Newcastle Building Society announces strong half year results, shares its branch investment plans and home ownership innovations

27 August 2021

[Note: financial results quoted are for the half-year to 30 June 2021 (and equivalent period in 2020, unless stated as Full Year)]

Highlights:

Operating profit before impairment and provisions increased by £5.7m to £13.0m (2020: £7.3m)
Profit before tax increased to £13.9m (2020: £2.2m)
Gross lending was £483m (2020: £357m)
Net core residential lending for the first half of the year was £220m (full year 2020: £228m)
Highest ever colleague advocacy scores
Customer Net Promoter Score increased to +81 (+78 for full year 2020)
Mortgage arrears remain at low levels at 0.43% (full year 2020: 0.36%)
Capital ratios remain robust with Total Capital Ratio (Solvency) at 14.6% (full year 2020 15.5%)
Tier 1 Ratio at 13.5% (full year 2020 14.4%), Common Equity Tier 1 Ratio at 13.3% (full year 2020 14.1%) and Leverage Ratio at 4.3% (full year 2020 4.4%)
Robust Liquidity with liquidity as a percentage of shares, deposits and liabilities (excluding encumbered assets) at 21.6% (full year 2020 25.2%); cash liquidity of 16.7% (full year 2020: 19.1%)
Committed £111,000 in community grants focused on supporting employability skills, food poverty and debt management charities across our region
Average savings interest rate paid to Members at 0.83% is over 0.5% more than the market average
Deposit Unlock – the first lender in an innovative North East new build homes mortgage collaboration supporting those with a small deposit get a foot on the housing ladder
First Homes – participation in the government scheme to support affordable home ownership

Newcastle Building Society has announced its 2021 financial results to 30 June, reporting robust performance in the first half of the year, reflecting a buoyant mortgage market and a growth in savers.

The Society’s operating profit before impairments and provisions was £13m for the six months ended 30 June 2021, compared to £7.3m for the first half of 2020. Despite continued macro-economic uncertainty, the Society has held credit and legacy provisioning largely constant since 2020, reflecting a strong underlying business performance.

The UK savings market has continued to see significant growth in 2021 following the uplift seen in 2020 as a result of reduced spending linked to the Covid-19 lockdown, creating a stable source of funding for mortgage lending. The Society continued to offer members savings interest rates which were significantly better than the UK average – paying an average rate of 0.83% compared to a whole of market average of 0.32% based on CACI’s independent financial benchmarking data.*

A strong mortgage market in 2021, fuelled by a combination of government intervention and a shift in the needs of home owners, helped the Society report gross mortgage lending of £483m for the first half of the year. That figure represents a 35% increase on the first half of 2020, a period which was significantly impacted by the first national lockdown.

Net core residential lending was £220m, compared to £228m delivered in full year 2020. Mortgage arrears remain at low levels at 0.43% demonstrating the consistent quality of the Society’s mortgage lending.

In the first half of 2021, Newcastle Building Society welcomed more than 2,300 new mortgage customers, and whilst mortgage lending volumes have increased, the Society maintained a sensible lending approach. The difficulties of raising a deposit, compounded by a heated housing market has meant the dream of home ownership has stayed out of reach for many people, so the Society took steps to support low deposit borrowers through participation in two new innovative mortgage schemes.

The Society is the first lender to offer mortgages under the Deposit Unlock scheme, which is a new-build home purchase scheme created in collaboration with insurance broker, Gallagher Re, The Home Builders Federation and four of its members: Vistry Group, Barratt Developments, Keepmoat Homes, and Bellway Homes.

Newcastle Building Society also announced its participation in the Government-led First Homes scheme, which helps local first time buyers – many of whom could be key workers such as NHS staff and veterans – onto the property ladder by offering homes at a discount of at least 30% compared to the market price.

