Annual Report
and Accounts 2024
Welcome to our
Annual Report and Accounts 2024
Contents
Strategic report
An overview of how we have
done this year, our strategy
and how we measure our
performance.
What your Society has
achieved this year 4
Our difference is our
mutual ownership model 6
A letter from your
Society’s Chairman 9
Chief Executive review 12
How we performed in
2023/24 a
gainst our key
performance indicators 23
Engaging with our
stakeholders 26
Nationwide Foundation 41
Committed to doing the
right thing 43
Nonfinancial and
sustaina
bility information
statement
Climaterelated financial
disclosures 53
52
Risk overview 62
Viability statement 65
Financial review 67
Governance
How we are governed, what
items are discussed in our
Board and Committee meetings
and how we pay our directors.
Chairman’s introduction to
the Corporate Governance
report 76
Your Board 77
Governance at Nationwide 81
Statement of compliance
with the U
K Corporate
Governance Code 2018 81
Audit Committee report 97
Board Risk Committee
report 104
Nomination and Governance
Committee report 108
Report of the directors
on remuneration 112
Directors’ report 139
Risk report
Key risks that could affect our
business performance and
what we do to manage them.
Introduction 144
Managing risk 144
Principal risks and
uncertainties 148
Credit risk 149
Liquidity and funding risk 187
Capital risk 199
Market risk 205
Pension risk 212
Business risk 214
Operational and conduct
risk 215
Model risk 219
Financial statements
Our audited financial
statements, related notes and
independent auditor’s report.
Independent auditor’s
report 221
Income statements 235
Statements of
comprehensive income 236
Balance sheets 237
Statements of movements
in mem
bers’ interests and
equity 238
Cash flow statements 240
Notes to the financial
statements 241
Other information
Including our annual business
statement.
Annual business
statement 317
Countrybycountry
report 320
Underlying profit 321
Forwardlooking
statements 321
Glossary 321
2
Strategic report
What your Society has achieved this year 4
Our difference is our mutual ownership model 6
A letter from your Society’s Chairman 9
Chief Executive review (includes delivery against
our strategic drivers) 12
How we performed in 2023/24 against our key
performance indicators 23
Engaging with our stakeholders 26
Nationwide Foundation 41
Committed to doing the right thing (includes
our Mutual Good Commitments) 43
Non-financial and sustainability
information statement 52
Climate-related financial disclosures 53
Risk overview 62
Viability statement 65
Financial review 67
The Strategic report has been approved by the Board of directors and signed on its behalf by:
Debbie Crosbie
22 May 2024
Banking -
but fairer,
more
rewarding,
and for the
good of
society.
• Ownership model
Describes how we create
value over the longer term.
Page 6
• Our strategy
Our delivery against our
strategic drivers is set
out in the Chief Executive
review.
Page 12
• Risk overview
Includes our approach to
managing risks and our
assessment of our top
and emerging risks.
Page 62
• Financial review
Includes information on
financial performance and
the main trends and factors
which have impacted our
financial results.
Page 67
• Key performance
indicators
Our performance in the
year is shown against our
strategic key performance
indicators.
Page 23
• Our stakeholders
Listening and engaging
regularly with our
stakeholders is
fundamental to the
way we do business.
Page 26
• Committed to doing
the right thing
We remain committed
to doing business in a
way that positively impacts
our customers, employees
and communities.
Page 43
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
What your Society has
achieved this year
4
Strategic report Risk report Financial statements Other informationGovernanceAnnual Report and Accounts 2024
What your Society has achieved this year
No. 1
for customer satisfaction
among our peer group
for the 12th year running
1
Branch Promise
Everywhere we have a branch, we
promise to still be there until at least
the start of 2028
2
Almost £1 in every £10
of balances saved in the UK were looked
after by us
3
64,000 rst
time buyers
2023: 72,000
More net current
account switchers
to us than to any other brand
4
£15.5 million
committed to charitable activities
5
2023: £9.6 million
Highest ranked
UK high street financial services
provider
in the Financial Times
Diversity Leaders in Europe list,
for the third year running
6
The brand consumers are
most likely to say they have
‘heard good
things about’
7
£2,194 million
in member value
through member financial benefit and our
first Nationwide Fairer Share Payment
2023: £1,055 million in value from member
financial benefit
£2,003 million
underlying prot
8
2023: £2,233 million
£1,776 million
statutory prot
8
2023: £2,229 million
6.5%
leverage ratio
2023: 6.0%
5
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
1. Lead as at March 2024: 5.5%pts, March 2023: 3.8%pts. © Ipsos 2024, Financial Research Survey (FRS), for the 12 months ending 31 March 2013 to 12 months ending 31 March 2024. Results based on a sample of around 47,000 adults (aged
16+). The survey contacts around 51,000 adults (aged 16+) a year in total across Great Britain. Interviews were face to face, over the phone and online, taking into account (and weighted to) the overall profile of the adult population. The
results reflect the percentage of extremely satisfied and very satisfied customers minus the percentage of customers who were extremely or very or fairly dissatisfied across those customers with a main current account, mortgage or
savings. Those in our peer group are providers with more than 3.2% of the main current account market as at April 2023 – Barclays, Halifax, HSBC, Lloyds Bank, NatWest, Santander and TSB. Prior to April 2017, those in our peer group were
providers with more than 6% of the main current account market – Barclays, Halifax, HSBC, Lloyds Bank (Lloyds TSB prior to April 2015), NatWest and Santander.
2. All our 605 branches will remain open until at least 1 January 2028. Opening hours may vary. There may be exceptional circumstances outside of our control that mean we have to close a branch. But we will only do this if we do not have
another workable option.
3. Market share of household deposit balances, based on Bank of England data, as at 31 March 2024: 9.5% (2023: 9.6%).
4. Pay.UK quarterly Current Account Switch Service data, 9 months to December 2023, based on the latest available data.
5. The £15.5 million includes £13.6 million of charitable donations and £1.9 million relating to supporting activity and staff costs.
6. The FTStatista ranking of Europe’s Diversity Leaders, as published by the Financial Times (www.ft.com). For more information, see footnote 2 on page 10.
7. Based on a study conducted by an international market research company commissioned by Nationwide Building Society. Based on total consumer responses, including noncustomers, for the 6 months ending March 2024. Financial brands
included are Nationwide, Barclays, Cooperative Bank, First Direct, Halifax, HSBC, Lloyds, Monzo, NatWest, Santander, Starling Bank and TSB.
8. The Nationwide Fairer Share Payment of £344 million, distributed in June 2023, accounted for the majority of the difference between underlying and statutory profit. More information can be found on page 68.
Our difference is our mutual
ownership model
We are a building society, not a bank. That means we are owned by our members –
our customers who have their current account, mortgage or savings with us.
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Strategic report Risk report Financial statements Other informationGovernanceAnnual Report and Accounts 2024
Our difference is our mutual ownership model
Our purpose
Banking –
but fairer,
more rewarding,
and for the
good of society.
As a modern mutual, we make a positive difference for
our members and customers, our communities and
society as a whole.
Our business model
Nationwide holds a unique position in UK financial
services. As the largest building society, we can deliver
the value, service and benefits of mutuality to our
customers and members that others cannot.
We aim to return additional value to our members as
owners, including through our Nationwide Fairer Share
products and payments.
We deliver our valuable banking products and services to
all of our customers by helping them with:
• managing everyday finances – almost one in ten
1
of the
UK’s current accounts are with us and one in six current
account switchers came to us last year
2
• owning a home – we are the UK’s third
3
largest
mortgage provider
• saving for the future – we look after almost £1 in every
£10 saved in the UK
We also support landlords, and those who rely on the
private rented sector for their longterm housing needs,
through our buy to let business, The Mortgage Works.
This diversifies our income, and helps us give value back
to our customers, through better product pricing and
service. In addition, we offer a comprehensive range of
wider retail financial services and products, including
credit cards, personal loans and insurance.
In total, around 75% of our funding comes from our
customers, and over 95% of our lending is to individuals,
secured on residential property.
Our strategy
We have four strategic drivers that help us to fulfil our
purpose. They are:
• More rewarding relationships
• Simply brilliant service
• Beacon for mutual good
• Continuous improvement
Our strategic drivers are supported by our Mutual Good
Commitments, that seek to measure the positive impact
we have on our customers, communities and wider
society.
For more information on:
• Delivery against our strategic drivers,
see pages 15 to 22.
• Our Mutual Good Commitments,
see pages 46 to 51.
1. CAC’s Current Account and Savings Database, Stock (February 2024).
2. Pay.UK monthly CASS data. 12 months to March 2024: 17.7% (12 months to March 2023: 19.2%).
3. UK Finance 2022 balance database (latest available data).
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Our key stakeholders
Members and customers
Colleagues
Mortgage intermediaries
Communities
Regulators and policymakers
Investors and rating agencies
Suppliers
As a mutual, our members – customers who have their
current account, mortgage or savings with us – are our
owners and are our primary stakeholders. We also have
other customers, including our buy to let and social
housing customers.
In addition, we have other important stakeholders who
we engage with and consider in our decision making.
We are committed to maintaining effective
communications and building positive relationships
with all our stakeholders. More information on our
engagement with stakeholders can be found on
pages 26 to 40.
What makes us different –
our ownership model
As a mutual, we are owned by our members, which means we
think about profit in a different way from our banking peers.
We do not have to pursue profit to pay shareholders dividends.
Instead, we balance our need to retain sufficient profit to remain
financially strong, with rewarding members and our commitment
to share our success through:
Delivering value and rewarding loyalty.
Product and service propositions that meet the
needs and expectations of existing and future
customers.
Providing brilliant and trusted service.
Committing at least 1% of our pre-tax profits
4
each year to charitable activities.
4. The 1% is calculated based on average pretax profits over the previous three years.
Our difference is our mutual ownership model
(continued)
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
A letter from
Kevin Parry
Your Society’s Chairman
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Chairman’s Letter
Dear fellow member
The past year has remained challenging as our members,
customers and colleagues faced into economic
uncertainties, including interest rate rises and higher
costs of living. As a memberowned modern mutual,
we support our customers by offering valuable banking
and savings products to help them plan and save for
their financial futures, and mortgages to help them buy
their homes.
Last year was a year of several firsts for the Society.
I am pleased to reflect on some of these as I take the
opportunity to look back on 2023/24, and also look
forward to the exciting but challenging year ahead.
I am pleased to report that our financial position remains
strong, ensuring financial stability for the future in line
with the Society’s mutual ethos. Our pretax profit of
£1,776 million allows us to deliver financial value to
our members, including the Nationwide Fairer Share
Payment.
Our first Nationwide Fairer Share Payment in 2023
enabled us to deliver financial value back to members
during these economically challenging times, giving
eligible members a share of our 2022/23 profits by
making payments totalling £344 million. We also
launched the Nationwide Fairer Share Bond, offering a
highly competitive savings interest rate to our existing
members for a limited time. Being a modern mutual
enables us to reinvest our profits for our members’
benefit, which is a huge differentiator between us and
the big banks. The Board intends to declare an annual
Fairer Share Payment going forward, subject to a formal
approval each year, to ensure that any payment would
not be considered detrimental to the financial strength
of the Society. Helping our members in this positive and
tangible way truly demonstrates our mutual difference.
The Society’s first brand refresh in over 30 years was
an exciting development and has been a great talking
point for our colleagues and customers alike. Updating
how we look, and expressing our mutual difference, will
help us to attract and retain more customers. Increasing
our customer base helps ensure that we can continue to
offer competitive savings and mortgage rates now and in
the future. We recognise that branches matter – and our
customers value being able to speak to our staff face to
face. Our branch promise
1
is a clear demonstration of our
commitment to local communities.
On 21 March 2024, following full consideration and the
appropriate due diligence, the Society confirmed its
intention to buy Virgin Money. The Board’s assessment
is that this binding offer is in the best interests of the
Society and its present and future members. I can
confirm that following the acquisition, Nationwide will
remain a building society and a modern mutual. This
acquisition will strengthen the Society’s ongoing financial
position, enabling it to continue to provide further value
to customers and members through its products and
services. The Board expects that the acquisition will
bring the benefit of mutual ownership to more people in
the UK.
The Society’s first online Annual General Meeting (AGM)
was held on 19 July 2023. It was the bestattended AGM
for many years, and the online format enabled more
members to participate by attending, voting and asking
questions online. My fellow Board members and I valued
the opportunity to engage with you, respond to your
questions, and receive your feedback and views. We look
forward to welcoming even more of you to our AGM in
2024.
Nationwide continues to be an inclusive organisation
that values the diversity of the communities it serves.
The Board is also most effective when it reflects the
diversity of its colleagues and members. This year I am
pleased that the Society’s diversity has been recognised
in both the 2024 Financial Times’ Diversity Leaders list
2
,
where we were ranked fourth out of 850 and, in the FTSE
Women Leaders Report
3
, where we ranked sixth for
female representation on our Board of Directors across
50 of the UK’s largest private businesses.
1. All our 605 branches will remain open until at least 1 January 2028. Opening hours may vary. There may be exceptional circumstances outside of our control that mean we have to close a branch. But we will only do this if we do not have
another workable option.
2. The FTStatista ranking of Europe’s Diversity Leaders is based on independent surveys of more than 100,000 employees across Europe, on their perceptions of their organisation’s diversity and inclusion practices. For the 2024 list,
the employee surveys accounted for 70% of the final score, and three new indicators accounted for 30% of the score (the share of women in management positions, the communications made in favour of diversity, and a diversity score
calculated by data provider Denominator).
3. FTSE Women Leaders Review (February 2024).
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Our Society strategy – Blueprint for a modern mutual –
continues to set our direction. It is centred around our
purpose: Banking – but fairer, more rewarding, and for
the good of society. It is supported by four strategic
drivers: More rewarding relationships; Simply brilliant
service; Beacon for mutual good and Continuous
improvement. Our customers’ interests are at the heart
of how we do things. More information on the success
of our strategy can be found in the later sections of the
Strategic report.
The Governance report on page 76 sets out the key
changes to the Board during the year. I would like to pass
on my thanks and that of the Board to Gunn Waersted
and Mai Fyfield who both stepped down from the Board
at the 2023 AGM. Additionally, Tracey Graham was
appointed Senior Independent Director with effect from
20 July 2023 and Sally Orton was appointed to the Board
with effect from 1 June 2023.
The Society has a lot to be proud of and we all look
forward to the opportunities ahead. Our members,
customers and colleagues continue to be at the heart of
everything we do.
Kevin Parry
Society Chairman
Chairman’s Letter (continued)
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Chief Executive review
Reections on
2023/24 from
Debbie Crosbie
Your Society’s Chief Executive
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
My reections on 2023/24
Last year, we set a new strategic direction and a clear
and compelling purpose: Banking – but fairer, more
rewarding, and for the good of society. We continue to
seek and respond to member and customer feedback,
and the progress we are making against our strategy is
leading to a better customer experience and a strong
financial performance.
Our financial performance means we can provide our
customers with great value products, choice in the way
they bank with us, and simply brilliant service.
We delivered our highest ever level of member financial
benefit, which included better pricing than the market
average. We offered valuable savings products, such as
our memberexclusive Fairer Share Bond, and passed a
greater proportion of the Bank of England’s interest rate
rises on to savers.
We continue to stand out as a genuine alternative to the
shareholderowned banks. Following your feedback last
year, we have continued to develop our propositions and
are providing more ways for members to benefit from
our financial strength and to share in our success.
In 2024, for a limited period, our members can benefit
from the preferential interest rate on our Member
Exclusive Bond
1
. In addition, eligible members who
have chosen us for their everyday banking will receive
a Nationwide Fairer Share Payment
2
. For members who
do not have their main current account with us, we are
offering a memberonly £200 incentive to switch to us
using the Current Account Switch Service
3
.
As well as sharing in our success, members have
benefitted from our great services and commitment
to branches. We take time to consult with our members
through our Member Connect Panel, frequent surveys
and by regularly tracking customer experience,
responding to their feedback. As a result, satisfaction
amongst those who use our branches is now at its
highest ever level
4
.
We are also proud to have remained first among our peer
group for customer satisfaction for 12 years running
5
.
We continue to provide choice in how customers bank
with us. We know from your feedback that customers
value facetoface banking and so we again extended our
Branch Promise until at least the start of 2028. While
others close their doors, we have promised to keep
ours open. We now have the largest singlebrand branch
network across the UK and remain committed to the high
streets, our customers, and their communities.
We also launched our new banking app, with a refreshed
look and added features. With almost five million
customers using our banking app, we will continue to
innovate and add the features that you have asked for to
improve the app and make banking even easier.
We continue to work hard to protect our customers from
fraud. Last year, our fraud defence systems and specialist
fraud team helped prevent more than £130 million of
attempted fraud on card and online transactions, and our
Scam Checker Service helps protect customers too.
Over the year, we revealed our most significant rebrand
in over 30 years. This was supported by a highprofile
marketing campaign, bringing to life our purpose and the
difference we make as a modern mutual. This will help
us to build stronger relationships with our customers,
now and into the future. We are now first among our peer
group when consumers rate the brands that they have
‘heard good things about’
6
.
Our overall progress has resulted in record numbers of
people switching their current account to Nationwide.
More net current account switchers came to us than to
any other brand
7
.
Chief Executive review
1. More information can be found on nationwide.co.uk/memberbond. Available only to those who were a member on 22 May 2024 and at the point of application. Members need to be UK resident and aged 16 or over to apply for the Bond. We
may vary or withdraw the Bond at any time.
2. T&Cs apply. Qualifying current account and either qualifying savings or mortgage required on 31 March 2024. Visit nationwide.co.uk/aboutus/fairershare/
3. To qualify you must have held a qualifying mortgage, savings or current account on 31 March 2024. More information and full terms can be found on nationwide.co.uk. We may vary, withdraw or extend this offer at any time.
4. Based on branch facetoface satisfaction within our Customer Experience Score, for the 3 months ending 31 March 2024.
5. © Ipsos 2024, Financial Research Survey (FRS), for the 12 months ending 31 March 2013 to the 12 months ending 31 March 2024. For more information, see footnote 1 on page 5.
6. Based on a study conducted by an international market research company commissioned by Nationwide Building Society. Based on total consumer responses, including noncustomers, for the 6 months ending March 2024. Financial brands
included are Nationwide, Barclays, Cooperative Bank, First Direct, Halifax, HSBC, Lloyds, Monzo, NatWest, Starling Bank and TSB.
7. Pay.UK quarterly Current Account Switch Service data, 9 months to December 2023, based on the latest available data.
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Looking ahead to the future
In the coming year, we will continue to deliver good value
and great customer service.
We will build on the launch of our new mobile banking
app, invest in internet banking, and continue to drive the
service advantage we have through our branch network.
In doing so, we aim to build broader, deeper and more
lifelong relationships, that meet our customers’ key
needs, through all stages of their lives.
Our Member Exclusive Bond, Nationwide Fairer Share
Payment and memberonly current account switching
incentive demonstrate our mutual difference. We also
remain committed to demonstrating our mutual good in
the communities we serve. Last year, we committed
£15.5 million
8
to charitable activities. In 2024/25, we
will launch our new social impact strategy, making a
meaningful difference on the key societal issues that
impact across a range of customer life stages, including
young people, families and older people.
In March 2024, we confirmed our offer to buy Virgin
Money. We continue to make good progress on our plans
and Virgin Money shareholders have now voted in favour
of the acquisition, with completion expected in Q4 2024,
subject to regulatory approval. We believe this deal will
strengthen Nationwide financially and offers an exciting
opportunity to create a more diverse business that
delivers even more value to our members in the future.
I wish to thank our colleagues for engaging so
enthusiastically in our new purpose, and for their passion
in delivering so much for our members.
Building on all that we have achieved, I look forward
to another exciting year ahead, and delivering on our
purpose: Banking – but fairer, more rewarding, and for
the good of society.
Debbie Crosbie
Chief Executive
Chief Executive review (continued)
8. The £15.5 million includes £13.6 million of charitable donations and £1.9 million relating to supporting activity and staff costs.
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
More rewarding relationships
Deeper, broader, more lifelong relationships that provide the best value in banking.
We aim to provide our customers with the best value
in UK banking. Our mutual model is intrinsically more
rewarding than our banking peers, as we deliver value
to our customers rather than paying dividends to
shareholders. We want to extend this beyond monetary
value and to create deeper, lifelong relationships with our
customers.
Our engaged customers have deeper relationships with
us: they have their main personal current account with
us, plus either a savings balance of at least £100 or a
mortgage of at least £100. In March 2024, we had
3.53 million engaged customers. For more information,
see page 24.
Creating value for our customers
Over the year, we delivered £2,194 million in value to
our members. This included our highest ever member
financial benefit of £1,850 million (2023: £1,055 million)
from better pricing and incentives than the market
average. We delivered valuable savings products, such as
our Fairer Share Bond, which was offered exclusively to
our members. It also included our inaugural Nationwide
Fairer Share Payment of £344 million, distributed in June
2023 to 3.4 million eligible members with the deepest
banking relationships with us.
On average, we offered interest rates on deposits
(savings and current accounts) that were 38% higher
than the market average, largely driven by our savings
rates. Almost 80% of our total member financial benefit
related to our member deposits. For more information,
see page 69.
In addition, we delivered a total of £22 million of
cashback to current account customers on their
supermarket shopping in April 2023, as part of our
threemonth cashback offer that ran between February
and April 2023.
Delivered £2,194 million in value to our
members, through member financial
benefit
9
, and our Nationwide Fairer
Share Payment
(2023: £1,055 million in value from
member financial benefit)
10
Re-entered the young savers market
with our FlexOne Saver
Almost 1 in 10
11
of the UK’s current
accounts are with us
2023: 1 in 10
11
Helped 64,000 first time buyers into a
home of their own
2023: 72,000
3.53 million engaged customers, who
have their main personal current account,
and either savings or a mortgage, with us
12
Chief Executive review (continued)
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
9. Member financial benefit is the additional financial value delivered to members as a result of better pricing and incentives across our competitive mortgage, savings and banking products compared to the market average. More information
on can be found on page 69.
10. The comparative includes the value delivered through member financial benefit only, as our Nationwide Fairer Share Payment was distributed for the first time in the 2023/24 financial year.
11. CAC’s Current Account and Savings Database, Stock (February 2024 and February 2023).
12. Engaged customers have their main personal current account with us, plus either a residential mortgage of at least £100, or at least £100 in personal savings.
Encouraging more people to bank with us
Banking is core to our purpose and helps us build deeper,
lifelong relationships with our customers.
Overall, we opened 761,000 (2023: 679,000) new
current accounts, whilst achieving more net gains in
current account switches than any other brand
13
. This
was supported by our marketleading current account
switcher incentive, which ran between September and
December 2023 and offered £200 cashback to those
who switched to us
14
. Overall, we held almost one in ten
current accounts (2023: one in ten)
15
.
Alongside the launch of our current account switcher
incentive, we launched a topofthemarket Flex
Regular Saver, that had an interest rate of 8%. These
propositions demonstrate our commitment to building
more rewarding relationships with our customers and to
delivering the best value in UK banking.
Supporting those who save with us
We want to encourage good savings habits, as this can
provide customers with financial security in the long
term. We offered a competitive range of products over
the year, including our Flex Regular Saver, Nationwide
Fairer Share Bond and FlexOne Saver. We also made
saving easier through our banking app, with Impulse
Saver and Round Up tools, and Savings Goals. And
we continued to inform customers signed up to our
SavingsWatch service of our latest, and best, savings
rates and products.
Over the year, customer deposits increased by £6.3
billion (2023: £9.1 billion), supported by our competitive
fixedrate products and increased levels of accrued and
capitalised interest due to higher average savings rates.
Our market share of deposit balances reduced slightly to
9.5% (2023: 9.6%).
We also reentered the young savers market, launching
our FlexOne Saver for 11 to 17 year olds. Our FlexOne
Saver is available to our FlexOne current account
customers, offering an interest rate of 5% during the
year and no restrictions on withdrawals. It represents
one of our first key deliveries in improving our offering
for our younger customers, and we plan to broaden our
range further over time to meet a wider range of needs.
Helping people into homes
We were founded to help people into homes of their
own, and this remains important to our strategy today.
Our share of total mortgage balances increased to 12.3%
(2023: 12.2%), in a competitive market with subdued
growth. Net lending was £2.6 billion (2023: £3.3 billion),
supported by our continued focus on retention through
highly competitive products provided to existing
customers.
Our existing mortgage customers have access to rates
that are at least as good as those for new customers
remortgaging to us. We were proud to be awarded Best
Fixed Rate Mortgage Provider at the Moneyfacts Awards
2023.
We also made it easier for our customers to stay on top
of their mortgage payments with our online Mortgage
Manager service, where they could switch product or
extend their mortgage term to reduce their borrowing
costs.
We signed up to the Government’s Mortgage Charter,
reinforcing our support for our mortgage customers,
and providing them with options for reducing payments
without impacting their credit score. We continued
to offer a range of tailored options to our customers
through our specialist support team.
We helped 64,000 (2023: 72,000) first time buyers
into a home of their own. Our Helping Hand mortgage
supported affordability, enabling first time buyers to
borrow more (up to 5.5 times their salary) on 5 and
10year fixed rate mortgages. It also extends to 95%
loan to value, reducing the pressure on first time buyers
of saving for a larger deposit, and we offered £500
cashback to support them further. We continued to
lend responsibly, with robust underwriting checks, but
without relying on the Government’s 95% mortgage
guarantee scheme.
The buy to let market was smaller overall, as higher
interest rates impacted landlords’ affordability and
profitability, limiting their ability to expand portfolios
or raise capital. The gross lending market share of our
buy to let subsidiary, The Mortgage Works, increased
slightly to 11.2% (2023: 10.7%
16
) as we continued to
balance our new lending volumes and pricing to preserve
an appropriate level of interest margin in a challenging
market.
We continued to enable our landlords to switch
mortgage products up to 13 weeks ahead of maturity
and offered competitive rates for existing landlords
switching products. We introduced new fee options
that offered more choice for landlords, including those
looking for larger loan sizes. In addition, we improved
our affordability and lending criteria, making us more
competitive and able to support more landlords.
Over the year, we also increased our lending to social
housing, both through new lending and the refinancing
of existing facilities, demonstrating our support for this
important sector.
Chief Executive review (continued)
13. Pay.UK quarterly Current Account Switch Service data, 9 months to December 2023, based on the latest available data.
14. To earn the £200 cashback, customers must have completed a full switch to us, from a current account held with another provider, using the Current Account Switch Service.
15. CAC’s Current Account and Savings Database, Stock (February 2024 and February 2023).
16. Comparative has been restated to reflect updates to UK Finance total industry lending data.
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Simply brilliant service
Personalised service you can trust, at every touchpoint.
Delivering excellent customer service
We provide customers with great value products, choice
in the way they bank with us, and the best possible
service. We aim to combine a great mobile banking
experience with modern branches, where our colleagues
provide personalised and trusted support. Through the
year, we continued to invest in our branches, telephone
and mobile banking services.
In 2024, we ranked 1st for customer satisfaction among
our peer group for the 12th year running
17
. When an
independent survey conducted by Ipsos, on behalf
of the Competition and Markets Authority, asked
personal account customers how likely they would be to
recommend their provider’s branches, we came joint first
in both Great Britain and Northern Ireland
19
.
We also measure the experience our customers have
when they interact with us in our branches, by telephone
or digitally, through our customer experience score.
This enables us to act on their feedback and improve
our services further to continue to meet our customers’
needs. In March 2024, our customer experience score
of 76.8% was 0.8%pts below our target. Customers
were satisfied with the service across our channels,
particularly the support provided by colleagues across
our branches. However, our score was impacted in the
short term as customers transitioned to using our new
mobile banking app. Our key performance indicators can
be found on page 24.
Launching our new mobile banking app
In 2024, we launched our new mobile banking app,
improving our customers’ banking experience and
empowering them to take better control of their money.
The new app has a fresh look and feel aligned to our
brand, and provides new features and functionality,
including an updated navigation with easier access to the
features that customers use most.
We also gave customers the option to remove our
card reader requirements for making payments over
the banking app, through the introduction of selfie
authentication. This is a significant step in our journey
to delivering simply brilliant service to our customers
through our digital channels. Over the coming year, we
will continue to innovate and deliver regular releases
with new features we know our customers want to see in
the app.
No. 1 for customer satisfaction among
our peer group for the 12th year
running
17
. Our own customer experience
score
18
of 76.8% was 0.8%pts below our
target
Awarded Branch Network of the Year at
the Moneyfacts Consumer Awards 2024
Launched our new mobile banking app
Extended our telephone opening hours
to include later evenings and Sundays,
complementing our 24/7 chat availability
Chief Executive review (continued)
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
17. © Ipsos 2024, Financial Research Survey (FRS), for the 12 months ending 31 March 2013 to the 12 months ending 31 March 2024. For more information, see footnote 1 on page 5.
18. For more information on our customer experience score measure, see page 24.
19. According to an independent phone survey of 16,088 customers (aged 16+) of the 16 largest current account providers in Great Britain, and 5,535 customers (aged 16+) of the 11 largest current account providers in Northern Ireland,
between January 2023 and December 2023, run by Ipsos. Learn more at Ipsos.uk/personalbankingservicequality.
We now have almost five million (2023: 4.6 million)
customers who actively use our mobile banking app.
This represents 64% of all our active current account
customers. Payments and transfers through the banking
app increased by 13% over the year.
Extending our Branch Promise
We recognise the value that our high street branches
have for our customers, some of whom rely on our
branches, prefer to speak to us face to face, or value
choice in the way they bank.
That is why we again extended our Branch Promise
– everywhere we have a branch, we promise to still
be there until at least the start of 2028
20
. We remain
committed to our communities and to providing easy
access to cash.
As a result, we have the largest singlebrand branch
network across the UK financial services sector, made up
of 605 branches, with a branch manager in every single
branch. At the Moneyfacts Consumer Awards 2024, we
won the Branch Network of the Year award.
We have enabled our branch colleagues to serve more of
our customers in different ways, including by telephone
and through online chat, helping us increase resilience
in our customer service. As at 4 April 2024, 142 (2023:
50) of our branches were closed for one or two days each
week so our colleagues could support our customers
in these other ways. We also reintroduced facetoface
current account, credit card and personal loan opening
across around 150 of our branches, offering further
support to our customers.
We continue to make ourselves more accessible to our
customers, so that they can reach us at a time that suits
them. Over the year, we extended our telephone opening
hours to include later evenings and Sundays. Our online
and inapp chat already provides 24/7 availability, 365
days a year.
Protecting our customers in challenging
circumstances
Our dedicated cost of living helpline has now handled
over 11,000 calls. Our branches continued to provide
facetoface practical support, including free financial
healthchecks, and our online cost of living webpage
provides access to selfservice options for managing
money and budgeting.
We also make referrals to support charities, including
Citizens Advice, StepChange and PayPlan, in situations
where customers have debts across several lenders.
We work hard to protect our customers from fraud. Last
year, our fraud defence systems and specialist fraud
team helped prevent £134 million (2023: £115 million)
of attempted fraud on card and online transactions. In
addition, since its launch in 2021, our Scam Checker
Service has helped prevent around £12.9 million of
potential scams. In the Payment Systems Regulator’s
(PSR) independent benchmarking report published in
October 2023
21
, Nationwide was recognised as having
the second highest reimbursement rate for Authorised
Push Payment (APP) fraud losses across the industry
over 2022, both in terms of the value reimbursed and the
percentage of cases reimbursed. We refunded 78% of all
APP fraud losses by value in 2022.
Our specialist teams support our most vulnerable
customers, and we partner with gambling, debt
and mental health charities where customers need
assistance beyond their banking needs. Last year, we
made gambling blocks available in our banking app
and our branches, supporting customers who may be
impacted by the harms of gambling. We also rolled out
over 430 safe spaces across our branches – private
rooms where anyone experiencing domestic abuse can
come to access supporting information or discreetly
contact friends, family, charities or the police. We can
also put them in touch with our specialist support team
where appropriate.
In addition, we collaborated with Experian and six
other financial and energy service providers to create
an industryfirst: a free, digital service that enables
consumers to notify multiple organisations about their
vulnerabilities and support needs in one go, reducing the
need for repeat conversations.
20. All our 605 branches will remain open until at least 1 January 2028. Opening hours may vary. There may be exceptional circumstances outside of our control that mean we have to close a branch. But we will only do this if we do not have
another workable option.
21. Payment Systems Regulator, Authorised Push Payment (APP) fraud performance report, October 2023.
Chief Executive review (continued)
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Beacon for mutual good
Famous for having a meaningful impact on customers, communities and society, by being bigger and doing better.
We have a bold social ambition and strive to have a
positive impact in communities. The power of mutuality
means we can do more together than we could each do
alone.
We measure our reputation through an independent
brand survey. This allows us to understand how
recognised we are for doing good things. In March 2024,
we were first among our peer group when ranked by
consumers as to which brands they had ‘heard good
things about’
22
. In addition, we were first among non
customers
22
, which was above our target of at least third
place. For more information, see page 25.
Having a meaningful impact in our communities
We commit at least 1% of our pretax profits
23
each year
to charitable activities. This money is split between
our own social investment programmes (including our
Community Grants programme, funding our partnership
with Shelter and the internal costs of managing
our social investment agenda) and the Nationwide
Foundation.
In 2023/24, this amounted to £15.5 million
23
(2023: £9.6 million), our highest ever commitment.
Last year, we continued to focus our charitable giving
around:
• Helping people into a home
• Preventing people from losing their home
• Supporting people to thrive in their home environment
As part of our £15.5 million commitment, we awarded
£5.1 million (2023: £4.3 million) to support 105 (2023: 96)
charitable housing projects across the UK. The grants
were distributed through our Community Boards, under
the direction of customer and colleague volunteers,
and will benefit around 30,000 people across the UK.
Over the six years of our Community Grant giving, we
have donated £27 million, benefitting 645 housing
projects and supporting an estimated 149,000 people.
Through our Colleague Grants programme, we awarded
£945,000 to 125 registered charities.
First among our peer group when ranked
by consumers as to which brands they
had ‘heard good things about’
22
£15.5 million
23
committed to charitable
activities
2023: £9.6 million
Published our Intermediate (by 2030)
net-zero-aligned Transition Plan 2023
Continued to source 100% renewable
electricity to support our business
operations, and removed the use of gas
from over 80% of our branch network
Chief Executive review (continued)
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
22. Based on a study conducted by an international market research company commissioned by Nationwide Building Society. Based on total consumer responses, including noncustomers, for the 6 months ending March 2024. Financial brands
included are Nationwide, Barclays, Cooperative Bank, First Direct, Halifax, HSBC, Lloyds, Monzo, NatWest, Santander, Starling Bank and TSB. Nationwide’s key performance indicator is based on noncustomer responses only.
