Investor Presentation 2007 by svx16890

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									Investor Presentation
                January 2007
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Contents
  •   Executive Summary                          Page 3
  •   Business Overview                          Page 5
  •   Nationwide & Portman Merger                Page 8
  •   Nationwide Capital Base                    Page 19
  •   Summary                                    Page 25

  Appendices
  1. Housing Market                              Page 28
  2. Background & Financials                     Page 32




                                                           2
NATIONWIDE INVESTOR PRESENTATION: January 2007


  Executive Summary
  - Nationwide Background
 • No.1 mutual banking organisation in the UK, with total assets of
   £129.6bn
 • Strong first half performance underscores strength of mutual business
   strategy
 • Exceptional asset quality and performance creates low risk balance
   sheet
 • Merger with Portman Building Society provides a powerful alternative to
   Plc banks through creation of No.2 provider of residential mortgages
   and retail savings




                                                                             3
NATIONWIDE INVESTOR PRESENTATION: January 2007


  Executive Summary
  - PIBS Transaction
 Three key drivers for the proposed transaction are to support:
 • Continued strong asset growth
      •   April 2005 to April 2006 asset growth of 8.1%
      •   April 2006 to September 2006 asset growth of 7.5%
      •   Strong asset growth continuing in H2 2006-07
 • Transition from Basel I to Basel II
      •   Introduction of Basel II regime w.e.f. 1 Jan 2007 increases capital requirement for
          investment in certain investment subsidiaries
 • Portman merger
      •   Expected member payout of £500m will reduce regulatory capital




                                                                                                4
Business Overview
NATIONWIDE INVESTOR PRESENTATION: January 2007




  2006/07 Half Year Highlights
  • Financial Performance                                    • Operating Highlights
       –   Record Profit                                           –   Strong lending performance
              • Underlying Pre-Tax Profit up 20.1% to                     • Net Mortgage Lending up c. 50% to
                £306m                                                       £5.9bn
       –   Estimated Pricing Benefit £280m                                • Record Net Commercial Lending of
                                                                            £1.8bn, up 221%
       –   Retained Profits £233m
                                                                   –   Further growth of banking products
       –   1.9% reduction in Cost : Income ratio
                                                                          • Total Current Accounts up 8% to 3.9m
           to 58.7% (4 April 2006 – 60.6%)
                                                                          • Total Credit Cards in issue up 10% to
              • Rolling average Cost : Income ratio
                                                                            1.3m
                59.5%
                                                                   –   Savings up 4% to £84.1bn
       –   Total assets up 7.5% to £129.6bn
                                                                          • E-Savings up 7% to £14.6bn
                                                                          • Cash ISA’s up 8% to £21.5bn




    Half year ended 30th September 2006
    A full copy of the interim results are available at: www.nationwide.co.uk/about_nationwide/results_and_accounts




                                                                                                                      6
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Group Strategy
  • Successful modern mutual strategy
       –   Focus on profit optimisation rather than maximisation
       –   Delivering value to members via competitive pricing (min £500m+ pa)
  • Attain No.2 position in both mortgage and savings markets in the UK
  • Continue to focus on improving our retail distribution channels
       –   £300m investment in services and facilities over 6 years (2004-2010)
       –   2006 restructure to enhance sales management and training
  • Full range of top quartile financial products and services
       –   Key focus is mortgages and savings
       –   But growing non mortgage and savings activities to diversify income




                                                                                  7
Nationwide & Portman Merger
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Nationwide & Portman to Merge
  • Nationwide and Portman Building              Retail Savings Market Share June 2006, %
    Societies have agreed to merge                                          HBOS
                                                                            15.5%

       –   Effective date September 2007                                           Na tionw ide
                                                                                      9.4%
  • Enlarged society will be the UK’s                                               Portma n
                                                                                                   10.8%

                                                                                     1.4%
    leading mutual organisation                           Othe rs
                                                          58.0%                     NS&I
                                                                                    8.5%
       –   Projected assets of £162bn (30 Sept                                Abbe y
           2007)                                                              7.2%


       –   13 million members
                                                 Mortgage Market Share June 2006, Stock %
  • Nationwide will become No.2 in                                            HBOS
                                                                              21.4%
    both UK mortgage and retail
    savings markets                                       Othe rs
                                                          42.3%
                                                                                  Na tionw ide
                                                                                     8.8%
                                                                                                  10.2%

  • Graham Beale to become CEO on                                                   P o rtma n
                                                                                      1.4%

    1st April, Mark Rennison becomes                         Northe rn            Abbe y
                                                                                  9.9%
                                                               Rock
    Group FD on 1st February                                  6.9%
                                                                         Lloyds
                                                                          9.3%




