans and (in H1 07/08) TMW
•     Established brands operating through mortgage intermediaries
•     Growth in Buy to Let lending, which excludes new build flats
•     Carefully managed exposure to adverse lending
•     Accounts in arrears <1% of book



                                                                     21
Treasury Assets

        £bn                   2007                H1 07/08
                                                                 23.8
        25
                       19.8
        20                                              17.5
               14.0
        15
        10
                                     3.5    4.0
         5
         0
                 Liquidity           Investment              Total


• Group treasury assets held in two separate portfolios




                                                                        22
Treasury Assets - Liquidity

       £bn                    2007                H1 07/08
                                                                 23.8
        25
                       19.8
        20                                              17.5
               14.0
        15
        10
                                     3.5    4.0
         5

         0
                 Liquidity           Investment              Total

• Liquidity
Asset Qualityincreased >40% to £19.8bn
  c20% rated or better, 66%
• 100% due toAPortman mergerrated AA or better
  Prudential Liquidity ratio with BoE to 12.1% (April 07 10.4%)
• c40% is eligible collateral increasedor ECB
  8 day ratio increased to 5.6% (April 2007 4.1%)
• No exposure to sub-prime
• No assets on credit watch or downgraded


                                                                        23
Treasury Assets - Liquidity

       £bn                    2007                H1 07/08
                                                                 23.8
        25
                       19.8
        20                                              17.5
                14.0
        15
        10
                                     3.5    4.0
         5

         0
                 Liquidity           Investment              Total

Asset Quality
• 100% rated A or better, 66% rated AA or better
• c40% is eligible collateral with BoE or ECB
• No exposure to sub-prime
• No assets on credit watch or downgraded


                                                                        24
Treasury Assets - Investments

       £bn                  2007                 H1 07/08
                                                                23.8
       25
                     19.8
       20                                              17.5
              14.0
       15
       10
                                   3.5     4.0
        5

        0
               Liquidity           Investment               Total

Asset quality                            Exposure to SIVS £167m
• 92% rated A or better                  • 0.7% of total Treasury assets
• 89% rated AA or better                 • All SIVs sponsored by AA banks
• No direct US sub-prime exposure        • No exposure to SIV-Lites
                                         • Fair Value reduced by £35m through
                                            income statement



                                                                                25
Balance Sheet Funding




                                         • Over 70% funding from
                             Wholesale     Retail Savings
              Regulatory      29.0%
            Requirement -
  Retail    Min 50% Retail               • 2nd biggest UK retail
 Member        Funding                     savings franchise
 Deposits
  71.0%

                                         • Diverse wholesale funding
                                           platform




                                                                       26
Retail Funding

£bn        Retail Savings Deposits     •   Total member balances up 23% to
                                           £106.4bn
 120
                              106.4
                                       •   £13.8bn balances acquired from
 100                                       Portman merger – 7% organic
         84.1      86.8                    growth
  80
                                       •   £4.1bn inflow of funds, with
                                           £1.8bn savings receipts in
  60
                                           September alone

  40                                   •   15% share of overall increase in UK
                                           retail savings
  20
                                       •   Reinforced position as 2nd biggest
   0                                       UK savings franchise
       H1 06/07   YE 2007   H1 07/08




                                                                                 27
Wholesale Funding

                                                                 CP
                                                                 8%       Covered
                                              Wholesale                    Bond
                                 Regulatory    29.0%                       19%
                              Requirement
                   Retail     - Min 50%
                                                    TD's
                  Member        Retail
                                                   &CD's
                  Deposits   Funding                40%
                   71.0%                                                        EMTN
                                                                                 18%

                                                           Other       US MTN
                                                                ABCP
                                                            2%           9%
                                                                 4%

• Wholesale funding ratio 29.0% (4 April 07 – 28.4%)
•   Long term activity focused on Covered Bond issuance:
    –   Inaugural US dollar $2bn July 2007
    –   €1bn Covered Bond September 2007

• Proportion of long term funding stable at c50%
• Cobbler conduit largely refinanced on balance sheet




                                                                                       28
Capital & Solvency


000's
         Tier 1 capital     Total capital                           2007     H1 07/08

10                                 9.2
                      8.0
  8     7.0                                       Tier 1 Capital    8.7%       8.3%

  6

  4                                               Total Solvency    11.0%     10.5%

  2
                                                                             £87.0bn
  0                                         Risk Weighted Assets   £72.5bn
                                                                             (up 20%)
        2006         2007       H1 07/08