23. Our charitable commitment of 1% of pretax profits is based on average profits over the previous three years. For 2023/24 this amounted to £15.5 million, which included £13.6 million of charitable donations and £1.9 million relating to
supporting activity and staff costs.
We have partnered with the national housing charity,
Shelter, for 23 years. Last year, our colleagues and
customers raised £210,000 to support their services, on
top of the £730,000 we provided directly. Our donation
helps to fund advisers for their helpline and directly
enabled them to answer around 2,300 calls. It also funds
community engagement workers at their 11 national hubs,
broadening their reach and impact at a community level.
Over the 23 years, our funding has supported more than
155,000 people in housing need.
Last year, we made oneoff donations to charities to
support their innovative work. We donated £790,000 to
The Diana Award, to support its antibullying programme
in schools and to help with its mentoring programme.
We also donated £1.5 million to The Royal Marsden
Cancer Charity, to fund specialist teams at the forefront
of cancer research and for investment in artificial
intelligence technology and data.
Each year, at least a quarter of our charitable funding is
awarded to the Nationwide Foundation, an independent
charity. For more information on its work, see page 41.
Launching our new social impact strategy
In 2024, we are excited to be launching our new social
impact strategy – Nationwide Fairer Futures. This will
support us in delivering the Society’s new purpose and
ambitions for being a Beacon for Mutual Good. Our
investment through Nationwide Fairer Futures will have
a meaningful impact on key societal issues and help
people at different stages of their lives. Our focus will be
on helping:
• young people avoid homelessness
• families living in poverty
• older people living with dementia
We are partnering with Action for Children, Centrepoint
and Dementia UK for the next three years to support our
ambitions.
Reducing our environmental impact
Nationwide is committed to a netzero future and
supporting the UK in achieving its ambition to be net
zero by 2050.
We are a member of the NetZero Banking Alliance and
part of the Glasgow Financial Alliance for Net Zero. As
part of this, we set and disclosed intermediate (by 2030)
sciencebased emissions targets in December 2022.
In December 2023 we published our Intermediate (by
2030) netzeroaligned Transition Plan 2023, detailing
the actions, and potential actions, needed for us to
progress towards our targets.
We are proud of the progress we have made to reduce
the emissions of our own business operations. Since
2018, we have continued to source 100% renewable
electricity, and by the end of 2023, we had removed
the use of gas from over 80% of our branch network,
replacing it with electrical solutions. We are on track to
remove 100% of gas from our branches by the end of
2025. We are in the process of removing gas from our
data centres, with work expected to complete by the
end of 2024. And we are exploring the removal of gas
from our admin sites by 2030 (either by removing gas
or moving to gasfree sites). More information on our
approach and progress can be found in our Transition
Plan 2023.
We offer a range of green finance propositions and
initiatives to support our customers in making energy
efficient home improvements. Last year, we launched
a 0% interest green additional borrowing product as
a pilot. This will enable up to 5,000 households with a
Nationwide mortgage to borrow, interestfree, when
making energy efficient home improvements, such as
solar panels, air source heat pumps and insulation
24
.
At present, takeup remains limited, implying other
factors beyond access to finance are having an impact on
customers’ behaviour towards retrofitting their homes.
We will continue to monitor takeup and use our findings
to develop future green finance propositions and engage
with policymakers on practical steps to reduce the
environmental impact of housing. We also launched a
Home Energy Efficiency Tool, with the Energy Saving
Trust, supporting our customers with a personalised
energy saving action plan, including suggested
improvements, potential costs, and projected savings.
Action by government, customers and crossindustry
to date indicates that the UK is not going to achieve
the emissions reductions required to green UK
homes in line with its ambition to be net zero by 2050.
Therefore, we do not believe that our intermediate
(by 2030) sciencebased target for mortgages will be
achieved. Over the next 12 months, we will reflect on the
appropriateness of setting a more realistic intermediate
residential mortgages target. In doing so, we will give
due consideration to the current UK green homes policy
landscape, the outcome of the general election and any
policy changes that follow, and our 0% interest green
additional borrowing research.
24. Our 0% interest green additional borrowing pilot enables up to 5,000 households with a Nationwide mortgage the opportunity to borrow £5,000 – £15,000, up to a maximum of 90% loan to value across a two or fiveyear product term, to
finance a range of retrofit home improvements.
Chief Executive review (continued)
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Continuous improvement
Being focused, fit and fast, and delivering at pace.
Making our business operations more productive,
simplifying our processes and continuously managing
risk and improving controls helps us to deliver services
safely and efficiently for our customers. Being fit for
the future also means ensuring our ongoing financial
strength.
Our financial performance remained strong; we delivered
underlying profit of £2,003 million (2023: £2,233 million)
and statutory profit of £1,776 million
25
(2023: £2,229
million).
As a result, our leverage ratio and Common Equity
Tier 1 (CET1) ratio, which demonstrate our financial
strength by measuring our ability to withstand economic
shocks, increased to 6.5% (2023: 6.0%) and 27.1% (2023:
26.5%) respectively. Our leverage ratio is one of our key
performance indicators and more information is included
on page 25. Our financial strength means we can invest
in meeting customers’ needs and expectations, now and
into the future.
Over the year, we achieved a number of important
deliveries, focused around modernising our technology,
transforming our operating model and becoming more
data led in our approach.
Modernising our technology
We are investing in digital capability and innovation,
including improving our T platforms and simplifying
processes.
By prioritising our most important strategic change
programmes, we enabled a more focused and faster
approach to delivery.
During the year, we completed the first phase of
modernising our payments systems, which includes
moving our Faster Payments system to a secure, cloud
based platform. This is a significant step in our delivery,
and will result in a more resilient service, capable of
making a higher volume of payments safely, quickly and
securely. In 2024, we completed the initial migration of
our customer payments over to the cloudbased Faster
Payments platform.
We also made significant progress in our core banking
transformation, accelerating the migration of our
savings accounts onto a platform that will improve our
customers’ experience when opening and managing their
savings accounts.
Leverage ratio of 6.5% (2023: 6.0%)
Invested £100 million to modernise our
payments systems to provide customers
with a more stable and resilient service
Made significant progress in our core
banking transformation
Removed the need for our card reader
when making payments on our new
banking app
Simplified our processes to improve and
increase support for customers
Making our workspaces fit for the
future and investing in our branches and
customer support
Chief Executive review (continued)
25. The Nationwide Fairer Share Payment of £344 million, distributed in June 2023, accounted for the majority of the difference between underlying and statutory profit. For more information, see page 68.
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Our new mobile banking app is making it easier for our
customers to manage their money digitally, and we have
given customers the option to remove our card reader
requirements for making payments.
We also launched a new system for customers taking out
a personal loan, or extending their loan borrowing with
us, strengthening our digital offering and helping us to
better serve our customers. And we reinforced our fraud
detection system for payments and improved our scam
warnings, making them more targeted to reflect the
nature and circumstance of the payment being made.
For customers buying a home, we piloted shorter
mortgage advice appointments of one hour instead
of two hours. We intend to roll these out over the year
ahead, which will provide more availability to serve
more customers. We also automated more applications,
delivering faster certainty on lending decisions earlier in
the application process.
We continue to explore the latest developments in
artificial intelligence, including those that could enable
our colleagues to help our customers more quickly and
efficiently. We have refreshed our artificial intelligence
strategy, so we can take advantage of the opportunity
artificial intelligence brings, whilst ensuring any adoption
is safe, responsible and for the benefit of our customers,
and protects the Society from harm.
Colleagues in our specialist support teams are benefiting
from artificial intelligence capabilities within ChatBots,
which are providing them with key information during
conversations with customers who are experiencing
financial difficulties. We plan to expand the use of this
capability to other customer servicing teams, to support
an improved customer experience. We also continue
to explore ways to innovate our complaints process to
efficiently and effectively provide the right outcomes
for customers and provide the experience they would
expect from Nationwide.
Transforming our workspaces
We are making sure that the size and location of our
workplaces reflects how our colleagues work, reduces
our carbon footprint, and releases cost savings that
enable us to invest further in our branches and customer
support.
Last year, we reopened our Threadneedle Street
office in London. As well as bringing us closer to key
stakeholders, the move allowed us to reduce workspace
requirements elsewhere in London and will significantly
reduce our related costs in future years. In February
2024, colleagues relocated from our previous building
in Dunfermline to a smaller, more sustainable building
nearby, reducing costs and responding to our workplace
requirements.
Improving our operating models
We continue to simplify organisational structures
and strengthen controls. This is reducing complexity,
improving decision making and helping us to deliver
more value at pace.
As part of this, we streamlined some of our head
office workforce, which has resulted in around 600
colleagues
26
across the UK leaving the Society. We have
also rationalised the number of our thirdparty suppliers,
improving productivity and efficiency.
We are improving the core capabilities and skills needed
to deliver our strategy and modern mutual purpose. We
have refreshed our early career schemes for students,
graduates and career changers, aligning to the skills
we require for the future. In addition, we introduced
development programmes for senior leaders and people
managers, as described on page 30.
We aspire to be an organisation that is powered by
data. We have used data to understand what matters
most to our customers, so we can focus on making their
banking experiences better. We will continue to advance
our data capabilities to enable more timely and useful
communications and personalisation that provides
relevant, tailored and realtime offers through digital
channels.
Last year we initiated a new threeyear security strategy.
As part of this, we are investing to ensure we continue
to have the right security skills in place across our
workforce to protect our customers and their data. In
2023/24, this amounted to an additional investment
of £2.0 million, with up to £4.7 million to be invested
annually. We also strengthened our cyber defences, so we
remain cyber resilient and well placed to prevent, detect
and respond to potential security risks.
We are also streamlining our operations to drive greater
efficiency and, in February 2024, we transferred our
financial planning service to our longstanding partner,
Aegon UK, which will give our customers a broader
proposition.
Chief Executive review (continued)
26. This is the number of colleagues leaving the Society over 2023/24. Of the 600 colleagues, 370 of these departures were announced in our Annual Report and Accounts 2023.
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How we performed in
2023/24 against our
key performance indicators
23
Strategic report Risk report Financial statementsGovernance Other informationAnnual Report and Accounts 2024
Last year, we updated our key performance indicators to support more effectively the delivery of our strategy. Our four measures for 2023/24 are set
out below and on the next page.
More rewarding relationships
Deeper, broader, more lifelong relationships that provide the
best value in banking.
Our key performance indicator:
Engaged cu
stomers
New in 2023/24
What does it measure?
Our engaged customers measure reflects the depth of our relationship with our
customers, through the number of core products that they hold with us
1
.
How did we perform against our target over 2023/24?
We have 3.53 million engaged customers, which is above our 3.33 million target for
2023/24. Growth in this measure was supported by the strength of our competitive
products and propositions through the year, including our current account switching
incentive and Flex Regular Saver.
Engaged customers
Million
How we performed in 2023/24 against our
key perform
ance indicators
2024
Actuals
3.53
2024
Target
3.33
Simply brilliant service
Personalised service you can trust, at every touchpoint.
Our key performance indicator:
Customer experience score
New in 2023/24
What does it measure?
Our customer experience score is based on the feedback score customers provide
when they complete our survey after they interact with us, in our branches, telephone
and digital channels
2
. Customers are asked to rate their satisfaction with our service.
How did we perform against our target over 2023/24?
Our customer experience score of 76.8% was slightly below our target of 77.6%.
Customers were satisfied with the service across our channels, particularly the
support provided by colleagues across our branches. However, our score was
impacted in the short term as customers transitioned to using our new mobile
banking app.
Customer experience score
%
2024
Actuals
76.8%
2024
Target
77.6%
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
1. Engaged customers have their main personal current account with us, plus either a residential mortgage of at least £100, or at least £100 in personal savings.
2. Our customer experience score measure is based on a 12month average score over the 12 months ending 31 March 2024, and is calculated by weighting the aggregated scores across channels reflecting the way customers interact with
us. Digital channels include our mobile banking app, internet bank, webchat and our website (nationwide.co.uk).
Beacon for mutual good
Famous for having a meaningful impact on customers, communities and
society, by being bigger and doing better.
Our key performance indicator:
Heard good things about Nationwide
New in 2023/24
What does it measure?
We measure our brand reputation through Kantar’s brand study, which asks
noncustomers: “Which of the brands have you heard good things about?”, with
respondents asked to rate Nationwide and peer brands from a list
3
.
How did we perform against our target over 2023/24?
We were first among our peer group when rated by noncustomers for which brands
they had ‘heard good things about’. This was above our target of at least third place.
In particular, our new branding and advertising, focused on the difference of our brand
and the benefits of mutuality over our peers, has had a positive impact on improving
awareness of, and engagement with, our brand.
Heard good things about
Ranking
2024
Actuals
1st
2024
Target
3rd
Continuous improvement
Being focused, fit and fast, and delivering at pace.
Our key performance indicator:
Leverage rati
o
What does it measure?
Our leverage ratio demonstrates our financial strength, and our ability to withstand
economic shocks. Our financial strength helps us to progress the delivery of our
strategy. More information on the leverage ratio can be found on page 74.
How did we perform against our target over 2023/24?
Our leverage ratio of 6.5% exceeded both regulatory requirements and our own
internal minimum target threshold of at least 4.5%.
Leverage ratio
%
How we performed in 2023/24 against our
key performance indicators (continued)
2021
Actuals
5.4%
2022
Actuals
5.4%
2023
Actuals
6.0%
2024
Actuals
6.5%
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
2024
Target
4.5%
3. Based on a study conducted by an international market research company commissioned by Nationwide Building Society. Based on noncustomer responses for the 6 months ending March 2024. Financial brands included are Nationwide,
Barclays, Cooperative Bank, First Direct, Halifax, HSBC, Lloyds, Monzo, NatWest, Santander, Starling Bank and TSB.
Engaging with our
stakeholders
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Strategic report Risk report Financial statements Other informationGovernanceAnnual Report and Accounts 2024
Section 172(1) statement
This section describes how the directors considered
matters set out in section 172(1) of the Companies Act
2006 (the ‘Companies Act’). It also forms the directors’
statement required under section 414CZA of the
Companies Act. Although Nationwide, as a building
society, is not required to follow the Companies Act, we
seek to apply its requirements where appropriate.
Our stakeholders
Listening to and engaging regularly with our
stakeholders is fundamental to the way we do business,
and it ensures we operate in a balanced and responsible
way, both in the short and longer term. Their views are
important to us and help to guide our decision making.
In this section, we summarise how we have engaged
with, and responded to, feedback from each of our
key stakeholder groups during the year, both at a
broader Society level and at Board level. In addition, key
decisions taken by the Board in the year, and its related
consideration of relevant stakeholders, are set out on
pages 35 to 40.
Separately, in 2024, we ran our third materiality survey,
to understand from a range of our stakeholders the
environmental, social and governance (ESG) topics that
mattered most to them. These responses will continue to
help guide our ESG ambitions, as articulated through our
Mutual Good Commitments (see pages 46 to 51).
Members and customers
As a mutual, we are here to support our customers,
including our members (who are our customers with
a current account, mortgage or savings with us). It is
important we understand their needs, now and in the
future. More information on how we have delivered
simply brilliant service and value can be found on pages
15 to 18.
Our engagement
At our Annual General Meeting (AGM), our members can
have their say and vote on important issues. Our AGM
in July 2023 was fully online, a first in the UK financial
services industry. The 2023 AGM was attended by 367
members, which was the highest in 12 years. Members
could vote online during the meeting and ask questions
to the Board via an online platform.
In addition, we engaged with members through the year
via our Member Connect online forum, which provides a
platform for them to share their views with us on a range
of subjects. It has a cohort of over 6,500 members.
Our branches also ran more than 60 digital lessons over
the year, held face to face in local branches and streamed
online, to help customers manage their money online,
safely and securely.
The themes of the topics raised at our AGM and via
Member Connect, included:
• Nationwide Fairer Share
• Cost of living support
• Protection from fraud and scams
• Mutuality and the benefits of membership
• Maintaining access to branches and to cash
• Our brand refresh (including the advert and logo)
• Executive remuneration
• Children’s accounts
• Mobile banking app improvements
• Acting responsibly, including our approach to climate
change and our netzero ambitions
Our response included:
• Delivering value through competitive products and
propositions, including our Nationwide Fairer Share
products and payments (see page 15)
• Supporting customers with our cost of living
helpline and Scam Checker Service (see page 18)
• Extending our Branch Promise (see page 18)
• Launching our new mobile banking app (see page 17)
• Reentering the young savers market (see page 16)
Engaging with our stakeholders
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Board engagement
Following the success of last year, the 2024 AGM
will be hosted online again. Members will be able to
submit live questions and vote during the meeting.
The Board reviews customer service and satisfaction
data regularly and supported the extension of the
Branch Promise.
The Board and the Board Risk Committee reviewed
and challenged the approach and activity being
undertaken by the Society to ensure it was fully
prepared for the implementation of the FCA’s
Consumer Duty.
Nonexecutive directors visited branches to
strengthen their understanding of customer and
colleague needs. Board directors also took part in
Closer to Customer events where they engaged with
customers on specific topics, including cost of living
challenges.
Buy to let customers
We support landlords and those who rely on the private
rented sector for their longterm housing needs. We
do this through our buy to let mortgage business, The
Mortgage Works.
Our engagement
We provided education and help through our website to
support landlords’ understanding of their responsibilities
and the provision of better homes for renters. This
benefits all types of landlords, including those running
their portfolios as a limited company.
Over the year, we extended our telephone opening hours
for landlords, to include later evenings and Saturdays.
We also emailed over a third of our customer base,
letting them know how they can reach us for support,
and highlighting our new online Help Centre
1
. And we
proactively contacted many of our landlords with their
certificate of interest, to support them with their endof
year tax returns.
We work with our research providers to gain monthly
and quarterly feedback from landlords. In 2024, we
formed our own dedicated research team to engage with
landlords on specific issues, to understand what they
find challenging and where we can better help them.
Themes discussed included:
• Keeping them updated with helpful and timely
information that may impact them
• Providing easier viewing of their mortgage details
• Providing additional information and support at
term expiry
• Support in a changing Bank rate environment
We responded with supportive initiatives:
• Our new Help Centre
1
provides landlords with
relevant and timely information, to support their
understanding of the latest legislation changes and
housing market news that may affect them and their
tenants.
• In April 2024, we launched a new digital platform for
landlords to have an easier view of their mortgage
details.
• We emailed landlords approaching the maturity
of their fixedrate mortgage with guiding tools for
supporting their next steps.
• We maintained a 13week period for landlords to
switch product ahead of product maturity, so they
could secure a new rate earlier. And we priced
competitively to support the retention of existing
landlords switching products.
Board engagement
While the Board has not engaged directly with buy to
let customers, it received regular reports on buy to let
lending and engagement and discussed the pressures
facing landlords and tenants as part of these updates.
Colleagues
Our colleagues are at the heart of serving our customers
and delivering our strategy and we want to have a
supportive and inclusive environment for them at work.
This means helping them to thrive in a culture where
they feel supported and valued, and can grow their
careers. On page 30, you can read more about how we
support our colleagues.
Our engagement
Nationwide’s strong culture remains as important as ever
to us. Following feedback from colleagues and leaders,
we introduced a new listening approach for 2023/24.
This consisted of quarterly surveys, two of which focused
on our culture in more depth. We invite all colleagues
to share their views on working at Nationwide, the
challenges they face and what works well. On average,
61% of colleagues responded to these surveys over the
year.
1. Help Centre | The Mortgage Works
Engaging with our stakeholders (continued)
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We also gathered colleague insights and feedback
through other surveys, and through engagement with
Employee Network Groups and the Nationwide Group
Staff Union (NGSU). In addition, we answered questions
and sought feedback during webcasts, such as our
Chairman and nonexecutive director Townhall events,
that discussed important and timely topics.
Key topics raised by colleagues included:
• Cost of living support
• Changes to our workplaces
• Our hybrid working approach (see page 31)
• Leadership, strategy and organisational changes
• Pay, bonuses and pensions
• Resourcing, training and development
• Inclusion, diversity and wellbeing
We responded to this by:
• Improving our communication approach to share
more on the progress made against our strategy
and celebrating the successes of our colleagues
• Continuing to engage colleagues on how we are
responding to their feedback
• Providing clarity on our hybrid working policy
• Strengthening our inclusion and diversity approach
to be more data driven and to provide more support
to our employee network groups
• Launching our leadership development and people
manager programmes (page 30)
• Partnering with Gympass, to give colleagues access
to a broader wellbeing offering.
Board engagement
The Society’s culture remains a key focus of the
Board to support the Society’s purpose and delivery
of its strategy. To ensure the Board has a strong
understanding of the Society’s culture, they received
updates on the results of colleague culture surveys.
They also met with the outgoing and incoming General
Secretaries of the NGSU where the alignment of
interests between the NGSU and the Society were
discussed.
The Board has appointed one director (Tamara Rajah)
with specific responsibility for the Employee Voice
in the Boardroom. She holds quarterly events with
colleagues across locations and job levels, to better
understand how our colleagues are feeling.
The Chairman led nonexecutive director Townhall
events, face to face and virtually, where colleagues
were able to engage with our Board.
The Board will continue to sponsor and monitor
progress in all areas of our culture in the coming year.
Engaging with our stakeholders (continued)
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A focus on our colleagues
We aim to build a supportive and inclusive
environment for our colleagues.
In doing so, we seek to create a highperformance,
purposedriven culture where they can thrive
and develop rewarding careers.
Engaging colleagues in our new purpose, strategy
and values
In 2022/23, Nationwide approved a new strategy and
business purpose: Banking – but fairer, more rewarding,
and for the good of society. Our new simplified strategy,
with its four strategic drivers, helps us to fulfil our
purpose. To support the delivery of our strategy, we
introduced customer first behaviours. These are based
on our cultural values and inform how colleagues behave,
putting members and customers at the heart of how we
work together.
Our colleagues are integral to the delivery of
our strategy. In April 2023, we began a cultural
transformation, engaging colleagues in our new purpose,
strategy and values. We improved our performance
management approach, linking colleagues’ performance
to the delivery of our strategy and our behavioural
framework, to focus on both what we do and how we
do it. As a result, colleagues are clear on expectations
and priorities, and regular engagement with colleagues
(described on page 28) provides insight on how our
culture is evolving. Our cultural transformation is
supporting the successful delivery of our strategy.
Supporting performance and development
Our leaders and people managers are critical in driving
the culture and capabilities we need to stay relevant
and evolve. In 2023, we rolled out a new leadership
development programme for senior leaders, focused on
developing commercial and business leadership skills,
and skills for building highperforming teams. We also
launched a new people manager programme.
In addition, we introduced live data covering a range of
people measures, to enable managers to manage and
support their teams effectively.
Building our inclusive culture
We want to ensure that we have an inclusive culture
where everyone can thrive, and where our workforce
better reflects the diversity of society. Having a diverse
range of backgrounds, skills and experiences will help
us continue to serve our customers in the best way and
offer the services and products that are most relevant
to them.
Our Board and Executive Committee are committed
to progressing our inclusion and diversity approach,
with diversity measures around gender and ethnicity at
senior levels forming part of our Directors’ LongTerm
Performance Pay awards (see pages 112 to 113). Our
diversity measures (page 51) are reported each month
to the Board. In June 2023, we also made inclusion and
diversity data available to our senior leaders, to enable
better informed action.
Engaging with our stakeholders (continued)
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A focus on our colleagues
In 2022, we began our focus on social mobility, and
partnered with Progress Together, a membership body
centred on progression, retention and socioeconomic
diversity in financial services, to benchmark our socio
economic diversity against our peers and inform our
future priorities. Their market analysis showed that,
based on colleagues who shared their socioeconomic
background with us, we show greater socioeconomic
diversity than most financial services firms who were
surveyed. In 2024, our approach will focus on prioritising
actions and initiatives that remove the barriers to
recruitment, retention, progression and inclusion.
Our 11 employee networks focus on initiatives that
support Nationwide’s ambition of being an inclusive
employer. They cover: gender; race and ethnicity;
LGBTQ+; disability; faith and belief; working carers;
working families; veterans and reservists; mental
wellbeing; social mobility and sustainability. Our
networks build awareness through Ask Me Anything
sessions, covering a diverse range of lived backgrounds
and experiences. Collaborating with our employee
networks, we introduced new supportive policies on
domestic abuse and on transitioning and change of
gender expression, and enhanced our becoming a parent
policy.
In the 2024 Financial Times’ Diversity Leaders list, we
were the highestranked UK high street financial services
provider for the third year running
2
. We were also the
highestranked UK financial services provider for female
representation on our Board of Directors in the FTSE
Women Leaders Report
3
, across 50 of the UK’s largest
private businesses.
Refreshing our hybrid working commitments
This year, we introduced our new hybrid working policy,
effective in January 2024, with a transition period
that ran until April 2024. The new policy, agreed in
conjunction with the Nationwide Group Staff Union,
combines the positive aspects of working flexibly, with
the benefits of coming together regularly in our office
spaces to share knowledge and skills, collaborate, and
strengthen working relationships, all critical to creating a
healthy and highperforming culture.
Under the policy, colleagues are expected to work
two days a week at one of our offices (or 40% of their
working hours if part time). This remains an attractive
and competitive proposition and we continue to support
a range of flexible working options, including parttime
hours and job sharing.
Understanding gender and ethnicity pay gaps
Our statutory mean gender and ethnicity pay gaps at
5 April 2023 were 22.2% (2022: 30.0%) and 5.8%
(2022: 7.4%) respectively. These take into account a
oneoff payment of £500, made as part of our annual pay
review in April 2023.
Without this oneoff payment, our mean gender pay gap
at 5 April 2023 was 27.5% (2022: 30.0%), reflecting an
improvement in our overall gender balance, although we
acknowledge more needs to be done to increase women
in senior roles. The improvement was supported by our
hiring approach, including our use of diverse interview
panels.
Without the oneoff payment of £500, our mean ethnicity
pay gap at 5 April 2023 was 6.4% (2022: 7.4%), driven
by an increase in the proportion of ethnically diverse
colleagues in midlevel roles and senior roles.
Pay gaps are different to equal pay. Equal pay compares
the pay of colleagues doing the same or similar work.
We regularly monitor pay to ensure our pay policies are
not biased. Our Gender and Ethnicity Pay Gaps report
provides more information
4
.
2. The FTStatista ranking of Europe’s Diversity Leaders is based on independent surveys of more than 100,000 employees across Europe, on their perceptions of their organisation’s diversity and inclusion practices. For the 2024 list,
the employee surveys accounted for 70% of the final score, and three new indicators accounted for 30% of the score (the share of women in management positions, the communications made in favour of diversity, and a diversity score
calculated by data provider Denominator).
3. FTSE Women Leaders Review (February 2024).
4. Pay gaps at Nationwide, nationwide.co.uk/aboutus/inclusionanddiversity/paygaps
Engaging with our stakeholders (continued)
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Mortgage intermediaries
We have around 25,000 mortgage intermediaries who
place business with us, accounting for over 80% of all the
mortgages we provide.
Our engagement
We regularly survey our mortgage brokers on their views
on our products and service. This includes using third
party firms to obtain feedback on applications submitted
and perceptions of us as a mortgage provider.
We also gathered feedback through sixmonthly and
ad hoc workshops, where brokers provided feedback on
their experiences directly to our colleagues responsible
for formulating products and policy.
Our engagement with mortgage intermediaries included
discussion on the following topics:
• Improving service
• Digital integration
• Implementation of Consumer Duty rules
• Supporting first time buyers
• Supporting customers with additional support needs
or vulnerabilities
We responded to this by:
• Simplifying the submission process for digital
mortgage applications.
• Enabling our mortgage intermediaries to notify our
specialist support team directly of any additional
support our customers may need.
• Engaging with trade bodies and having
representatives in important forums such as the
Intermediary Mortgage Lenders Association so we
can influence how the mortgage industry develops.
• Maintaining a constant presence in the mortgage
market, providing consistency for both our
intermediaries and our borrowers.
Board engagement
The Board has been updated on intermediary
engagement during the year, including receiving
updates on broker recommendation scores.
Communities
Our purpose: Banking – but fairer, more rewarding,
and for the good of society sets out the role we play in
the lives of our customers, communities and society as
a whole. It means having a positive impact on broader
society. That is why we commit at least 1% of our pretax
profits
5
each year to good causes. Last year, these largely
focused on supporting housing activity and our work
with community partners and charities.
Our engagement
Our Community Grants programme enables UK charities
across the UK to apply for grants that support people
and communities in housing need. We held 11 Community
Boards, where community grants were distributed under
the direction of member and colleague volunteers.
We also engaged with, and supported, our communities
through our employee volunteering programme, and our
partnership with charity Shelter.
Our engagement with communities included the
following topics:
• Awareness of housing issues and emergencies
• Challenges faced by local charities, particularly as a
result of cost of living pressures
Our response included:
• Increasing the size of our Community Grants from
£50,000 to £60,000, in recognition of the increased
costs faced by charities.
• Supporting those in housing need through our
partnership with Shelter (see page 20).
• Encouraging colleagues to use their allocated
volunteering hours to help local communities, with
31,000 hours volunteered during the year.
In addition, we engaged with the local communities
near to our Oakfield housing development in Swindon,
and opened the Oakfield Park, a green space for local
people.
Board engagement
The Board received updates on our social investment
activity through the year, and on proposals around
our new social impact strategy – Nationwide Fairer
Futures – which will commence in 2024. This included
a summary of the activities, impact and learnings of
our housingrelated social investment strategy over
the past six years, and detail of the charitable activity
that the new strategy will support over the next three
years. More information on our new social impact
strategy can be found on page 20.
Engaging with our stakeholders (continued)
5. The 1% is calculated based on average pretax profits over the previous three years.
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Regulators and policymakers
Regulators and policymakers oversee our activities and
undertake consultations and policy reform. We aim for
the highest possible standards of regulatory compliance
to protect and enhance the integrity of the UK financial
system and ensure good outcomes for our customers.
Our engagement
We engaged effectively with regulators and policymakers
through the year to influence them on behalf of the
Society and its customers. Most notably, we worked with
others to secure a Private Members Bill to modernise the
Building Societies Act which, if passed into law, would
provide a more uptodate regulatory environment for
Nationwide to operate within.
We engaged through onetoone meetings, roundtable
discussions, and conferences and events, which were
attended by members of the Board, the Executive
Committee and subject matter experts. This included our
Chairman attending meetings with the Chief Secretary
to the Treasury, the Economic Secretary to the Treasury,
the Chief Executive of the PRA and the Director General
of Financial Services at HM Treasury. Our Chief Executive
was appointed to the Prime Minister’s Business Council
for 2024, attended roundtables with the Chancellor
of the Exchequer and had individual meetings with
other politicians, including the Economic Secretary
to the Treasury and the Shadow Chancellor. We gave
evidence to the Treasury Select Committee, and we also
engaged with senior Labour party members and leading
Conservative party politicians at their respective party
conferences.
At a global level, we continued to build links through the
NetZero Banking Alliance (NZBA) and Glasgow Financial
Alliance for Net Zero (GFANZ), contributing to reports on
transition planning and public policy frameworks.
During the year, our engagement with regulators and
policymakers included the following topics:
• Modernisation of the Building Societies Act through
the Building Societies Act 1986 (Amendment) Bill
• Our implementation of the FCA’s Consumer Duty
• The importance of mutuality through research with the
Social Market Foundation
6
• Access to cash and banking hubs
• Support for mortgage customers, including our
participation in the Government’s Mortgage Charter
• The FCA’s Cash Savings Market Review and 14point
action plan on cash savings
• Authorised Push Payment (APP) fraud, including our
findings from our fraud research report, produced with
the Social Market Foundation
• Economic crime and operational resilience
• Our branch strategy
• Reform of the private rented sector via the Renters
(Reform) Bill
• First time buyers
• Social mobility and creating opportunities in the
workplace
• Green homes and climate change
We responded through:
• Answering information requests and Select
Committee inquiries on key issues of interest.
• Providing input to consultations from government
departments.
• Organising over 60 MP branch visits.
• Engaging with the Shadow Treasury team on
financial services regulatory topics, and joining
roundtable discussions with senior Government and
Opposition policymakers, including on fraud, green
homes and mortgage support.
Board engagement
The Board received regular updates on interactions
with regulators and taxation authorities, and how
the changing regulatory environment impacts
Nationwide. This included the FCA’s Consumer Duty.
Board members attended regular meetings with
regulators, and regulators attended Board meetings
to present on key topics.
Investors and rating agencies
Our wholesale funding investors support us in meeting
our funding and capital requirements. Our investors are
interested in our financial performance and sustainability
practices and use our credit and Environmental,
Social and Governance (ESG) ratings to support their
understanding.
Our engagement
We maintain an active dialogue with our investors.
This includes during the due diligence process ahead
of wholesale funding issuances and in responding to
general queries. Our Investor Relations programme
provides existing and potential investors with the
opportunity to meet senior managers and executive
directors of the Society. In the year, we updated our
investors on our latest financial performance and ESG
credentials, and on other areas of interest.
Engaging with our stakeholders (continued)
6. Social Market Foundation in partnership with Nationwide Building Society and Royal London – Mutuals can meet public demand for responsible business (June 2023).
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
To support investors’ understanding of our performance
and risk management, we continued to engage with
credit and ESG rating agencies to ensure the Society is
rated appropriately.
Key areas of interest for our investor base included:
• Strategic objectives
• Housing market outlook and implications for the
mortgage market
• Deposit market competition, pricing and volumes
• The outlook for asset quality as the UK macroeconomic
outlook evolves
• Capital strength and expected wholesale funding
requirements
• Approach to climate change risk and our netzero
commitment
• Achievements related to our social ambitions, including
financial inclusion and social investment activity
We responded to this by:
• Providing timely strategic and financial updates to
our investors, to meet their information needs.
• Further enhancing our sustainabilityrelated
disclosures. In December 2023, we published our
Intermediate (by 2030) netzeroaligned Transition
Plan 2023. We also published our inaugural
Sustainability Report 2023, describing our ESG
ambitions and progress.
Board engagement
On behalf of the Board, the Chief Executive and Chief
Financial Officer engaged directly with investors
following our external results announcements.
The Chief Financial Officer led meetings with our
largest investors in the weeks following our results
announcements, and the Chief Executive hosted
an ESG investor webcast on our Mutual Good
Commitments and climate strategy.
Suppliers
Our suppliers help us run and improve our business and
deliver quality service for our customers.
Our engagement
Our initial engagement with our suppliers is through
direct negotiations or within a tender, and through our
preonboarding due diligence. Once we enter into a
relationship with a supplier, we engage with them as part
of our ongoing due diligence. To support our engagement
and monitoring, we use external industry tools to collect
information from suppliers. This includes the Financial
Services Qualification System (FSQS) for information
on a supplier’s policies and controls, and EcoVadis for
sustainability ratings and data.