                                                                                                           9
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Strategic Context of Merger
  • Mutuals offer a powerful alternative to Plc banking
       –   Deliver member value
       –   Able to pass scale efficiency to members through improved pricing
  • Major force on high street, internet and through direct distribution
  • Efficiencies of scale will provide significant opportunities for growth in
    core markets
  • Synergies for both societies on costs, revenues, funding and product
    alignment
  • Better able to promote mutual agenda to customers, regulators and
    employees




                                                                                 10
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Low Risk Asset Profile
                      Asset Growth                                           Loan Asset Profile Comparison
                                                                                                                        as at Dec 2005
   £bn                                                   +8%
                                                                   100%      2.6%                                             2.1%
                                             +8%                                        8.3%          8.9%      4.9%
   120                         +10%                                                                                           7.8%
                                                                            14.3%
                     +19%                                                                             7.6%
   100                                                             80%                                          27.2%
                                                                                               2.2%
          +15%
    80
                                                                   60%
                                                        129.6                                                                90.1%
    60                                       120.6
                              111.6
                    101.4                                          40%
    40    85.4                                                                         89.5%          83.5%     66.8%
                                                                            83.1%
                                                                   20%
    20

     0                                                              0%
         2002/03   2003/04   2004/05        2005/06   2006/07 H1          Nationwide   N Rock         A&L      HBOS          Abbey

                             Total Assets                                   Residential Mortgages       Commercial       Personal



  • Strong asset growth H1 2006/07 – up 7.5% (10.1% year on year)
  • Maintaining low risk - 97.4% secured lending




                                                                                                                                         11
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Focus on High Quality Residential Lending
           Residential Lending 3m+ Arrears                                                                 Year End       Half Year
  1.0%   0.28% v 0.96% CML
                                                                             SOCIETY                       2005/06        2006/07
                                                                  +26%
  0.8%                                                                       Total No of Loans             1,209,674      1,232,223
  0.6%                                                                       No. 3m+                          2,835          2,531
  0.4%                                                                       No. 12m+                          254            224
                                                                  -20%
  0.2%
                                                                             Stock of possessions              97              87
      Jun-04        Dec-04       Jun-05       Dec-05         Jun-06          Arrears Ratio                   0.26%           0.23%
                 Nationwide                  CML Average


                             Average LTV
  60%                                                                    •    Mortgage balances £90bn – up 7%
  50%                                                                            –     Gross lending £14.5bn – up 34%
  40%                                                                            –     Net lending £5.9bn – up c.50%
  30%                           55%                59%                           –     85% of customers retained after product maturity
           53%
  20%               38%               39%                   39%          •    Low risk profile
  10%                                                                            –     No lending > 95% LTV
   0%                                                                            –     146 possessions cases Sept 2006
               2004/05           2005/06           2006/07 H1                    –     0.25% arrears rate Sept 2006 - Group (CML 0.90%)
                 New Business               Seasoned Book




                                                                                                                                          12
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Mortgage Market Comparison
           Mortgage Market Share, June 2006                                             •     Estimated 10.5% net advances
                    Merger will increase market                                               market share
   25%
                   share, Nationwide will be 2nd                                                –     1.6% above par share of 8.9%
   20%                  largest UK lender              Portman                                  –     2.2% above 2005/06 H1 performance
   15%
                                                       1.4%
                                                                                        •     Increased market share v par
   10%                                                                                        achieved without deterioration in
   5%
                                                                                              net interest margin or credit
          21.30%       9.90%       9.30%       8.80%       6.70%     6.00%                    quality, unlike other winners in the
   0%
                                                                                              market
           HBOS        Abbey       Lloyds   Nationwide      RBS      Barclays


                                                   H1 2006 Net Mortgage Lending vs Par
  10%
  10%                                                                                                                                       16 bps
                                                                                                                                            12
   5%
   5%                                                                                                                                       8
               5                                                                                                                            4
   0%
   0%                                                                -1                                                                     0
                                                                                   -2
                                                                                                                   -5                       -4
  -5%
  -5%                                                                                                     -8                                -8
                                                                                                -11                                         -12
 -10%
 -10%                                     -16                                                                                               -16
         Nationwide
         Nationwide Abbey              A&L         Barclays
                                                   Barclays        B&B          HBOS        Lloyds
                                                                                            Lloyds    N Rock    RBS     Britannia Portman
                                                                                                                        Britannia Portman

                                                   Market Share v par                   Net Interest Margin




                                                                                                                                                     13
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Continued Growth of Commercial Lending
  • Record gross lending - up 67% to £3.6bn
  • Net lending up 221% to £1.8bn
  • Profit contribution £100m – 33% of underlying Group Profit
 £bn                           Commercial Lending Volumes                          £bn
  4                                                                      16.3      18