The Society now offers five different mortgage support products to help first time buyers or buyers with small deposits own their own home. In addition to Deposit Unlock and First Homes, the Society offers 95% home loans and continues to offer products under Help to Buy. For customers looking to increase their borrowing capability, the Society’s Joint Mortgage Sole Proprietor mortgage allows the borrower to use the income of a family member to calculate affordability.

The Society has continued to invest in its branch network as part of an ongoing multi-million pound programme of improvement to benefit communities, branch customers and colleagues. In partnership with North Tyneside Council, plans for a new branch within a refurbished Tynemouth Library building were revealed earlier this year.

Relocation of the Society’s West Denton branch also got underway to create a more modern, accessible and welcoming space for customers. The Society’s branch in Bishop Auckland will be next to undergo a major refurbishment later this year, as part of a programme of work that was originally put on hold due to Covid-19.

The Society’s financial advice subsidiary, Newcastle Financial Advisers, which provides access to face to face advice on the high street, has delivered another strong performance in the first half of 2021. In the past six months, Newcastle Financial Advisers has successfully grown its customer base, level of funds invested, and funds under management, well ahead of planned targets and continues to deliver an outstanding customer service.

The Society’s market leading savings management outsourcing business, Newcastle Strategic Solutions, delivered a solid first half financial performance and welcomed a new client, Recognise Bank, on board earlier in the year.

Newcastle Building Society chief executive officer, Andrew Haigh said:

“Although we are experiencing positive uplifts in the economy, we are mindful that uncertainty continues to dominate not just the economic environment, but the lives of our members too and is likely to continue for some time.

“The resilience we demonstrated in 2020 laid the necessary foundations to deliver strong results in the first half of 2021, despite Covid-19 restrictions and uncertainties. We’ve continued our focus on helping communities recover from the impacts of the pandemic, and driven innovations in home ownership to help borrowers onto the property ladder, particularly those with lower deposits.”

Recognising that the pandemic has brought significant challenge to its communities, the Society’s community grant-giving programme through the Community Foundation Tyne & Wear and Northumberland was refocused to support Covid recovery by providing ongoing support to programmes delivering employability skills and experience; addressing food poverty; and helping with debt management.

In the first half of the year, £111,000 of support grants across these areas of focus have been provided or committed.

Following the 2020 launch of a £1.1m partnership with the Newcastle United Foundation to deliver a new community hub for sports, education and wellbeing, the Society marked a key point in the construction in May. At a ceremonial signing of the building foundation steels, colleagues were joined by two participants from the NU:Futures programme who, following completion of the programme supported by the Society, have gone on to full employment.

The Society also continues to offer support through volunteering, with colleagues having delivered the equivalent of more than 148 days of volunteering in their communities in the first half of 2021.

Early in 2021 the Society moved out of its Newcastle city centre head office, reducing its head office building footprint from two to one. The Society is investing in its building at Cobalt Park, North Tyneside, with a substantial programme of transformation underway to provide a future-friendly hybrid working environment for colleagues.

The Society made two significant changes to its Board during the first half of 2021 after Phil Moorhouse announced that he would stand down as Chair after nearly 10 years on the Board.

Following a thorough recruitment process, James Ramsbotham CBE DL was selected as new Chair. From his previous role as chief executive of the North East of England Chamber of Commerce for the past 15 years, James brings significant knowledge of business throughout the region. James also has specific experience of financial services through 14 years spent at Barclays and as a former Chair of Darlington Building Society.

The Society also announced the appointment of Michele Faull as a non-executive director. Michele, a former Chief Financial Officer at Coventry Building Society and a Risk Director at Nationwide, has also become a member of the Board’s Audit and Group Risk Committees.

Andrew Haigh concluded:

“We have continued to focus on the role we play and the difference we can make for our customers and communities across our region. While there is no doubt we are not yet clear of the pandemic and all the challenges it brings, we are well placed to move forward with confidence, to continue to invest for the future and to remain focused on delivering on the Purpose-led strategy which has served our members, communities and the Society so well throughout.”