We updated our suppliers on any material announcements
through email or webcast communications. This included:
• Our new Blueprint for a modern mutual
• The Society’s financial performance
• Leadership updates
• A request for suppliers to update greenhouse gas
emissions data on EcoVadis, to support our annual
upstream scope 3 emissions calculations
Outcomes of our engagement with suppliers
Through engagement with our supplier Social
Enterprise UK, we have entered into two new social
enterprise relationships over the year.
To mark AntiSlavery Day in October 2023, we reached
out to key suppliers to reinforce our expectations,
promote external resources, and ask if they wanted
support to progress their own antislavery efforts.
14% responded that they would benefit from guidance
and we plan to make this available in the coming year.
We also worked with 15 suppliers on a Skills Fair for
1,400 of our colleagues, as they supported us in
building the skills we need for the future.
Board engagement
The Board Risk Committee received updates on key
supplier relationships during the year and considered
the Society’s management of its key supply chains
and the steps being taken to avoid undue risk. In the
second half of 2023, the Board was kept updated on
our response to the financial distress and insolvency
of a key supplier. Using our incident management
approach, we were able to deliver successfully
replacement solutions for each service line that had
been performed by the supplier.
The Board Risk Committee, under delegated authority
from the Board, approved the ThirdParty Risk Policy.
Engaging with our stakeholders (continued)
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Board decisions
Central to modern mutuality is engaging, consulting
with and acting in the interests of our stakeholders.
The Board is responsible for setting a clear strategy
and direction and ensuring the longterm success and
sustainability of the Society.
In October 2022, the Board discussed and approved a
refreshed strategy, comprising a set of actions to deliver
focused outcomes over a three to five year ambition. The
strategy followed a thorough assessment of the current
financial services landscape and a review of the needs
and aspirations of our members. Horizon one of the
strategy, set until 2023/24, focused on strengthening
the foundations for future execution as well as starting to
transform the value we provide for members, including
through new Fairer Share products and payments.
Horizon two, set until 2025/26, focuses on improving our
propositions and digital capabilities, while Horizon three,
set until 2027/28, will build on core strengths to further
differentiate Nationwide in the market.
When making decisions, the Board considers the
outcome for all relevant stakeholders, as well as the need
to maintain a reputation for high standards of business
conduct, the need to act fairly, and the consequences of
its decisions. The terms of reference of the Board and
Board committees (available at nationwide.co.uk) reflect
the importance of considering the requirements set
out in section 172(1) of the Companies Act. Our Board
and Board committee papers must include a section for
authors to outline how the matter directly or indirectly
impacts our key stakeholder groups. The Board reviews
this as part of its assessment to determine the relevant
stakeholder impacts.
Principal decisions are those decisions taken by the
Board, including decisions taken by or delegated to
management which the Board has oversight of, that
are of strategic importance, material to the operations
of the business and are significant to the Society’s key
stakeholders.
The following pages set out a description of the process
and approach for three of the principal decisions taken
by the Board during the year against the backdrop of its
overarching strategy.
The Board plays a pivotal role in providing strong
governance and oversight of the Society. Our goal
is not only to fulfil our statutory obligations as a
Board but also to ensure the Society is managed in
line with our mutual values. Among these values is
the strong commitment from the Board to engage
directly with our stakeholders, to listen to their
views and to consider their interests during Board
discussions and decision making.
Kevin Parry
Chairman
Which stakeholders were considered?
Members and customers
Buy to let customers
Colleagues
Mortgage Intermediaries
Communities
Regulators and policymakers
Investors and rating agencies
Suppliers
Engaging with our stakeholders (continued)
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Nationwide Fairer Share
What was the decision-making process?
At its Strategy Conference in October 2022, the Board
discussed the concept of paying a portion of profit
to members. This would present a tangible, fair and
inclusive way of rewarding members financially. The
Board was positive about the initial concept but required
further modelling around eligibility, the amount of the
distribution, and the extent to which it would enhance
member engagement. The Board also considered
whether future payments could be made within the
context of financial sustainability, operational capacity
and potential complaints which may arise.
The Board received regular updates on progress and
continued to challenge during the planning process.
At its March 2023 meeting, management set out the
proposed eligibility criteria, explained how operational
testing was progressing and updated on the marketing
campaign being developed. The Board challenged the
eligibility criteria and operational planning to ensure
these were sufficiently robust and that customer
vulnerability had been considered.
At its April 2023 meeting, the Board considered and
approved the eligibility criteria for the Fairer Share
Payment: members with a qualifying current account
and either qualifying savings or a qualifying mortgage
on 31 March 2023. These criteria strongly aligned to the
Society’s longterm strategy of growing and deepening
member relationships by encouraging more customers
to hold their current account and other products with
us. The Board also considered the needs of members
who only held deposits with Nationwide and supported
the launch of a Fairer Share Bond with a preferential
savings rate that all members could access. This would
be offered alongside the Fairer Share Payment.
At its May 2023 meeting, the Board recommended that
the Nationwide Fairer Share Payment be made to eligible
members, following due and careful consideration of
the full year financial results to ensure that the payment
was affordable. The Board intends to declare annual
distributions going forward, provided they would not be
detrimental to the financial strength of the Society.
How did the directors fulfil their
duties under section 172 and how were
stakeholders considered?
The Board considered that the Society’s strategic
ambition to grow and deepen current account
relationships was in the best longterm interests of
the Society. Achieving this ambition would in turn help
the Society provide more benefit to a wider group of
members. The Board considered that paying a portion of
profit to members in the form of the Nationwide Fairer
Share Payment, rewarding membership and loyalty and
hopefully encouraging new members, was in the long
term interests of the Society. In addition, by launching
the Fairer Share Bond, with a preferential savings rate,
the benefits of mutuality would be shared with more
members.
It was vital the Society was operationally ready to make
payments to a wide cohort of members. End to end
journeys were mapped, including consideration of direct
communications, opt outs, eligibility investigation and
complaints. The requirements of vulnerable customers
were considered. Front line colleagues were trained to
handle eligibility queries and related complaints.
Regulators were engaged on plans to reward members’
loyalty throughout the process. A Member Reward
Distribution Policy was agreed by the Board in April
2023 which set out the affordability test for any future
Nationwide Fairer Share Payment.
What were the actions and outcomes?
The total Fairer Share Payment of £344 million was paid
to 3.4 million eligible members who received a payment
into their current account in June 2023 and over 116,000
Fairer Share Bonds were opened by members.
Engaging with our stakeholders (continued)
Which stakeholders were considered?
Members and customers
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Colleagues
Regulators and policymakers
Investors and rating agencies
Proposed acquisition of Virgin Money
What was the decision-making process?
In October 2023 the Board held its annual strategy
session where, amongst other things, earnings diversity
and longterm financial sustainability in a highly
competitive market and challenging macroeconomic
environment were considered. The Board considered
ways to compete with the large incumbent UK retail
banks. To do this, the reliance on mortgage income and
the sensitivity to Bank rate movements would need to
be reduced. Greater levels of earnings generated
from other product areas would also help the Society
to achieve scale. The Board reviewed business banking
case studies and Nationwide’s previous attempts to
develop a business banking proposition organically.
It noted the high costs of creating these services, the
length of time that it would take to generate scale
and the difficulties startup providers had in making
profitable returns through organic growth. It asked
management to identify target banks or building
societies to acquire when the opportunity presented
that would deliver business banking capability cost
effectively and diversify earnings more quickly than
had been delivered through historical current account
growth.
At the end of 2023 the Board met a number of times
and considered a proposal to acquire the whole of the
issued share capital of Virgin Money. The proposal would
combine two complementary businesses and bring the
resulting scale of being the second largest provider of
mortgages and savings in the UK as well as providing
greater earnings diversity through business banking and
a larger credit card book. After seeking assurances that
the requisite resource capacity and capabilities existed
within the Society to execute the transaction, the Board
began a process of initial due diligence under a formal
project framework with appropriate governance, to
consider whether the acquisition of Virgin Money would
be in the best interests of the Society and its members
as a whole, both present and future. The Board appointed
specialist financial and legal advisers to assist the Board
and management on the application of laws such as the
Building Societies Act 1986, the Society’s Rules, the deal
structure and the City Code on Takeovers and Mergers.
The Board thoroughly considered the business case and
initial due diligence and determined that the acquisition
would benefit members by bringing a profitable bank
into the Nationwide Group, allowing it to create greater
value by retaining profits that would otherwise have
been paid out to Virgin Money shareholders as dividends.
These retained profits would improve Nationwide’s
financial strength and ability to provide greater member
financial benefit and incentives, including through
better savings and mortgage rates compared to the
market average. Customer service excellence would
be maintained as the acquisition would allow more
investment in branches, digital platforms and contact
centres as well as fraud prevention and support for
vulnerable customers. The Board determined that
bringing the established business banking services of
Virgin Money into the Nationwide Group would not only
respond to some members’ demands to support small
and mediumsized businesses but also create a broader
and more diverse product range and make income more
resilient to economic changes.
The Board also considered the resulting capital strength
of a combined group and were satisfied that, following
the acquisition, Nationwide would still remain best in
class in Common Equity Tier 1 ratio compared to peers.
The Board also agreed that being a mutual would afford
Nationwide time to carefully integrate Virgin Money
and therefore it would be run as a separate entity for
a number of years, in a similar way to how Nationwide
successfully runs its buy to let mortgage business.
The Board would be able to use this period to decide
whether it is in the interests of members to combine
some systems or services. Virgin Money will retain
its own banking licence, and so the Financial Services
Compensation Scheme protection will cover up to
£85,000 of deposits per customer in each of Nationwide
and Virgin Money.
Engaging with our stakeholders (continued)
Which stakeholders were considered?
Members and customers
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Colleagues
Communities
Regulators and policymakers
Investors and rating agencies
Suppliers
How did the directors fulfil their
duties under section 172 and how were
stakeholders considered?
A key consideration for directors was the benefits that
would flow to members and customers. The Board
carefully considered the needs of members and their
feedback on the things that are important to them.
Following appropriate due diligence and review, the
Board was confident in the quality of Virgin Money’s
assets and the opportunities the deal would bring for
members. The Board considered that the price agreed
for the Virgin Money business represented good value
and would lead to immediate financial benefits for the
Society and its members.
The Board also considered the wider community and how
Nationwide’s impact and contribution would be affected.
The Board was clear that Nationwide would continue
to be committed to remaining a building society and a
modern mutual. The acquisition would make the Society
the second largest provider of mortgages and savings in
the UK, increasing the impact it could have on customers
and wider communities by continuing to commit 1% of its
profits to charitable activities.
Board directors were guided by the City Code on
Takeovers and Mergers, which regulates public takeovers
in the UK. These rules cover directors’ responsibilities,
confidentiality, announcements, shareholdings and
dealings, and processes leading up to and following a
public announcement.
The directors considered the interests of current and
future members when considering the acquisition and
took appropriate independent legal and financial advice
on whether a member vote was required under section
92A of the Building Societies Act 1986 (the Act). The
assessment of those matters is one that is reserved to
the opinion of the Society’s directors alone and, given the
objective thresholds in the Act were not met, no member
vote was required.
A significant part of the Board’s decisionmaking
process to determine whether the acquisition was in
the best interests of current and future members was
the assessment of the value of Virgin Money. To support
this, the Board undertook two separate due diligence
processes that looked at the risks that might impact the
Board’s value assessment. This due diligence focused
on reputation risks, transaction risks, regulatory risks,
customer and conduct risks, business assumption risks
and integration risks. The Board were assured by the
support from advisers, the quality of the information
available on Virgin Money and the openness of Virgin
Money management. The Board also noted the robust
regulatory standards that Virgin Money operates within
and the financial resources that would be available to
invest in any areas requiring enhancement.
The Society’s regulators, the PRA and FCA, were briefed
at regular intervals on the proposed acquisition and their
feedback was taken into account.
The Board considered the impact on the Society’s
employees, and following the public announcement,
the CEO kept them informed of the progress of the
proposed acquisition.
What were the actions and outcomes?
In early 2024 the Board approved the initial approach to
the Board of Virgin Money, followed by approval to make
an offer which was announced publicly on 7 March 2024.
Following agreement between the Nationwide and Virgin
Money boards, it was announced on 21 March 2024 that
the terms of a recommended cash acquisition of the
entire issued and to be issued share capital of Virgin
Money by Nationwide had been agreed.
The Chairman wrote to all members twice in March
2024 to outline the proposed transaction and surveys of
members were undertaken. As at May 2024, more than
30,000 members have been surveyed and over 90% of
respondents have been positive or neutral about the
proposed deal. The Board is updated regularly on all
member feedback.
Engaging with our stakeholders (continued)
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Refreshing our Society’s brand
What was the decision-making process?
In May 2023 the Chief Customer Officer outlined to
the Board the opportunities and challenges facing the
Nationwide brand. The unchanged logo and iconography
made the brand feel old fashioned and staid, limiting
the Society’s appeal and ability to broaden its customer
base. Retaining what made the Society uniquely special
whilst embracing modern mutuality presented a unique
challenge, but it was proposed that improving brand
strength would leverage better member engagement,
inspire loyalty and avoid brand decay.
A proposal to modernise the appearance of the
brand and transform the effectiveness of marketing
communications was presented to the Board. A new logo
and advertising campaign was discussed. The refreshed
branding would feature a modern, premium design and
align with a revitalised advertising strategy.
The Board considered market research which had been
conducted with customers, and challenged management
on how the success of the marketing campaign would
be measured. It was informed that outcomes measuring
engagement, customer experience metrics and customer
satisfaction would all be monitored closely and reported
to the Board regularly to inform on the success of the
campaign. The rebrand would not focus exclusively on
the physical branding such as billboards and branches
but would also include a better digital member
experience.
The Board challenged that existing customers may not
recognise the new branding and therefore a strong
member communication strategy must run alongside
the changes to raise awareness. The Board recognised
that significant investment was already needed in many
branches and was satisfied that the costs associated
with the rebrand were appropriate and represented
a costeffective and responsible investment in the
Society’s future.
The refreshed branding and advertising strategy
was presented to the Board at its September 2023
meeting ahead of the relaunch on 7 October 2023. The
Board agreed that it would monitor the impact of the
brand refresh through the “Heard good things about
Nationwide” strategic measure and other key metrics.
How did the directors fulfil their
duties under section 172 and how were
stakeholders considered?
Refreshing the Society’s brand for the first time in
over 30 years was a big step forward for the Society in
distinguishing itself as a modern mutual. It presented a
tangible change, and using slogans such as “Nationwide,
a better way to bank” was a simple way of communicating
to a wide audience that Nationwide was a more rewarding
banking provider.
All customers who bank, save or have a mortgage with
Nationwide were contacted directly about the rebrand
so that they could familiarise themselves with what was
changing and how messages from the Society would
look going forward. Customers using the mobile app
were also informed of how its appearance would change
following the brand refresh.
Colleagues were invited to attend brand launch
events with Board members and senior management
before being launched externally. These provided an
opportunity for staff to ask questions about the rebrand
activity.
Regulators were consulted on the proposed changes to
ensure that they were aware of the forthcoming change.
The Procurement Team engaged with strategic partners
and suppliers to inform them of the brand changes and
involve them in scheduling updates of any materials with
the new Nationwide logo.
Engaging with our stakeholders (continued)
Which stakeholders were considered?
Members and customers
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Colleagues
Communities
Regulators and policymakers
Investors and rating agencies
Suppliers
What were the actions and outcomes?
Following the launch of the refreshed brand on 7 October
2023 and new advertising campaign, our key brand
metrics (“Prompted advertising awareness”, “Heard good
things about Nationwide” and “Spontaneous advertising
awareness”) all increased in absolute score and rank
position for Nationwide
1
amongst our peer group, when
ranked by all consumers, including noncustomers. By the
end of the 2023/24 financial year the Society was first
among its peer group when ranked by all consumers,
including noncustomers, as to which brands they had
‘heard good things about’
2
.
1. Based on a study conducted by an international market research company commissioned by Nationwide Building Society. Based on total consumer responses, including noncustomers, for the 3 months ending September 2023 vs.
3 months ending December 2023. Financial brands included are Nationwide, Barclays, Cooperative Bank, First Direct, Halifax, HSBC, Lloyds, Monzo, NatWest, Santander, Starling Bank and TSB.
2. Based on a study conducted by an international market research company commissioned by Nationwide Building Society. Based on total consumer responses, including noncustomers, for the 6 months ending March 2024. Financial
brands included are Nationwide, Barclays, Cooperative Bank, First Direct, Halifax, HSBC, Lloyds, Monzo, NatWest, Santander, Starling Bank and TSB. Nationwide’s key performance indicator is based on noncustomer responses only,
as set out on page 25.
Engaging with our stakeholders (continued)
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Nationwide Foundation
1. Nurturing ideas to change the housing system
This programme supports innovative solutions to change
the housing system so that more decent and affordable
homes are available for those most in need. Its work in
2023/24 included:
• Continuing work with the Joseph Rowntree Foundation
and FrameWorks UK to promote the ‘How to talk about
homes’ toolkit and develop workshops for organisations
and campaigners. This project provides guidance on
the best ways for campaigners to communicate, to help
the public understand the need for more affordable
and decent homes, and to encourage support for
solutions.
• Supporting and funding work by the Town and Country
Planning Association on new legislation to make sure
homes are built to benefit the health of the people who
live in them.
• Funding ‘We Can Make’, a pioneering project in Bristol
that provides homes for people in need, situated on
microsites around existing houses with a large amount
of surrounding space. The Foundation is working to
bring this project to more areas.
• Working in partnership with the Church of England
and political representatives from the House of Lords
to create a crossparty national housing strategy for
England, which will outline a vision of what a good
housing system should look like in the longer term.
2. Backing community-led housing
Communityled housing gives communities the power to
create decent, affordable homes in the places where they
are wanted and needed. The Nationwide Foundation is a
major funder of this sector and in 2023/24 it:
• Continued to advocate for the importance of
government funding to help the communityled
housing sector grow further.
• Announced a new partnership with the Scottish
government to invest in two communityled housing
trusts, helping the Scottish government to deliver good
quality and genuinely affordable homes in Scotland.
• Funded research to further understand the benefits
and challenges to scaling up the communityled
housing sector.
The Nationwide Foundation is an independent charity set up by the Society in 1997. We donate at least 0.25%
1
of Nationwide’s pre-tax profits to the Nationwide
Foundation – £3,870,000 in 2023/24 – as part of the 1% of pre-tax profits
2
we commit each year to good causes.
The Nationwide Foundation’s vision is for everyone in the UK to have access to a decent home that they can afford. It is currently focused on delivering its Decent Affordable
Homes Strategy, which is being implemented through three programmes. Through these programmes, it seeks to increase the availability of decent affordable homes for people
in need, by using the learning and evidence from the work it funds, and its own activity, to influence change to the housing system.
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
1. The 0.25% is calculated based on average pretax profits for the current and previous two years.
2. The 1% is calculated based on average pretax profits over the previous three years.
3. Transforming the private rented sector
The Nationwide Foundation campaigns and funds other
organisations to reform the private rented sector so that
it provides more affordable, secure and decentquality
homes. In 2023/24, this included:
• Continuing its research into the impact of tenancy
reform in Scotland, especially on the tenants who
are most vulnerable to harm, and using the findings
to influence further reforms across the UK. This
included giving evidence to a government committee
investigating reform of the English private rented
sector.
• Funding a programme of work across the UK to
support renters to have their voices heard in local and
national decision making.
• Funding, and being a key member of, the Renters
Reform Coalition, a group of leading organisations
supporting private renters. The coalition has been at
the forefront of the campaign for the Government to
bring forward the Renters (Reform) Bill, and to make
sure this provides real change for renters.
Next steps for the Nationwide Foundation
The Nationwide Foundation is committed to its Decent Affordable Homes strategy until 2031. During 2024/25, the
Foundation will continue to focus on delivering this strategy, generating and using robust evidence to influence
positive change to the UK’s housing system.
Nationwide Foundation (continued)
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Committed to doing
the right thing
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Strategic report Risk report Financial statementsGovernance Other informationAnnual Report and Accounts 2024
Committed to doing the right thing
Statement from Debbie Crosbie, Chief Executive
We strive to do the right thing in a responsible way for
the benefit of our customers, colleagues, communities
and the environment.
In 2019, we committed to the UN Global Compact and I
am pleased to reaffirm our support for the Ten Principles
of the United Nations Global Compact, which includes
our commitment to protect and promote Human Rights,
Labour Rights, the Environment and AntiCorruption.
The social, political, economic and environmental
challenges facing the world today make it more
important than ever that we act to progress activities
that support these Ten Principles. Our Mutual Good
Commitments help us to hold true to our ethical
principles and mutual purpose, and further reinforce the
UN Sustainable Development Goals (SDGs).
We continue to integrate the principles of the UN Global
Compact into our business strategy, culture and daily
operations. Outside of our Annual Report and Accounts
2024, further information on how we are progressing
can be found in our Sustainability Report (available
at nationwide.co.uk) and on our Responsible Business
policies and statements website.
For more information on:
• our alignment with the UN Sustainable
Development Goals, see page 45.
• our Mutual Good Commitments, see page 46.
Our broader Environmental, Social and
Governance (ESG) disclosures can be found on
our investor relations website. These include our:
• Sustainability Report 2023.
• Principles for Responsible Banking 2024.
• Climaterelated Financial Disclosures 2024.
• Intermediate (by 2030) NetZero Ambitions 2022:
Basis of Preparation.
• Intermediate (by 2030) netzeroaligned Transition
Plan 2023.
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
UN Sustainable Development Goals
Being a responsible business is part of our mutual heritage. We remain committed to doing business in a way that positively impacts our customers, employees and communities.
As a signatory to the United Nations Principles for Responsible Banking, we are committed to a strategic alignment with the UN Sustainable Development Goals (SDGs) and to our
netzero ambition. Our Mutual Good Commitments, as set out on the next page, are most closely aligned to the SDGs listed below.
SDG 1 No poverty
We take positive action against homelessness, and to enhance financial inclusion and
wellbeing, and support and protect our customers’ money.
SDG 5 Gender equality
We promote gender equality and are working towards equal representation of women in
our leadership population by 2028.
SDG 7 Affordable and clean energy
Since 2018, we have sourced 100% of our electricity for our own operations from
renewable sources.
SDG 8 Decent work and economic growth
We are a Real Living Wage employer, promote positive work practices and take action to
enhance the wellbeing, diversity and inclusion of our people.
SDG 10 Reduced inequalities
We are working to reduce economic inequality in our communities and seek to ensure
everyone has access to good and secure housing, finances and work opportunities.
SDG 11 Sustainable cities and communities
Our social investment programme helps us give back to our communities. And we work
on solutions to create affordable, accessible and sustainable homes.
SDG 12 Responsible consumption and production
We divert as much waste as possible from landfill, recycle our office equipment and
source food locally. Sustainable considerations are also built into our procurement and
supply chain management processes.
SDG 13 Climate action
We are part of the NetZero Banking Alliance, committing to a netzero future by 2050.
We have published intermediate (by 2030) sciencebased targets and our Intermediate
(by 2030) netzeroaligned Transition Plan 2023. Our green propositions are intended to
encourage our customers to improve the energy efficiency of their homes.
Committed to doing the right thing (continued)
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Our Mutual Good Commitments
Our ESG ambitions are embedded within our Society strategy, and are focused in areas where we believe we can make the most significant, positive impacts for our members and
customers, our communities and society as a whole. Our ESG ambitions are articulated through a set of Mutual Good Commitments, which demonstrate how our business aligns to,
and supports, the UN Sustainable Development Goals (SDGs) and our netzero ambitions. Our Mutual Good Commitments are overseen by the Executive Committee and the Board,
and the measures that support them are set out over the following pages.
Our strategic drivers
More rewarding relationships
Deeper, broader, more lifelong
relationships that provide the
best value in banking.
Simply brilliant service
Personalised service you can
trust at every touchpoint.
Beacon for mutual good
Famous for having a meaningful impact on customers, communities
and society, by being bigger and doing better.
Continuous improvement
Being focused, fit and fast,
and delivering at pace.
Our mutual good commitments
We will help more people into
safe and secure homes, both our
customers who have relationships
with us and more broadly.
More on our measures can be found
on page 47.
We will offer customers a choice in
how they bank with us, and support
their financial resilience.
More on our measures can be found
on page 48.
We will make a positive difference
for our customers, communities and
society as a whole.
More on our measures can be found
on page 49.
We aim to build a more sustainable
world by supporting progress
towards a greener society.
More on our measures can be found
on page 49 and pages 53 to 61.
We will enhance our performance by
better reflecting the diversity of our
society.
More on our measures can be found
on pages 50 to 51.
UN Sustainable Development Goals supported by our mutual good commitments
SDG 1
No poverty
SDG 10
Reduced inequalities
SDG 11
Sustainable cities and
communities
SDG 1
No poverty
SDG 8
Decent work and economic
growth
SDG 10
Reduced inequalities
SDG 1
No poverty
SDG 11
Sustainable cities and
communities
SDG 7
Affordable and clean energy
SDG 11
Sustainable cities and
communities
SDG 12
Responsible consumption and
production
SDG 13
Climate action
SDG 5
Gender equality
SDG 8
Decent work and economic
growth
SDG 10
Reduced inequalities
Committed to doing the right thing (continued)
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
More rewarding relationships
Deeper, broader, more lifelong relationships that provide the best value in banking.
We will help more people into safe and secure homes, both our customers who have relationships with us and more broadly.
Our measures Our progress
By 2025, we will help 250,000 people,
through our first time buyer proposition,
to buy a home
1
.
We continue to focus on helping people, through our first time buyer proposition, into homes.
We are working to address the two main challenges that first time buyers face – raising a
deposit and being able to borrow enough to afford a property. Since setting our target in
November 2020, we have helped 260,000 people into a home, ahead of both our cumulative
target for 2024 and our 2025 target. This reflected a stronger overall mortgage and first
time buyer market in 2021 and 2022, having set our target in a more subdued market in
2020. It also reflects the continued success of our Helping Hand mortgage, which launched
in 2021 (see page 16).
As a result, we will uplift our cumulative March 2025 target to help 300,000 people to buy
a home.
2024
Actuals
260,000
2024
Target
200,000
2025
Original
2025
target
250,000
2025
Revised
2025
target
300,000
We will ensure 100% of our new buy to
let lending on rental properties meets
our minimum standards, which are
informed by and exceed the Decent
Homes Standard
2
Over a fifth of the 4.6 million households that rent privately in England endure the poor
conditions associated with substandard housing
3
. With many of our customers in rented
accommodation, we seek to enable a private rented sector that works for the mutual good
of both landlords and tenants. We ensure that the buy to let properties we lend on meet
our minimum standards, which are informed by and exceed the Decent Homes Standard
4
recommendations, so that tenants can live in safe and decent homes. Assessments against
our minimum standards are undertaken by Royal Institute of Chartered Surveyors (RCS)
qualified valuers.
We inspect the buy to let properties we originate new loans to. Properties that do not meet
these conditions must complete remedial work prior to us lending on the property.
By 2025, we will have provided £1 billion
of new lending to support the social
housing sector
5
.
Our target demonstrates our support for the social housing sector, benefiting those in more
vulnerable housing situations. Since our target began in March 2022, we have provided
£1.7 billion of new lending to the sector, ahead of both our cumulative target for 2024 and
our 2025 target. This has reflected the evolution of our lending criteria, which has enabled us
to become more competitive and support a broader range of customers with their financing
requirements.
As a result, we will uplift our cumulative March 2025 target to provide £2 billion of new
lending to the social housing sector.
2024
Actuals
£1,700m
2024
Target
£600m
2025
Original
2025
target
£1,000m
2025
Revised
2025
target
£2,000m
1. Set against a baseline of 30 November 2020. Nationwide’s definition of first time buyers is set out in the Glossary for the Annual Report and Accounts, available on nationwide.co.uk.
2. We inspect the buy to let properties we originate new loans on, to ensure they meet our minimum standards, which are informed by and exceed the Decent Homes Standard.
3. Reforming the Private Rented Sector: Government’s response to the Committee’s Fifth Report of Session 202223  Levelling Up, Housing and Communities Committee (parliament.uk).
4. A Decent Homes Standard in the private rented sector: consultation (www.gov.uk).
5. Set against a baseline of 31 March 2022.
Committed to doing the right thing (continued)
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Simply brilliant service
Personalised service you can trust at every touchpoint.
We will offer customers a choice in how they bank with us, and support their financial resilience.
Our measures Our progress
Our Branch Promise: Everywhere we
have a branch, we promise to still be
there until at least the start of 2028
6
.
In March 2024, we extended our Branch Promise again, providing reassurance to our
customers who rely on our branches, or prefer to speak to us face to face. We now have the
largest singlebrand branch network across the UK financial services sector, with a branch
manager in every branch. We won the Branch Network of the Year award at the Moneyfacts
Consumer Awards 2024.
In April 2023, we closed one branch, which was in close proximity to another and was in
keeping with the wording of our Branch Promise at the time. Since this time, we have further
strengthened and extended our Branch Promise to at least the start of 2028, committing to
no further closures.
By 2025, we will protect 750,000
customers with our Scam Checker
Service
7
.
We strive to protect our customers from fraud.
In 2021, we launched our Scam Checker Service. This enables our customers to check
their payments with us before they make them, if they have concerns, providing additional
support and reassurance. Since our target began in March 2022, we have protected 967,000
customers through this service, ahead of both our cumulative target for 2024 and our 2025
target. Usage was higher than expected, supported by more people using our branches
(which is the main channel for use of our Scam Checker Service), and by our advertising
approach, which increased visibility and awareness of our service.
As a result, we will uplift our cumulative March 2025 target to protect 1.4 million customers
through our Scam Checker Service.
2024
Actuals
967,000
2024
Target
500,000
2025
Original
2025
target
750,000
2025
Revised
2025
target
1,400,000
6. All our 605 branches will remain open until at least 1 January 2028. Opening hours may vary. There may be exceptional circumstances outside of our control that mean we have to close a branch. But we will only do this if we do not have
another workable option.
7. Set against a baseline of 31 March 2022. We protect our customers by enabling them to check their payments with us before they make them, if they have concerns it could be a scam. If a customer has used the service and the payment
does not appear suspicious, but later turns out to be a scam, our promise is to refund the customer every penny, unless we advised them not to make the payment.
Committed to doing the right thing (continued)
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Beacon for mutual good
Famous for having a meaningful impact on customers, communities and society, by being bigger and doing better.
We will make a positive difference for our customers, communities and society as a whole.
Our measures Our progress
We will commit at least 1% of our pretax profits
8
to charitable
activities each year.
We met our target in 2023/24, committing £15.5 million
8
(2022/23: £9.6 million). More information can be found on page 19.
We aim to build a more sustainable world by supporting progress towards a greener society.
Our measures Our progress
We aim to reduce our scope 1 emissions that we control across
our own business operations, in line with our 2030 scope 1
sciencebased target.
In December 2022, Nationwide published its intermediate (by 2030) sciencebased targets. Our Mutual Good Commitment
measures reflect these. More information about our targets can be found in our Intermediate NetZero Ambitions 2022: Basis of
Preparation and our Intermediate (by 2030) netzeroaligned Transition Plan 2023. More on our progress towards our intermediate
(by 2030) sciencebased targets can be found on pages 53 to 61 of our Climaterelated Financial Disclosures 2024.
We are proud of the progress we have made to reduce the emissions of our own business operations. Since 2018, we have continued
to source 100% renewable electricity, and by the end of 2023, we had removed the use of gas from over 80% of our branch network,
replacing it with electrical solutions.
We have also built climate change considerations into our thirdparty processes to support a greener supply chain. We offer a range
of green finance propositions and initiatives to support our customers in making energy efficient home improvements, as described
on page 20. Scope 1 and 2 emissions are included in our directors’ longterm variable pay targets. More information can be found on
page 128.
We do not believe that, at present, our intermediate (by 2030) sciencebased target for mortgages can be achieved under
current government policies in connection with the UK’s housing stock. Therefore, over the next 12 months, we will reflect on the
appropriateness of setting a more realistic intermediate residential mortgages target, giving due consideration to the current
UK green homes policy landscape, the outcome of the general election and any policies announced by the new government, and
the outcome of our 0% interest Green Additional Borrowing research. Nevertheless, we continue to take action to seek to reduce
emissions from our mortgages book.
We aim to continue to source 100% renewable electricity for
our own operations, in line with our 2030 scope 2 science
based target.
We will aim to reduce our scope 3 emissions for our
mortgages, other secured lending activity, and our supply
chain, by taking steps to reduce those emissions within our
control and encouraging our customers and suppliers to do
the same, in line with our 2030 scope 3 sciencebased target.
8. The 1% is calculated based on average pretax profits over the previous three years. The £15.5 million includes £13.6 million of charitable donations and £1.9 million relating to supporting activity and staff costs.
Committed to doing the right thing (continued)
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Continuous improvement
Being focused, fit and fast, and delivering at pace.
We will enhance our performance by better reflecting the diversity of our society.
Our measures Our progress
By 2028, our people will better reflect the wider society that
we represent.
This includes seven measures that span across gender,
ethnicity, disability and sexual orientation, as set out on the
next page.
We achieved five of our seven measures to meet by 2024. These measures are set out on the next page.
Of the two remaining measures, we made positive progress in the ethnically diverse representation across our leadership
population; however, the proportion of women in our leadership population reduced. In the coming year, we will focus on the
attraction and retention of diverse talent, with targeted interventions to support progression into senior roles. We will improve
diverse representation and progression through processes, policies and practices that enable inclusion by design. This includes
through our approach to talent identification, succession, development, leadership and people management, performance
management and change processes, that will enable us to better help our colleagues reach their potential. Through a datadriven
approach, we are sharing inclusion and diversity data with key decision makers to inform action.
We continue to partner with the 10,000 Interns Foundation and support their Black Interns programme; last year we supported
around 70 interns. Over 2024, we will broaden the programme to include students from low socioeconomic backgrounds. We will
also launch our Nationwide Scholarship programme, providing financial support to students from low socioeconomic backgrounds
through their university degree.
For more information on the work we are doing to progress inclusion and diversity, including our gender and ethnicity pay gaps, see
pages 30 to 31.
Diversity measures are also included in our directors’ longterm variable pay targets. More information can be found on page 128.