                                                    14.5                           16
  3                              13.3
             12.7                                                                  14

                                                                                   12
  2
                                                                                   10
              2.3                 2.2               3.3                  3.6
  1                                                                                8
          2004/05 H2          2005/06 H1         2005/06 H2           2006/07 H1

                              Gross lending                Balances




                                                                                         14
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Continued Savings Growth
                  Savings Balances               • Balance sheet growth up 4% to
    £bn
                                                   £84.1bn
    90                                               –   More measured growth than in
    80                                                   2005/06 as a result of margin
                                                         widenings in April 2006
    70                                               –   Over 1m e-saver accounts – balances
    60                                                   up 7% to £14.6bn
    50                                               –   Cash ISA balances up 8% to £21.5bn

    40                                           • Extended range of competitively
    30
                                                   priced products
                                                     –   3 year loyalty tracker bond
    20                                                   introduced in August 2006 to reward
    10                                                   long term members has attracted
           72.6     76.7     80.9    84.1                over £0.5bn
     0
          2004/05 2005/06 2005/06 2006/07
                    H1      H2      H1




                                                                                               15
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Record Underlying Profit
  • Underlying profit growth of 20.1% to £306m
  • 3rd in peer group of underlying profit growth


   45%
                                   2006 H1 Underlying Profit Growth



   25%




    5%




   -15%
          Nationwide Abbey   A&L   Barclays   B&B   HBOS   Lloyds     N Rock   RBS   Britannia Portman




                                                                                                         16
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Improvement to net interest margin
  • 5 bps improvement in net                                              Net Interest Margin
    interest margin to 1.11% from                 1.15%

                                                  1.10%
    4 April 2006                                  1.05%
       –   Tight margins on new mortgage          1.00%
           business                               0.95%
       –   Balanced by a combination of higher    0.90%
                                                                 1.06%                   1.06%                  1.11%

           than anticipated base rate v LIBOR                  2005/06 H1             2005/06 H2              2006/07 H1
           differential
       –   Active margin management on other                      LIBOR : Base Comparison
           products                                0.50
                                                                            2005/06                          2006/07 H1
       –   3bps of net interest margin increase
                                                   0.25
           due to LIBOR : Base
                                                   0.00


                                                  -0.25
                                                      Apr-05     Jul-05      Oct-05      Jan-06     Apr-06       Jul-06

                                                           2005/06 Average Spread 9bps        2006/07 H1 Average Spread 22bps
                                                                  Bank of England Base Rate             3 Month LIBOR




                                                                                                                                17
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Efficiency market comparison
  • Market continues to focus on improving efficiency
  • 2.7% reduction in Cost Income Ratio from 2005 H1 to 58.7%
         –   Rolling average Cost : Income ratio 59.5%
         –   Greater improvement in CIR than majority of peers
  • Efficiency will continue to be a key strategic focus for the Group
                                                2006 H1 Underlying Cost : Income Ratios
               When pricing
   70%       benefit is added
               back C:I ratio
             reduces to 44.5%
   60%

   50%

   40%

   30%

   20%
         Nationwide                  Abbey          A&L       Barclays        B&B          HBOS         Lloyds       N Rock         RBS      Britannia Portman
             Source – group cost income ratios included in published interim results (or, where computed, calculated excluding exceptional expenses and derivative gains)




                                                                                                                                                                            18
Nationwide Capital Base
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Maintaining Strong Capital Ratios
 • Continued strong asset growth will impact capital ratios in short term
      –   Risk Weighted Assets have grown 15.4% since April 2005
      –   Retained capital has grown 11.5% across the same period
      –   Strong growth continuing in H2 2006-07
 • Objective remains to become self supportive for capital generation over
   the medium term, achieved via
      –   Further improvements in cost efficiency
      –   Increased income (margin and non margin)
 • Portman merger will support cost efficiency and income generation
   activities
      –   Initial impact will be capital reductive due to member payout of £500m




                                                                                   20
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Maintaining Strong Capital Ratios
                               Capital £bn
                    8
                    7
                                             1.4                 1.4
                    6       1.4
                    5                                                                  Credit Ratings
                    4                                                                   S&P   Moody’s   Fitch
                    3                        5.6                 5.8
                            5.2
                                                                               Long
                    2                                                                   A+      Aa3     AA-
                                                                               Term
                    1
                                                                               Short
                    0                                                                   A-1     P-1     F1+
                                                                               Term
                          2004/05         2005/06            2006/07 H1
                                                                               Exp.
                                                                                         A-     A2       A+
        Tier 1 Capital      8.8%             8.8%                8.5%          PIBS