 • Regulatory capital £9.2bn, up 15% including £0.9bn from Portman
 • Solvency ratios remain strong following the merger
 • Basel II – waiver application submitted
 • An Individual Capital Guidance from FSA is anticipated in December 2007



                                                                                        29
Conclusion

• We are in a strong financial position to deliver our objectives:
    –   Strong mutual franchise

    –   Robust financial performance

    –   Excellent asset quality

    –   Strong capital position

• Strategic transactions will further improve position
    –   Merger on track to deliver synergies of approximately £90m per year by
        2009/10

    –   Strategic Distribution Agreement with Legal & General effective from
        February 2008


                    Strong and sustainable business model



                                                                                 30
The UK housing market – future
          prospects
                 Fionnuala Earley
    Chief Economist, Nationwide Building Society
Outline



• Current position and recent trends

• Prospects

• Perceived risks

• Summary




                                       32
Strong housing market - now cooling
                                                                  House price inflation
                                    14.0%                                                                           3.5%

• Rapid house price growth now      12.0%
                                                             Yearly % change
                                                             3 month % change
                                                                                                                    3.0%

  beginning to cool                 10.0%                                                                           2.5%

                                    8.0%                                                                            2.0%
• Resilience of market surprised
  many in 2007
                                    6.0%                                                                            1.5%

                                    4.0%                                                                            1.0%

• Particular areas of strength in   2.0%                                                                            0.5%

  London, South East and Northern   0.0%                                                                            0.0%

  Ireland
                                        Jan-05           Jul-05       Jan-06      Jul-06      Jan-07       Jul-07
                                               Source: ONS
                                              Source: Nationwide
                                                         Gross Mortgage Lending, £ m
• Gross mortgage lending reached     50,000

  record levels boosted by           45,000              House purchase
                                     40,000              Remortgage

    –   Strong housing demand        35,000
                                                         Other

                                     30,000
    –   Rising prices                25,000

    –   Maturity profile             20,000
                                     15,000
    –   Buy-to-let sector            10,000
                                      5,000
                                         0
                                               Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3
                                              1997 1997 1998 1999 2000 2000 2001 2002 2003 2003 2004 2005 2006 2006 2007

                                              Source: CML




                                                                                                                           33
Affordability deteriorated but arrears modest
                                                    Effective mortgage Rates
• New buyer affordability
                                    6.1%

                                    5.9%
  deteriorating due to              5.7%
    –   Higher interest rates       5.5%
    –   Higher house prices         5.3%

                                    5.1%
• Existing borrowers seen a 50bp    4.9%                                          Weighted average book rate
  increase in rates in a year       4.7%                                          Weighted average new rate

• Arrears remain modest by          4.5%
                                        Nov-05 Feb-06 May-06   Aug-06    Nov-06   Feb-07   May-07   Aug-07

  historical standards                   Source: BoE
                                     Arrears and possessions as % total mortgages
                                    4%                                                                         0.45
• Increase in possessions largely                                                                              0.40
                                                                                           Arrears +6m
  confined to sub prime sector of   3%                                                     (LHS)               0.35

  the market                                                                               Possessions         0.30
                                                                                                               0.25
                                    2%
                                                                                                               0.20
                                                                                                               0.15
                                    1%                                                                         0.10
                                                                                                               0.05
                                    0%                                                                       0.00
                                      1983       1987      1991         1995      1999        2003       2007
                                           Source: CML




                                                                                                                 34
Reasons for housing market strength

                                                         UK Real GDP Growth
                                      4.5%
                                      4.0%
                                      3.5%
• Healthy economic growth             3.0%
                                      2.5%
• Strong employment growth            2.0%
                                      1.5%

• Slow response of mortgage rates     1.0%
                                      0.5%
  to base rate increases              0.0%
                                            2003q2       2004q2       2005q2    2006q2    2007q2
• Acute supply shortages,                 Source: ONS
  especially in London and the             Rise in base rates v new mortgage rates
  South East                        140

                                    120
• Strong demand from buy-to-let     100
  sector                            80

                                    60

                                    40

                                    20

                                      0
                                             Base rate      All new       Floating       Fixed

                                          Source: Bank of England




                                                                                                   35
Prospects

                                     FTB mortgage payments as % take-home-pay
• Nationwide forecast slower        60%
  house price growth: 5-8% 2007,    50%
  broadly flat 2008 due to:         40%