Committed to doing the right thing (continued)
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Committed to doing the right thing (continued)
Gender
9
Leadership population
10
2024
Actuals
11
35.7%
2024
Target
38.0%
2028
Target
50.0%
Ethnicity
12,13
All employees
2024
Actuals
11
15.0%
2024
Target
13.2%
2028
Target
15.0%
Leadership population
10
Actuals
11
2024
8.1%
2024
Target
8.7%
2028
Target
12.0%
Disability
13,14
All employees
2024
Actuals
8.3%
11
2024
Target
7.2%
2028
Target
12.0%
Leadership population
10
2024
Actuals
7.6%
11
2024
Target
5.9%
2028
Target
8.0%
Sexual Orientation
13,15
All employees
2024
Actuals
11
4.3%
2024
Target
3.8%
2028
Target
4.0%
Leadership population
10
2024
Actuals
11
3.2%
2024
Target
2.7%
2028
Target
4.0%
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
We also report on other statutory diversity measures
16
separately to our Mutual Good Commitments. These are as below:
Gender
9
Ethnicity
12,13
All employees 60.4% (10,825 females) 15.0%
Senior managers
16
34.1% (31 females) 4.4%
9. Gender – Figures reflect female representation. Gender is as recorded in Nationwide’s HR system.
10. Leadership population – A targeted and broader leadership population comprising around 1,000 of our leaders.
11. All data as at 4 April 2024, and based upon headcount not FTE (fulltime equivalent value) of employees directly employed by Nationwide Building Society.
12. Ethnicity – Figures reflect Black, Asian, mixed and other. Excluded from the calculation are white majority and minority.
13. The percentage of colleagues meeting this diverse characteristic is based on their selfdeclaration recorded in Nationwide’s HR system, which states that they consider themselves to belong to this characteristic.
14. Disability – Figures reflect those identifying as disabled or as having a longterm health condition.
15. Sexual Orientation – Figures reflect those identifying as bisexual, gay man, gay woman, lesbian and other. Excluded from the calculation are those identifying as heterosexual.
16. Statutory measures – We have presented additional measures that are not part of our Mutual Good Commitment targets but are statutory measures based on the Companies Act. Figures are based upon headcount and percentage
headcount of each population. Senior manager figures reflect the Companies Act definition of an employee who has responsibility for planning, directing or controlling the activities of an entity or a strategically important part of it, which
includes our executive population comprising the Executive Committee and their direct reports.
Non-nancial and sustainability
information statement
This statement provides an overview of topics and related reporting references as required by Sections 414CA
and 414CB of the Companies Act 2006. Nonfinancial and sustainability (environmental, social and governance)
information is integrated across the Strategic report and other publications and we have used crossreferencing in
the table on the right to avoid duplication.
For further information on non-financial and
sustainability matters, please see our separate
reporting on nationwide.co.uk:
• Climaterelated Financial Disclosures 2024
• Intermediate NetZero Ambitions 2022: Basis of
Preparation
• Intermediate (by 2030) netzeroaligned Transition
Plan 2023
• Sustainability Report 2023
• Principles for Responsible Banking 2024 report
• Modern slavery statement
• Responsible business webpages (for information on
our ESG policies and statements)
Supporting our colleagues with disabilities
It is the Society’s policy to provide equal access
to training, career development and promotion
opportunities (with appropriate adjustments made to
processes if required) to all colleagues, regardless of
their gender, race and ethnicity, gender reassignment,
sexual orientation, age, religion or belief, disability,
marriage or civil partnership, or socioeconomic
background.
We are a Disability Confident Leader, the highest level
under the Disability Confident scheme introduced by the
Government’s Department for Work and Pensions. We
support colleagues with disabilities and longterm health
conditions with appropriate workplace adjustments and
access to occupational health support if needed. Should
colleagues become disabled while employed, the Society
will, wherever possible, make appropriate adjustments to
support them in their existing role or redeploy them to a
more suitable alternative role. We also have an active and
supportive disability employee network group, which all
colleagues are welcome to join.
Reporting
requirements
Section of Annual
Report and Accounts
Page
Business model Our difference is our
mutual ownership model
6
Key performance
indicators
How we performed in
2023/24 against our key
performance indicators
23
Governance Governance 75
Stakeholders Engaging with our
stakeholders
26
Social matters Committed to doing the
right thing
43
Key risks and their
management
Risk overview
62
Colleagues
Our key policies and statements
of intent are set out on our
Responsible Business webpages
on nationwide.co.uk, and are
in place to ensure consistent
governance in respect of our
colleagues, environmental
matters, human rights and
economic crime and anti
corruption.
Environmental
matters
Human rights
Economic crime
and anticorruption
For more information on how we support our
colleagues more generally, see page 30.
Non-financial and sustainability
info
rmation statement
52
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Climate-related
nancial disclosures
53
Strategic report Risk report Financial statementsGovernance Other informationAnnual Report and Accounts 2024
Climate-related financial disclosures
Ambition and overview
Environmental and climate consciousness are aligned to our mutual purpose of Banking – but fairer, more rewarding and for the good of society.
This compels us to take meaningful action by limiting the environmental impact of our business operations, helping customers to green their homes
(so that they are warmer, healthier, more comfortable places to live, and more cost effective to heat in the long term), and better managing the impacts
of a more unpredictable climate. In doing so, we can demonstrate our mutual difference, that extends beyond our own customers, and positively
impacts our communities as well as wider society.
Climate change presents a risk to Nationwide and its customers, and so managing the
risk from climate change, and aiming to build a more sustainable world by supporting
progress towards a greener society, is core to Nationwide being a responsible business.
In 2023/24, Nationwide has further embedded climaterelated risk management across
the organisation and continues to consider climate change as a cause to its principal
risks, increasing internal capabilities to manage the impact climate change has on the
Society and its customers. The impacts of naturerelated risks are in the early stages
of being considered as a causal factor in our Enterprise Risk Management Framework
(ERMF).
Pages 55 to 58 below outline how we have aligned to the four categories of the Task
Force on Climaterelated Financial Disclosures (TCFD’s) recommendations
1
(Strategy,
Governance, Risk management, and Metrics and targets) and recommended disclosures,
and aligns with the Financial Conduct Authority’s Listing Rules (9.8.6R(8)). Across these
categories are 11 subcategory headings which we have used to present our activities
for this year, along with ongoing and future activity. Page number references have been
provided to indicate where additional detail can be found in Nationwide’s full Climate
related Financial Disclosures 2024.
Nationwide’s full Climate-related Financial Disclosures 2024
can be found at nationwide.co.uk
1. Nationwide follows the TCFD’s Annex: Implementing the Recommendations of the Task Force on Climaterelated Financial Disclosures (October 2021).
54
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Strategy – The actual and potential impacts of climate-related risks and opportunities on Nationwide, our strategy, and financial planning Disclosures:
pages 4-15
The climate-related risks and opportunities Nationwide has identified over the short, medium, and long term Disclosures:
pages 411
Activity in 2023/24
• Reevaluated the risks and opportunities across the short, medium, and long term, to support the UK’s ambition to achieve netzero by 2050 and explored these as part of our climate strategy and
green finance proposition development.
• Published our Intermediate (by 2030) netzeroaligned Transition Plan 2023, expanding upon our 2022 intermediate (by 2030) sciencebased targets disclosure, detailing the actions, and
potential actions, across the short to medium term, the anticipated impact these will have, and the level of control and challenges faced.
• Requested some of our larger third parties (those with a minimum spend of £3 million, and a minimum contract tenure of 12 months) sign up to EcoVadis, set and disclose sciencebased targets for
scope 1, 2, and 3 emissions, and publish their own climate change transition plan.
Ongoing and future activity
• Continue to embed climate change considerations into Nationwide’s strategy and proposition development processes, including the identification of additional climaterelated risks and
opportunities.
• Continue to actively engage with Environmental, Social, and Governance (ESG) rating agencies to ensure Nationwide’s credentials are fully understood and appropriately reflected in our ratings.
• Reflect on the appropriateness of setting a more realistic intermediate residential mortgages target, giving due consideration to the UK green homes policy landscape.
• Continue to work with policymakers, and crossindustry, to encourage the development of policies which support the greening of UK homes.
• Consider how to integrate naturerelated risks and opportunities into our climate strategy.
• Continue to invite thirdparty suppliers to join the EcoVadis platform, disclose their carbon emissions, and set emissions reduction targets.
The impact of climate-related risks and opportunities on Nationwide’s businesses, strategy, and financial planning Disclosures:
pages 57, 1015
Activity in 2023/24
• Further embedded climate change into our strategic planning and financial planning processes, including consideration of the insights and financial outputs generated by our internal climate
change scenario analysis activity within our FRS9 provisions process.
• Launched the 0% interest Green Additional Borrowing to existing eligible members with a Nationwide mortgage. The loan supports customers in making energyefficient home improvements,
such as a boiler upgrade, solar panels, air source heat pumps, cavity wall insulation, or double glazing.
• Launched Nationwide’s Home Energy Efficiency Tool to support customers in understanding the benefits of retrofitting their homes and helping them make better choices when considering
different retrofit options.
• Maintained our participation in crossindustry forums, to understand new and emerging risks and opportunities across the financial sector, including continuing to campaign for further green
home policy through engagement with policymakers.
• Removed the use of gas from over 80% of our branch network, replacing it with electrical solutions, and continued to source 100% renewable electricity for all our business operations.
Ongoing and future activity
• Continue to explore further green finance opportunities and propositions to support our customers in the greening of their homes and help progress towards our intermediate (by 2030)
sciencebased targets.
• Continue to convene and participate in crossindustry working groups to drive real change, including raising awareness of the challenges of greening UK homes and encouraging further
government action that supports greener homes.
• Undertake an outcome review of our 0% interest Green Additional Borrowing pilot, to understand the impact on customer behaviour in the greening of their homes. This will support future policy
influencing and green finance proposition development.
Climate-related financial disclosures (continued)
Nationwide’s full Climaterelated
Financial Disclosures 2024 can
be found at nationwide.co.uk
55
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
The resilience of Nationwide’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario Disclosures:
pages 1315
Activity in 2023/24
• Completed an internal climate change scenario analysis exercise in 2023, including the use of a dynamic balance sheet and two different scenarios (including a 2°C or lower scenario), to quantify
better the financial risks arising from the physical and transitional impacts of climate change.
• Considered climaterelated risk as part of this year’s Internal Capital Adequacy Assessment Process (CAAP) and Internal Liquidity Adequacy Assessment Process (LAAP).
• Incorporated climate change risk as a consideration when undertaking reverse stress testing, as part of Nationwide’s stress testing framework.
Ongoing and future activity
• Further enhancements to our climate change scenario analysis capabilities, and how we use it to manage climaterelated risks.
Governance – Nationwide’s governance over climate-related risks and opportunities Disclosures:
pages 16-19
The Board’s oversight of climate-related risks and opportunities Disclosures:
pages 1617
Activity in 2023/24
• The Board continues to have ultimate accountability for all climaterelated risk matters at Nationwide. In 2023/24 members of the Board engaged with a number of climaterelated topics,
including:
–
The Board approved the delivery of Nationwide’s Intermediate (by 2030) netzeroaligned Transition Plan 2023, including actions, and potential actions, to progress towards our intermediate
(by 2030) sciencebased targets
–
Board Risk Committee noted and discussed the outcomes of our internal climate change scenario analysis activity
– Audit Committee reviewed and recommended Nationwide’s Transition Plan for Board approval, and reviewed and approved the Society’s Climaterelated Financial Disclosures.
Ongoing and future activity
• Continue to engage the Board on progress towards our intermediate (by 2030) sciencebased targets as part of our Mutual Good Commitments.
• Continue to evolve and optimise the climate risk governance model to ensure even greater focus at Board level.
Management’s role in assessing and managing climate-related risks and opportunities Disclosures:
pages 1819
Activity in 2023/24
• Ownership for responding to climate change sits with Nationwide’s Director of Strategy, Performance, and Sustainability, who reports to the Chief Financial Officer (CFO), whilst Senior Managers
Regime accountabilities sit with the Chief Executive Officer (CEO). In 2023/24, management engaged with a number of climaterelated topics, including:
– Our directors’ long term incentive arrangement continued to be aligned with Nationwide’s scope 1 and scope 2 carbon emission targets, which are captured within a wider ESG measure, with a
defined weighting of 10%
–
Members of the Executive Committee (ExCo) supported the governance of Nationwide’s Intermediate (by 2030) netzeroaligned Transition Plan 2023.
• The Responsible Business Committee is now an executive managementlevel committee.
Ongoing and future activity
• Continue to engage management on progress towards our intermediate (by 2030) sciencebased targets and transition plan.
• Engage management on the integration of naturerelated risk within our climate change risk governance approach.
Climate-related financial disclosures (continued)
Nationwide’s full Climaterelated
Financial Disclosures 2024 can
be found at nationwide.co.uk
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Risk Management – How Nationwide identifies, assesses, and manages climate-related risks Disclosures:
pages 20-23
Nationwide’s processes for identifying and assessing climate-related risks Disclosures:
pages 2123
Activity in 2023/24
• Reassessed the impacts of climate change against Nationwide’s principal risks in line with our Enterprise Risk Management Framework (ERMF) and identified potential impacts over the short,
medium, and long term.
• Updated and improved the Society’s climate change risk standard, including stakeholders’ roles and responsibilities, and the inclusion of naturerelated risk, ensuring the standard remains a
robust key control of climaterelated risk.
• Continued to leverage physical risk assessment capabilities, through the Nationwide Property Risk Hub
2
, while internal capabilities continue to be enhanced to assess transition risk across the
Society’s residential mortgages and social housing lending portfolios.
• Updated our Housing Finance Credit Standards, which apply to our registered social landlord (RSL) borrowers, to include clear recommendations for borrowers to have an ESG strategy aligned to
netzero. We continued to encourage RSL borrowers to improve the energy performance composition of their portfolios.
Ongoing and future activity
• Consider further incorporating climate factors into Nationwide’s business as usual financial forecasting activity.
• Monitor progress of our suppliers to set and disclose sciencebased targets and supporting transition plans.
• Continue to develop understanding of naturerelated risk and how it applies to Nationwide’s business model.
Nationwide’s processes for managing climate-related risks Disclosures:
pages 2021
Activity in 2023/24
• Delivered a refreshed climaterelated risk implementation plan to further embed climaterelated risk capabilities to meet future disclosure recommendations.
• Submitted a report to the PRA in response to a thematic review request regarding climaterelated risk, detailing how we have further embedded the requirements of SS3/19 and evolved our
climate scenario analysis capabilities.
Ongoing and future activity
• Consider the management of naturerelated risk as part of our climate risk assessments.
• Continue to review our lending policy to ensure customers are not unduly exposed to physical and transition risks.
How Nationwide’s processes for identifying, assessing, and managing climate-related risks are integrated into the Society’s overall risk management Disclosures:
pages 2021
Activity in 2023/24
• Climate change continued to be embedded as a cause within our existing ERMF. We are considering how naturerelated risk is embedded into the ERMF as a causal factor.
• Enhanced our climate change risk standard which aids the embedding, monitoring, and management of climaterelated risk as a cause to the Society’s most significant risks.
Ongoing and future activity
• Further broaden understanding of climaterelated risk through continued development of Nationwide’s scenario analysis approach.
2. Nationwide’s Property Risk Hub assesses all mortgage applications for several physical risks at the decision in principle stage of a mortgage application. More information on our Property Risk Hub can be found in the Strategy section of
Nationwide’s Climaterelated Financial Disclosures 2024, on page 12.
Climate-related financial disclosures (continued)
Nationwide’s full Climaterelated
Financial Disclosures 2024 can
be found at nationwide.co.uk
57
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Metrics and Targets – The metrics and targets used to assess and manage relevant climate-related risks and opportunities Disclosures:
pages 24-41
The metrics used by Nationwide to assess climate-related risks and opportunities in line with our strategy and risk management process Disclosures:
pages 3841
Activity in 2023/24
• Continued to utilise a robust set of metrics to assess climaterelated risks and opportunities. These include:
–
Physical risk data, including flood, subsidence, coastal, and storm risk
– Transition risk data, such as Energy Performance Certificate (EPC) exposure of our mortgage book
– Data that shows the takeup of our green finance propositions.
• Enhanced internal climate change Management Information (M) which supports better decision making by management and the Board.
• Incorporated naturerelated metrics into our M dashboard, including waste and water usage data.
Ongoing and future activity
• Continue to enhance our climate change metrics and data that support our climaterelated risk management.
• Continue to review climate ambitions, targets, and transition plan progress, in line with future changes to strategy, propositions, scenario analysis and climate science.
Nationwide’s scope 1, 2, and 3 greenhouse gas (GHG) emissions and targets, and the related risks Disclosures:
pages 2437
Activity in 2023/24
• Continued to disclose progress against the Society’s intermediate (by 2030) sciencebased targets, for scopes 1, 2, and 3 carbon emissions, aligned to the Greenhouse Gas (GHG) protocol and
industry bestpractice.
• Enhanced our internal controls for monitoring the methodologies used to calculate scope 1, 2, and 3 emissions.
Ongoing and future activity
• Continue to calculate our scope 1, 2 and 3 emissions aligned to the GHG protocol and industry bestpractice, disclosing annually within our Climaterelated Financial Disclosures, and measuring
progress against our intermediate (by 2030) sciencebased targets.
• Continue to refine and enhance Nationwide’s approach to calculating scope 3 emissions, reflecting improvements in data availability, coverage, and industry understanding.
The targets used by Nationwide to manage climate-related risks and opportunities, and performance against these targets Disclosures:
pages 27, 29, 32, 35, 37
Activity in 2023/24
• Continued to evolve Nationwide’s internal climate change M to track better our climate change ambitions and support management decisionmaking.
• Calculated and disclosed metrics that support progress towards our scope 1, 2, and 3 emissions targets, within our Climaterelated Financial Disclosures.
• Continued to track physical risk data (for example flood exposure) and transition risk data (such as EPC composition) of our mortgage book.
• Continued to track the takeup of our green finance propositions, and progress of government policy related to the greening of UK homes, to understand progress towards our scope 3 mortgages
target.
Ongoing and future activity
• Continue to enhance climate metrics and targets, including the consideration of naturerelated metrics, in line with changes to strategy, propositions, scenario analysis and climate science.
• Continue to enhance our climate metrics and data that support us in measuring our progress towards our climaterelated Mutual Good Commitment, and our intermediate (by 2030)
sciencebased targets.
• Continue to monitor performance against Nationwide’s climaterelated targets and Mutual Good Commitment – aiming to build a more sustainable world by supporting progress towards a
greener society – and update our Climaterelated Financial Disclosures accordingly.
Climate-related financial disclosures (continued)
Nationwide’s full Climaterelated
Financial Disclosures 2024 can
be found at nationwide.co.uk
58
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Nationwide’s carbon emissions
Nationwide is committed to a netzero future; it is our ambition to support the UK in
achieving its target to be netzero by 2050. This ambition is embedded into our strategy
through our Mutual Good Commitment; we aim to build a more sustainable world by
supporting progress towards a greener society, aligned to our intermediate (by 2030)
sciencebased targets.
As a building society, Nationwide’s focus is on providing banking products and services
for our customers. We have very limited corporate lending through small, closed
commercial real estate and private finance initiative portfolios, and lending to registered
social landlords. Nationwide does not lend to any other industries.
In December 2022 we set and disclosed intermediate (by 2030) sciencebased
emissions targets
3
, across scope 1, 2, and 3, and in December 2023, we published our
inaugural Intermediate (by 2030) NetZeroaligned Transition Plan 2023
4
, detailing the
actions and potential actions needed for us to progress towards our targets.
Our scope 1 and 2 sciencebased targets are within our control due to our ability to
manage our operational energy usage, actions underway to reduce or remove gas usage
from our buildings, and the continued procurement of renewable electricity. We remain
confident in achieving our scope 1 and 2 intermediate (by 2030) sciencebased targets.
We have very limited influence over practical measures to reduce emissions from
properties which are owned by our borrowers, and no control over government policy
needed to green UK homes and social housing. Whilst we always considered our
intermediate (by 2030) sciencebased targets to be challenging, the UK’s progress
towards netzero, particularly the greening of homes (which has been described in the
Climate Change Committee’s (CCC’s) Progress in Reducing Emissions: 2023 Report
to Parliament as ‘worryingly slow’), has been much slower than anticipated and has
not been at the pace needed to deliver the emissions reductions required to support
progress towards our sciencebased mortgages target.
Therefore, we now do not believe that our intermediate (by 2030) sciencebased target
for mortgages will be achieved. Considering this, over the next 12 months, we will reflect
on the appropriateness of setting a more realistic intermediate residential mortgages
target, giving due consideration to the current UK green homes policy landscape, the
outcome of the general election and any policies announced by the new government,
and the outcome of the 0% interest Green Additional Borrowing research. For more
information, please see our Climaterelated Financial Disclosures 2024.
We continue to disclose our carbon emissions in line with the Government’s Streamlined
Energy and Carbon Reporting regulation requirements
5
.
Scope 1, 2 and 3 emissions assurance
Nationwide appointed Ernst and Young LLP (EY) to provide limited independent
assurance over our scope 1, 2 and 3 carbon emission disclosures for the year ended
4 April 2024. This includes scope 1 and 2 emissions for the year ended 4 April
2024, scope 3 upstream emissions for the 12month period ended 31 December
2023, and scope 3 financed (investments) emissions for the 12month period
ended 31 December 2023. Assured metrics and KPs are indicated throughout.
The assurance engagement was planned and performed in accordance with the
International Standard for Assurance Engagements (SAE) (UK) 3000 (July 2020),
Assurance Engagements Other than Audits or Reviews of Historical Financial
Information. A limited assurance report was issued and is available on Nationwide’s
website
6
. This report includes details of the scope, respective responsibilities,
work performed, limitations and conclusion.
3. Intermediate NetZero Ambitions 2022: Basis of Preparation
4. Intermediate (by 2030) netzeroaligned Transition Plan 2023
5. Streamlined Energy and Carbon Reporting requirementsGOV.UK(www.gov.uk). Detail of the Society’s energy efficiency action can be found in the Strategy section in Nationwide’s Climaterelated Financial Disclosures 2024.
6. EY emissions assurance report 2024
Climate-related financial disclosures (continued)
Nationwide’s full Climaterelated
Financial Disclosures 2024 can
be found at nationwide.co.uk
59
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Nationwide’s scope 1 and 2 carbon emissions (see table on page 61)
Nationwide’s scope 1 emissions have continued to decrease in comparison to previous
years. This is due to our ongoing efforts to reduce our operational emissions, such as the
removal of gas from our branch network. Nationwide will continue to reduce its scope 1
emissions, aligned to its sciencebased target ambitions.
We use a marketbased approach
7
for calculating our scope 2 emissions. 100% of our
scope 2 energy consumption is attributed to renewable sources, through a solar power
purchase agreement (PPA) which produces emissionsfree energy, and use of green
tariff electricity. Our scope 2 emissions are associated with purchased electricity only,
as we do not purchase any steam, heat, or cooling. We also disclose our absolute
(locationbased
8
) scope 2 emissions which have risen this year as we embed new ways
of working (with increased office presence) and replace gas with electrical solutions
throughout our business operations.
We remain aware that the pace of emissions reduction may vary over the coming years
as working behaviours adapt, but we are committed to reducing scope 1 emissions
associated with our business operations in line with netzero.
Nationwide’s scope 3 upstream carbon emissions (see table on page 61)
We have calculated our scope 3 emissions for upstream activities across purchased
goods and services, capital goods, and upstream transportation and distribution, which
account for around 91% of our total scope 3 upstream emissions.
Our upstream emissions have been calculated using publicly disclosed thirdparty
supplier emissions data (covering scopes 13) from responses submitted to CDP, and
revenue from the most recent publicly available annual reports, where available. Data
gaps were supplemented using industry average emissions contained within the Scope
3 Evaluator tool, made available by the GHG Protocol and Quantis.
Our total scope 3 upstream emissions in 2023 have remained the same compared to
2022, due to an increase in spend on goods and services, and a decrease in supplier
specific emissions for capital goods.
Nationwide’s scope 3 downstream emissions – residential mortgages,
registered social landlords, and commercial real estate (see table on
page 61)
Nationwide continues to disclose the emissions associated with its mortgage, registered
social landlord (RSL), and commercial real estate (CRE) portfolios. In 2023 we used
our EPC model to calculate the emissions for both our mortgage and RSL portfolios.
Aligned to the Partnership for Carbon Accounting Financials (PCAF) GHG Accounting
and Reporting standard, publicly available EPC data is interpolated across the book to
estimate carbon emissions, where valid EPC certificates are not available.
We have calculated both the absolute and LTV weighted emissions for our mortgage,
RSL, and CRE portfolios. The absolute emissions have been weighted by loan to value
(LTV) to calculate the proportion of emissions financed by Nationwide. This is in line with
PCAF’s methodology.
The UK’s progress towards netzero, particularly the greening of homes, has not been
at the pace needed to deliver the emissions reductions required to support progress
towards our intermediate (by 2030) sciencebased mortgages target. Therefore, we now
do not believe that our intermediate (by 2030) sciencebased target for mortgages will
be achieved.
Our LTV weighted carbon intensity for our residential mortgage portfolio has reduced in
comparison to last year. This is due to an improvement in the average energy efficiency
of the book.
Our absolute scope 3 RSL emissions and total floor area have reduced this year, due to a
decrease in the number of properties in the RSL portfolio. Due to an increase in overall
lending and an increase in average LTV, LTV weighted carbon intensity has increased
slightly in comparison to last year.
Our absolute scope 3 CRE emissions, and LTV weighted emissions and intensity,
have reduced in comparison to last year, due to the continued managed runoff of the
portfolio.
Information on how scope 1, 2, and 3 emissions have been calculated is in our Climate
related Financial Disclosures 2024.
7. A marketbased approach allows flexibility to utilise marketbased measures such as renewable energy to achieve netzero.
8. A locationbased approach doesn’t factor in marketbased measures and considers operational absolute emissions only.
Climate-related financial disclosures (continued)
Nationwide’s full Climaterelated
Financial Disclosures 2024 can
be found at nationwide.co.uk
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
A summary of Nationwide’s scope 1, 2, and 3 carbon emissions data
9
The key movements in the carbon emissions data table below are explained on the previous page.
We recognise certain limitations in climate data affecting climate metrics and targets, and their usefulness in strategic decision making. For more information on scope 1, 2, and 3 data
scores and data limitations, see pages 26, 28, 30, 33 and 36 in Nationwide’s Climaterelated Financial Disclosures 2024.
Scope 1 and 2 emissions data Year to 4 Apr 2024* Year to 4 Apr 2023 (Baseline) Year to 4 Apr 2022
Scope 1 – Energy and travel (tCO
2
e/y)
1,792 2,361 3,002
Scope 2 – Electricity (tCO
2
e/y)
14,042 12,774 14,972
Total gross Scope 1 and 2 emissions (tCO
2
e/y)
15,834 15,135 17,974
Absolute carbon outturn – less PPA carbon reduction and green tariff electricity (tCO
2
e/y)
1,792 2,361 3,002
Total carbon dioxide in tonnes per full time employee (FTE)
0.13 0.17 0.19
Total energy usage – Electricity and gas (MWh)
76,650 76,781 86,417
Scope 3 upstream emissions data – purchased goods and services, capital goods, upstream
transportation and distribution
Year to 31 Dec 2023* Year to 31 Dec 2022^ (Baseline) Year to 31 Dec 2021
Total upstream scope 3 carbon dioxide emissions (tCO
2
e/y)
157,000 157,000 230,000
Scope 3 emissions data – residential mortgages Year to 31 Dec 2023* Year to 31 Dec 2022^ (Baseline) Year to 31 Dec 2021
Absolute carbon emissions on whole book using interpolated EPC data (tCO
2
e/y)
6,077,000 6,021,000 6,187,000
LTV weighted carbon emissions using interpolated EPC data (tCO
2
e/y)
2,807,000 2,766,000 2,795,000
LTV weighted carbon intensity using interpolated EPC data (kgCO
2
e/m
2
/y)
18.27 18.65 19.03
Scope 3 emissions data – registered social landlords Year to 31 Dec 2023* Year to 31 Dec 2022 (Baseline) Year to 31 Dec 2021
Absolute carbon emissions on whole book using interpolated EPC data (tCO
2
e/y)
439,000 466,000 747,000
LTV weighted carbon emissions using interpolated data (tCO
2
e/y)
218,000 222,000 346,000
LTV weighted carbon intensity using interpolated data (kgCO
2
e/m
2
/y)
20.61 20.01 22.36
Scope 3 emissions data – commercial real estate Year to 31 Dec 2023* Year to 31 Dec 2022 (Baseline) Year to 31 Dec 2021
Absolute carbon emissions on whole book using proxy EPC data (tCO
2
e/y)
110,000 138,000 259,000
LTV weighted carbon emissions using proxy EPC data (tCO
2
e/y)
32,000 45,000 96,000
LTV weighted carbon intensity using proxy EPC data (kgCO
2
e/m
2
/y)
25.40 31.28 46.39
9. Notes for the carbon emissions data table are detailed in Nationwide’s Climaterelated Financial Disclosures 2024.
* Nationwide’s emissions and financed emissions are subject to independent limited assurance by EY, with exception of total energy usage. Further information is available in Nationwide’s Climaterelated Financial Disclosures 2024 on page 37.
^ Comparative amounts have been restated due to improvements in emissions calculation methodology.
Climate-related financial disclosures (continued)
Nationwide’s full Climaterelated
Financial Disclosures 2024 can
be found at nationwide.co.uk
61
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Annual Report and Accounts 2024
Strategic Report
(continued)
Risk overview
The Board recognises that effective risk management is essential to Nationwide’s ongoing strength and the delivery of our strategic objectives. We adopt a prudent approach to risk
management, keeping our customers’ money safe and secure by ensuring that the risks we take in support of our strategy are controlled through a robust risk framework. We operate a
relatively simple business model and operate in lower risk markets to serve our customers and protect their money. We only take risks we understand and can manage well.
How risk is managed at Nationwide
Nationwide uses a Board-approved Enterprise Risk Management Framework (ERMF) to ensure risks are managed in a consistent and rigorous way. The ERMF defines how risks are managed
and sets out the risk management responsibilities of all colleagues within an industry-standard three lines of defence model. It also ensures that all risks are appropriately and consistently
identified, assessed, managed, monitored, and reported. Independent oversight and challenge of the Society’s risk management practices are provided by the Society’s independent Risk
function, led by the Chief Risk Officer, whilst the Internal Audit function provides assurance of the effectiveness of our control environment for the Board.
Through the ERMF, the Board formally sets its risk appetite, articulating how much risk it is prepared to take in the pursuit of its objectives. A comprehensive suite of policies and
standards translates this appetite into the localised risk management activities and controls that our colleagues operate on a day-to-day basis to protect our customers and their money.
The Board and management receive regular reporting on the Society’s risk profile and key risk metrics to support them in monitoring our position relative to risk appetite. We also
continuously review the risks to which Nationwide is exposed and strengthen both the framework and controls we rely upon to mitigate these risks. Further information on the ERMF and
its key components can be found in the Managing risk section of the Risk report on page 144.
Principal risks and uncertainties
The ERMF sets out eight principal risks, encompassing all of the different types of risk which are relevant to Nationwide’s business model and achievement of its strategic objectives. This
ensures we understand and manage all risks to which we are exposed in a comprehensive and consistent way. Further information on these risks can be found in the Risk report as indicated
below.
Principal risk Key developments Further detail
Credit risk – The risk of loss as a result of a customer or counterparty
failing to meet their financial obligations.
The external environment remained uncertain during the year, with high but falling inflation
and the higher interest rate environment contributing to pressure on customers’ finances,
impacting both the housing market and mortgage trading volumes. Arrears rates increased,
with residential lending cases more than three months in arrears now representing 0.41%
(2023: 0.32%) of the total portfolio. Some customers are also taking up measures offered
under the Mortgage Charter. Despite this increase in arrears, credit performance remained
within expectations and appropriate provisions are in place.
Page 149
Liquidity and funding risk – Liquidity risk is the risk that Nationwide is
unable to meet its liabilities as they fall due and maintain member and
other stakeholder confidence. Funding risk is the risk that Nationwide
is unable to maintain diverse funding sources in wholesale and retail
markets and manage retail funding risk that can arise from excessive
concentrations of higher risk deposits.
Nationwide maintained a strong liquidity and funding position throughout the year, with a
Liquidity Coverage Ratio of 191% (2023: 180%) and a Net Stable Funding Ratio of 151% (2023:
147%).
Page 187
Capital risk – The risk that Nationwide fails to maintain sufficient
capital to absorb losses throughout a full economic cycle and sufficient
to maintain the confidence of current and prospective investors,
members, the Board, and regulators.
Nationwide maintained capital resources comfortably above both regulatory and internal
minima throughout the year. The Common Equity Tier 1 (CET1) ratio increased to 27.1% (2023:
26.5%) and leverage ratio increased to 6.5% (2023: 6.0%).
Page 199
Risk overview
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Risk overview (continued)
Annual Report and Accounts 2024
Strategic Report (continued)
Risk overview (continued)
Principal risk Key developments Further detail
Market risk – The risk that the net value of, or net income arising from,
the Group's assets and liabilities is impacted as a result of market price
or rate changes. Nationwide does not have a trading book; therefore
market risk only arises in the banking book.
Nationwide’s market risk exposure primarily arises from fixed rate mortgages and savings,
and changes in the market value of the treasury liquidity portfolio. Whilst economic conditions
impacted the Group, market volatility was comparatively lower this year and market risk
continued to be managed prudently, resulting in a low level of exposure to interest rate risk.
Page 205
Pension risk – The risk that the value of the pension schemes’ assets
will be insufficient to meet the estimated liabilities, creating a pension
deficit.
Following the finalisation of the Fund’s latest Triennial Valuation, no employer deficit
contributions were required, and none are scheduled for the year ending 4 April 2025 as the
valuation indicated a funding surplus. Nationwide actively engages with the Trustee to ensure
broad alignment on investment objectives and implementation.
Page 212
Business risk – The risk that volumes decline, margins shrink, or losses
increase relative to the cost or capital base, affecting the sustainability
of the business and the ability to deliver the strategy due to external
factors (macroeconomic, geopolitical, industry, regulatory or other
external events) or internal factors (including the development and
execution of the strategy).
Competition from incumbent banks and digitally-focused new entrants remained strong, with
enhanced service and product propositions being used to attract and retain customers.
Nationwide’s strategy is focused on providing a simply brilliant service and continuous
improvement, promoting enhanced efficiency and productivity. Furthermore, continual
reviews of customer propositions maintain the Society’s competitive position in the core
mortgage, savings, and personal current account markets in which it operates.
Page 214
Operational and conduct risk – The risk of impacts resulting from
inadequate or failed internal processes, conduct and compliance
management, people and systems, or from external events.
Nationwide has continued to mature its operational and conduct risk management processes
and capabilities, with a particular focus on change management, economic crime risk
capabilities and strengthening the technology control environment.
Page 215
Model risk – The risk of adverse consequences from model errors or
the inappropriate use of modelled outputs. Model outputs may be
affected by the quality of data inputs, choice and suitability of
methodology and the integrity of implementation. The adverse
consequences include financial loss, poor business or strategic decision
making, or damage to Nationwide’s reputation.