        Tier 2 Capital      2.3%             2.2%                2.0%
        Total Solvency     11.1%            11.0%               10.5%
  Risk Weighted Assets   £59.1bn          £63.6bn            £68.2bn


                         Tier 1 Capital   Tier 2 Capital (Net of Deductions)




                                                                                                                21
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Basel II
  • Aspects of Basel II regime effective from 1 January 2007
       –     Initial impact increases capital weighting of investments in certain subsidiaries
  • Overall Nationwide expects to be a net beneficiary under Basel II reflecting
    mature asset profile
       –     c70% of RWA are residential mortgages:


           Basel 1     Basel II     Basel II
                         Std          IRB
            50%          35%         <20%



  • NBS working towards full application of Basel II regime during 2007
  • Approach to Basel II regulatory regime is to seek IRB status initially for
    Retail and IRB Foundation status for Commercial and Treasury




                                                                                                 22
NATIONWIDE INVESTOR PRESENTATION: January 2007




   Overview of proposed transaction
Issuer:                    Nationwide Building Society
Instrument:                Sterling Denominated, Permanent Interest Bearing Shares (the “PIBS”).
                           Tier I capital
Expected Issue Size:       Benchmark
Expected Issue Rating:     A2 (Moody’s), A- (S&P), A+ (Fitch)

Interest:                  Fixed rate payable semi-annually until the end of year 6.
                           Thereafter equivalent margin over 3-month Sterling Libor, payable
                           quarterly, until the end of year 11.
                           Thereafter floating rate (including step-up) over 3-month Sterling Libor,
                           payable quarterly.
Redemption:                Perpetual maturity. Redeemable at par at the issuer’s option after 6 years,
                           and every interest payment date thereafter.
Early Redemption Events:   Withholding tax, loss of deductibility, capital disqualification
Interest Step-up:          100bps at the end of year 11
Ranking:                   Pari passu with existing PIBS




                                                                                                       23
NATIONWIDE INVESTOR PRESENTATION: January 2007




   Overview of proposed transaction
Non Payment of Interest:   Payment of Interest is at the absolute discretion of Directors. Deferred
                           Interest must be settled immediately using payment in kind (PIK), subject
                           to a limit of 15% of the original principal amount.
                           If Interest is not paid in cash, the Issuer cannot make a payment on or
                           repurchase any other class of deferred shares of the Society (other than
                           mandatory PIBS) for 12 months.
Settlement                 Euroclear / Clearstream
Listing                    London
Form                       Registered, denominations of £50,000 and increments of £1,000 thereafter
Lead Managers and          Morgan Stanley, UBS Investment Bank
Bookrunners




                                                                                                       24
Summary
NATIONWIDE INVESTOR PRESENTATION: January 2007




  In Summary…
  • Leading mutual banking organisation in the UK
  • Exceptional asset quality and low risk balance sheet
       –   97.5% secured lending
       –   Residential arrears cases <1/3 industry average
  • Currently 4th largest mortgage lender and 2nd largest savings
    institution in the UK
       –   Merger with Portman will position Nationwide as 2nd in both mortgage lending and
           savings markets
  • Very successful across a wide range of financial products
  • Web address: www.nationwide.co.uk/investorrelations




