Newcastle Building Society announces 2020 results

Highlights:

• Operating profit (before impairments) increased to £16.4m, compared to £16.3m in 2019
• Due to increased impairments in the year, profit before tax was £2.0m, compared to £14.7m for 2019.
• Gross mortgage lending for the year was £645m and net core residential lending £228m (£575m in 2019).
• Standard Variable Rate for mortgages reduced to 3.96%
• Mortgage 3 month or more arrears remain at low levels at 0.36% (2019: 0.34%)
• More than 13,000 new savings customers, growing savings balances by £376m or 11%
• Over £66m invested through financial advice subsidiary, Newcastle Financial Advisers Limited
• The Group’s capital ratios remain robust with Common Equity Tier 1 ratio of 14.1% (2019: 13.9%) and Tier 1 ratio was 14.4% from 14.3%.
• £1.5m commitment to support communities across the North East, North Yorkshire and Cumbria
• Customer engagement scores increased further with a Net Promoter Score of +78
• Platinum Investors in People award and increased colleague engagement

Despite challenges presented by the Covid-19 pandemic, Newcastle Building Society delivered a strong 2020 performance, which it attributes to its resilient, Purpose driven operating model.

The North East’s largest building society slightly increased operating profit before impairments and provisions from 2019 levels, to £16.4m, with record mortgage lending in the second half of 2020 supported by strong retail funding through branches. It continued to provide support to its local communities, while investing in people and technology throughout the year, and remains strongly capitalised with appropriate levels of liquidity.

The exceptional deterioration in the economic outlook resulted in a significant increase in impairments and provisions made by the Society, and resulted in a reduction of pre-tax profit, which was £2.0m compared to £14.7m for 2019.

The Society’s Covid-19 response: remaining open for business; supporting communities; and helping enable its region’s recovery, saw a raft of proactive measures and investments implemented at pace. Remaining safely open throughout the pandemic, and maintaining uninterrupted access to essential financial services, the Society focused on customer and colleague wellbeing, and continuing its Purpose-led support for communities. This included the support of 4,500 mortgage payment holidays for customers experiencing financial difficulty due to Covid-19, the introduction of new safe ways of working in branches and the adoption of video technology to support customers with personal financial advice. The Society also made a community commitment of £1.5m to good causes to focus impact where it is needed most.

This commitment to communities included the launch of a £1.1m partnership in July with Newcastle United Foundation. This will deliver the development of NUCASTLE powered by Newcastle Building Society, in the City centre as a hub for sports, education and wellbeing, and supports the Foundation’s NU:Futures programme benefiting thousands of schoolchildren and young people not in education, employment and training across North of Tyne. The Society continued its ongoing programme of community grants through the Newcastle Building Society Community Fund at The Community Foundation, providing £179,000 to groups in its region most affected by the pandemic, including food banks; hospices; and charities providing support for cancer, dementia and older or isolated adults. In addition, the Society donated £100,000 at the launch of the Community Foundation Tyne & Wear and Northumberland’s Coronavirus Recovery & Response Fund, which has directed urgent funding support to a wide range of groups and charities across the region.

The Society continued with its long term strategy of supporting its region’s high streets and finding new and innovative ways to bring financial services back to communities that have been left without a bank. The official opening of new community branches was celebrated in Hawes in North Yorkshire and Wooler in Northumberland.

Andrew Haigh, chief executive, Newcastle Building Society said: “2020 has been a year unlike any other but in many ways has served to underline the importance of our Purpose, to connect communities with a better financial future. Although Covid-19 has had a profound impact on the Society’s operations during the year, our underlying business has continued to perform very well, reflecting our resilient core. We have been delighted to see high levels of customer satisfaction increase during this difficult period, reflected in an increased Net Promoter Score (NPS) of +78.

“It is encouraging to be able to report that even with the many challenges of the last 12 months and the increased non-recurring costs associated with Covid-19, our operating profit was slightly higher than the previous year.”

As the property market recovered then rapidly grew following the first national lockdown, the Society continued its focus on core residential lending, leading to a net increase in customer loans and advances of £183m in 2020. A significant reduction of the Society’s mortgage standard variable rate (SVR) to 3.96% from 5.99%, making it one of the lowest in the market, was announced towards the end of the year.

More than 5,000 new mortgage customers joined the Society, with lending supported by strong retail savings balances. The Society’s savings balances grew by £376m in 2020, and despite the impact of lockdown, branches welcomed more than 6,000 new customers.

Its subsidiary, Newcastle Financial Advisers, which provides financial advice across branch locations, experienced its best ever year for new investments with over £66m invested. The introduction of video and phone meetings ensured ongoing and much-needed support for customers.

Fintech subsidiary Newcastle Strategic Solutions has continued to make a solid contribution to Group profits, and helped its clients win recognition for savings service with 21 national awards in 2020, alongside welcoming two new SME-focused challenger banks as clients. As part of its commitment to playing a role in its region’s recovery, the Society maintained its ongoing multi-million pound investment in IT infrastructure and technology skills through the Solutions business.

As a result of the Covid-19 pandemic changes to working locations, the majority of the Society’s 1,200 colleagues transitioned to remote working and those colleagues whose jobs were protected under the furlough or Job Retention Scheme returned to their roles as the year progressed. Recognising a more stable operating environment and recovery in the housing market, the Society returned, in full, all funds claimed under the scheme, to the sum of around £600,000.

In receiving the Platinum Investors in People accreditation in the second half of the year, the Society joined the top three per cent of organisations nationwide assessed to this standard. The award recognises the efforts the organisation makes in supporting colleagues to be the best they can be and proves people believe in the vital role they play in the success of the business. Colleagues played a vital role in the Society’s response to the pandemic and their commitment to the Society’s Purpose and supporting their customers and communities was evident in the record colleague engagement scores, with employee Net Promoter Score (eNPS) of +45.

Andrew Haigh concluded: “We aspire to exit this period of crisis and recovery in a stronger strategic position than we might have expected to achieve without this experience. We recognise that this will not be without challenge and will require a need for caution in a period of severe economic stress and facing the broader impact of the Covid-19 pandemic.

“As our region recovers, we’re committed to playing our role through continued investment in people, skills and technology and have great confidence that our resilience and ability to adapt will help us continue to serve and support our customers, clients, colleagues and communities.”

Published: 08 March 2021