A number of models have been redeveloped to improve performance and compliance with
new Internal Ratings Based (IRB) roadmap regulations.
Model risk management and governance capabilities have been enhanced in response to
changing regulation, including the Prudential Regulation Authority’s (PRA) supervisory
statement 1/23 ‘model risk management principles for banks’ and implementation of the
Basel 3.1 standards.
Page 219
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Risk overview (continued)
Annual Report and Accounts 2024
Strategic Report (continued)
Risk overview (continued)
Emerging risks
Emerging risks are specific risks which have the potential to materially impact Nationwide’s financial results and delivery of its strategic objectives, and often impact across several
principal risks. The most significant of these are described below, together with key developments, a summary of actions we are taking to reduce the risk, and the principal risks which are
most likely to be impacted.
Risk How we mitigate this risk Related principal risks
Climate change
Nationwide is exposed to both physical risks arising from climate
change (such as damage to UK housing stock and property) and
transitional risks (such as lower economic growth and government
policy impacts on property values) as the country moves towards net-
zero emissions. These threats continue to evolve as government policy
develops and technologies mature.
• We invest in sustainable business practices and proactively review lending criteria to limit
the impact our activities have on climate change and to mitigate potential credit risk.
• We continue to develop our processes to reflect potential changes in macroeconomic
conditions and the housing market as we transition to a low-carbon economy, and
complete internal and external stress testing for climate change.
• Credit risk
• Model risk
• Operational and
conduct risk
Cyber
The threat of cyber attacks remains heightened, with ongoing
geopolitical tensions posing a threat to Nationwide, our staff, and our
customers.
• We continuously monitor the cyber threat level and invest in our cyber defences to ensure
we are able to respond appropriately.
• Operational and
conduct risk
Emergent Technologies (note i)
The emergence of viable generative artificial intelligence, as well as the
continued development of quantum computing and associated
technologies, creates new risks and opportunities as they are adopted
internally, across the industry and potentially by malicious organisations
or individuals.
• We only use generative artificial intelligence for specific activities aligned to defined
principles and subject to high levels of control and oversight, including human
intervention where required.
• We continually develop and refine our risk management approach and control framework
for advanced and emerging technology, reflecting industry best practice.
• Operational and
conduct risk
• Model risk
Geopolitical environment
(note ii)
The geopolitical environment remains volatile with ongoing conflicts in
Ukraine and Gaza, and a range of global tensions. This uncertainty
impacts the macroeconomic environment. Conflicts and disputes also
have the potential to disrupt supply chains and increase cyber and
economic crime.
• We prepare for a range of economic outcomes and continually assess the risks arising
from these.
• Whilst our retail lending is restricted to the UK, we actively control our exposure to
volatile sectors to mitigate the risks arising from geopolitical events.
•
We work with suppliers to understand and manage exposures to geopolitical events,
whilst protecting services through enhanced due diligence and diversification.
• Credit risk
• Operational and
conduct risk
• Liquidity and
funding risk
Macroeconomic environment (note ii)
Nationwide is inherently exposed to fluctuations in economic
conditions and the UK housing market. The economic environment
remains uncertain with high but falling inflation and Bank rate
impacting customer finances as well as the performance of other
institutions and counterparties.
• We maintain strong capital and liquidity levels in excess of regulatory minima, and we
regularly undertake both internal and regulatory stress tests to ensure our financial
resources are sufficient under a range of severe but plausible scenarios.
• We continuously review and adjust our credit policies so they remain appropriate for the
prevailing economic conditions and continue to support customers who may experience
financial difficulty.
• We only have exposures to highly rated banking counterparties; these consist primarily of
fully collateralised derivatives and covered bonds for liquidity management.
• Credit risk
• Capital risk
• Liquidity and
funding risk
Technology and resilience
The combination of a rapidly evolving and increasingly complex
technological environment alongside the increasing importance of
services being available when customers need them, increases both the
potential for, and the impact of, outages and system failures.
• We have prioritised strategic investment in our systems and simplified and modernised
our technology estate.
• We continue to strengthen our internal control environment to improve resilience,
proactively balancing continued service provision with the need to update and develop
our systems to meet the current and future needs of our customers.
• Operational and
conduct risk
Key (change in underlying risk to Nationwide in year)
Increased level of risk
Stable level of risk
Decreased level of risk
Notes:
i. Not reported as a separate emerging risk in the Annual Report and Accounts 2023.
ii. Reported as combined macroeconomic and geopolitical environment risk in the Annual Report and Accounts 2023.
64
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Viability statement
Annual Report and Accounts 2024
Strategic report
(continued)
Viability
statement
Viability statement
The directors have an obligation to confirm that they believe that both the Society and the Group will be able to continue in
operation, and to meet their liabilities as they fall due. This viability statement considers the Group’s current financial and strategic
position and the potential impact of its principal risks, to explain the directors’ assessment of the Group’s prospects over an
appropriate period.
Assessment of viability
In addition to taking a 12-month view of whether the Group remains a going concern, the directors have considered the viability of the Group over a three-year period. Whilst it will
always be difficult to predict the future path of the UK or the wider global economy with any degree of precision, this period strikes the right balance between assessing likely outcomes
using the current information we have, whilst accepting a degree of uncertainty over a longer period. A three-year period is within the timeframe of the Group’s profitability projections
and stress tests which provide a reasonable expectation of continued operations and ability to meet liabilities as they fall due.
In making their assessment, the directors have considered the Group’s key risks, and the stress testing activity which has been carried out to assess the potential impact of these risks.
This assessment includes consideration of the key risks outlined in the Risk overview on pages 62 to 64. These have been reviewed alongside the Group’s strategic plan, and the
strength of the Group’s current financial position, in assessing the viability of the Group over the three-year period.
The viability assessment has also considered the impact on the Group of the proposed acquisition of Virgin Money, which is expected to complete in Q4 2024, subject to regulatory
approval.
Consideration of key risks
The directors of Nationwide have considered for the purposes of viability over the past year the impact on Nationwide’s risk profile of the prevailing macroeconomic and geopolitical
environment, the changing needs of our customers and our work to ensure our processes and systems remain robust. While some key risks on pages 62 to 64 were not directly
modelled, our assessment concluded that the severity and impact of these risks fall within the scenarios used for this analysis. Throughout the year, the Board has considered the risks
which are most relevant to Nationwide’s strategy, which include:
•
Geopolitical and macroeconomic environment – As a UK-focused business, the Group’s performance is naturally aligned to the UK’s economic conditions. The macroeconomic outlook
remains uncertain, with ongoing geopolitical tensions and significant risks in both directions in relation to Bank rate expectations. Despite this uncertainty, the Society maintains
strong capital and liquidity levels and regularly undertakes robust internal and regulatory stress tests to ensure it continues to meet Board Risk Appetite and regulatory
requirements under a range of severe scenarios.
•
Competitive environment and consumer behaviours – The level of competition and brand relevance remains a key consideration. This could be driven by shifting customer behaviours,
regulatory changes and continued innovation in the financial services sector, or new participants using price and service advantage to challenge our market share aspirations and
profitability.
•
Economic crime and cyber security – We continuously monitor the external landscape to identify potential cyber and fraud threats whilst operating and maturing our key financial
crime and cyber controls to protect our customers and services, and to meet our regulatory obligations.
•
Technology and resilience – Maintaining resilient systems, infrastructure and processes remains critical as changing consumer behaviours influence customer needs in accessing our
products and services and how they interact with us. We continue to monitor and strengthen our control environment whilst proactively monitoring the resilience of our services to
reduce disruption to our customers.
•
Climate change – Risks continue to evolve as government policy develops and technologies mature. We invest in sustainable business practices, proactively review lending criteria and
continue to consider the potential impact on the macroeconomic and trading environment as we transition to a low carbon economy.
65
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Viability statement (continued)
Annual Report and Accounts 2024
Strategic report
(continued)
Viability statement (continued)
Planning and stress testing activity during 2023/24
During 2023/24, the Group developed financial forecasts and a range of plausible stressed macroeconomic scenarios, which reflect the risks which are most material to our business
model. The prioritisation of risks to explore in stress testing activities uses an established process, which is informed by a range of internal and external risk assessments and the
engagement of a range of subject matter experts. The Stress Testing Committee, chaired by the Chief Financial Officer, is responsible for reviewing the prioritisation of risks and
approving the scenarios used for stress testing activities. The scenarios explored during 2023/24 include:
•
A base case macroeconomic scenario, that was regularly updated during the year to reflect developments in the macroeconomic outlook and support decision making to ensure the
Group maintained a resilient financial performance in an uncertain macroeconomic environment.
•
A range of interest rate income sensitivities to the base case macroeconomic scenario, exploring the impact of Bank rate reducing as low as 1%.
•
An internally generated stress test exploring a severe but plausible stress in which monetary policy responds to persistent inflationary pressures, resulting in the UK entering a major
recession and house purchase activity falling to record low levels.
•
A severe idiosyncratic liquidity stress scenario exploring the impact of a ransomware attack and resultant failure to maintain member confidence, in addition to the temporary loss of
access to wholesale funding markets.
•
A severe capital and liquidity stress scenario based on a loss of member confidence due to misinformation on social media regarding the security of deposits, in addition to the
temporary loss of access to wholesale funding markets, within the context of a macroeconomic stress.
•
An internally generated climate change stress test to assess the financial risks arising from climate change, focusing on the macroeconomic, physical and transition risks of two
climate change scenarios across a 30-year horizon.
•
A reverse stress test scenario which explores the financial impact of a failure to deliver successfully Nationwide’s strategy. The purpose of the reverse stress test scenario is to test
Nationwide’s current business model to failure in order to enhance understanding of its business model vulnerabilities that could cause the current business model to become
unviable.
A selection of these scenarios has been used for expected credit loss modelling during 2023/24, and further detail can be found in note 10 to the financial statements.
Impact of the proposed acquisition of Virgin Money
As part of the Virgin Money acquisition proposal, the expected financial performance of a new combined group was considered based on the economic and market assumptions used in
Nationwide’s Financial Plan 2024-29. A number of prudent sensitivities to this forecast were also considered, in addition to an assessment of the combined group performance in the
Solvency Stress Test 2021 (SST 2021) and 2022/23 Concurrent Stress Test (2022/23 CST). Management believe that the analysis performed represents an appropriately prudent
assessment.
Conclusion on viability
The directors have assessed the Group’s current financial strength, demonstrated through strong capital ratios (CET1 ratio of 27.1% and leverage ratio of 6.5% at 4 April 2024), and
liquidity position (12-month average LCR for the year ended 4 April 2024 of 191%), and the impact of the scenarios described above on the Group’s key financial metrics over the three-
year assessment period.
In our base case macroeconomic scenario, key financial performance metrics are projected to remain comfortably above Board Risk Appetite and regulatory buffers. In addition, our
recent external and internal stress testing activity demonstrates how the Group can withstand severe macroeconomic and competitive stresses, including those linked to heightened
inflation and changes to the expected path of Bank rate.
In addition, the analysis performed in relation to the proposed acquisition of Virgin Money provides confidence in the viability of the combined group under a range of stress scenarios.
The directors have a reasonable expectation that the Society and Group will be able to continue its operations, and to meet its liabilities as they fall due, over the three-year assessment
period.
66
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Financial review
Annual Report and Accounts 2024
Financial highlights
• Underlying profit for the year reduced to
£2,003 million (2023: £2,233 million), largely
reflecting higher costs and provisions for liabilities
and charges. Statutory profit was £1,776 million
(2023: £2,229 million), after reflecting the inaugural
Nationwide Fairer Share payment.
• Total underlying income remained broadly stable at
£4,664 million (2023: £4,673 million) as the
increased income from the impact of rising interest
rates has been largely offset by a highly competitive
mortgage market. Net interest margin decreased
slightly to 1.56% (2023: 1.57%).
• A combined £2,194 million of value has been
delivered to members. This comprises member
financial benefit of £1,850 million (2023:
£1,055 million), supported by the strength of our
savings rates, and the inaugural Nationwide Fairer
Share payment to eligible members in June 2023
of £344 million.
• Member deposit balances increased by
£6.3 billion to £193.4 billion (2023: £187.1 billion);
our market share of balances reduced slightly to
9.5% (2023: 9.6%).
• Mortgage balances increased to £204.5 billion
(2023: £201.7 billion), with stock market share
increasing to 12.3% (2023: 12.2%).
• Administrative expenses increased by £99 million
to £2,422 million (2023: £2,323 million). The
increase includes £36 million recognised in the year
for the 2024/25 Bank of England levy.
• Credit impairment charges have reduced to
£112 million (2023: £126 million), reflecting the
resilience of our lending, whilst retaining provisions
for the continued economic uncertainty. Mortgage
arrears have increased but remain low.
• CET1 and leverage ratios increased to 27.1% and
6.5% (2023: 26.5% and 6.0%) respectively.
Underlying profit:
£2,003m
(2023: £2,233m)
Statutory profit:
£1,776m
(2023: £2,229m)
Leverage ratio:
6.5%
(2023: 6.0%)
Annual Report and Accounts 2024
Financial highlights
• Underlying profit for the year reduced to
£2,003 million (2023: £2,233 million), largely
reflecting higher costs and provisions for liabilities
and charges. Statutory profit was £1,776 million
(2023: £2,229 million), after reflecting the inaugural
Nationwide Fairer Share payment.
• Total underlying income remained broadly stable at
£4,664 million (2023: £4,673 million) as the
increased income from the impact of rising interest
rates has been largely offset by a highly competitive
mortgage market. Net interest margin decreased
slightly to 1.56% (2023: 1.57%).
• A combined £2,194 million of value has been
delivered to members. This comprises member
financial benefit of £1,850 million (2023:
£1,055 million), supported by the strength of our
savings rates, and the inaugural Nationwide Fairer
Share payment to eligible members in June 2023
of £344 million.
• Member deposit balances increased by
£6.3 billion to £193.4 billion (2023: £187.1 billion);
our market share of balances reduced slightly to
9.5% (2023: 9.6%).
• Mortgage balances increased to £204.5 billion
(2023: £201.7 billion), with stock market share
increasing to 12.3% (2023: 12.2%).
• Administrative expenses increased by £99 million
to £2,422 million (2023: £2,323 million). The
increase includes £36 million recognised in the year
for the 2024/25 Bank of England levy.
• Credit impairment charges have reduced to
£112 million (2023: £126 million), reflecting the
resilience of our lending, whilst retaining provisions
for the continued economic uncertainty. Mortgage
arrears have increased but remain low.
• CET1 and leverage ratios increased to 27.1% and
6.5% (2023: 26.5% and 6.0%) respectively.
Chris Rhodes, Chief Financial Officer, Nationwide Building Society, said:
“
We have delivered a robust financial performance with statutory profit of £1,776 million and combined
m
ember value of £2,194 million. Member value comprises £1,850 million of member financial benefit
through better pricing and incentives than the market average and
the inaugural Nationwide Fairer Share
payment of £344 million to eligible members.”
“We have continued to support our customers’ savings and borrowing needs
throughout the year. Our good
value savings and mortgage products have supported growth in our deposit and mortgage balanc
es.”
“
We have maintained a strong balance sheet, with both CET1 and leverage ratios increasing during the year
to 27.1% and 6.5% respectively.
”
Annual Report and Accounts 2024
Chris Rhodes, Chief Financial Officer, Nationwide Building Society, said:
“
We have delivered a robust financial performance with statutory profit of £1,776 million and combined
m
ember value of £2,194 million. Member value comprises £1,850 million of member financial benefit
through better pricing and incentives than the market average and
the inaugural Nationwide Fairer Share
payment of £344 million to eligible members.”
“We have continued to support our customers’ savings and borrowing needs
throughout the year. Our good
value savings and mortgage products have supported growth in our deposit and mortgage balanc
es.”
“
We have maintained a strong balance sheet, with both CET1 and leverage ratios increasing during the year
to 27.1% and 6.5% respectively.
”
Underlying profit:
£2,003m
(2023: £2,233m)
Statutory profit:
£1,776m
(2023: £2,229m)
Leverage ratio:
6.5%
(2023: 6.0%)
Financial review
Chris Rhodes, Chief Financial Officer, Nationwide Building Society, said:
“We have delivered a robust financial performance with statutory profit of £1,776 million and combined
member value of £2,194 million. Member value comprises £1,850 million of member financial benefit
through better pricing and incentives than the market average and the inaugural Nationwide Fairer Share
payment of £344 million to eligible members.”
“We have continued to support our customers’ savings and borrowing needs throughout the year. Our good
value savings and mortgage products have supported growth in our deposit and mortgage balances.”
“We have maintained a strong balance sheet, with both CET1 and leverage ratios increasing during the year
to 27.1% and 6.5% respectively.”
Financial highlights
• Underlying profit for the year reduced to
£2,003 million (2023: £2,233 million), largely
reflecting higher costs and provisions for liabilities
and charges. Statutory profit was £1,776 million
(2023: £2,229 million), after reflecting the inaugural
Nationwide Fairer Share payment.
• Total underlying income remained broadly stable at
£4,664 million (2023: £4,673 million) as the
increased income from the impact of rising interest
rates has been largely offset by a highly competitive
mortgage market. Net interest margin decreased
slightly to 1.56% (2023: 1.57%).
• A combined £2,194 million of value has been
delivered to members. This comprises member
financial benefit of £1,850 million (2023:
£1,055 million), supported by the strength of our
savings rates, and the inaugural Nationwide Fairer
Share payment to eligible members in June 2023
of £344 million.
• Member deposit balances increased by
£6.3 billion to £193.4 billion (2023: £187.1 billion);
our market share of balances reduced slightly to
9.5% (2023: 9.6%).
• Mortgage balances increased to £204.5 billion
(2023: £201.7 billion), with stock market share
increasing to 12.3% (2023: 12.2%).
• Administrative expenses increased by £99 million
to £2,422 million (2023: £2,323 million). The
increase includes £36 million recognised in the year
for the 2024/25 Bank of England levy.
• Credit impairment charges have reduced to
£112 million (2023: £126 million), reflecting the
resilience of our lending, whilst retaining provisions
for the continued economic uncertainty. Mortgage
arrears have increased but remain low.
• CET1 and leverage ratios increased to 27.1% and
6.5% (2023: 26.5% and 6.0%) respectively.
Chris
Rhodes
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Underlying profit:
£2,003m
(2023: £2,233m)
Statutory profit:
£1,776m
(2023: £2,229m)
Leverage ratio:
6.5%
(2023: 6.0%)
Financial review (continued)
Annual Report and Accounts 2024
Financial review
(continued)
The results are prepared in accordance with International Financial Reporting Standards (IFRSs) as set out in note 1 to the financial statements. Underlying results are shown below,
together with a reconciliation to the statutory results.
Income statement
Underlying and statutory results
2024 2023
£m £m
Net interest income 4,450 4,498
Net other income 214 175
Total underlying income 4,664 4,673
Administrative expenses (2,422) (2,323)
Impairment charge (112)
(126)
Provisions for liabilities and charges (127) 9
Underlying profit before tax (note i) 2,003 2,233
Gains/(losses) from derivatives and hedge accounting (note ii) 117
(4)
Member reward payments (note iii) (344) -
Statutory profit before tax 1,776 2,229
Taxation (476) (565)
Profit after tax 1,300
1,664
Notes:
i. Underlying profit represents management’s view of underlying performance. Member reward payments, gains or losses from derivatives and hedge accounting (presented separately within total income in
the income statement) and any FSCS costs and refunds from institutional failures (included within provisions for liabilities and charges) are excluded from statutory profit to arrive at underlying profit.
There were no FSCS costs or refunds from institutional failures for the financial years ended 4 April 2024 and 4 April 2023.
ii. Although we only use derivatives to hedge market risks, income statement volatility can still arise.
iii. Member reward payments represent discretionary payments to members of the Society which may be determined by the Board from time to time, depending on the financial strength of the Society.
Member reward payments were first recognised in the financial year ended 4 April 2024, and have been excluded from underlying profit on the basis that management does not consider such payments to
be part of the Group’s underlying business performance.
iv. The underlying cost income ratio represents management’s view of underlying performance. Gains or losses from derivatives and hedge accounting are excluded from the statutory cost income ratio to
arrive at the underlying cost income ratio.
Total income and net interest margin
Net interest income decreased by £48 million to £4,450 million (2023: £4,498 million), with the net interest margin decreasing slightly to 1.56% (2023: 1.57%). Increases in interest rates
during the year have led to an increase in net interest margin relating to deposit balances, reflecting the timing and level of pass through of interest rate changes on to our savers. The
increase in deposit net interest margin has been offset by a decline in mortgage net interest margin, largely driven by competition within the mortgage market.
Net other income has increased by £39 million to £214 million (2023: £175 million), primarily reflecting a gain relating to the disposal of the Society's investment advice business in
February 2024.
Net interest margin:
1.56%
(2023: 1.57%)
Underlying cost income
ratio
: (note iv)
51.9%
(2023: 49.7%)
Statutory cost income ratio
: (note iv)
50.7%
(2023: 49.8%)
Return on assets:
0.48%
(2023: 0.61%)
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Financial review (continued)
Annual Report and Accounts 2024
Financial review
(continued)
Member financial benefit
As a building society, we seek to maintain Nationwide’s financial strength whilst providing value to our members through pricing, products and service. Through member financial benefit,
we measure the additional financial value for members from the competitive mortgage, savings and banking products that we offer compared to the market average. Member financial
benefit is calculated by comparing, in aggregate, Nationwide’s average interest rates and incentives to the market, predominantly using market data provided by the Bank of England and
CACI, alongside internal calculations. The value for individual members will depend on their circumstances and product choices.
We quantify member financial benefit as: Our interest rate differential + incentives and lower fees.
Interest rate differential
We measure how our average interest rates across our member balances in total compare against the market over the year.
For our two largest member segments, mortgages and retail deposits, we compare the average member interest rate for these portfolios against Bank of England and CACI industry data.
A market benchmark based upon the data from CACI and internal Nationwide calculations is used for mortgages and a Bank of England benchmark is used for retail deposits, both
adjusted to exclude Nationwide balances. The differentials derived in this way are then applied to member balances for mortgages and deposits.
For unsecured lending, a similar comparison is made. We calculate an interest rate differential based on available market data from the Bank of England and CACI and apply this to the
total interest-bearing balances of credit cards and personal loans.
Member incentives and fees
Our member financial benefit measure also includes amounts in relation to incentives and fees that Nationwide offers to members. The calculation includes annual amounts for the
following:
• Mortgages: the differential on incentives for members compared to the market.
• FlexPlus account: this current account is considered market leading against major banking competitors, with a high level of benefits for a relatively smaller fee. The difference
between the monthly account fee of £13 and the market average over the financial year of £21 is included in the member financial benefit measure.
For the year ended 4 April 2024 we delivered member financial benefit of £1,850 million (2023: £1,055 million). The increase is due to our strong savings and mortgage products which
seek to provide good value to members. Nationwide has passed a greater proportion of interest rate rises on to our deposit holders, than the market average, resulting in an increase in
member financial benefit in the year.
Member reward payments
The Board announced the inaugural Nationwide Fairer Share payment in May 2023 as part of our ongoing commitment to reward our members. The initial Nationwide Fairer Share
payment of £344 million was paid in June 2023 to eligible members who had a qualifying current account plus either qualifying savings or a qualifying mortgage as at 31 March 2023. This
payment is in addition to delivering the £1,850 million of member financial benefit to our members outlined above.
Administrative expenses
Administrative expenses have increased by £99 million to £2,422 million (2023: £2,323 million) primarily due to inflationary increases and £36 million recognised in the year for the
2024/25 Bank of England levy. The increases have been partially mitigated by efficiencies within strategic investment.
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Financial review (continued)
Annual Report and Accounts 2024
Financial review
(continued)
Impairment charge on loans and advances to customers
Impairment charge (note i)
2024 2023
£m £m
Residential lending 44
94
Consumer banking 51 31
Retail lending 95 125
Commercial 17
1
Impairment charge on loans and advances 112 126
Note:
i. Impairment charge represents the net amount recognised in the income statement, rather than amounts written off during the year.
The net impairment charge for the year has reduced to £112 million (2023: £126 million). The majority of provisions for economic uncertainty have been retained, reflecting continued high
interest rates and household affordability pressures. Both residential mortgage and consumer banking arrears have increased gradually from historically low levels. More information
regarding critical accounting judgements, and the forward-looking economic information used in impairment calculations, is included in note 10 to the financial statements.
Provisions for liabilities and charges
Provisions are held to cover the costs of remediation and redress in relation to historical quality control procedures, past sales and administration of customer accounts, and other legal
and regulatory matters. The charge of £127 million (2023: £9 million release) relates primarily to an increase in legal and regulatory provisions in the year. More information is included in
note 27 to the financial statements.
Gains/(losses) from derivatives and hedge accounting
Gains from derivatives and hedge accounting of £117 million (2023: losses of £4 million) arose primarily from portfolio hedges of interest rate risk, due to a combination of amortisation of
existing balance sheet amounts and hedge ineffectiveness. Further information is provided in note 7 to the financial statements.
Taxation
From 1 April 2023, the main rate of corporation tax increased from 19% to 25% and the banking surcharge decreased from 8% to 3%. The tax charge for the year of £476 million (2023:
£565 million) represents an effective tax rate of 26.8% (2023: 25.4%) which is higher than the statutory UK corporation tax rate of 25% (2023: 19%). The effective tax rate is higher
primarily due to the banking surcharge of £41 million (2023: £145 million). Further information is provided in note 11 to the financial statements.
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Financial review (continued)
Annual Report and Accounts 2024
Financial review
(continued)
Balance sheet
Total assets have remained stable at £271.9 billion at 4 April 2024 (2023: £271.9 billion).
Mortgage lending has been robust, with residential mortgage balances increasing to £204.5 billion (2023: £201.7 billion), slightly increasing our market share of mortgage balances in a
subdued market. Member deposit balances have increased by £6.3 billion to £193.4 billion (2023: £187.1 billion) as a result of increases in savings balances, supported by competitive fixed
rate products and increased levels of accrued and capitalised interest due to higher average savings rates.
Assets
2024 2023
£m
%
£m
%
Cash 23,817
25,635
Residential mortgages (note i) 204,467
95
201,662
95
Commercial lending 5,491
3
5,477
3
Consumer banking 4,263
2
4,408
2
214,221
100
211,547
100
Impairment provisions (781) (765)
Loans and advances to customers 213,440 210,782
Other fin
ancial assets 31,970 32,387
Other non-financial assets 2,690 3,089
Total assets 271,917 271,893
12-month average
Liquidity Coverage Ratio
(note ii):
191%
(2023: 180%)
Asset quality
% %
Residential mortgages : (note i)
Proportion of residential mortgage accounts more than 3 months in arrears 0.41 0.32
Average indexed loan to value (by value) 55 55
Consumer banking:
Proportion of customer balances with amounts past due more than
3 months (excluding charged off balances)
1.36 1.21
Notes:
i. Residential mortgages include owner-occupied, buy to let and legacy lending.
ii. This represents a simple average of the Liquidity Coverage Ratio (LCR) for the last 12 month ends. The LCR ensures that sufficient high-quality liquid assets are held to survive a short-term severe but
plausible liquidity stress.
Cash
Cash is held by our Treasury function for liquidity purposes, with the £1.8 billion decrease to £23.8 billion (2023: £25.6 billion) predominantly due to repayment of drawings from the Bank
of England’s Term Funding Scheme with additional incentives for SME’s (TFSME), offset by increases in retail savings balances.
The average Liquidity Coverage Ratio over the 12 months ended 4 April 2024 increased to 191% (12 months ended 4 April 2023: 180%), with higher average liquid asset balances driven by
growth in member deposits. Liquidity continues to be managed against internal risk appetite, which is more prudent than regulatory requirements and, under the most severe internal 30
calendar day stress test, the average liquid asset buffer remains robust. Further details are included in the Liquidity and funding risk section of the Risk report.
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Financial review (continued)
Annual Report and Accounts 2024
Financial review
(continued)
Residential mortgages
Total gross mortgage lending was lower than in the prior year at £26.3 billion (2023: £33.6 billion) due to subdued market growth; our market share of gross advances increased to 11.5%
(2023: 10.8%) with continued focus on first time buyers. Net lending was £2.6 billion (2023: £3.3 billion), with Nationwide’s market share of balances increasing to 12.3% (2023: 12.2%). Net
lending has been supported by our continued focus on retention through highly competitive products provided to existing customers. Owner-occupied mortgage balances increased to
£161.0 billion (2023: £157.6 billion) and buy to let and legacy mortgage balances decreased slightly to £43.5 billion (2023: £44.1 billion) in a subdued buy to let market.
Arrears remain low but have increased gradually during the year, with cases more than three months in arrears representing 0.41% (2023: 0.32%) of the total portfolio. Further increases
in arrears from current levels are expected, due to both inflation and higher interest rates negatively impacting household finances. Impairment provision balances have increased to £321
million (2023: £280 million) as stage 3 provisions have increased due to the growth in the number of cases more than three months in arrears and adjustments for economic uncertainty
being l
argely maintained.
Consumer banking
Consumer banking balances have decreased to £4.3 billion (2023: £4.4 billion). Consumer banking comprises personal loan balances of £2.4 billion (2023: £2.6 billion), credit card
balances of £1.6 billion (2023: £1.5 billion) and overdrawn current account balances of £0.3 billion (2023: £0.3 billion).
Arrears have increased during the year, with balances more than three months in arrears (excluding charged off accounts) representing 1.36% (2023: 1.21%) of the total portfolio. Provision
balances reduced to £436 million (2023: £469 million), as the estimated impact of inflation on future credit performance has reduced during the year.
Commercial lending
During the year, commercial lending balances remained stable at £5.5 billion (2023: £5.5 billion). The overall portfolio includes registered social landlords with balances of £4.4 billion
(2023: £4.1 billion), project finance with balances of £0.5 billion (2023: £0.5 billion), commercial real estate balances of £0.3 billion (2023: £0.4 billion) and a fair value adjustment for micro
hedged risk of £0.3 billion (2023: £0.4 billion). Both project finance and commercial real estate books are closed to new lending.
Impairment provision balances increased to £24 million (2023: £16 million) due to updates relating to a small number of individual loans.
Other financial assets
Other financial assets of £32.0 billion (2023: £32.4 billion) comprise investment assets held by Nationwide’s Treasury function of £26.5 billion (2023: £27.6 billion), loans and advances to
banks and similar institutions of £2.5 billion (2023: £2.9 billion), derivatives with positive fair values of £6.3 billion (2023: £6.9 billion) and fair value adjustments for portfolio hedged risk
of £(3.3) billion (2023: £(5.0) billion). Derivatives largely comprise interest rate and foreign exchange contracts which economically hedge financial risks inherent in Nationwide’s lending
and funding activities.
Members’ interests, equity and liabilities
2024 2023
£m £m
Mem
ber deposits 193,366
187,143
Debt securities in issue 29,599
27,626
Other financial liabilities 29,817
38,701
Other liabilities
1,449
1,517
Total liabilities 254,231 254,987
Members’ interests and equity 17,686 16,906
Total members’ interests, equity and liabilities 271,917 271,893
Wholesale funding ratio:
22.5%
(2023: 25.0%)
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Financial review (continued)
Annual Report and Accounts 2024
Financial review
(continued)
Member deposits
Member deposit balances grew by £6.3 billion (2023: £9.1 billion) to £193.4 billion (2023: £187.1 billion). Nationwide’s market share of deposit balances reduced slightly to 9.5% (2023:
9.6%). Savings balances increased by £9.1 billion (2023: £11.1 billion) supported by competitive fixed rate products, including the Fairer Share Bond, and increased levels of accrued and
capitalised interest due to higher average savings rates. Credit balances on current accounts reduced by £2.9 billion (2023: £2.0 billion reduction) as customer behaviours changed in
response to higher interest rates.
Debt securities in issue and other financial liabilities
Debt securities in issue relate to wholesale funding but exclude subordinated debt which is included within other financial liabilities. Balances increased to £29.6 billion (2023: £27.6
billion) reflecting secured and unsecured wholesale funding issuances during the year. Other financial liabilities decreased to £29.8 billion (2023: £38.7 billion) primarily due to the early
repayment of £7.9 billion of drawings from the Bank of England’s Term Funding Scheme with additional incentives for SMEs (TFSME). Nationwide’s wholesale funding ratio decreased to
22.5% (2023: 25.0%).
Members’ interests and equity
Members’ interests and equity have increased to £17.7 billion (2023: £16.9 billion) largely as a result of retained profits.
Statement of comprehensive income
Statement of comprehensive income (note i)
2024 2023
£m
£m
Profit after tax 1,300 1,664
Net remeasurement of pension obligations (190) (56)
Net movement in cash flow hedge reserve (49)
(8)
Net movement in other hedging reserve (4) (4)
Net movement in fair value through other comprehensive income reserve (24)
(103)
Net movement in revaluation reserve (2)
1
T
otal comprehensive income 1,031
1,494
Note:
i. Movements are shown net of related taxation. Gross movements are set out in the financial statements on page 236.
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Financial review (continued)
Annual Report and Accounts 2024
Financial review
(continued)
Capital structure
Nationwide’s capital position remains strong, with both the Common Equity Tier 1 (CET1) ratio and leverage ratio comfortably above regulatory capital requirements of 12.9% and 4.3%
respectively. The CET1 ratio increased to 27.1% (2023: 26.5%) and the leverage ratio increased to 6.5% (2023: 6.0%). The capital disclosures included in this report are in line with UK
Capital Requirements Directive V (UK CRD V) with IFRS 9 transitional arrangements included.
Capital structure
2024 2023
£m £m
Capital resources
CET1 capital 14,798
13,733
Total Tier 1 capital 16,134 15,069
Total regulatory capital 17,808
16,908
Capital requirements
Risk weighted assets (RWAs)
54,628
51,731
Leverage exposure 249,263 249,299
UK CRD V capital ratios % %
CET1 ratio 27.1
26.5
Leverage ratio 6.5
6.0
The CET1 ratio increased to 27.1% (2023: 26.5%) as a result of an increase in CET1 capital of £1.1 billion, partially offset by an increase in RWAs of £2.9 billion. The CET1 capital resources
increase was driven by £1.3 billion profit after tax, partially offset by £0.2 billion of capital distributions. The RWA increase was predominantly driven by an increase in residential
mortgage credit risk RWAs.
The leverage ratio increased to 6.5% (2023: 6.0%), with Tier 1 capital increasing by £1.1 billion as a result of the CET1 capital movements referenced above, and leverage exposure
remaining at £249 billion. Leverage requirements continue to be Nationwide’s binding Tier 1 capital constraint, as the combination of minimum and regulatory buffer requirements are in
excess of the risk-based equivalent.