                                                                                              26
    DISCLAIMER: INVESTOR PRESENTATION: January 2007
    NATIONWIDE PIBS Roadshow, January 2007
•   This presentation is the property of the Issuer, Nationwide Building Society (“Nationwide”). It is being communicated by Nationwide in conjunction with Morgan
    Stanley and UBS Investment Bank.
•   The investments and services contained herein are not available to private customers in the United Kingdom.
•   By attending this presentation and receiving these materials each investor represents that it is not a U.S. person within the meaning of the United States
    securities regulations and is not accessing the presentation from a location within the United States. By attending this presentation you represent, warrant and
    agree that you will not attempt to reproduce, redistribute or transmit the contents (in whole or in part) of this presentation by any means.
•   This presentation is intended for distribution in the United Kingdom only to: (i) persons who have professional experience in matters relating to investments
    falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”); or (ii) persons falling within Article
    49(2)(a) to (d) of the Order or to those persons to whom it can otherwise lawfully be distributed (all such persons together being referred to as “relevant
    persons”). This document must not be acted upon by persons who are not relevant persons. Any investment or investment activity to which this communication
    relates is available only to relevant persons and will be engaged in only with relevant persons.
•   This presentation is an advertisement and not a prospectus and investors should not subscribe for or purchase any PIBS referred to in this document except on the
    basis of information in the prospectus to be published by Nationwide Building Society in due course in connection with the admission of the PIBS to the Official
    List of the Financial Services Authority and to trading on London Stock Exchange plc’s Gilt Edged and Fixed Interest Market ( (the “Prospectus”). Copies of the
    Prospectus will, following publication, be made available in accordance with EU Directive 2003/71/EC.
•   Information contained in this presentation is a summary only. Neither this presentation nor anything contained herein shall form the basis of, or be relied on in
    connection with, any contract or commitment whatsoever. It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or
    markets referred to. It is strongly recommended that each investor read the Prospectus for more complete information regarding any offering before making an
    investment decision.
•   This presentation shall not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any PIBS. There shall be no sale of any securities in any
    state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to qualification under the securities laws of such state or jurisdiction.
•   By attending this presentation and receiving these materials each investor is deemed to represent that it is a sophisticated investor and possesses sufficient
    investment expertise to understand the risks involved in any potential offering. Investors must rely solely on their own examination of the Prospectus and the
    offering in making a determination as to whether to invest in the securities offered. No reliance is to be placed on any representations other than those
    contained in the Prospectus.
•   This presentation is published solely for informational purposes and should not be treated as giving investment advice. It has no regard to the specific investment
    objectives, financial situation or particular needs of any recipient. No representation or warranty, express or implied, is or will be made in relation to, and no
    responsibility is or will be accepted by Nationwide, Morgan Stanley or UBS Investment Bank as to the accuracy or completeness of the information contained in
    this presentation and nothing in this presentation shall be deemed to constitute such a representation or warranty or to constitute a recommendation to any
    person to acquire any securities. Nationwide, Morgan Stanley and UBS Investment Bank and their respective affiliates, agents, directors, partners and employees
    accept no liability whatsoever for any loss or damage howsoever arising from any use of this presentation or its contents or otherwise arising in connection
    therewith.
•   Although the statements of fact in this presentation have been obtained from and are based upon sources that are believed to be reliable, their accuracy is not
    guaranteed by Nationwide, Morgan Stanley or UBS Investment Bank and any such information may be incomplete or condensed. All opinions and estimates
    included in this presentation are subject to change without notice. Nationwide, Morgan Stanley and UBS Investment Bank are under no obligation to update or
    keep current the information contained herein.
•   The distribution of this report in jurisdictions other than the United Kingdom may be restricted by law and persons in whose possession this document comes
    should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the laws of any
    such other jurisdictions. In particular, neither this presentation nor any copy of it nor the information contained in it is for distribution directly or indirectly in
    the US, Canada, Australia or Japan.
•   Furthermore, you should consult with your own legal, regulatory, tax, business, investment, financial and accounting advisers to the extent that you deem it
    necessary, and make your own investment, hedging and trading decisions (including decisions regarding the suitability of this transaction) based upon your own
    judgement and advice from such advisers as you deem necessary and not upon any view expressed in this material.
•   By participating in this presentation or by accepting any copy of the slides presented, you agree to be bound by the foregoing limitations.




                                                                                                                                                                          27
Housing Market
    Appendix 1
HOUSING MARKET: January 2007
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Housing Market and Prices
   4%                                                              House Price Inflation (YoY%, moved back 7 mths)
                                                                   Approvals (000s, SA), RHS
   3%                                                      30                                                       140
                                                           25                                                       130
   2%                                                      20                                                       120
                                                           15                                                       110
   1%                 GDP Growth     Trend                 10                                                       100
                                                            5                                                       90
   0%                                                       0                                                       80




                                                            Mar-


                                                                   Mar-


                                                                          Mar-


                                                                                 Mar-


                                                                                        Mar-


                                                                                               Mar-


                                                                                                      Mar-


                                                                                                             Mar-
        2001



               2002



                       2003



                                   2004



                                             2005



                                                    2006




                                                             99


                                                                    00


                                                                           01


                                                                                  02


                                                                                         03


                                                                                                04


                                                                                                       05


                                                                                                              06
         Q3



                Q3



                        Q3



                                    Q3



                                              Q3



                                                     Q3
  •     Strong house purchase activity pushed house price growth to 10.5% pa in 2006
  •     Continued firm growth of house prices in 2007 expected due to: buoyant macro-
        economy – especially labour market; momentum built in 2006 and slow response
        of housing supply in UK
  •     But rate of growth likely to be tempered by deteriorating affordability, concerns
        about future house price growth and falling yields on new buy-to-let purchases
  •     Rate of growth of house prices to slow in 2007 to 5-8% and cool further into 2008