• Weaker economic growth            30%

                                    20%

• Deteriorating affordability       10%

                                    0%
• Impact of earlier rate hikes       1983 Q1 1986 Q1 1989 Q1 1992 Q1 1995 Q1 1998 Q1 2001 Q1 2004 Q1 2007 Q1


                                          Source: Nationwide, ASHE
• Weaker house price growth
  expectations                        Consumers’ house price growth expectations
                                     70

• Negative B2L yields                60


• Impact of credit crunch on risk
                                     50

                                     40
  appetite                           30

                                     20

                                     10

                                     0
                                     Jun-04     Dec-04     Jun-05    Dec-05     Jun-06     Dec-06    Jun-07
                                           Source: Nationwide




                                                                                                               36
Prospects

                                                    Residential Construction as % of GDP
• Why no crash?                         11            UK            US             Spain
                                        10            France        Germany
• Slower GDP but not recession           9
                                         8

• Very different economic
                                         7
                                         6

  conditions than 1990s                  5
                                         4
                                         3
• UK’s poor housing supply response      2
                                         1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

• Strong population growth with         Source: Reuters Ecow in
  supportive age structure
                                             Rents recovering from 2003 lows
• B2L sector resilient as rents begin
  to rise and longer term yields          4.5                  RICS rent expectations balance (rhs)          45
  remain respectable                      4.0                  RPI Rental Inflatio n (%, lhs)                40
                                          3.5                                                                35

• Credit crunch effects on pricing        3.0
                                          2.5
                                                                                                             30
                                                                                                             25
  are still primarily in sub-prime        2.0                                                                20

  market sector
                                          1.5                                                                15
                                          1.0                                                                10
                                          0.5                                                                5
                                          0.0                                                                0
                                             1997       1999        2001       2003       2005        2007
                                        Source: ONS, RICS Quarterly Lettings Survey (f rom 2000 onw ard)




                                                                                                                  37
Mortgage lending prospects

                                                           Base case scenario: Compound
• Weaker net lending across all                            annual BTL returns (after tax)
  sectors                                             10.0%
                                                       5.0%

• Gross lending supported by                           0.0%
                                                      -5.0%
  remortgage lending due to                    -10.0%
  supportive maturity profile                  -15.0%
                                               -20.0%
• Economic and affordability                                       1   2   3   4   5   6   7   8   9 10 11 12 13 14 15

  conditions will weaken house                                                 Inve s tm e nt hor izon (yr s )


  purchase lending, from FTB in                            Key assumptions: ● 3.5% compound annual capital growth ●


  particular                                               5.0% compound annual rental growth



• Moderation in B2L lending but                                    P r oje c t e d c ha ng e s in FT B po pu lat ion c oh or t s

  outlook not so bleak                                  30 0
                                                                                   15 -2 4 y r s old
                                                                                   To tal FTB c oh or ts
                                                                                                                   2 5- 3 4 y rs old


                                                        20 0
• Main contraction expected at                          10 0




                                     T h o u s an d
  riskiest end of lending spectrum                         0

  due to demand AND supply                             - 10 0


  conditions
                                                       - 20 0
                                                       - 30 0
                                                       - 40 0
                                                                1 9 82 1 9 85 1 98 8 1 99 1 1 99 4 1 99 7 2 00 0 2 00 3 2 00 6 20 0 9 20 1 2
                                                      S ou r ce : G ov er n me nt A c tu a ry 's De p ar tme nt




                                                                                                                                        38
Perceived risks

• UK Sub-Prime sector
    –   Small part of UK market – even higher estimates suggest less than half proportion of US
    –   Lower LTVs, regulated market
    –   Payment shocks likely but much less than in US
    –   UK housing market much stronger than US

• B2L
    –   Negative rental yields now – but look reasonable over longer term
    –   Exit of speculative landlords

• Overvalued market
    –   IMF model unable to take account of factors very important in UK market

• Debt
    –   Bank of England model shows household distress confined to small sector of market




                                                                                                  39
Summary

• UK market cooling, but do not expect a housing market crash
• Weakening demand due to
    –   Slower GDP growth
    –   Higher interest rates
    –   Poor affordability

• But supportive factors too
    –   Labour market remaining firm
    –   Demographics
    –   Housing supply

• Risks are there, but in current circumstances fundamentals still look
  fairly supportive