Further details of the capital position and future regulatory developments are described in the Capital risk section of the Risk report.
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Governance
Chairman’s introduction to the Corporate
Governance report 76
Your Board 77
Governance at Nationwide 81
Statement of compliance with the UK Corporate
Governance Code 2018 81
Audit Committee report 97
Board Risk Committee report 104
Nomination and Governance Committee report 108
Report of the directors on remuneration 112
Directors’ report 139
75
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Report of the directors on corporate governance
Chairman’s introduction to the Corporate
Governance report
Annual Report and Accounts 2024
Report of the directors on corporate governance
Chairman’s introduction to the Corporate Governance Report
Dear fellow member,
I am pleased to present the Governance report for the financial year ended 4 April 2024.
Nationwide, as a modern mutual, puts members and their diverse needs at the heart of its
decision making. The long-term success and sustainability of the Society is underpinned
by good governance to ensure that decisions taken by the Board and management
deliver value for present and future members. The Board is responsible for governance,
setting a clear strategy, and ensuring that, as well as fulfilling our statutory duties, the
Society is managed in line with its mutual values. Further information on our governance
structure and how we have applied the provisions of the UK Corporate Governance Code
2018 is set out in this report, together with a description of some of the Board’s key
activities during the year.
Member and customer engagement
Engaging with our customers continues to be central to what we do at Nationwide, and we
continue to listen and respond to customers’ needs. I am pleased that we have been able to
help members through the cost of living challenge through the Fairer Share Payment. More
information is found on page 36.
Members are encouraged to share their views and insights and contribute their
suggestions via the Connect Community. Members can get involved in discussions with
other members and with Nationwide, take part in surveys to help shape new products, and
take part in telephone interviews and group online live chats so that the member voice
plays a valuable role in shaping our future.
The Board has continued to strengthen its understanding of customer and colleague needs
through a number of activities this year. All non-executive directors are undertaking branch
visits to strengthen their understanding in support of this. The Board has also taken part in
Closer to Customer focus groups where we engage with customers on specific topics, such
as the cost of living, to provide a greater understanding of customers and their needs,
ensuring they remain at the centre of its decision making.
The Society’s 2023 AGM was run successfully as an online event, enabling members all
over the UK to join and participate. All Board members were available to answer member
questions and the event had the highest member participation of recent years. I look
forward to welcoming as many members as possible to our AGM in 2024.
Inclusion, diversity and culture
To ensure we continue to serve our members and their diverse needs effectively, we
remain committed to maintaining diversity of perspectives, experience and backgrounds
within senior management and the Board. The composition of the Board is outlined on page 92;
it continues to exceed the Listing Rules gender diversity requirement and meet the ethnic
diversity requirement. We remain committed to our inclusive culture which reflects the
diversity of our membership, customers and colleagues and supports our principle of
modern mutuality. Further information about our oversight of the Society’s culture can be
found on page 83.
Climate change
The Board is conscious of the impact of climate change and is committed to ensuring that
the Society scrutinises its carbon footprint and reduces its energy consumption. We have
five pillars to our climate change strategy which can be found on pages 53 to 61 and within
our Climate-Related Financial Disclosures publication on nationwide.co.uk.
Board changes
We welcomed Sally Orton as a non-executive director on 1 June 2023 and Tracey Graham
assumed the role of Senior Independent Director from 20 July 2023. Mai Fyfield and Gunn
Waersted retired from the Board at the 2023 AGM. Full details of all changes are on
page 82.
The year ahead
The Blueprint for a modern mutual was endorsed by the Board at its October 2023
Strategy Conference and all colleagues, including the Board and management, are
collaborating on its effective implementation. To ensure it remains fit for the future, the
Society continues to strengthen its digital offering and internal controls around member-
facing processes. Finally, embedding our customer first behaviours throughout the
business will help us push for better in the year ahead.
I would like to thank all of my fellow Board members for their hard work, support and
dedication this year.
Ke
vin Parry
Society Chairman
Annual Report and Accounts 2024
Report of the directors on corporate governance
Chairman’s introduction to the Corporate Governance Report
Dear fellow member,
I am pleased to present the Governance report for the financial year ended 4 April 2024.
Nationwide, as a modern mutual, puts members and their diverse needs at the heart of its
decision making. The long-term success and sustainability of the Society is underpinned
by good governance to ensure that decisions taken by the Board and management
deliver value for present and future members. The Board is responsible for governance,
setting a clear strategy, and ensuring that, as well as fulfilling our statutory duties, the
Society is managed in line with its mutual values. Further information on our governance
structure and how we have applied the provisions of the UK Corporate Governance Code
2018 is set out in this report, together with a description of some of the Board’s key
activities during the year.
Member and customer engagement
Engaging with our customers continues to be central to what we do at Nationwide, and we
continue to listen and respond to customers’ needs. I am pleased that we have been able to
help members through the cost of living challenge through the Fairer Share Payment. More
information is found on page 36.
Members are encouraged to share their views and insights and contribute their
suggestions via the Connect Community. Members can get involved in discussions with
other members and with Nationwide, take part in surveys to help shape new products, and
take part in telephone interviews and group online live chats so that the member voice
plays a valuable role in shaping our future.
The Board has continued to strengthen its understanding of customer and colleague needs
through a number of activities this year. All non-executive directors are undertaking branch
visits to strengthen their understanding in support of this. The Board has also taken part in
Closer to Customer focus groups where we engage with customers on specific topics, such
as the cost of living, to provide a greater understanding of customers and their needs,
ensuring they remain at the centre of its decision making.
The Society’s 2023 AGM was run successfully as an online event, enabling members all
over the UK to join and participate. All Board members were available to answer member
questions and the event had the highest member participation of recent years. I look
forward to welcoming as many members as possible to our AGM in 2024.
Inclusion, diversity and culture
To ensure we continue to serve our members and their diverse needs effectively, we
remain committed to maintaining diversity of perspectives, experience and backgrounds
within senior management and the Board. The composition of the Board is outlined on page 92;
it continues to exceed the Listing Rules gender diversity requirement and meet the ethnic
diversity requirement. We remain committed to our inclusive culture which reflects the
diversity of our membership, customers and colleagues and supports our principle of
modern mutuality. Further information about our oversight of the Society’s culture can be
found on page 83.
Climate change
The Board is conscious of the impact of climate change and is committed to ensuring that
the Society scrutinises its carbon footprint and reduces its energy consumption. We have
five pillars to our climate change strategy which can be found on pages 53 to 61 and within
our Climate-Related Financial Disclosures publication on nationwide.co.uk.
Board changes
We welcomed Sally Orton as a non-executive director on 1 June 2023 and Tracey Graham
assumed the role of Senior Independent Director from 20 July 2023. Mai Fyfield and Gunn
Waersted retired from the Board at the 2023 AGM. Full details of all changes are on
page 82.
The year ahead
The Blueprint for a modern mutual was endorsed by the Board at its October 2023
Strategy Conference and all colleagues, including the Board and management, are
collaborating on its effective implementation. To ensure it remains fit for the future, the
Society continues to strengthen its d
igital offering and internal controls around member-
facing processes. Finally, embedding our customer first behaviours throughout the
business will help us push for better in the year ahead.
I would like to thank all of my fellow Board members for their hard work, support and
dedication this year.
Kevin Parry
Society Chairman
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Report of the directors on corporate governance
Your Board
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Your Board
Key: Audit Committee Nomination and Governance Committee Remuneration Committee Board Risk Committee
Indicates Chair of
Committee
Kevin Parry
OBE
Tracey Graham
Debbie Crosbie
Society Chairman
Date of appointment
23 May 2016 (Board) and 1 February 2022 (Chairman)
Skills and experience
Kevin Parry is a chartered accountant and brings to the
Board expertise in audit, regulation and governance, risk
management, finance and corporate finance. As a former
Chairman of the Homes and Communities Agency, his
perspective on housing is a valuable asset to the Society.
He has a wealth of experience across a broad range of
organisations. He was Chairman of Intermediate Capital
Group plc and Senior Independent Director of Standard
Life Aberdeen plc as well as having been the Chief
Financial Officer of Schroders plc and the Chief Executive
Officer of Management Consulting Group plc. In addition,
he is a former trustee and Chairman of the Royal National
Children’s Springboard Foundation.
Current external appointments
Chairman of Royal London Mutual Insurance Society
Limited
Non-executive director and Chairman of the Audit and
Risk Committee of Daily Mail and General Trust plc
Senior Independent Director
Date of appointment
28 September 2022 (Board) and 20 July 2023
(Senior Independent Director)
Skills and experience
Tracey Graham is an experienced non-executive
director having served on several listed companies and
mutual boards across a range of sectors including
financial services. She has extensive experience as a
remuneration committee chair and as a senior
independent director.
She was Chief Executive Officer of Talaris Limited, an
international cash management business. Before that
she held a number of senior roles in De La Rue plc,
HSBC and at AXA Insurance.
Current external appointments
Non-executive director of Close Brothers Group plc
Non-executive and Senior Independent Director of
DiscoverIE Group plc
Non-executive director of LINK Scheme Limited, where
she is Chair of the LINK Consumer Council
Chief Executive Officer
Date of appointment
2 June 2022
Skills and experience
Debbie Crosbie joined Nationwide as CEO in June
2022. She has over 25 years of experience in financial
services leadership. Debbie was previously CEO at TSB
where she led its successful turnaround by delivering a
strategy to transform customer experience, made the
bank more competitive, improved its reputation and
increased colleague engagement – delivering the
three-year growth strategy a year early. Debbie has
extensive experience of leading turnaround strategies
and, while Acting CEO of Clydesdale Bank, led
preparations for its successful demerger and
subsequent Initial Public Offering. Debbie has overseen
the execution of several major transformation projects.
Current external appointments
Non-executive director of SSE plc
Member of the FCA’s Practitioner Panel
Director of UK Finance Limited
Member of the Prime Minister’s 2024 Business Council
Governan
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Your Board
Key: Audit Committee Nomination and Governance Committee Remuneration Committee Board Risk Committee
Indicates Chair of
Committee
Kevin Parry
OBE
Tracey Graham
Debbie Crosbie
Society Chairman
Date of appointment
23 May 2016 (Board) and 1 February 2022 (Chairman)
Skills and experience
Kevin Parry is a chartered accountant and brings to the
Board expertise in audit, regulation and governance, risk
management, finance and corporate finance. As a former
Chairman of the Homes and Communities Agency, his
perspective on housing is a valuable asset to the Society.
He has a wealth of experience across a broad range of
organisations. He was Chairman of Intermediate Capital
Group plc and Senior Independent Director of Standard
Life Aberdeen plc as well as having been the Chief
Financial Officer of Schroders plc and the Chief Executive
Officer of Management Consulting Group plc. In addition,
he is a former trustee and Chairman of the Royal National
Children’s Springboard Foundation.
Current external appointments
Chairman of Royal London Mutual Insurance Society
Limited
Non-executive director and Chairman of the Audit and
Risk Committee of Daily Mail and General Trust plc
Senior Independent Director
Date of appointment
28 September 2022 (Board) and 20 July 2023
(Senior Independent Director)
Skills and experience
Tracey Graham is an experienced non-executive
director having served on several listed companies and
mutual boards across a range of sectors including
financial services. She has extensive experience as a
remuneration committee chair and as a senior
independent director.
She was Chief Executive Officer of Talaris Limited, an
international cash management business. Before that
she held a number of senior roles in De La Rue plc,
HSBC and at AXA Insurance.
Current external appointments
Non-executive director of Close Brothers Group plc
Non-executive and Senior Independent Director of
DiscoverIE Group plc
Non-executive director of LINK Scheme Limited, where
she is Chair of the LINK Consumer Council
Chief Executive Officer
Date of appointment
2 June 2022
Skills and experience
Debbie Crosbie joined Nationwide as CEO in June
2022. She has over 25 years of experience in financial
services leadership. Debbie was previously CEO at TSB
where she led its successful turnaround by delivering a
strategy to transform customer experience, made the
bank more competitive, improved its reputation and
increased colleague engagement – delivering the
three-year growth strategy a year early. Debbie has
extensive experience of leading turnaround strategies
and, while Acting CEO of Clydesdale Bank, led
preparations for its successful demerger and
subsequent Initial Public Offering. Debbie has overseen
the execution of several major transformation projects.
Current external appointments
Non-executive director of SSE plc
Member of the FCA’s Practitioner Panel
Director of UK Finance Limited
Member of the Prime Minister’s 2024 Business Council
Governan
Your Board
77
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Report of the directors on corporate governance
Your Board (continued)
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Your Board (continued)
Key: Audit Committee Nomination and Governance Committee Remuneration Committee Board Risk Committee
Indicates Chair of
Committee
Albert Hitchcock Alan Keir Debbie Klein
Independent non-executive director
Date of appointment
2 December 2018
Skills and experience
Albert Hitchcock is a leader in information technology with
over 30 years in the technology industry. His experience is
of huge value to the Society as we continue our ambitious
transformation programme to meet the expectations of
our members today and in the future.
He was previously a technology adviser to the Board of the
Royal Bank of Scotland plc and has held executive
positions as a Group Chief Information Officer at
Vodafone plc and Nortel Networks. He was previously
Chief Technology and Operations Officer of Pearson plc.
Current external appointments
Non-executive director of PureProfile Ltd
Independent non-executive director
Date of appointment
1 March 2022
Skills and experience
Alan Keir is an experienced banker who began his non-
executive career when he retired as a Group Managing
Director and CEO of EMEA at HSBC in 2016, where he
had been leading the operations in 30 countries,
including the UK home market. He has extensive
experience in a full range of banking activity, including
retail branches and investment banking. His expertise in
the retail and commercial banking sector, and his proven
track record of delivering a successful commercial
banking strategy whilst redefining the culture and values
of a large organisation, assists the Board in setting and
delivering strategic performance. He was previously a
non-executive director of HSBC Bank plc between 2018
and 2021.
Current external appointments
Chair of the Sumitomo Mitsui Banking Corporation Bank
International plc
Non-executive director of Majid Al Futtaim
Independent non-executive director
Date of appointment
1 March 2021
Skills and experience
Debbie Klein has extensive experience in commercial
brand and marketing roles. Until mid-2023, she was
Group Chief Marketing, Corporate Affairs and People
Officer at Sky. As part of her role, she was responsible for
Sky’s corporate social responsibility (CSR) programme,
leading Sky’s challenge to meet its 2030 net-zero goals.
Her expertise in sustainability and CSR matters assists
in building Nationwide’s future Environmental, Social and
Corporate Governance (ESG) agenda.
She was previously Chief Executive Europe and Asia
Pacific at The Engine Group, an integrated marketing
services business, and held various leadership roles in
her 20 years at the firm. Earlier in her career she worked
in Strategy and Insight at Saatchi & Saatchi and Nielsen.
Current external appointments
Non-executive director of The Guardian Media Group
Non-executive director of Multichoice Group
Non-executive director of Showmax Africa Holdings
Limited
Non-executive director of Xyon Health Inc
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Your Board
Key: Audit Committee Nomination and Governance Committee Remuneration Committee Board Risk Committee
Indicates Chair of
Committee
Kevin Parry
OBE
Tracey Graham
Debbie Crosbie
Society Chairman
Date of appointment
23 May 2016 (Board) and 1 February 2022 (Chairman)
Skills and experience
Kevin Parry is a chartered accountant and brings to the
Board expertise in audit, regulation and governance, risk
management, finance and corporate finance. As a former
Chairman of the Homes and Communities Agency, his
perspective on housing is a valuable asset to the Society.
He has a wealth of experience across a broad range of
organisations. He was Chairman of Intermediate Capital
Group plc and Senior Independent Director of Standard
Life Aberdeen plc as well as having been the Chief
Financial Officer of Schroders plc and the Chief Executive
Officer of Management Consulting Group plc. In addition,
he is a former trustee and Chairman of the Royal National
Children’s Springboard Foundation.
Current external appointments
Chairman of Royal London Mutual Insurance Society
Limited
Non-executive director and Chairman of the Audit and
Risk Committee of Daily Mail and General Trust plc
Senior Independent Director
Date of appointment
28 September 2022 (Board) and 20 July 2023
(Senior Independent Director)
Skills and experience
Tracey Graham is an experienced non-executive
director having served on several listed companies and
mutual boards across a range of sectors including
financial services. She has extensive experience as a
remuneration committee chair and as a senior
independent director.
She was Chief Executive Officer of Talaris Limited, an
international cash management business. Before that
she held a number of senior roles in De La Rue plc,
HSBC and at AXA Insurance.
Current external appointments
Non-executive director of Close Brothers Group plc
Non-executive and Senior Independent Director of
DiscoverIE Group plc
Non-executive director of LINK Scheme Limited, where
she is Chair of the LINK Consumer Council
Chief Executive Officer
Date of appointment
2 June 2022
Skills and experience
Debbie Crosbie joined Nationwide as CEO in June
2022. She has over 25 years of experience in financial
services leadership. Debbie was previously CEO at TSB
where she led its successful turnaround by delivering a
strategy to transform customer experience, made the
bank more competitive, improved its reputation and
increased colleague engagement – delivering the
three-year growth strategy a year early. Debbie has
extensive experience of leading turnaround strategies
and, while Acting CEO of Clydesdale Bank, led
preparations for its successful demerger and
subsequent Initial Public Offering. Debbie has overseen
the execution of several major transformation projects.
Current external appointments
Non-executive director of SSE plc
Member of the FCA’s Practitioner Panel
Director of UK Finance Limited
Member of the Prime Minister’s 2024 Business Council
Governan
78
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Report of the directors on corporate governance
Your Board (continued)
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Your Board (continued)
Sally Orton Tamara Rajah MBE
Chris Rhodes
Independent non-executive director
Date of appointment
1 June 2023
Skills and experience
Sally Orton is a dual-qualified chartered accountant in
Australia and the UK, with a career spanning 30 years in
financial services and professional services, bringing to
the Board expertise in audit, regulation and finance.
She was previously Group Chief Financial Officer at
GAM Holdings AG (listed on the SIX Swiss Exchange),
where her remit included responsibility for all financial
matters in the Group, including reporting, tax, treasury,
capital management and related regulatory matters.
Prior to joining GAM, she held CFO roles at LCH Ltd
(part of the London Stock Exchange Group) and
Howden Broking Group, and also held senior roles at
Man Group plc. Having started her career at KPMG in
Australia, she moved to London in 1997 to join the
Banking and Capital Markets industry groups of PwC
and then EY. She has been Group CFO at Volante Group
since April 2024.
Current external appointments
Group CFO of Volante Group
Independent non-executive director
Date of appointment
1 September 2020
Skills and experience
Tamara Rajah has extensive experience in
entrepreneurial ventures and technology and ran an
award-winning, venture capital backed global consumer
healthcare platform. She has published widely on high
growth entrepreneurship and was formerly a non-
executive director of the ScaleUp Institute Limited and
Entrepreneur First Operations Limited. Prior to
launching her own company, Tamara was one of the
youngest partners at strategy firm McKinsey where she
spent a decade in the healthcare practice and led
McKinsey’s knowledge and client work on
entrepreneurship and technology clusters in life
sciences, digital and technology. She brings to the Board
vast experience of digital transformation,
entrepreneurship and innovation.
Current external appointments
CEO Holland and Barrett Wellness Solutions and Chief
Transformation Officer
Non-executive director of London & Partners Limited
(stepped down from this role on 10 May 2024)
Chief Financial Officer
Date of appointment
20 April 2009
Skills and experience
Chris Rhodes was appointed as Chief Financial Officer in
October 2019, having been a Board member since 2009.
He is a chartered accountant with over 30 years’
experience in retail and commercial banking, holding
senior leadership roles across finance, treasury,
operations, retail distribution and risk management. His
previous positions include Group Finance Director of
Alliance and Leicester Group, Board Director at Visa
Europe and Deputy Managing Director for Girobank.
He has been a Director of the Lending Standards
Board and a Trustee of National Numeracy. His broad
background means he has a deep understanding of
the Society and the mutual business model, and he is
ideally placed to oversee the long-term financial
stability of the Society, ensuring the Society continues
to invest for the future on behalf of its members.
Current external appointments
Director of Silverstone Securitisation Holdings Limited
Director of Arkose Funding Limited
Key: Audit Committee Nomination and Governance Committee Remuneration Committee Board Risk Committee
Indicates Chair of
Committee
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Your Board
Key: Audit Committee Nomination and Governance Committee Remuneration Committee Board Risk Committee
Indicates Chair of
Committee
Kevin Parry
OBE
Tracey Graham
Debbie Crosbie
Society Chairman
Date of appointment
23 May 2016 (Board) and 1 February 2022 (Chairman)
Skills and experience
Kevin Parry is a chartered accountant and brings to the
Board expertise in audit, regulation and governance, risk
management, finance and corporate finance. As a former
Chairman of the Homes and Communities Agency, his
perspective on housing is a valuable asset to the Society.
He has a wealth of experience across a broad range of
organisations. He was Chairman of Intermediate Capital
Group plc and Senior Independent Director of Standard
Life Aberdeen plc as well as having been the Chief
Financial Officer of Schroders plc and the Chief Executive
Officer of Management Consulting Group plc. In addition,
he is a former trustee and Chairman of the Royal National
Children’s Springboard Foundation.
Current external appointments
Chairman of Royal London Mutual Insurance Society
Limited
Non-executive director and Chairman of the Audit and
Risk Committee of Daily Mail and General Trust plc
Senior Independent Director
Date of appointment
28 September 2022 (Board) and 20 July 2023
(Senior Independent Director)
Skills and experience
Tracey Graham is an experienced non-executive
director having served on several listed companies and
mutual boards across a range of sectors including
financial services. She has extensive experience as a
remuneration committee chair and as a senior
independent director.
She was Chief Executive Officer of Talaris Limited, an
international cash management business. Before that
she held a number of senior roles in De La Rue plc,
HSBC and at AXA Insurance.
Current external appointments
Non-executive director of Close Brothers Group plc
Non-executive and Senior Independent Director of
DiscoverIE Group plc
Non-executive director of LINK Scheme Limited, where
she is Chair of the LINK Consumer Council
Chief Executive Officer
Date of appointment
2 June 2022
Skills and experience
Debbie Crosbie joined Nationwide as CEO in June
2022. She has over 25 years of experience in financial
services leadership. Debbie was previously CEO at TSB
where she led its successful turnaround by delivering a
strategy to transform customer experience, made the
bank more competitive, improved its reputation and
increased colleague engagement – delivering the
three-year growth strategy a year early. Debbie has
extensive experience of leading turnaround strategies
and, while Acting CEO of Clydesdale Bank, led
preparations for its successful demerger and
subsequent Initial Public Offering. Debbie has overseen
the execution of several major transformation projects.
Current external appointments
Non-executive director of SSE plc
Member of the FCA’s Practitioner Panel
Director of UK Finance Limited
Member of the Prime Minister’s 2024 Business Council
Governan
79
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Report of the directors on corporate governance
Your Board (continued)
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Your Board (continued)
Gillian Riley Phil Rivett
Jason Wright
Independent non-executive director
Date of appointment
1 April 2022
Skills and experience
Gillian Riley is a senior banker with an accomplished
track record in consumer and commercial banking at
Bank of Nova Scotia, which is Canada’s third largest
bank. Since 2018, she has been President and CEO of its
subsidiary, Tangerine Bank, which she evolved from
being a digital deposits bank to an everyday digital
bank that is profitable, has a full suite of banking
solutions and which consistently wins awards for its
client satisfaction. She also previously founded The
Scotiabank Women Initiative to strengthen equality and
support for women entrepreneurs. She is a champion
for diversity and community values, contributing in
areas such as health, youth issues and gender equality.
Current external appointments
Non-executive director and Chair of Roynat Capital
Incorporation
Non-executive director of St Michael’s Hospital
Foundation in Canada
Independent non-executive director
Date of appointment
1 September 2019
Skills and experience
Phil Rivett is a chartered accountant with over 40 years’
experience of professional accountancy and audit, with a
focus on banks and insurance companies. He has a wealth
of experience, advising major financial services providers
in the UK and on a global basis. He has held various
senior positions at PricewaterhouseCoopers LLP and
was Chair of its Global Financial Services Group prior to
retiring from the firm. He has an exceptional leadership
track record, advocating a collaborative and inclusive
approach.
Current external appointments
Non-executive director of Standard Chartered plc
Non-executive director of Standard Chartered Bank
Society Secretary
Date of appointment
17 March 2021
Skills and experience
Jason Wright is responsible for delivering a
comprehensive secretariat service to the Board,
Board committees and senior management. He
advises the Chairman and the Board on governance-
related matters and helps the Board function
effectively by ensuring it has the policies, processes,
information, time and resources it needs. He joined
Nationwide in December 2019 to lead the Secretariat
function and became Society Secretary in March
2021. He is a qualified chartered company secretary
with over 25 years’ experience working as a
governance professional within financial services. Prior
to joining the Society, he was Company Secretary at
Barclays Bank plc and previously Head of Board
Support at Santander UK plc. He is a Fellow of the
Chartered Governance Institute.
Key: Audit Committee Nomination and Governance Committee Remuneration Committee Board Risk Committee
Indicates Chair of
Committee
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Your Board
Key: Audit Committee Nomination and Governance Committee Remuneration Committee Board Risk Committee
Indicates Chair of
Committee
Kevin Parry
OBE
Tracey Graham
Debbie Crosbie
Society Chairman
Date of appointment
23 May 2016 (Board) and 1 February 2022 (Chairman)
Skills and experience
Kevin Parry is a chartered accountant and brings to the
Board expertise in audit, regulation and governance, risk
management, finance and corporate finance. As a former
Chairman of the Homes and Communities Agency, his
perspective on housing is a valuable asset to the Society.
He has a wealth of experience across a broad range of
organisations. He was Chairman of Intermediate Capital
Group plc and Senior Independent Director of Standard
Life Aberdeen plc as well as having been the Chief
Financial Officer of Schroders plc and the Chief Executive
Officer of Management Consulting Group plc. In addition,
he is a former trustee and Chairman of the Royal National
Children’s Springboard Foundation.
Current external appointments
Chairman of Royal London Mutual Insurance Society
Limited
Non-executive director and Chairman of the Audit and
Risk Committee of Daily Mail and General Trust plc
Senior Independent Director
Date of appointment
28 September 2022 (Board) and 20 July 2023
(Senior Independent Director)
Skills and experience
Tracey Graham is an experienced non-executive
director having served on several listed companies and
mutual boards across a range of sectors including
financial services. She has extensive experience as a
remuneration committee chair and as a senior
independent director.
She was Chief Executive Officer of Talaris Limited, an
international cash management business. Before that
she held a number of senior roles in De La Rue plc,
HSBC and at AXA Insurance.
Current external appointments
Non-executive director of Close Brothers Group plc
Non-executive and Senior Independent Director of
DiscoverIE Group plc
Non-executive director of LINK Scheme Limited, where
she is Chair of the LINK Consumer Council
Chief Executive Officer
Date of appointment
2 June 2022
Skills and experience
Debbie Crosbie joined Nationwide as CEO in June
2022. She has over 25 years of experience in financial
services leadership. Debbie was previously CEO at TSB
where she led its successful turnaround by delivering a
strategy to transform customer experience, made the
bank more competitive, improved its reputation and
increased colleague engagement – delivering the
three-year growth strategy a year early. Debbie has
extensive experience of leading turnaround strategies
and, while Acting CEO of Clydesdale Bank, led
preparations for its successful demerger and
subsequent Initial Public Offering. Debbie has overseen
the execution of several major transformation projects.
Current external appointments
Non-executive director of SSE plc
Member of the FCA’s Practitioner Panel
Director of UK Finance Limited
Member of the Prime Minister’s 2024 Business Council
Governan
80
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Report of the directors on corporate governance
Governance at Nationwide
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
The Board has established a set of internal standards and principles by which Nationwide is governed to ensure sound and prudent
control of the Society, and to keep members’ money and interests safe. Everyone in Nationwide has a role to play in governance.
UK Corporate Governance Code 2018 – statement of compliance
Nationwide is committed to high standards of corporate governance and has continued to adopt the relevant parts of the UK Corporate Governance Code 2018 (the Code), which is
available at www.frc.org.uk. The Board believes that throughout the year ended 4 April 2024 Nationwide has complied with the principles of the Code in line with the Building Societies
Association guidance of July 2018. Details of the principles, including where you can read more about how Nationwide complied with them, are set out below:
1
The Code uses the terminologies of ‘company’ and ‘shareholder’ but for the purpose of Nationwide and this Corporate Governance report, these terms should be read as ‘Society’ and ‘members’, respectively.
Section
Code Principles
1
Where to read about how Nationwide has complied
1. Board leadership and company purpose
A. An entrepreneurial board with the role to promote the long-term sustainable success
of the Society and generate value for members
Pages 3-74 and 82-83
B. Purpose, values and culture
Pages 3-74 and 82-83
C. Performance measures, risks and controls framework
Pages 23-25, 104-107 and 148
D. Stakeholder engagement
Pages 26-40
E. Workforce policies and practices
Pages 30-31 and 82-83
2. Division of responsibilities F. Leadership of Board and Board operations
Pages 10-11, 82-83, 88-91 and 108-111
G. Board composition, Board roles and independence
Pages 88-95
H. Directors’ responsibilities and time commitment
Pages 82 and 89
I. Board support, information and advice
Pages 89-90
3. Composition, succession and evaluation J. Board appointments and succession plans for Board and senior management
Pages 108-111
K. Board skills, experience and knowledge
Pages 77-90 and 93
L. Annual Board evaluation
Pages 94-95
4. Audit, risk and internal control M. Effectiveness of external auditor and internal audit
Pages 97-103
N. Fair, balanced and understandable assessment of the company’s position and
prospects
Pages 98-99 and 141
O. Risk Management and Internal Control Framework
Pages 97-103 and 144-147
5. Remuneration P. Remuneration and Society purpose, strategy and values
Pages 112-138
Q. Executive and senior management remuneration
Pages 112-138
R. Authorisation of remuneration outcomes
Pages 112-138
Governance at Nationwide
81
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Report of the directors on corporate governance
Governance at Nationwide (continued)
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
How the Board operates
The Board met 11 times in the 2023/24 financial year. In addition, the Board held a Strategy Conference to
consider and develop the Society’s strategic direction; held Closer to Customers sessions to strengthen the
Board’s understanding of customer needs; and undertook training to keep directors abreast of technical,
regulatory and statutory developments. Further information on the Closer to Customers programme can be
found on page 90. The Chief Risk Officer and the General Counsel attend Board meetings and other members of
senior management regularly attend meetings of the Board and its committees to present matters relating to
their respective business and subject matter areas.
Board meetings are structured to ensure that the Board considers and discusses a range of matters relating to
the Society’s strategy, performance, operations and culture. In addition to the main items for consideration, the
Board received updates at each meeting on the work of its principal committees to ensure that all Board
members are aware of significant issues. Should matters arise that require consideration between scheduled
Board meetings, the Board may arrange to meet on an ad hoc basis. A number of ad hoc Board meetings were
held in respect of the Virgin Money transaction. During each Board cycle, the Society Chairman meets with his
fellow non-executive directors, without executive directors present. The attendance record for Board members
during the period is set out on this page.
Board member
Board Audit
Committee
Board Risk
Committee
Remuneration
Committee
Nomination
and Governance
Committee
Kevin Parry
11/11
- - -
6/6
Tracey Graham 11/11 - 6/6 6/6 6/6
Albert Hitchcock 11/11 - 6/6 6/6 -
Alan Keir 10/11 6/7 5/6 - 4/6
Debbie Klein 11/11 - - 6/6 -
Sally Orton
2
9/9 5/5 - - -
Tamara Rajah 9/11 - - - -
Gillian Riley 11/11 - 6/6 4/6 -
Phil Rivett 11/11 7/7 6/6 - 6/6
Debbie Crosbie 11/11 - - - -
Chris Rhodes 11/11 - - - -
Mai Fyfield
3
4/4 3/3 - 2/2 -
Gunn Waersted
1,4
3/4 - - - 2/2
1
Directors who are unable to attend a meeting are provided with the
supporting
papers in advance and have the opportunity to provide
comments to the
Society Chairman or to the relevant Committee Chair.
2
Sally Orton was appointed to the Board and as a member of the Audit
Co
mmittee on 1 June 2023.
3
Mai Fyfield resigned from the Board and the Audit and Remuneration
C
ommittees on 19 July 2023.
4
Gunn Waersted resigned from the Board and the Nomination and
Governance Committee
on 19 July 2023.
Board
and Committee composition and attendance at scheduled meetings in 2023/24
1
45%
15%
10%
8%
15%
7%
How the Board spent its time in the year
Strategic development and performance
Risk and regulatory matters
People, culture and remuneration
Governance
Finance and internal controls
Other (including meeting administration)
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
How the Board operates
The Board met 11 times in the 2023/24 financial year. In addition, the Board held a Strategy Conference to
consider and develop the Society’s strategic direction; held Closer to Customers sessions to strengthen the
Board’s understanding of customer needs; and undertook training to keep directors abreast of technical,
regulatory and statutory developments. Further information on the Closer to Customers programme can be
found on page 90. The Chief Risk Officer and the General Counsel attend Board meetings and other members of
senior management regularly attend meetings of the Board and its committees to present matters relating to
their respective business and subject matter areas.
Board meetings are structured to ensure that the Board considers and discusses a range of matters relating to
the Society’s strategy, performance, operations and culture. In addition to the main items for consideration, the
Board received updates at each meeting on the work of its principal committees to ensure that all Board
members are aware of significant issues. Should matters arise that require consideration between scheduled
Board meetings, the Board may arrange to meet on an ad hoc basis. A number of ad hoc Board meetings were
held in respect of the Virgin Money transaction. During each Board cycle, the Society Chairman meets with his
fellow non-executive directors, without executive directors present. The attendance record for Board members
during the period is set out on this page.
Board member
Board Audit
Committee
Board Risk
Committee
Remuneration
Committee
Nomination
and Governance
Committee
Kevin Parry
11/11
- - -
6/6
Tracey Graham 11/11 - 6/6 6/6 6/6
Albert Hitchcock 11/11 - 6/6 6/6 -
Alan Keir 10/11 6/7 5/6 - 4/6
Debbie Klein 11/11 - - 6/6 -
Sally Orton
2
9/9 5/5 - - -
Tamara Rajah 9/11 - - - -
Gillian Riley 11/11 - 6/6 4/6 -
Phil Rivett 11/11 7/7 6/6 - 6/6
Debbie Crosbie 11/11 - - - -
Chris Rhodes 11/11 - - - -
Mai Fyfield
3
4/4 3/3 - 2/2 -
Gunn Waersted
1,4
3/4 - - - 2/2
1
Directors who are unable to attend a meeting are provided with the
supporting
papers in advance and have the opportunity to provide
comments to the
Society Chairman or to the relevant Committee Chair.