                                                                                                                          29
HOUSING MARKET: January 2007
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Housing Market and Prices
   12%     Gross B2L lending                                                                                                       17.5                                                               Mortgage Appovals, £m
              as % total gross lending                                                                                                       25,000                                                                                                                                                                              3,500
   10%        total B2L lending - £bn                                                                                    14.6
                                                                                                                                                                                                                                                                                                                                 3,000
                                                                                                               9.9                           20,000
      8%                                                                                             9.8                                                                                                                                                                                                                         2,500
                                                                                                                                             15,000                                                                                                                                                                              2,000
      6%

                                                                                                                                             10,000                                                                                                                                                                              1,500
      4%
                                                                                                                                                                                                                                                                  House Purchase
                                                                                                                                                                                                                                                                                                                                 1,000
      2%                                                                                                                                      5,000
                                                                                                                                                                                                                                                                  Remortgage                                                     500
                                                                                                                                                                                                                                                                  Other (rhs)
      0%                                                                                                                                         0                                                                                                                                                                               0
           2000 H1


                     2000 H2


                               2001 H1

                                         2001 H2


                                                   2002 H1


                                                             2002 H2


                                                                       2003 H1

                                                                                 2003 H2


                                                                                           2004 H1


                                                                                                     2004 H2

                                                                                                               2005 H1


                                                                                                                         2005 H2


                                                                                                                                   2006 H1




                                                                                                                                                      Apr-02




                                                                                                                                                                                          Apr-03




                                                                                                                                                                                                                              Apr-04




                                                                                                                                                                                                                                                                  Apr-05




                                                                                                                                                                                                                                                                                                      Apr-06
                                                                                                                                                                                 Jan-03




                                                                                                                                                                                                                     Jan-04




                                                                                                                                                                                                                                                         Jan-05




                                                                                                                                                                                                                                                                                             Jan-06
                                                                                                                                                               Jul-02
                                                                                                                                                                        Oct-02



                                                                                                                                                                                                   Jul-03
                                                                                                                                                                                                            Oct-03



                                                                                                                                                                                                                                       Jul-04
                                                                                                                                                                                                                                                Oct-04



                                                                                                                                                                                                                                                                           Jul-05
                                                                                                                                                                                                                                                                                    Oct-05



                                                                                                                                                                                                                                                                                                               Jul-06
                                                                                                                                                                                                                                                                                                                        Oct-06
  •        Investment demand important in 2006, boosted by increased tenant demand,
           changing preferences and greater availability of finance
  •        New buy-to-let loans more than replaced fall in number of first time buyers in
           2006
  •        Fewer house purchase transactions, but higher house prices will support lending
           in 2007
  •        Remortgage lending recovering in 2007-08, but retention competition likely to
           limit growth



                                                                                                                                                                                                                                                                                                                                         30
HOUSING MARKET: January 2007
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Housing Market Risks
                     % of mortgages 3 months+ in arrears
   1.50%
                                                                     2.0                              Value of mortgaged stock (£m)
   1.25%                                                             1.8                              Outstanding mortgage balances -ex HA (£m)
                                                                     1.6
   1.00%                                                             1.4                                                                                                                                                    Equity
                                                                     1.2
   0.75%
                                                                     1.0
   0.50%
                                                                     0.8
                                                                     0.6
   0.25%                                                             0.4
                                                                     0.2
   0.00%                                                             0.0




                                                                           1987q2
                                                                                    1988q3
                                                                                             1989q4
                                                                                                       1991q1
                                                                                                                1992q2
                                                                                                                         1993q3
                                                                                                                                  1994q4
                                                                                                                                           1996q1
                                                                                                                                                    1997q2
                                                                                                                                                             1998q3
                                                                                                                                                                      1999q4
                                                                                                                                                                               2001q1
                                                                                                                                                                                        2002q2
                                                                                                                                                                                                 2003q3
                                                                                                                                                                                                          2004q4
                                                                                                                                                                                                                   2006q1
           2003 H1        2004 H1          2005H1          2006 H1
                        CML          Nationwide




  •    Arrears expected to remain low and stable due to benign economic outlook and
       strong labour market. Higher interest rates pose some risk.
  •    Nationwide has high asset quality relative to market. Most debt problems so far
       centred on unsecured debt and unlikely to significantly affect secured market.
  •    Value of outstanding mortgages small relative to value of housing stock.
  •    House prices would have to fall by over 40% before the equity position of
       mortgaged households turns negative.