                                                                          40
Appendix
Non Margin Income

                                    H1 06/07     H1 07/08    Growth
                                   Underlying   Underlying
                                          £m           £m        %
         Mortgages & Savings              16           19        17
         Consumer Finance                 88           92         5
         Insurance & Investments          70           68         3
         Non Retail                       18            5      (72)
         Group                             9           24       185
         Total                           201          208         4

• Relatively low exposure to bank charges review
• Non-Retail reflects the sale of at.home nationwide in August 2006
• Group income boosted by dividends on equities held within Treasury
  investment portfolio



                                                                       42
Retail – Insurance & Investments


000's                                      000's
           General Insurance Sales                            Life Sales
400                                        40

                                           30


200                                        20                    37
                                     358             34                      34
          258         288
                                           10


  0                                         0
        H1 06/07   H2 06/07     H1 07/08           H1 06/07   H2 06/07     H1 07/08


• Continuing good performance in GI sales
• Investment product balances up 12% to £2.9bn




                                                                                      43
Underlying Contribution By Business Stream


                              H1 06/07      H1 07/08      Growth
                             Underlying    Underlying
                                    £m            £m           %

           Retail                 123.8         120.3       (2.8)

           Non-Retail             115.7         132.2       14.3

           Group                   66.5         141.9      113.4

           Total                  306.0         394.4       28.9



•Benefit of higher LIBOR/Bank Base Rate differential reflected in Group income




                                                                             44
Underlying Income & Expenditure



                                H1 06/07     H1 07/08    Growth
                               Underlying   Underlying
                                      £m           £m        %
         Net interest income        679.4        835.9       23

         Other income               200.5        208.4        4

         Total income               879.9       1044.3       19

         Costs                      516.2        559.1        8

         Provisions                  57.7         90.8       57

         Profit before tax          306.0        394.4       29




                                                                  45
Costs


                                     H1 06/07     H1 07/08    Growth
                                    Underlying   Underlying
                                           £m           £m        %
           Employee                       247          264         7
           Depreciation                    61           61         -
           Administration                 208          281        35
           Total                          516          606        17
           Merger and other costs            -         (47)
           Underlying costs               516          559         8

• Underlying costs up 8% overall
• Headcount (FTE) of 17,521 up 19% on H1 06/07 (14,765 FTE’s)
• Merger and other costs include costs associated with the disposal of
  Nationwide’s life, investment and pensions subsidiaries




                                                                         46
Mortgage Performance Relative to Peers

%                      H1 07/08                            Par Share

20


15


10


5


0
     HBOS    Abbey   Lloyds TSB   Nationwide   RBS   Northern   Barclays   Alliance &   Bradford &
                                                      Rock                 Leicester     Bingley

     Nationwide Group net lending market share of 6.2% below par market
     share of 10.3% post merger with Portman


                                                                                                     47
      Prudential Liquidity Portfolio
                                                                                   8-Day Liquidity Portfolio Composition
                                                                                Balance £8.47billion, (28 September 2007)
                                      8-day          Prudential
                                                                                   Retail Cash
    Total at end Sept               £8.47bn          £18.20bn                          6%
                                                                                                                             CD
    Total at end June               £5.20bn          £13.05bn                                                               38%

    Ratio at end Sept                 5.57%            12.12%
                                                                           Loans
    Ratio at end June                 4.06%            10.18%               35%

    Minimum ratio                     3.50%            10.00%
                                                                                                                           CP
                                                                                                                           0%

–      High quality prudential liquidity portfolio maintained well in                                      BoE Call
       excess of FSA and internal Board requirements                                       Gilt            Account
                                                                                           11%               10%
–      Liquidity risk is conservatively managed through twice
       monthly modelling stressed cash-flows across the whole                      8-Day Liquidity Portfolio Composition
       business in a range of adverse scenarios                                    Balance £5.20 billion, (29 June 2007)
                                                                                                  CP
–      Increased focus on defensive strategy for key 8-day ratio:                                 12%
          • £2bn additional investments in UK Govt. securities and       Retail Cash
             £1.4bn added to deposit with Bank of England since             9%
                                                                        Loans
             August
                                                                          5%
–      As at 28 September the prudential portfolio comprised
                                                                         Gilt
          • 8-day liquidity, £8.47bn
                                                                          0%
          • FRNs, £5.69bn (all AA or A rated)
          • RMBS, £3.19bn (96% AAA rated)                               BoE Call
                                                                                                                      CD
                                                                        Account
          • Covered Bonds, £677m (80% AAA rated)                                                                      72%
                                                                          2%
–      Circa 40% of portfolio is eligible collateral with BoE or ECB