2
Sally Orton was appointed to the Board and as a member of the Audit
Co
mmittee on 1 June 2023.
3
Mai Fyfield resigned from the Board and the Audit and Remuneration
C
ommittees on 19 July 2023.
4
Gunn Waersted resigned from the Board and the Nomination and
Governance Committee
on 19 July 2023.
Board
and Committee composition and attendance at scheduled meetings in 2023/24
1
45%
15%
10%
8%
15%
7%
How the Board spent its time in the year
Strategic development and performance
Risk and regulatory matters
People, culture and remuneration
Governance
Finance and internal controls
Other (including meeting administration)
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
How the Board operates
The Board met 11 times in the 2023/24 financial year. In addition, the Board held a Strategy Conference to
consider and develop the Society’s strategic direction; held Closer to Customers sessions to strengthen the
Board’s understanding of customer needs; and undertook training to keep directors abreast of technical,
regulatory and statutory developments. Further information on the Closer to Customers programme can be
found on page 90. The Chief Risk Officer and the General Counsel attend Board meetings and other members of
senior management regularly attend meetings of the Board and its committees to present matters relating to
their respective business and subject matter areas.
Board meetings are structured to ensure that the Board considers and discusses a range of matters relating to
the Society’s strategy, performance, operations and culture. In addition to the main items for consideration, the
Board received updates at each meeting on the work of its principal committees to ensure that all Board
members are aware of significant issues. Should matters arise that require consideration between scheduled
Board meetings, the Board may arrange to meet on an ad hoc basis. A number of ad hoc Board meetings were
held in respect of the Virgin Money transaction. During each Board cycle, the Society Chairman meets with his
fellow non-executive directors, without executive directors present. The attendance record for Board members
during the period is set out on this page.
Board member
Board Audit
Committee
Board Risk
Committee
Remuneration
Committee
Nomination
and Governance
Committee
Kevin Parry
11/11
- - -
6/6
Tracey Graham 11/11 - 6/6 6/6 6/6
Albert Hitchcock 11/11 - 6/6 6/6 -
Alan Keir 10/11 6/7 5/6 - 4/6
Debbie Klein 11/11 - - 6/6 -
Sally Orton
2
9/9 5/5 - - -
Tamara Rajah 9/11 - - - -
Gillian Riley 11/11 - 6/6 4/6 -
Phil Rivett 11/11 7/7 6/6 - 6/6
Debbie Crosbie 11/11 - - - -
Chris Rhodes 11/11 - - - -
Mai Fyfield
3
4/4 3/3 - 2/2 -
Gunn Waersted
1,4
3/4 - - - 2/2
1
Directors who are unable to attend a meeting are provided with the
supporting
papers in advance and have the opportunity to provide
comments to the
Society Chairman or to the relevant Committee Chair.
2
Sally Orton was appointed to the Board and as a member of the Audit
Co
mmittee on 1 June 2023.
3
Mai Fyfield resigned from the Board and the Audit and Remuneration
C
ommittees on 19 July 2023.
4
Gunn Waersted resigned from the Board and the Nomination and
Governance Committee
on 19 July 2023.
Board
and Committee composition and attendance at scheduled meetings in 2023/24
1
45%
15%
10%
8%
15%
7%
How the Board spent its time in the year
Strategic development and performance
Risk and regulatory matters
People, culture and remuneration
Governance
Finance and internal controls
Other (including meeting administration)
82
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Report of the directors on corporate governance
Governance at Nationwide (continued)
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Board leadership and Society purpose
The role of the Board
The Board is responsible for ensuring that the Society’s long-term strategy is implemented within a robust governance framework. More information on the Society’s purpose, its business
model and how the Society generates and preserves value over the long term can be found on pages 6 to 8. The Board is also responsible for ensuring that the Society is sustainable and
delivers long-term value for its members. It determines the Society’s strategic objectives within a framework of risk appetite, internal controls and governance. The Board monitors the
Society’s overall financial performance and ensures effective governance, internal controls and risk management.
When setting the Society’s strategy, the Board considers the impact that its decisions might have on various stakeholders such as members, customers, colleagues, suppliers, investors,
regulators and the wider community. It is accountable for ensuring that, as a collective body, it has the appropriate skills, knowledge and experience to perform its role effectively. The Board
is also responsible for providing leadership to the Society on culture, values and ethics. The powers of the Board are set out in the Society’s Memorandum and Rules which are available at
nationwide.co.uk. The Board operates under formal terms of reference which include a schedule of matters reserved for the Board to decide upon. The day-to-day running of the business
is delegated to the Chief Executive Officer, who derives authority from the Board and cascades the agreed standards to the business. The Board’s Terms of Reference and Matters
Reserved are available at nationwide.co.uk.
Culture
The Society’s culture remains a key focus of the Board, to ensure it supports the Society’s purpose and delivery of the Blueprint for a modern mutual. The Society’s customer first
behaviours sit alongside its strategic drivers. The Board receives regular updates from management to ensure it has a strong understanding of the Society’s current culture and progress
made towards achieving and embedding its cultural goals. Over the last 12 months, the Society has worked with Ipsos Karin & Box to evolve how culture is measured, assessed and
externally benchmarked. Feedback from employees has demonstrated that not only are the Society’s employees highly engaged with the Society’s culture and its strategic direction, but
that the Society benchmarks favourably against its financial services and wider peers.
The Board has an appointed non-executive director with specific responsibilities for the Employee Voice in the boardroom. This role is held by Tamara Rajah. Additionally, Board directors
hold regular Townhall events, answering questions directly from colleagues. The Board will continue to sponsor and monitor progress in all areas of our culture in the coming year.
Whistleblowing
Nationwide has arrangements in place for employees, contractors and temporary workers to raise concerns about possible misconduct, wrongdoing and behaviour towards others by its
employees and third parties, including those related to non-financial matters. Concerns can be raised confidentially or anonymously (if preferred) via various channels, including an online
portal and a mobile app, hosted by an independent third party. These reporting channels make anonymous reporting easier for our employees when raising concerns.
All Nationwide’s employees, contractors and temporary workers receive annual training on the Society’s whistleblowing policies and procedures, which includes how to raise concerns
both internally and by reporting directly to the Financial Conduct Authority or the Prudential Regulation Authority without first reporting the matter internally. This training, which is
refreshed annually, also incorporates additional training for managers.
Phil Rivett is the Whistleblowers’ Champion and is responsible for ensuring and overseeing the integrity, independence and effectiveness of Nationwide’s policies and procedures relating
to whistleblowing, including measures to protect whistleblowers from being victimised because they have disclosed reportable concerns.
The Board recognises that having effective and trusted confidential whistleblowing arrangements is key in supporting the Society’s open and honest culture. A recent survey showed that
86% of employees would be happy to Speak Up if they witnessed any unacceptable behaviour. The Board receives an Annual Whistleblowing Report and has reviewed the adequacy and
effectiveness of the arrangements in place for the proportionate and independent investigation of concerns raised, including any required follow-up action taken. During the 12 months to
31 December 2023, a total of 232 concerns were raised, of which 78 were formally investigated as whistleblowing (12 months to 31 December 2022: 214 concerns raised, of which 103 were
investigated as whistleblowing). The remainder were managed utilising other internal channels.
83
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Conflicts of interest
The Society Secretary maintains a Register of Directors’ Interests (the Register) which records actual or potential conflicts of Board members’ interests. The Board approves the
Register annually, and directors are required to notify the Board of any changes to their interests throughout the year. The Board has considered the current external appointments of
all directors which may give rise to a conflict. In any matter where a director’s interest does present an actual conflict, in accordance with the Society’s Memorandum and Rules and the
Building Societies Act 1986, the director shall not vote or be counted in the quorum, when that matter is considered.
Board activity during the year
The following pages set out a non-exhaustive list of the key matters that the Board has considered during the year in line with the Society’s strategic drivers, together with stakeholders
impacted and principal risks. Further information on how the Board has engaged with key stakeholder groups is outlined on pages 26 to 40.
Board activity – Strategic development and performance
Strategic Driver Stakeholder Principal risk
Discussed regular updates from the CEO and the COO on progress against the Society’s strategy,
including provision of external insights on key factors affecting the business. As part of this, the
Board reviewed regular data to assess progress made in the implementation of the Society’s
strategy.
Members and customers
Colleagues
Suppliers
Communities
Regulators and
policymakers
Investors
Debated and considered the opportunities and challenges facing Nationwide due to the changing
macroenvironment, including cost of living challenges and the current geopolitical uncertainty.
This included agreeing the propositional, financial, strategic and risk response.
Members and customers
Suppliers
Communities
Regulators and
policymakers
Investors
Discussed and approved recommendations regarding the future strategic growth of Nationwide.
This included strategic discussions centred on organisational vision (including the Blueprint for a
modern mutual), customer outcomes, proposition, strategic investment spend, sustainability,
responsible business, brand (including re-brand), and delivering operational and service
excellence.
Members and customers
Colleagues
Mortgage Intermediaries
Suppliers
Communities
Regulators and
policymakers
Investors
Approved the Society’s refreshed social impact strategy, Nationwide Fairer Futures, and
Nationwide’s key charitable partnerships, including the Nationwide Foundation.
Members and customers
Colleagues
Communities
Key: More rewarding relationships Simply brilliant service Beacon for mutual good Continuous improvement
Prudential risks (including credit, model, liquidity and
funding, market, capital, and pension risk)
Operational and conduct risks
Enterprise risk (including
business risk)
Report of the directors on corporate governance
Governance at Nationwide (continued)
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Conflicts of interest
The Society Secretary maintains a Register of Directors’ Interests (the Register) which records actual or potential conflicts of Board members’ interests. The Board approves the
Register annually, and directors are required to notify the Board of any changes to their interests throughout the year. The Board has considered the current external appointments of
all directors which may give rise to a conflict. In any matter where a director’s interest does present an actual conflict, in accordance with the Society’s Memorandum and Rules and the
Building Societies Act 1986, the director shall not vote or be counted in the quorum, when that matter is considered.
Board activity during the year
The following pages set out a non-exhaustive list of the key matters that the Board has considered during the year in line with the Society’s strategic drivers, together with stakeholders
impacted and principal risks. Further information on how the Board has engaged with key stakeholder groups is outlined on pages 26 to 40.
Board activity – Strategic development and performance
Strategic Driver Stakeholder Principal risk
Discussed regular updates from the CEO and the COO on progress against the Society’s strategy,
including provision of external insights on key factors affecting the business. As part of this, the
Board reviewed regular data to assess progress made in the implementation of the Society’s
strategy.
Members and customers
Colleagues
Suppliers
Communities
Regulators and
policymakers
Investors
Debated and considered the opportunities and challenges facing Nationwide due to the changing
macroenvironment, including cost of living challenges and the current geopolitical uncertainty.
This included agreeing the propositional, financial, strategic and risk response.
Members and customers
Suppliers
Communities
Regulators and
policymakers
Investors
Discussed and approved recommendations regarding the future strategic growth of Nationwide.
This included strategic discussions centred on organisational vision (including the Blueprint for a
modern mutual), customer outcomes, proposition, strategic investment spend, sustainability,
responsible business, brand (including re-brand), and delivering operational and service
excellence.
Members and customers
Colleagues
Mortgage Intermediaries
Suppliers
Communities
Regulators and
policymakers
Investors
Approved the Society’s refreshed social impact strategy, Nationwide Fairer Futures, and
Nationwide’s key charitable partnerships, including the Nationwide Foundation.
Members and customers
Colleagues
Communities
Key: More rewarding relationships Simply brilliant service Beacon for mutual good Continuous improvement
Prudential risks (including credit, model, liquidity and
funding, market, capital, and pension risk)
Operational and conduct risks
Enterprise risk (including
business risk)
R
R
R
S
S
C
C
C
P
P
P
O
O
O
E
E
E
E
M
M
M
R S CM P O E
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Report of the directors on corporate governance
Governance at Nationwide (continued)
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Board activity – Strategic development and performance
Strategic Driver Stakeholder Principal risk
Discussed and considered the Society’s re-brand and refreshed advertising campaign. Reviewed
and considered updates on the impact of the Society’s re-brand activity in building brand
recognition and loyalty.
Members and customers
Colleagues
Regulators and
policymakers
Investors
Considered and approved the sale of the Society’s investment advice business to Aegon UK.
Members and customers
Colleagues
Suppliers
Regulators and
policymakers
Considered and approved the proposed acquisition of Virgin Money. This is discussed in more detail in the
Board Decisions section of the Strategic report on pages 37 to 38.
Members and customers
Colleagues
Suppliers
Regulators and
policymakers
Investors
Board activity – Finance
Strategic Driver Stakeholder Principal risk
Reviewed the Society’s five-year Plan for 2024-29 against a backdrop of continued geopolitical and
economic uncertainty, Bank rate uncertainty, market competition and cost of living challenges. The
Board undertook a thorough review ahead of finalising and approving the Society’s Financial Plan
for 2024-29.
Members and customers
Colleagues
Regulators and
policymakers
Investors
Regularly assessed financial performance and the capital and liquidity position of the Society via
business performance reports from the Chief Financial Officer.
Members and customers
Regulators and
policymakers
Investors
Reviewed and approved the Society’s interim and full-year financial results and Annual Report and
Accounts prior to publication, with consideration given to business viability and the preparation of
the accounts on a going concern basis.
Members and customers
Colleagues
Suppliers
Regulators and
policymakers
Investors
Reviewed the Society’s cost performance and outlook and discussed the opportunities to reduce
costs over the five-year Financial Plan.
Members and customers
Colleagues
Suppliers
Regulators and
policymakers
Investors
Key: More rewarding relationships Simply brilliant service Beacon for mutual good Continuous improvement
Prudential risks (including credit, model, liquidity and
funding, market, capital, and pension risk)
Operational and conduct risks
Enterprise risk (including
business risk)
R S CM
R
R
R
R
S
S
S
C
C
C
C
C
C
P
P
P
P
P
P
O
O
O
O
O
E
E
E
E
E
E
E
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Board activity – Strategic development and performance
Strategic Driver Stakeholder Principal risk
Discussed and considered the Society’s re-brand and refreshed advertising campaign. Reviewed
and considered updates on the impact of the Society’s re-brand activity in building brand
recognition and loyalty.
Members and customers
Colleagues
Regulators and
policymakers
Investors
Considered and approved the sale of the Society’s investment advice business to Aegon UK.
Members and customers
Colleagues
Suppliers
Regulators and
policymakers
Considered and approved the proposed acquisition of Virgin Money. This is discussed in more detail in the
Board Decisions section of the Strategic report on pages 37 to 38.
Members and customers
Colleagues
Suppliers
Regulators and
policymakers
Investors
Board activity – Finance
Strategic Driver Stakeholder Principal risk
Reviewed the Society’s five-year Plan for 2024-29 against a backdrop of continued geopolitical and
economic uncertainty, Bank rate uncertainty, market competition and cost of living challenges. The
Board undertook a thorough review ahead of finalising and approving the Society’s Financial Plan
for 2024-29.
Members and customers
Colleagues
Regulators and
policymakers
Investors
Regularly assessed financial performance and the capital and liquidity position of the Society via
business performance reports from the Chief Financial Officer.
Members and customers
Regulators and
policymakers
Investors
Reviewed and approved the Society’s interim and full-year financial results and Annual Report and
Accounts prior to publication, with consideration given to business viability and the preparation of
the accounts on a going concern basis.
Members and customers
Colleagues
Suppliers
Regulators and
policymakers
Investors
Reviewed the Society’s cost performance and outlook and discussed the opportunities to reduce
costs over the five-year Financial Plan.
Members and customers
Colleagues
Suppliers
Regulators and
policymakers
Investors
Key: More rewarding relationships Simply brilliant service Beacon for mutual good Continuous improvement
Prudential risks (including credit, model, liquidity and
funding, market, capital, and pension risk)
Operational and conduct risks
Enterprise risk (including
business risk)
P O E
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Board activity - People, culture and remuneration
Strategic Driver Stakeholder Principal risk
Reviewed and discussed the Society’s People strategy and the tracking of inclusion and diversity
metrics.
Members and customers
Colleagues
Engaged with the wider workforce via the designated non-executive director for Employee Voice
and received updates from management on topics which provided insight on key matters
impacting colleagues. Through Townhall events, colleagues from the across the Society were able
to ask questions directly of non-executive directors.
Colleagues
Considered the Society’s Gender and Ethnicity Pay Gap reporting for 2023, including Nationwide’s
approach to closing the gap.
Colleagues
Regulators and
policymakers
Investors
Communities
Reviewed the progress made on the development and embedding of Nationwide’s culture and
customer first behaviours and how colleague sentiment was monitored through various internal
engagement surveys and sentiment trackers.
Colleagues
Reviewed the Annual Whistleblowing Report, sponsored by the Board’s Whistleblowers’ Champion,
and the Society’s whistleblowing arrangements.
Colleagues
Regulators and
policymakers
Key: More rewarding relationships Simply brilliant service Beacon for mutual good Continuous improvement
Prudential risks (including credit, model, liquidity and
funding, market, capital, and pension risk)
Operational and conduct risks
Enterprise risk (including
business risk)
Board activity – Customers
Strategic Driver
Stakeholder
Principal risk
Received regular updates on the Society’s preparation for, and implementation of, the FCA’s
Consumer Duty rules, which were effective from 31 July 2023. The Board received regular updates
on customer complaints, their themes and mitigation, and oversaw the back book activity in
advance of the rules being applicable to back books and services from 31 July 2024.
Members and customers
Colleagues
Regulators and
policymakers
Approved the extension of the Society’s Branch Promise.
Members and customers
Colleagues
Communities
Considered, and approved, the inaugural Fairer Share Payment to members following the approval
of the 2022/23 financial results. This is discussed in more detail in the Board Decisions section of the
Strategic report on page 36.
Members and customers
Colleagues
Regulators and
policymakers
All non-executive directors have undertaken branch visits and engaged with customers via the
Closer to Customer initiative. This is discussed further on page 90.
Members and customers
Colleagues
Communities
Governance
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Board activity - People, culture and remuneration
Strategic Driver Stakeholder Principal risk
Reviewed and discussed the Society’s People strategy and the tracking of inclusion and diversity
metrics.
Members and customers
Colleagues
Engaged with the wider workforce via the designated non-executive director for Employee Voice
and received updates from management on topics which provided insight on key matters
impacting colleagues. Through Townhall events, colleagues from the across the Society were able
to ask questions directly of non-executive directors.
Colleagues
Considered the Society’s Gender and Ethnicity Pay Gap reporting for 2023, including Nationwide’s
approach to closing the gap.
Colleagues
Regulators and
policymakers
Investors
Communities
Reviewed the progress made on the development and embedding of Nationwide’s culture and
customer first behaviours and how colleague sentiment was monitored through various internal
engagement surveys and sentiment trackers.
Colleagues
Reviewed the Annual Whistleblowing Report, sponsored by the Board’s Whistleblowers’ Champion,
and the Society’s whistleblowing arrangements.
Colleagues
Regulators and
policymakers
Key: More rewarding relationships Simply brilliant service Beacon for mutual good Continuous improvement
Prudential risks (including credit, model, liquidity and
funding, market, capital, and pension risk)
Operational and conduct risks
Enterprise risk (including
business risk)
Board activity – Customers
Strategic Driver
Stakeholder
Principal risk
Received regular updates on the Society’s preparation for, and implementation of, the FCA’s
Consumer Duty rules, which were effective from 31 July 2023. The Board received regular updates
on customer complaints, their themes and mitigation, and oversaw the back book activity in
advance of the rules being applicable to back books and services from 31 July 2024.
Members and customers
Colleagues
Regulators and
policymakers
Approved the extension of the Society’s Branch Promise.
Members and customers
Colleagues
Communities
Considered, and approved, the inaugural Fairer Share Payment to members following the approval
of the 2022/23 financial results. This is discussed in more detail in the Board Decisions section of the
Strategic report on page 36.
Members and customers
Colleagues
Regulators and
policymakers
All non-executive directors have undertaken branch visits and engaged with customers via the
Closer to Customer initiative. This is discussed further on page 90.
Members and customers
Colleagues
Communities
Governance
Report of the directors on corporate governance
Governance at Nationwide (continued)
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Board activity - People, culture and remuneration
Strategic Driver Stakeholder Principal risk
Reviewed and discussed the Society’s People strategy and the tracking of inclusion and diversity
metrics.
Members and customers
Colleagues
Engaged with the wider workforce via the designated non-executive director for Employee Voice
and received updates from management on topics which provided insight on key matters
impacting colleagues. Through Townhall events, colleagues from the across the Society were able
to ask questions directly of non-executive directors.
Colleagues
Considered the Society’s Gender and Ethnicity Pay Gap reporting for 2023, including Nationwide’s
approach to closing the gap.
Colleagues
Regulators and
policymakers
Investors
Communities
Reviewed the progress made on the development and embedding of Nationwide’s culture and
customer first behaviours and how colleague sentiment was monitored through various internal
engagement surveys and sentiment trackers.
Colleagues
Reviewed the Annual Whistleblowing Report, sponsored by the Board’s Whistleblowers’ Champion,
and the Society’s whistleblowing arrangements.
Colleagues
Regulators and
policymakers
Key: More rewarding relationships Simply brilliant service Beacon for mutual good Continuous improvement
Prudential risks (including credit, model, liquidity and
funding, market, capital, and pension risk)
Operational and conduct risks
Enterprise risk (including
business risk)
Board activity – Customers
Strategic Driver
Stakeholder
Principal risk
Received regular updates on the Society’s preparation for, and implementation of, the FCA’s
Consumer Duty rules, which were effective from 31 July 2023. The Board received regular updates
on customer complaints, their themes and mitigation, and oversaw the back book activity in
advance of the rules being applicable to back books and services from 31 July 2024.
Members and customers
Colleagues
Regulators and
policymakers
Approved the extension of the Society’s Branch Promise.
Members and customers
Colleagues
Communities
Considered, and approved, the inaugural Fairer Share Payment to members following the approval
of the 2022/23 financial results. This is discussed in more detail in the Board Decisions section of the
Strategic report on page 36.
Members and customers
Colleagues
Regulators and
policymakers
All non-executive directors have undertaken branch visits and engaged with customers via the
Closer to Customer initiative. This is discussed further on page 90.
Members and customers
Colleagues
Communities
Governance
R S C
P O E
M
R
R
R
R
R
R
R
S
S
S
C
C
C
C
C P
O
O
O
O
O
O
O
O
O
E
E
E
E
E
E
M
M
M
M
M
M
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Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Key: More rewarding relationships Simply brilliant service Beacon for mutual good Continuous improvement
Prudential risks (including credit, model, liquidity and
funding, market, capital, and pension risk)
Operational and conduct risks
Enterprise risk (including
business risk)
Board activity - Risk and regulatory matters, including external outlook
Strategic Driver
Stakeholder
Principal risk
Assessed the Society’s overall risk profile and emerging risk themes, including consideration of
correspondence between Nationwide and its regulators and related action, receiving direct
reports from the Chief Risk Officer and Chair of the Board Risk Committee, and approved
revisions to the Board Risk Appetite metrics including triggers and limits.
Members and customers
Regulators and
policymakers
Investors
Assessed the economic and market conditions affecting the Society’s business and, as part of
this, reviewed in detail and approved the Society’s stress testing activity for 2024.
Members and customers
Regulators and
policymakers
Investors
Board activity – Governance
Strategic Driver
Stakeholder
Principal risk
Received and considered regular reports from the General Counsel, Society Secretary and Chief
Risk Officer on emerging changes to legislation and regulation impacting the Society’s business.
Colleagues
Suppliers
Regulators and
policymakers
Investors
Reviewed and approved the plans for the 2023 AGM and approved the Notice of the 2024 AGM
and associated documentation.
Members and customers
Regulators and
policymakers
Investors
Carried out and received the report of the evaluation of the Board and its committees’
performance, including developing an action plan to address areas needing improvement.
Members and customers
Regulators and
policymakers
Investors
Approved the Society’s Modern Slavery Statement for 2023.
Members and customers
Colleagues
Suppliers
Regulators and
policymakers
Investors
Received and reviewed updates on Environmental, Social and Governance (ESG) matters and the
Society’s Beacon for mutual good activity.
Members and customers
Investors
Communities
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Key: More rewarding relationships Simply brilliant service Beacon for mutual good Continuous improvement
Prudential risks (including credit, model, liquidity and
funding, market, capital, and pension risk)
Operational and conduct risks
Enterprise risk (including
business risk)
Board activity - Risk and regulatory matters, including external outlook
Strategic Driver
Stakeholder
Principal risk
Assessed the Society’s overall risk profile and emerging risk themes, including consideration of
correspondence between Nationwide and its regulators and related action, receiving direct
reports from the Chief Risk Officer and Chair of the Board Risk Committee, and approved
revisions to the Board Risk Appetite metrics including triggers and limits.
Members and customers
Regulators and
policymakers
Investors
Assessed the economic and market conditions affecting the Society’s business and, as part of
this, reviewed in detail and approved the Society’s stress testing activity for 2024.
Members and customers
Regulators and
policymakers
Investors
Board activity – Governance
Strategic Driver
Stakeholder
Principal risk
Received and considered regular reports from the General Counsel, Society Secretary and Chief
Risk Officer on emerging changes to legislation and regulation impacting the Society’s business.
Colleagues
Suppliers
Regulators and
policymakers
Investors
Reviewed and approved the plans for the 2023 AGM and approved the Notice of the 2024 AGM
and associated documentation.
Members and customers
Regulators and
policymakers
Investors
Carried out and received the report of the evaluation of the Board and its committees’
performance, including developing an action plan to address areas needing improvement.
Members and customers
Regulators and
policymakers
Investors
Approved the Society’s Modern Slavery Statement for 2023.
Members and customers
Colleagues
Suppliers
Regulators and
policymakers
Investors
Received and reviewed updates on Environmental, Social and Governance (ESG) matters and the
Society’s Beacon for mutual good activity.
Members and customers
Investors
Communities
Report of the directors on corporate governance
Governance at Nationwide (continued)
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Key: More rewarding relationships Simply brilliant service Beacon for mutual good Continuous improvement
Prudential risks (including credit, model, liquidity and
funding, market, capital, and pension risk)
Operational and conduct risks
Enterprise risk (including
business risk)
Board activity - Risk and regulatory matters, including external outlook Strategic Driver Stakeholder Principal risk
Assessed the Society’s overall risk profile and emerging risk themes, including consideration of
correspondence between Nationwide and its regulators and related action, receiving direct
reports from the Chief Risk Officer and Chair of the Board Risk Committee, and approved
revisions to the Board Risk Appetite metrics including triggers and limits.
Members and customers
Regulators and
policymakers
Investors
Assessed the economic and market conditions affecting the Society’s business and, as part of
this, reviewed in detail and approved the Society’s stress testing activity for 2024.
Members and customers
Regulators and
policymakers
Investors
Board activity – Governance Strategic Driver Stakeholder Principal risk
Received and considered regular reports from the General Counsel, Society Secretary and Chief
Risk Officer on emerging changes to legislation and regulation impacting the Society’s business.
Colleagues
Suppliers
Regulators and
policymakers
Investors
Reviewed and approved the plans for the 2023 AGM and approved the Notice of the 2024 AGM
and associated documentation.
Members and customers
Regulators and
policymakers
Investors
Carried out and received the report of the evaluation of the Board and its committees’
performance, including developing an action plan to address areas needing improvement.
Members and customers
Regulators and
policymakers
Investors
Approved the Society’s Modern Slavery Statement for 2023.
Members and customers
Colleagues
Suppliers
Regulators and
policymakers
Investors
Received and reviewed updates on Environmental, Social and Governance (ESG) matters and the
Society’s Beacon for mutual good activity.
Members and customers
Investors
Communities
R S C
P O E
M
R
C
C
C
C
C
C
P
P
P
O
O
O
O
O
O
E
E
E
E
E
E
M
M
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Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Division of responsibilities
Leadership structure
An overview of the Board composition and its committee structure as at 4 April 2024 is set out below:
The Society Board
Ensures that the Society delivers long-term value for its members and customers by setting the Society strategy through which value is created for the mutual benefit of members, colleagues,
suppliers, the environment and the wider community. The Board holds management to account for how the strategy is implemented and ensures effective governance, controls and risk
management.
Roles and responsibilities within the Board
Non-executive
Executive
Chairman
Leads the Board to ensure it
operates effectively in
setting the strategic
direction of the Society,
including shaping the culture
in the boardroom.
Epitomises the Society’s
culture by fostering open and
honest debate in the
boardroom and ensures
valuable contribution from all
non-executive directors.
Senior Independent
Director
Supports the Chairman in his
role and with the delivery of
his objectives and acts as his
sounding board.
Available to the Board
directors as an intermediary.
Non-executive directors
Use their skills, experience and
knowledge to hold management
to account by constructively
challenging the Society’s
performance, culture and
controls.
Chief Executive Officer (CEO)
Runs the Society day-to-day under delegated
authority from the Board and is accountable
to the Board for the Society’s financial and
operational performance. Provides
leadership and direction to set and
implement the Society’s strategy.
Embodies the Society’s culture and values
and develops policies to drive colleague
behaviour. Implements and monitors
systems for the apportionment and
oversight of responsibilities, controls and
best practice within the Society, which
maintain its operational efficiency and high
standard of business conduct.
Executive directors
As members of the Board, collectively with
the non-executive directors, set the
Society’s strategy, risk appetite, values and
culture. Ensure that the Board is kept
informed of all significant matters,
escalating issues on a timely basis. Are
accountable to the Board for the execution
of the strategy and the performance of the
business.
Hold specific management responsibilities
in the day-to-day running of the business.
Society Secretary
Advises the Board through the Chairman on all governance-related matters. Provides support to the Board in managing good information flows between the Board and the rest of the Society.
The Board delegates certain matters to its principal committees
Audit Committee
Oversees financial reporting, internal and external
audit, and the adequacy and effectiveness of
internal controls and risk management systems.
See the report on page 97.
Board Risk Committee
Oversees current and potential future risk
exposures, considers future risk strategy
and determines risk appetite.
See the report on page 104.
Nomination and Governance Committee
Reviews the Board’s governance
arrangements, as well as Board and senior
executive succession planning. Oversees the
implementation of the Society’s Inclusion and
Diversity Strategy.
See the report on page 108.
Remuneration Committee
Oversees the remuneration strategy and
policy of directors, senior management,
Material Risk Takers and all colleagues.
See the report on page 112.
Executive Committee
Supports the CEO in the day-to-day management of the Society. See page 91.
Governance
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Report of the directors on corporate governance
(continued)
Division of responsibilities (continued)
Time commitment
In order to discharge their responsibilities effectively, non-executive directors must commit sufficient time to their role. The time that non-executive directors are expected to commit to
their role at Nationwide is agreed individually, upon their appointment, and varies according to their responsibilities. For example:
• Non-executive directors: expected to commit a minimum of 30 days per year for core Board activities and membership of Board committees;
• Senior Independent Director and Committee Chairs: expected to commit a minimum of 50-60 days per year; and
• Society Chairman: will, on average, dedicate a minimum of two days per week to Nationwide business.
In addition, the Chairman and non-executive directors are expected to allocate sufficient time to understand the business through meetings with management, as well as to attend
meetings with the Society’s regulators to foster an open and transparent working relationship. This time is in addition to time spent on core Board and committee activities.
Directors' time commitments are reviewed annually or more regularly if needed. The Chairman has confirmed with each non-executive director that they have been able to allocate
sufficient time to fulfil their duties this year. There has been no increase in the Chairman’s significant external commitments during the year which would impact his time commitment to
fulfil his duties.
During the year, and on the recommendation of the Nomination and Governance Committee, the Board approved the additional external appointments of Debbie Klein as a non-executive
director of both The Guardian Media Group and MultiChoice Group, on the basis that these appointments were not considered to impair her ability to serve as a director of the Society.
Director independence
In reaching its annual determination of non-executive director independence, the Nomination and Governance Committee considers factors including length of tenure, relationships and
any circumstances which could influence or appear to influence the director’s judgement. On the recommendation of that Committee, the Board has determined that all non-executive
directors are independent and are free of relationships and other circumstances which could materially influence the exercise of their judgement.
Prior to his appointment to the Board, Alan Keir was a member of senior management, and subsequently served as a non-executive director, of HSBC UK. The Society has an agency
banking contract under which all incoming and outgoing CHAPs payments are routed through HSBC. The Committee remains satisfied that Mr Keir’s prior business relationship with
HSBC does not impact his independence or ability to undertake his role as a non-executive director of the Society.
All eligible directors will be recommended to members for re-election at the AGM in July 2024.
Information and advice
To enable the Board to exercise its judgement and make fully informed decisions when discharging its duties, the Society Secretary ensures appropriate and timely information flows
between the Board, its committees and senior management. The Society Secretary supports the Chairman in setting the Board’s agenda, and board papers are distributed to all directors
in a timely manner, in advance of each meeting via a secure electronic system. Between formal Board meetings, regular management updates are provided to directors to keep them
informed of the latest issues affecting the Society.
All directors have access to the advice and services of the Society Secretary, who is responsible for advising the Board on all governance matters, as well as ensuring that Board
procedures are followed and compliance with applicable rules and regulations is observed. Directors may also take independent professional advice at the Society’s expense.
Induction, training, and development
Upon appointment, directors receive a formal induction programme to familiarise them with their duties, the Society’s business and its risk
and governance arrangements. Induction
programmes are tailored to directors’ individual experience and expertise and are also aligned with their individual development plans.
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Report of the directors on corporate governance
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Division of responsibilities (continued)
Induction, training, and development
The Chairman, supported by the Society Secretary, holds overall responsibility for ensuring that all directors receive suitable training to enable them to fulfil their duties effectively.
Training may be delivered through meetings, presentations, and briefings from internal and external advisers. Directors are also encouraged to update their professional skills and
knowledge of the business on a continuous basis, and to identify any additional training needs that may assist them in carrying out their role. Opportunities to undertake ongoing training
are provided and, upon request from directors, individual training sessions are arranged with subject matter experts.
The Chairman holds regular conversations with each non-executive director throughout the year, as well as at the end of the year to review their individual performance and development
needs. The Senior Independent Director is responsible for the evaluation of the Chairman’s performance and development needs. Executive directors undertake performance reviews as
part of the Society’s annual performance management cycle.
Closer to Customers programme
The Closer to Customers programme provides an opportunity for the Society’s non-executive directors to build a deeper understanding of customers. All non-executive directors are
encouraged to visit Nationwide branches in their local area and beyond to meet with branch colleagues and build a greater understanding of the decisions and challenges facing our
customers. Another strand of the initiative is Closer to Customer focus groups, where our Board directors are able to ask a group of customers questions on a particular subject, such
as the cost of living. This provides our directors with insight into how our customers are using our products and ideas for future developments which they may wish to see.