                                                                                                                                                                                                                                     31
Background & Financials
         Appendix 2
BACKGROUND & FINANCIALS: at 30 September 2006
NATIONWIDE INVESTOR PRESENTATION: January 2007


                                                          £bn
  Commercial Lending                                      16     PFI   1.0
                                                                Structured
                                                                 Property
  • Assets concentrated in lower risk housing, property          Finance
    finance and PFI                                                3.0
                                                          12
  • Market leader in Registered Social Landlord lending
                                                                Regional
  • Continued strong asset quality                              Property
                                                                Finance
  • No speculative lending
                                                                   7.2
  • Limited non-UK exposure                                8
  • Only 63 loans 3m+ arrears (vs. 69 at 4 April 2006)
       –   Lowest level for 10 years

                                                           4
                                                                 Housing
                                                                 Finance
                                                                   5.1


                                                           0




                                                                             33
BACKGROUND & FINANCIALS: at 30 September 2006
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Personal Loan Performance
  • Cautious approach to new                                   Net Lending
    lending as a result of market                £bn

    conditions                                   2.0
       –   Net loans broadly unchanged at        1.8
           £1.8bn                                1.6
  • Continued focus on credit                    1.4
    quality                                      1.2
       –   1 in 2 applications declined          1.0
       –   75% of lending to group customers     0.8
       –   Arrears performance lower than        0.6
           industry                              0.4
  • Tiered pricing - 14bp margin                 0.2
                                                        1.54    1.71    1.74    1.81
    improvement                                  0.0
                                                       2004/05 2005/06 2005/06 2006/07
                                                                 H1      H2      H1




                                                                                         34
BACKGROUND & FINANCIALS: at 30 September 2006
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Strong Credit Card Growth
              Credit Cards in Issue              • Cards in circulation up 10% to
    m
                                                   1.3m
    1.6                                          • Book growth up 10% to 1.1m
    1.4                                              –   124,000 new cards
    1.2                                          • Receivables up 11% to £741m
    1.0                                          • Delinquent balances 7.5%
                                                     –   30% lower than APACS industry
    0.8                                                  average
    0.6
    0.4
    0.2
           1.06    1.18     1.22      1.35
    0.0
          2004/05 2005/06 2005/06 2006/07
                    H1      H2      H1




                                                                                         35
BACKGROUND & FINANCIALS: at 30 September 2006
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Strong Insurance & Investments Performance
             General Insurance – New Covers                          Life & Investments – Products in Force
  ‘000                                                       ‘000
  300                                                         1000
  250                                                         800
  200
                                                              600
  150
                                                              400
  100
                                                              200
   50
             156        214          257          258                   775          860           915         953
    0                                                           0
         2004/05 H2   2005/06 H1   2005/06 H2   2006/07 H1            2004/05 H2   2005/06 H1   2005/06 H2   2006/07 H1



  • General Insurance new covers up 21% to 258,000
         –    New Household Insurance product launched July 2006
         –    Insurance commission and profit share up 16% to £50m
  • Life & Investments products in force up 4% to 953,000
         –    New protection product launched May 2006
         –    Life insurance sales up 14% from 2005/06




                                                                                                                          36
BACKGROUND & FINANCIALS: at 30 September 2006
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Total Income Growth
  • Total income growth of 14% to £880m
       –     Net interest margin improvements through active margin management and beneficial
             interest rate environment
       –     Other income growth through increased sales of banking products
  • 3rd in peer group of income growth
                                     2006 H1 UK Income Growth
 20%


 15%


 10%


  5%


  0%
           NBS   Abbey    A&L    Barclays   B&B   HBOS    Lloyds   N Rock   RBS   Britannia   Portman




                                                                                                        37
BACKGROUND & FINANCIALS: at 30 September 2006
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Non Margin Income
  • Year on year growth of 11.5% to                       Non Margin Income
    £200.5m                                      £m

  • Continued strong performance                 250
    of non margin income reflects
    further focus on income                      200
    diversification into non-core
    products                                     150

  • Strong performance from
                                                 100
    current accounts and credit
    cards                                         50

                                                        179.8     221.6       200.5
                                                   0
                                                       2005/06   2005/06   2006/07
                                                         H1        H2        H1




                                                                                      38
BACKGROUND & FINANCIALS: at 30 September 2006
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Excellent Profit Growth & Member Value
             Underlying Profit Growth                                        Total Member Value
   £bn
   350                                                        600

   300                                                        500

   250                                                                175                    222
                                                              400                                                   233
   200
                                                              300
   150
                                284                  306
           255                                                200
   100

    50
                                                              100     350                    340                    280
     0                                                          0
         2005/06 H1         2005/06 H2           2006/07 H1         2005/06 H1             2005/06 H2            2006/07 H1

                      Underlying Profit Before Tax                       Pricing Benefit                Retained Earnings