                                                                                                                                  48
    Wholesale Funding
•   Maintain strong and diversified wholesale funding
    platform across a variety of programs:                            Total Funding (28 Sept 2007)
      • Long term activity has focused on Covered
        Bond issuance including inaugural US$ 144A                                                                         CP
        transaction supplemented by £300M of                                                                               8%
                                                                                                                                         Covered
        privately placed senior unsecured issuance                                                                                        Bond
                                                                                              Wholesale
                                                                         Regulatory                                                        19%
      • Short term funding balances up £3bn since                      Requirement -           29.0%
                                                                       Min 50% Retail
        August to support increased liquidity               Retail        Funding
                                                                                                   TD's &CD's
                                                           Member
                                                                                                      40%
      • Duration of short term funding dropped             Deposits
                                                                                                                                             EMTN
        slightly reflecting real impact of credit crunch    71.0%
                                                                                                                                              18%

      • Growing concentration in short £ issuance
        supplemented by increased USCP outstandings                                                                Other
                                                                                                                    2%
                                                                                                                         ABCP      US MTN
                                                                                                                                     9%
        and renewal of ECP presence                                                                                       4%
                                                           Wholesale Funding (Exc. Capital)               As at 28-Sep-07           As at 28-Jun-07
      • ABCP program Cobbler is now self funded.           Short Term (ST) to Long Term (LT)
        Decision taken during August based on funding                                                            58:42                      59:41
                                                           Split
        capacity and economic grounds.                     Weighted Average Life (ST & LT)                      2.03 yrs                 2.16 yrs
•   All funding transacted has been to end investors       Weighted Average Life (ST Only)                      72 days                  87 days
    with no reliance on contingency funding measures       Weighted average Spread (ST & LT)                    1.5 bps                  1.3 bps
    such as repo
                                                                          ** Nationwide is currently buying Cobbler CP, holding $2.0bn as at 30-Sep-07
•   Proactive Investor Relations strategy since August
    with over 150 calls and meetings to our global
    investor base




                                                                                                                                                         49
     Discretionary Investment Exposure
                                       Nominal                                                Un     • Total discretionary book of £4bn
Asset Description                                 AAA    AA    A         BBB       BB/B
                                        (£bn)                                                rated
                                                                                                           • Investments are split between Cobbler ABCP
RMBS                                        0.4   100%
                                                                                                           programme (£1.5bn) and the balance sheet
CLO & CDO                                   0.5   100%
                                                                                                           (£2.5bn)
CMBS                                        0.9   77%    20%   3%
                                            0.3   100%
                                                                                                           • 92% rated A or better, 89% rated AA or better
Credit Cards
US Student Loans                            0.7   100%                                                     • No direct US sub-prime exposure
Hedged Legacy Corp Bonds                    0.3   7%     86%                                  7%
                                                                                                           •30 dedicated staff spread across 3 divisions
CLO Warehousing Line                        0.2                                    100%                    (Treasury, Risk Management and Group Finance)
Financial Institutions                      0.3          91%   9%                                          manage the investment portfolio
SIV Capital Notes                           0.1                56%        44%
                                                                                                           • Ongoing surveillance of our investment
Other                                       0.3   75%    5%    5%         5%                 10%
                                                                                                           portfolio includes monitoring of underlying
                                                                                                           collateral
                                 Other Exposure (£m)                                                 • Main focus since August has been on exposure to SIV
                Legacy Corp Bonds                                                                    Capital Notes (£167.5m)
                     Unprotected                                     Liquidity Facility to
                      Portfolio 38                                   a conduit containing
                                                                                                           •All SIVs are sponsored by AA banks & we have
                                                                    AAA rated European                     no exposure to SIV-Lite vehicles
         EU Gov't G'teed ABS                                         ABS (Undrawn) 69.7
                                                                                                           • Conducted a comprehensive credit analysis on
                    8.1
                                                                                                           approximately 1500 underlying securities.
         Principal Protected                                        Private Equity Funds                   •Risk assessment on funding position of SIVs plus
             Notes 16.3                                                      25                            credit assessment has influenced approach to
                             UK Student Loans                                                              solutions to manage exposure including
                                     48.4                                                                  exchange of capital notes for underlying assets
 * As at 30/09/07




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