Newcastle Building Society announces half year results, outlines response to Covid-19 outbreak and commitment to community

29 July 2020

Highlights:

Operating profit before impairment and provisions decreased by £1.2m to £7.3m (2019: £8.5m);
Profit before tax was £2.2m (2019: £8.2m);
Gross lending was £357m (2019: 380m);
Net core residential lending for the first half of the year was £178m, despite the extremely challenging economic conditions (Full year 2019: £575m);
Highest ever engagement score for colleagues of +37;
Record new account openings in April and May in Newcastle Strategic Solutions business;
Customer Net Promoter Score 81 (84 for Full Year 2019);
Mortgage arrears remain at low levels at 0.36% (31 December 2019: 0.34%);
Capital ratios remain robust with Total Capital Ratio (Solvency) at 15.0%, Tier 1 Ratio at 13.9%, Common Equity Tier 1 Ratio at 13.7% and Leverage Ratio at 4.6%; and
Liquidity as a percentage of shares, deposits and liabilities (excluding encumbered assets) was 12.0%.

Note: financial results quoted are for the half-year to 30 June 2020 (and equivalent period in 2019, unless stated as Full Year)

Newcastle Building Society has announced its 2020 financial results to 30 June, reporting performance in the first half of the year that reflects the challenging economic conditions presented by the Covid-19 pandemic but shows the business is well placed to meet the ongoing financial challenges arising from the outbreak, with robust capital, good levels of liquidity and a sound underlying business.

The Society’s operating profit was £7.3m for the six months ended 30 June 2020, compared to £8.5m for the first half of 2019. A significant increase in credit and legacy provisions prompted by challenging economic forecasts resulted in a pre-tax profit of £2.2m, compared to £8.2m for the same period last year.

Helping people own their own home remains core to the Society’s purpose and whilst the mortgage market reduced by 50% between January and May this year due to the national lockdown, the Society reported gross mortgage lending of £357m for the first half of 2020, a decrease of 6% on the first half of 2019. Net core residential lending was £178m in the six months to 30 June, compared to £220m delivered in the first half of 2019.

Its mortgage arrears remain at low levels at 0.36% demonstrating the consistent quality of the Society’s mortgage lending.

The Society’s market leading savings management outsourcing business, Newcastle Strategic Solutions, secured record growth in account openings and balances under management over the past six months as it responded to its clients’ needs for additional savings funding. This contributed to an increase in income and other charges of £1.2m to £18.7m. The Solutions business has also developed and launched a mobile savings app, which its parent company Newcastle Building Society was the first client brand to adopt.

Despite the national lockdown which began in March, as a provider of an essential service, the Society’s branch network remained resilient and open throughout the crisis, with the exception of its Yarm Library Branch, which was closed as part of a wider council decision to close library locations. Safety measures were implemented for colleagues and customers, whose essential needs necessitated a branch visit. These actions protected customers’ access to cash and other key services and were reinforced by a partnership with the Post Office to provide a local cash access safety net for vulnerable customers in the event of an unavoidable branch closure. In the event all branches were able to stay open.

In order to safely continue the provision of financial advice, the Society’s Newcastle Financial Advisers subsidiary introduced telephone and video financial advice services. Its network of experienced advisers continue to provide information, reassurance and help as customers explore their options during this difficult and often worrying period.

Newcastle Building Society chief executive, Andrew Haigh summarised:

“The global impact of the pandemic has been painful and profound and we have witnessed an economic contraction the like of which has not been experienced for decades.

“Although Covid-19 has negatively impacted our Society’s trading, our underlying business is still performing well, reflecting our resilient core. And in these challenging times, our Society’s focus on Members and our communities is more relevant and important than ever. We have made it one of our priorities not just to continue, but to increase, our support for our local communities throughout the lock down and most importantly, into recovery.”

The Society redoubled its commitment to its communities providing support to those in need and helping people deliver positive change. Early in the Covid-19 crisis the Society moved quickly to provide a £100,000 donation to the North East region’s Coronavirus Response and Recovery Fund delivered through the Community Foundation Tyne & Wear and Northumberland.

This was followed by additional Covid-19 crisis-focused grants of £35,000 made through the Newcastle Building Society Community Fund. Alongside its grants, the Newcastle Building Society Community Fund provides ongoing financial support to the Sir Bobby Robson Foundation and The Prince’s Trust.

The Newcastle Building Society Community Fund is also helping community groups and charities find digital solutions to their challenges through the Society’s participation in the North East Social Tech Fund. A grant from the Fund of £20,000 has contributed towards £80,000 total awarded to North East-based charities and social enterprises.

Building on a long tradition of working with like-minded partners to support local communities, the Society has recently announced a six-year, £1.5m commitment to partnership with the Newcastle United Foundation, supporting their development of the Murray House Recreation Centre into a hub for sports, education and wellbeing. As Regional Community Partner, Newcastle Building Society will also support the ongoing operations of the hub.

In seeking new ways to apply technology to bring communities closer together, the Society also recently announced a partnership with the National Innovation Centre for Ageing and tech for good company, onHand. This Newcastle-based pilot is connecting volunteers from the Society with older people needing support with minor tasks via a mobile app, with the potential to revolutionise the approach to volunteering beyond the coronavirus crisis and into the years ahead.

The Society’s decision to participate in the Government’s Coronavirus Job Retention Scheme has helped to protect jobs in a rapidly changing business environment and some furloughed colleagues have since returned to their roles.

In order to keep colleagues safe whilst maintaining essential financial services during the Covid-19 outbreak, the Society implemented a significant change in working practices as around 1,000 colleagues moved to work remotely, from home. At the same time branch locations were adapted to ensure the safety of customers and colleagues and head office locations were modified to ensure colleague social distancing and the adoption of safety protocols to minimise the risks of catching and spreading the virus.

These measures, combined with a focus on mental health wellbeing contributed to the Society achieving a record high employee Net Promoter Score (eNPS) of +37, positioning the organisation in the top 25% of the survey provider’s global finance sector benchmark.

Andrew Haigh concluded:

“I have been impressed beyond words by the dedication, resourcefulness and determination of colleagues across our Society to meet the challenges of this pandemic and continue to offer an outstanding service to our customers, clients and partners.

“Our Society has been well placed to meet the ongoing financial challenges arising from the pandemic, with robust capital, good levels of liquidity and a sound underlying business, further supported with diversified income from our Newcastle Strategic Solutions subsidiary.

“There is no doubt we face challenging times to the end of the year and beyond. We will continue to find new ways to be there for our customers, to help drive the social and economic recovery in our region and to deliver a Society that makes a positive contribution and connects with our communities in the North East, Cumbria and North Yorkshire.”