  • Underlying profit before tax increased by 20.1% to £306m since Sept
    2005




                                                                                                                              39
BACKGROUND & FINANCIALS: at 30 September 2006
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Bad Debt Charge
 £m
 60
 40
 20
  0
-20
            Secured            Unsecured         Customer Redress    Treasury

                                         2005/06          2006/07      Movement
                                           H1 £m            H1 £m              %
 Secured                                      (1)                1           179
 Unsecured                                     36               55            54
 Customer Redress                               8                5          (42)
 Treasury                                       -              (3)           n/a
 Total                                         43               58            35



                                                                                   40
BACKGROUND & FINANCIALS: at 30 September 2006
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Capital ratios vs peer group
  • Total solvency ratio 10.5%, Tier 1 ratio 8.5%



   %                                 Peer Group Capital Ratios
   16
   14
   12
   10
    8
    6
    4
    2
    0
         NBS      A&L     Barclays        B&B      HBOS        Lloyds      N Rock   RBS   Portman

                                 Tier 1         Tier 2 (incl deductions)




                                                                                                    41
BACKGROUND & FINANCIALS
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Building Society vs. Bank
  A building society differs from a bank in the following ways:
  • Ownership structure - privately owned by members (retail mortgage
     and savings customers) rather than shareholders
  • Strategy – profit optimisation, i.e. generating maximum value for
     members via pricing benefits (“best value” mortgages and savings),
     rather than profit maximisation
  • Regulation - additional governance provided for by the Building
     Societies Act 1986:
       –   Minimum 50% of funding from retail deposits
       –   Retail deposits structurally subordinated to wholesale funding
       –   Minimum 75% of assets secured on residential property




                                                                            42
BACKGROUND & FINANCIALS: at 30 September 2006
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Increasingly diversified funding platform
                                           Total Funding              CP
                                                                     14%
                                                                                     Covered
                                                                                      Bond              • Wholesale funding
                                                                                                          ratio 29.3% (Apr
                                                                                       4%
   Retail      Regulatory              W holesale
             Requirement -
                                                                                                          2005/06 : 26.6%)
  Member                                  27%                                                  EMTN
             Min 50% Retail
  Deposits                                                                                      18%
                Funding
   65%
                                                                                                        • €14bn covered bond
                                                    TD's &CD's
                                                       31%


                                                                                               US MTN     programme launched
                                                                                                          Nov 2005
                                                                                                15%
                                 Capital
                         Other    6%                                                 ABCP
                                                                 Statutory   Other
                          2%                                                          4%
                                                                   8%         6%

                Funding                                          Programme                      Outstandings at 30   Percentage
                Programmes                                          Size                            Sept 2006         Utilised
                EMTN                                               US$ 25bn                             US$ 12.3bn      49%
    Long
                US MTN                                             US$ 20bn                             US$ 10.3bn      52%
    Term
                Covered Bond                                          € 14bn                               € 2.7bn      19%
                Global USCP & ECP                                  US$ 15bn                              US$ 6.8bn      46%

    Short       CAD CP                                             C$ 2.5bn                               C$ 0.6bn      24%
    Term        French CP                                               € 5bn                              € 1.2bn      24%
                Asset Backed CP                                     US$ 4bn                              US$ 2.5bn      64%




                                                                                                                                  43
BACKGROUND & FINANCIALS
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Awards
  • 3rd position in Sunday Times 20               • Your Money Awards 2006
    Best Big Companies to Work for                    –   Best Financial Services Provider
    2006                                              –   Best Savings Provider
  • Exemplar organisation by                          –   Best Online Credit Card.
    Investors In People                           • Over 30 other awards, including:
  • Your Mortgage Awards 2005/06                      –   Financial Advisor Awards 2005 –
       –   Best Building Society                          Building Society of the Year;
       –   Best First Time Buyer Mortgage                 Mortgage Lender of the Year,
           Lender                                     –   Euroweek – Covered Bond Deal of the
       –   Best Remortgage Lender                         Year 2005
       –   Best Self Employed & Best Buy to Let
           Mortgage Lender (UCB HomeLoans)




                                                                                                44
BACKGROUND & FINANCIALS: at 30 September 2006
NATIONWIDE INVESTOR PRESENTATION: January 2007




  Geographic Split of Residential Portfolio
               Geographic spread

                   REGION                        % value
                   East Anglia                       4.1

                   East Midlands                      7
                   London                           14.1
                   North West                        7.9
                   Northern                          2.8
                   Northern Ireland                  2.3
                   Outer Metropolitan               18.2
                   Outer South East                 13.6
                   Scotland                          6.2
                   South West                        8.7
                   Unknown                           0.6
                   Wales                             2.9
                   West Midlands                      7
                   Yorkshire and Humberside          4.6




                                                           45

								
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