Phil Rivett, non-executive director, commented “Closer to Customer really helps us as Board members understand what our customers are thinking and doing. This insight informs how
we develop the Society’s strategy, ensuring the needs of customers are at the front of our minds.”
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Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Steve Evenden
Chief Internal Auditor
Division of responsibilities (continued)
Executive Committee
There is a clear division of responsibilities between the Society Chairman, as leader of the Board, and the Chief Executive Officer, who is responsible for the day-to-day management of the
Society. To the extent that matters are not reserved to the Board for decision, responsibility is delegated to the Chief Executive Officer, who is assisted by the Executive Committee.
The Executive Committee is responsible for directing and coordinating the executive management of the Society within the strategy, risk appetite, operational plans, policies, objectives,
frameworks, budget and authority approved by the Board.
Membership comprises the Chief Executive Officer, Chief Financial Officer and the leaders of business functions, as set out below. In addition to Executive Committee members, the Chief
Internal Auditor, Deputy Chief Financial Officer and Society Secretary attend meetings of the Executive Committee
. Biographies of the executive directors can be found on pages 77 and
79, and details of other Executive Committee members can be found at nationwide.co.uk.
Suresh Viswanathan
Chief Operating Officer
Tom Riley
Director of Retail Products
Rachael Sinclair
Director of Mortgages and
Financial Wellbeing
Gavin Smyth
Chief Risk Officer
Governance
Catherine Kehoe
Chief Customer Officer
Lynn McManus
Chief People Officer
Stephen Noakes
Director of Retail
Mark Chapman
General Counsel
Mandy Beech
Director of Retail services
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Steve Evenden
Chief Internal Auditor
Division of responsibilities (continued)
Executive Committee
There is a clear division of responsibilities between the Society Chairman, as leader of the Board, and the Chief Executive Officer, who is responsible for the day-to-day management of the
Society. To the extent that matters are not reserved to the Board for decision, responsibility is delegated to the Chief Executive Officer, who is assisted by the Executive Committee.
The Executive Committee is responsible for directing and coordinating the executive management of the Society within the strategy, risk appetite, operational plans, policies, objectives,
frameworks, budget and authority approved by the Board.
Membership comprises the Chief Executive Officer, Chief Financial Officer and the leaders of business functions, as set out below. In addition to Executive Committee members, the Chief
Internal Auditor, Deputy Chief Financial Officer and Society Secretary attend meetings of the Executive Committee
. Biographies of the executive directors can be found on pages 77 and
79, and details of other Executive Committee members can be found at nationwide.co.uk.
Suresh Viswanathan
Chief Operating Officer
Tom Riley
Director of Retail Products
Rachael Sinclair
Director of Mortgages and
Financial Wellbeing
Gavin Smyth
Chief Risk Officer
Governance
Catherine Kehoe
Chief Customer Officer
Lynn McManus
Chief People Officer
Stephen Noakes
Director of Retail
Mark Chapman
General Counsel
Mandy Beech
Director of Retail services
Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Steve Evenden
Chief Internal Auditor
Division of responsibilities (continued)
Executive Committee
There is a clear division of responsibilities between the Society Chairman, as leader of the Board, and the Chief Executive Officer, who is responsible for the day-to-day management of the
Society. To the extent that matters are not reserved to the Board for decision, responsibility is delegated to the Chief Executive Officer, who is assisted by the Executive Committee.
The Executive Committee is responsible for directing and coordinating the executive management of the Society within the strategy, risk appetite, operational plans, policies, objectives,
frameworks, budget and authority approved by the Board.
Membership comprises the Chief Executive Officer, Chief Financial Officer and the leaders of business functions, as set out below. In addition to Executive Committee members, the Chief
Internal Auditor, Deputy Chief Financial Officer and Society Secretary attend meetings of the Executive Committee
. Biographies of the executive directors can be found on pages 77 and
79, and details of other Executive Committee members can be found at nationwide.co.uk.
Suresh Viswanathan
Chief Operating Officer
Tom Riley
Director of Retail Products
Rachael Sinclair
Director of Mortgages and
Financial Wellbeing
Gavin Smyth
Chief Risk Officer
Governance
Catherine Kehoe
Chief Customer Officer
Lynn McManus
Chief People Officer
Stephen Noakes
Director of Retail
Mark Chapman
General Counsel
Mandy Beech
Director of Retail services
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Report of the directors on corporate governance
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Composition, succession, and evaluation
Board Diversity
The Board is committed to ensuring that it comprises a membership which is diverse and reflects the Society’s members that it represents. It aims to achieve this by ensuring
representation within the Board of race, age, gender, disability and sexuality in addition to appropriate socio-economic, educational and professional backgrounds. Selecting the best
candidate is paramount and all appointments are based on merit and objective criteria with due regard for the benefits of diversity on the Board. The Board’s Diversity Statement is set
out in the Board Composition and Succession Policy which can be found at nationwide.co.uk. The Nomination and Governance Committee Report on pages 108 to 111 sets out the selection
process for new non-executive directors appointed during the year and states how the Board plans to maintain its effectiveness by ensuring that it has a diverse membership going
forward.
The gender and diversity data set out on this page is collected from executive management at the application stage of
their recruitment and from Board members at the onboarding stage of their recruitment.
Gender representations as at 4 April 2024
Board members
Number of senior
positions (note i)
Executive management (note ii)
Number Percentage Number Percentage
Male 5 45% 2 7 58%
Female 6 55% 2 5 42%
Other categories - - - - -
Not specified / prefer not to say - - - - -
Ethnicity representation as at 4 April 2024
Board members
Number of senior
positions (note i)
Executive management
(note ii)
Number Percentage Number Percentage
White British or other White
(including minority-white
groups)
10 91% 4 11 92%
Mixed/Multiple Ethnic Groups - - - - -
Asian/Asian British 1 9% - 1 8%
Black/African/Caribbean/Black
British
- - - - -
Other ethnic group, including
Arab
- - - - -
Not specified/prefer not to say
- - - - -
Performance against FCA diversity targets
Target Outcome Position at 4 April 2024
At least 40% of Board directors are women Exceeded 55% of Board directors are women
At least one senior Board position is held by a
woman
Exceeded The positions of CEO and SID are held by women
At least one director from a minority ethnic
background
Met
One Board director is from a minority ethnic
background
Notes:
i.
Senior positions are the CEO, CFO, SID and Society Chairman
ii. Executive management is defined as the Executive Committee, including the CEO, the CFO and the Society Secretary.
5
6
Gender diversity on the Board
Male
Female
10
1
Board ethnic diversity
Non-Ethnically
Diverse
Ethnically Diverse
1
4
3
3
Age of Board members
35-45
46-55
56-60
61+
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Composition, succession, and evaluation (continued)
Board tenure
The Society’s Memorandum and Rules require that Board directors must be re-elected by the Society’s membership every three years.
However, in compliance with the UK Corporate Governance Code 2018, all directors of Nationwide are subject to election or re-election
by the members annually. Before re-election, each non-executive director will be subject to a review of their continued effectiveness and
independence.
Board composition
The Nomination and Governance Committee is responsible for reviewing Board composition, considering succession plans for both
the Board and senior executives, selecting and appointing new directors and considering the results of the Board performance review.
More information on the work of this Committee can be found on pages 108 to 111.
To
ensure that an appropriate balance of skills, experience and knowledge on the Board is maintained, the competencies of individual
Board members are regularly reviewed. A balanced board is vital for constructive and open debate in the boardroom and, ultimately,
effective Board decisions. Individual director biographies, including their relevant skills and experience, can be found on pages 77 to 80.
All directors are subject to conduct rules laid down by the Society’s regulators and must satisfy requirements relating to their fitness and
propriety. In addition, the Chairman, the Senior Independent Director and Committee Chairs are subject to all aspects of the Senior
Managers and Certification Regime.
Executive directors’ service contracts, as well as letters of appointment for the Chairman and non-executive directors, are available for
inspection at the Society’s principal office and will be available at the AGM.
0 1 2 3 4 5 6 7 8 9
Strategy and Competition
People leadership and talent
Complex groups (multiple business units, geographies, ring fenced banks)
Financial Services
ESG, including climate
Risk management
Corporate / business / transactional banking
Retail/Commercial banking
UK Financial regulation and compliance
Customer, brand and marketing
Financial accounting and audit
Digital and technology resilience and transformation
Credit cards
Non-executive director's skills and experience - number with considerable experience and knowledge
Note: Individual directors may fall into one or more categories.
4
4
1
Non-executive director's tenure
0-3 years
3-6 years
6 years+
2
9
Executive and non-executive directors
Executive
directors
Non-executive
directors
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Report of the directors on corporate governance
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Composition, succession, and evaluation (continued)
Member nominations
Members of Nationwide have the right to nominate candidates for election to the Board, subject to the Society’s Memorandum and Rules and compliance with PRA and FCA requirements.
No such nominations had been received by 4 April 2024, this being the deadline for election to the Board at the 2024 AGM.
Chairman performance and tenure
The Chairman’s performance review was led by the Senior Independent Director on behalf of the Board in May 2023. This review included peer feedback from the non-executive and
executive directors. The review concluded that Kevin Parry continued to perform effectively, remained fit and proper to perform the role, upheld his regulatory responsibilities, and
demonstrated commitment to his role. In light of this conclusion, the election of Kevin Parry as Society Chairman was put to members at the 2023 AGM where he was re-elected.
To facilitate effective long-term succession planning and development of a diverse board, the Senior Independent Director led a review process of the Chairman’s tenure. The Board, in
the absence of the Chairman, approved an extension to the Chairman's tenure of 2 years to July 2027, therefore serving a maximum of 5 years in the role of Chairman. The review
considered the Chairman's preceding tenure as a non-executive director, his performance, his extensive experience in financial services and in the mutual sector, his continued
independence and significant ongoing contribution to the Board's strategy. The Prudential Regulatory Authority and Financial Conduct Authority were consulted as part of the review
and raised no objections.
Individual director performance
A review of the performance and contribution of each director was conducted by the Society Chairman to ensure that all directors contributed effectively to the good governance of
Nationwide. This is one of the factors considered when deciding whether individual directors will offer themselves for election or re-election at the Society’s AGM. The reviews concluded
that each director continued to perform effectively and demonstrated commitment to the role. During the year, the Society Chairman met each director individually to discuss their
personal performance and establish whether each director continued to contribute effectively to the long-term success of the Society.
Board performance
The Board conducts an annual review of its performance which is a key mechanism for ensuring that it continues to operate effectively, and for setting objectives and development areas
for the forthcoming year. This annual review is conducted through a formal evaluation and considers the work of individual directors, the Board and its committees. All reviews are
conducted in accordance with the Code and the Financial Reporting Council (FRC) Guidance on Board Effectiveness which require boards to undergo an externally facilitated review at
least every three years.
2023 Board performance review
Lintstock Limited was engaged by the Society for a three-year programme to support the Board performance reviews in 2021. The scope of the 2023 Board evaluation was determined at
the November 2022 Nomination and Governance Committee meeting and approved by the Board, following review of the 2022 effectiveness responses and agreeing which areas
required focus. It covered general areas of effectiveness including: the strengths and capabilities of the Board and each of its principal committees; the effectiveness of the Board’s
decision-making processes and identification of areas needing more Board attention; evaluation of individual Board members; and stakeholder oversight.
The review consisted of questionnaires sent to all Board members, the Society Secretary and other relevant key senior stakeholders for each of the Board’s principal committees. The
questionnaire covered the agreed areas of focus. Individual committee questionnaires were also completed by the relevant committee members and other key stakeholders where
appropriate. The key findings were captured in a review document that was submitted and presented to the Board in May 2023.
Overall, the findings endorsed the belief that the Board and its committees are performing and operating effectively, with directors satisfied with the performance and effectiveness of
the Board and its committees. The Board will continue to make progress against the key findings of the review and ensure that time is devoted to Board composition and succession
planning. The
Board adopted the recommendations from the findings and developed a plan to implement the actions. The monitoring of progress was delegated to the Nomination and
Governance Committee, and an update on the actions taken is provided below.
Governance
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Annual Report and Accounts 2024
Report of the directors on corporate governance
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Composition, succession, and evaluation (continued)
Area of focus and recommendation Action taken
The Board should enhance its knowledge and
understanding of the opportunities presented by
Artificial Intelligence, digital capabilities and technology
The Director of Digital was invited to present the Society’s digital roadmap to the Board at its January 2024 meeting. Training
sessions on Transformative Artificial Intelligence and Quantum Computing were also provided to Board members and senior
managers.
Monitor and oversee the evolving Society culture
To help it oversee the embedding of the Blueprint for a modern mutual and its customer first behaviours, the Board receives a
regular Culture Dashboard from the Chief People Officer. Additional regular updates on the embedding of the Blueprint and
customer first behaviours are received via the CEO Report at each Board meeting.
Further develop the Board’s understanding of member
needs and member engagement
Closer to Customer sessions have been arranged where discussions on topics of concern are facilitated between members and
the Board. Board directors have also visited numerous branches and engaged with customers and colleagues to enhance their
understanding of member needs.
2024 Board performance review
The 2024 performance review is being externally supported by Dr Sabine Dembkowski from Better Boards in accordance with the Code and the FRC Guidance on Board Effectiveness.
Consideration of the 2024 review commenced at the November 2023 meeting of the Nomination and Governance Committee, when potential independent external facilitators were
considered, along with the prospective focus of the review. Following consideration, a shortlist was drawn up in January 2024 and meetings held with the shortlisted firms. Better Boards
was chosen to conduct the externally facilitated review which commenced in March 2024.
The results of the review will be presented to the Board for discussion at its May 2024 meeting and will form the basis of an action plan for completion during 2024. A similar process will
be followed for Board committees. Further information on the evaluation process, outcomes and actions identified will be presented in the Annual Report and Accounts 2025.
Audit, risk and internal control
The Board is responsible for determining the nature and extent of the risks the Society is willing to take to achieve its long-term strategic objectives. This is detailed in the Society’s Risk
Appetite Statement. The Board is responsible for ensuring that management maintains an effective system of risk management and internal control and for assessing its effectiveness.
Nationwide has a robust Enterprise Risk Management Framework (ERMF) in place for identifying, evaluating and managing principal and emerging risks in accordance with the
‘Guidance on Risk Management, Internal Control and Related Financial and Business Reporting’, published by the FRC. The ERMF is supported by a system of internal controls and
processes. These systems and processes are designed to manage, not eliminate, the risk of failure to achieve business objectives, and can only provide reasonable and not absolute
assurance against material misstatement or loss.
The Board monitors the Society’s risk management and internal control systems and carries out an annual review of their effectiveness. On the basis of this year’s review, the Board is
satisfied that the ERMF is appropriate.
Internal control over financial reporting
The Society’s financial reporting process has been designed to provide assurance regarding the reliability of financial reporting and preparation of financial statements, as well as
consolidated financial statements, in accordance with International Financial Reporting Standards (IFRS).
Internal controls and risk management systems are in place to provide assurance over the preparation of the financial statements. These include independent testing of the critical
financial reporting processes and controls, from data origination to reporting, to an agreed level aligned to the Society’s Board Risk Appetite. The result of this assurance work is
reported to control owners and the Chief Financial Officer, with a summary report presented to the Audit Committee. Financial information submitted for inclusion in the financial
statements is attested by individuals with appropriate knowledge and experience.
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Annual Report and Accounts 2024
Report of the directors on corporate governance
(continued)
Audit, risk and internal control (continued)
The Annual Report and Accounts are scrutinised throughout the financial reporting process by relevant senior stakeholders before being submitted to the Audit Committee, which
provides challenge, before recommending to the Board for approval. The Audit Committee also discusses control conclusions and recommendations arising from the audit with the
external auditor.
Aspects of internal control over financial reporting have also been reviewed by Internal Audit. Based on the various reviews and reports provided to the Audit Committee, it was
concluded that the controls over financial reporting are effective.
More information on the Society’s risk management and internal control systems can be found on pages
97 to 103 of the Governance report and on pages 144 to 147 of the Risk report.
Remuneration
The Board is responsible for determining the Society’s remuneration policies and practices, including executive and senior management remuneration. Information on the work of the
Remuneration Committee and the Report of the directors on remuneration can be found on pages 112 to 138.
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Audit Committee report
Annual Report and Accounts 2024
Key activities of the Committee:
• Scrutinised and monitored the integrity of
the Society’s half and full-year external
reporting.
• Reviewed the going concern basis of
preparation of the financial statements and
the statement of business viability for
recommendation to the Board for approval.
• Monitored the overall effectiveness of the
Society’s internal control environment.
• Oversaw both the work of Internal Audit and
the relationship with the Society’s external
auditor, EY.
• Oversaw the identification of a new statutory
external audit partner at EY.
Audit Committee report
Dear fellow member,
As Chair of the Audit Committee, I am pleased to report on the work of the Committee and its key areas of focus during the
financial year ended 4 April 2024. I would like to thank my fellow Committee members for their input and insight during the
year, especially Mai Fyfield, who stepped down from the Board in July 2023, and Sally Orton, who joined the Committee as a
member in June 2023.
In exercising its primary purpose, the Committee has continued to play a key role in challenging and monitoring the integrity
of the Society’s external reporting and overseeing the supporting internal controls on behalf of the Board. In doing so, the
Committee scrutinised the Society’s half and full-year results and reviewed both the significant financial reporting judgements
made therein, and the accounting policies adopted. In addition, the Committee reviewed and provided challenge to the
Society’s climate-related disclosures and ensured that the Society challenged itself appropriately in respect of its science-
based emissions targets.
The Committee oversees and reviews the Society’s internal financial controls and internal control systems, ensuring that they
operate effectively. Such controls are designed to mitigate the Society’s risks and keep our customers’ money safe. Looking to
the future, this will include overseeing steps being taken by management to ensure compliance with new requirements
relating to internal controls under the UK Corporate Governance Code 2024, with which the Society will be expected to
comply from the 2026/27 financial year.
Whilst the Board Risk Committee retains overall responsibility for model risk oversight, during the year, the Committee
oversaw the steps taken by management in readiness for the forthcoming implementation of new regulatory requirements
relating to model risk management.
The Committee oversees and challenges the work undertaken by Internal Audit to ensure that the Society’s controls and
processes have appropriate oversight, with particular focus having been given to the prompt and effective resolution of issues
raised by Internal Audit.
Matters that fall within the scope of the Committee’s responsibilities are considered within the wider context of a range of
external factors to ensure that the Society’s reporting and controls take into consideration, and appropriately respond to,
emerging developments and external risks. During the year, this has included consideration of the geopolitical environment,
which remains volatile due to the ongoing war in Ukraine and the conflict in Gaza, and the potential impacts of rising interest
rates on our customers’ disposable income.
During the year, the Committee has overseen the work undertaken by the Society’s external auditors, Ernst & Young (EY). This
included undertaking a review of EY’s effectiveness, independence and objectivity, which took into consideration all applicable
UK professional and regulatory requirements. As Chair of the Audit Committee, I support the re-election of EY by members at
our AGM in July 2024 and direct members to further information on the work of EY that can be found on pages 221 to 234.
Additionally, I would like to take this opportunity to thank Javier Faiz for his work during his term as Nationwide’s senior
statutory auditor. In line with regulatory requirements to preserve audit independence, Javier will rotate off and our new
senior statutory auditor, Manprit Dosanjh, will assume responsibility for the financial year ending 4 April 2025.
Phil Rivett Chair – Audit Committee
38%
38%
11%
8%
4%
How the Committee spent its time in the year
Financial Reporting
Internal controls and risk management
(including Internal Audit)
External Audit
Statutory and governance duties
Other (including meeting
administration)
Annual Report and Accounts 2024
Key activities of the Committee:
• Scrutinised and monitored the integrity of
the Society’s half and full-year external
reporting.
• Reviewed the going concern basis of
preparation of the financial statements and
the statement of business viability for
recommendation to the Board for approval.
• Monitored the overall effectiveness of the
Society’s internal control environment.
• Oversaw both the work of Internal Audit and
the relationship with the Society’s external
auditor, EY.
• Oversaw the identification of a new statutory
external audit partner at EY.
Audit Committee report
Dear fellow member,
As Chair of the Audit Committee, I am pleased to report on the work of the Committee and its key areas of focus during the
financial year ended 4 April 2024. I would like to thank my fellow Committee members for their input and insight during the
year, especially Mai Fyfield, who stepped down from the Board in July 2023, and Sally Orton, who joined the Committee as a
member in June 2023.
In exercising its primary purpose, the Committee has continued to play a key role in challenging and monitoring the integrity
of the Society’s external reporting and overseeing the supporting internal controls on behalf of the Board. In doing so, the
Committee scrutinised the Society’s half and full-year results and reviewed both the significant financial reporting judgements
made therein, and the accounting policies adopted. In addition, the Committee reviewed and provided challenge to the
Society’s climate-related disclosures and ensured that the Society challenged itself appropriately in respect of its science-
based emissions targets.
The Committee oversees and reviews the Society’s internal financial controls and internal control systems, ensuring that they
operate effectively. Such controls are designed to mitigate the Society’s risks and keep our customers’ money safe. Looking to
the future, this will include overseeing steps being taken by management to ensure compliance with new requirements
relating to internal controls under the UK Corporate Governance Code 2024, with which the Society will be expected to
comply from the 2026/27 financial year.
Whilst the Board Risk Committee retains overall responsibility for model risk oversight, during the year, the Committee
oversaw the steps taken by management in readiness for the forthcoming implementation of new regulatory requirements
relating to model risk management.
The Committee oversees and challenges the work undertaken by Internal Audit to ensure that the Society’s controls and
processes have appropriate oversight, with particular focus having been given to the prompt and effective resolution of issues
raised by Internal Audit.
Matters that fall within the scope of the Committee’s responsibilities are considered within the wider context of a range of
external factors to ensure that the Society’s reporting and controls take into consideration, and appropriately respond to,
emerging developments and external risks. During the year, this has included consideration of the geopolitical environment,
which remains volatile due to the ongoing war in Ukraine and the conflict in Gaza, and the potential impacts of rising interest
rates on our customers’ disposable income.
During the year, the Committee has overseen the work undertaken by the Society’s external auditors, Ernst & Young (EY). This
included undertaking a review of EY’s effectiveness, independence and objectivity, which took into consideration all applicable
UK professional and regulatory requirements. As Chair of the Audit Committee, I support the re-election of EY by members at
our AGM in July 2024 and direct members to further information on the work of EY that can be found on pages 221 to 234.
Additionally, I would like to take this opportunity to thank Javier Faiz for his work during his term as Nationwide’s senior
statutory auditor. In line with regulatory requirements to preserve audit independence, Javier will rotate off and our new
senior statutory auditor, Manprit Dosanjh, will assume responsibility for the financial year ending 4 April 2025.
Phil Rivett Chair – Audit Committee
38%
38%
11%
8%
4%
How the Committee spent its time in the year
Financial Reporting
Internal controls and risk management
(including Internal Audit)
External Audit
Statutory and governance duties
Other (including meeting
administration)
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How the Committee works
Committee purpose
The Committee was established to provide oversight and advice to the Board on the matters listed in its terms of reference, which is available at nationwide.co.uk. Membership comprises
at least three independent non-executive directors who possess a diverse range of experience in business, finance, auditing and risk and controls, with particular depth of experience in
the financial services sector. Sally Orton joined the Committee in June 2023, ahead of Mai Fyfield’s retirement from the Board in July 2023. The Committee draws on the expertise of key
advisers and control functions, including the Society’s Internal Audit Function and external auditors, EY.
Committee meetings
During the year, the Committee held seven scheduled meetings. The attendance record of Committee members is set out on page 82. In addition to Committee members, regular
attendees of Committee meetings included the Society Chairman, Chief Executive Officer, Chief Internal Auditor, Chief Financial Officer, Chief Risk Officer and representatives of EY.
Subject matter experts were invited to meetings to present on particular topics as required. The Chair of the Committee reported to the Board on the matters considered at each
meeting.
The Committee additionally held two joint meetings with the Board Risk Committee to consider matters of common interest and to provide input to the Remuneration Committee to
assist that committee in its assessment of possible impacts on variable remuneration. Updates on the steps being taken to support a more coordinated approach to working between the
Society’s second and third lines of defence were also provided at these joint meetings.
The Committee met privately with the Chief Financial Officer, Chief Internal Auditor, EY and the Chief Risk Officer, without management present. In addition, the Chair of the Committee
met regularly with the Chief Internal Auditor and EY, and also attended meetings with the PRA, including a tripartite meeting with EY.
Committee performance, skills and expertise
A review of the Committee’s performance, its terms of reference and activities during the year is undertaken annually. The purpose of this review is to ensure that the terms of reference
remain aligned with the Committee’s remit and purpose, and continue to reflect all applicable governance codes, guidelines, legislation and best practice. As in previous years, the 2023
performance review was undertaken by the Society’s Secretariat function with the assistance of Lintstock Limited, as part of the three-year Board and committee performance review
process agreed in 2021. Feedback on the Committee’s performance was provided to both the Committee and the Board. The review findings indicate that Committee members are
satisfied with the performance and effectiveness of the Committee.
A review of the qualifications and experience of each member of the Committee is also undertaken on a periodic basis as part of the Board and committee succession planning process,
and the Board is satisfied that the Committee possesses recent and relevant financial experience and accounting competence, and that the Committee as a whole is competent in the
sector in which the Society operates. The 2023 performance review, including actions and next steps, is described on pages 94 to 95.
What the Committee did in the year
Financial reporting and non-financial reporting
A key role of the Committee is to monitor the integrity of the Society’s financial statements and any formal announcements relating to its financial performance, as well as to review the
significant financial reporting judgements contained therein. During the year, the Committee scrutinised the Society’s Annual Report and Accounts, Preliminary Results Announcement
and the Interim Results. The Committee oversaw the process undertaken by management to ensure these documents met the ‘fair, balanced and understandable’ principles and
considered whether the reporting accurately reflected the Group’s position and performance, business model and strategy. The Committee was satisfied these documents, taken as a
whole, are fair, balanced and understandable and recommended their approval to the Board.
The Committee also considered whether the impacts of increases in the cost of living, the geopolitical environment, which remains volatile due to the ongoing war in Ukraine and the
conflict in Gaza, and higher rates of interest were properly assessed, particularly within impairment provisions, and whether they were appropriately recognised and disclosed.
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The Committee engaged in active debate and challenge of management’s analyses, the external auditor’s work, and conclusions on the main areas of judgement presented in both the
Society’s Annual Report and Accounts and Interim Results. The Committee was satisfied that the Society has appropriate internal controls over its financial reporting systems in place to
provide assurance over the preparation of both its year-end and interim reporting, and that financial information submitted for inclusion in the financial statements is attested by
individuals with appropriate knowledge and experience. Key internal controls used to process transactions are subject to regular testing, the results of which are regularly reported to
the Committee.
The significant judgements made in relation to the preparation of the 2023/24 Annual Report and Accounts, which were discussed with both management and the external auditor during
the year, are noted below as significant areas of focus.
The Committee discussed with management the continued development of disclosures regarding climate change risks and impacts. In addition, the Committee reviewed the Report on
Climate-related Financial Disclosures which is published on nationwide.co.uk, as well as the summary of those disclosures presented in the Annual Report and Accounts. The Committee
remained focused on ensuring transparency in the Society's disclosure of the challenges in working towards net-zero, as well as ensuring that the Society challenged itself appropriately
with regard to its science-based emissions targets.
Going concern and viability statement
The Committee considered whether the preparation of the financial statements on a going concern basis and the Society’s viability statement remained appropriate. The Committee,
together with the Board Risk Committee, undertook a forward-looking assessment of the Society’s capital position and the levels of funding and liquidity available to the Society, together
with outputs of stress testing and reverse stress testing exercises. In addition, the Committee considered risks arising from its business activities, technological developments and
evolving customer needs, alongside ongoing macroeconomic factors, which may affect the Society’s future development, performance and financial position. This included consideration of
the impacts of rising interest rates, inflation and the current geopolitical environment, together with the implications of the Society’s principal risks including operational resilience and
cyber security. Additionally, this year’s going concern and viability assessments considered the
current Nationwide Group and the impact of the proposed acquisition of Virgin Money UK
plc, notwithstanding that the acquisition remains subject to regulatory approval.
The Committee considered whether a period longer than three years should be covered in the viability statement. The Committee concluded that a period of three years remained
appropriate, particularly when taking into account changes in the economic, technological, and regulatory environment. Based on its review, the Committee concluded that the application
of the going concern basis for the preparation of the financial statements remained appropriate and recommended the approval of the viability statement to the Board. The going concern
statement is included in the Directors’ report on page 141 and the viability statement is included in the Strategic report on pages
65 to 66.
Accounting policies and judgements
Following review, the Committee confirmed that the Society’s accounting policies and processes were appropriate to be used in the financial statements. Areas of key judgement made in
preparation of the financial statements considered by the Committee are set out within this report.
The Committee noted that there were no new accounting standards, or amendments to standards, effective for the reporting period which had a significant impact for the Group.
Alternative performance measures
Whilst the financial statements have been prepared in accordance with Generally Accepted Accounting Principles (GAAP), the Committee continues to believe that certain alternative
performance measures (also known as non-GAAP measures), such as underlying profit, aid a better understanding of the Society’s results. The Committee concluded that the disclosure
of, and the prominence provided to, underlying profit within the financial statements is appropriate.
The other performance measure considered by the Committee was a metric presented in Nationwide’s financial reporting which estimates the benefit provided to members in the form of
differentiated pricing and incentives, referred to as the member financial benefit. This metric represents Nationwide’s interest rate differential, lower fees and higher member incentives
compared with market averages. The Committee was satisfied with the approach to the measurement of member financial benefit and associated disclosure. Details of member financial
benefit are shown on page 69.
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Significant financial reporting issues and accounting judgements considered by the Committee during the year
The preparation of financial statements necessitates estimates and judgements to be made in relation to outcomes that are typically dependent on future events. Due to the inherently
uncertain nature of such estimates and judgements, actual results may vary. Significant financial reporting issues and accounting judgements considered by the Committee are set out in
the table below.
Area of focus Committee response
Impairment
provisions for loan
portfolios and
related disclosures
Information on credit
risk and assumptions
relating to expected
credit losses is
included in note 10 to
the financial
statements
Understanding the Society’s exposure to credit risk and ensuring that impairment provisions are appropriate remain priorities for the Committee, given the significance
of Nationwide’s loan portfolios. Significant judgements were made during the year, particularly in respect of the UK economic outlook and the current geopolitical
environment. The Committee challenged management to demonstrate that provisions appropriately reflected economic conditions, taking into account ongoing
affordability pressures due to increases in borrowing costs and inflation, the outlook for unemployment and house prices, and the ongoing uncertainty in relation to the
geopolitical environment, which remains volatile due to the ongoing war in Ukraine and the conflict in Gaza.
The selection of, and probabilities applied to, a range of economic scenarios for the purpose of modelling expected credit losses continue to have a material impact on
credit impairment provisions. Consideration was given to contemporary economic data and management’s forward-looking view of the economy. Following detailed review
and discussion, assumptions for base case, upside and downside scenarios, as well as for a severe economic downturn, were agreed and the Committee concurred with
management that these agreed scenarios reflected an appropriate range of assumptions. Following discussion, scenario probability weights were maintained to reflect
some improvement in the UK domestic economic position, offset by ongoing geopolitical uncertainty, such that at the year end the upside scenario weight was 10%, base
case scenario 45%, downside scenario 30% and the severe downside scenario 15%.
At the 2023/24 financial year end, the level of estimation uncertainty continued to be heightened by the current economic conditions. The Committee challenged
management to demonstrate that all relevant risks had been taken into account in expected credit loss provisions. Where risks could not be captured by models, for
example due to tail risks or credit risks where insufficient historical data exists to support a model, the Committee reviewed the material model adjustments that were
based on expert judgement. A key area of focus was the increased credit risk associated with UK household disposable income having reduced in the past two years and
the associated affordability pressures on borrowers generally caused by increases in both borrowing costs and inflation. The Committee reviewed management’s
assessment of the impacts of the payment shock that would be experienced by residential mortgage borrowers whose fixed rates would expire in the near term, as well as
those that had already expired but the impact of which had not yet crystallised. The methodology used assessed the impact of the prevailing economic outlook, as well as
the extent to which improvement in observed borrower credit quality in recent years might be temporary. Specific areas of risk such as property valuation risk, originally
driven by risks associated with buildings with fire safety issues requiring remediation work, were also considered. The Committee was satisfied that available evidence,
including the use of sensitivity analysis to determine the materiality of changes to assumptions, supported the level of provisioning.
Disclosures in respect of credit risk and provisions were considered carefully to ensure that they were transparent and provided sufficient insight into Nationwide’s
credit risk profile, taking into account industry best practice and the aims of the PRA to improve consistency. Overall, the Committee was satisfied with the level of
provisioning and related disclosures. The Committee also considered management’s development of capabilities in line with the PRA’s guidance on good practices in
impairment provisioning and was satisfied with progress made.
Provisions for
liabilities and
charges
Information is included
in notes 27 and 29 to
the financial
statements
The Committee received updates on a number of matters during the year and considered whether provisions established were appropriate. This included in relation to
conduct issues which may require redress, as well as legal and other regulatory matters. In order to evaluate whether a provision or, alternatively, disclosure of a
contingent liability is required, judgements are needed to assess the likelihood that these matters will crystallise as a liability. Judgement may also be required to assess
whether contingent assets meet the criteria for recognition under accounting standards.
For legal and regulatory matters, consideration was given to the appropriate recognition of provisions and disclosure of related contingent liabilities, as well as the
disclosure of contingent assets relating to expected recoveries from defendants in litigation proceedings.
For customer redress provisions, judgement is exercised in relation to the number of cases within scope, the associated cost of processing cases for review and the
value of redress required. The level of customer redress provisions has continued to reduce over the year.
The FCA is undertaking an investigation of the Society’s compliance with UK money laundering regulations and the FCA’s rules and Principles for Business in an enquiry
focused on aspects of the Society’s anti-money laundering control framework. The Society is co-operating with the investigation, which remains ongoing. The Group has
not disclosed an estimate of any potential financial impact arising from this matter on the basis that it is not currently practicable to do so.
The Committee reviewed judgements and estimates for a number of matters, discussing with management the criteria for recognition of new provisions or provision
releases, as well as the estimation of liabilities. The Committee concluded that the provisions held, and disclosures made in relation to contingent liabilities and contingent
assets were appropriate.
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Capitalisation,
expected useful
lives and
impairment of
intangible assets
Nationwide’s significant investment in technology, together with fast-moving technology development and change, increases the importance of a detailed assessment of
the useful lives of assets, and the implications of new investment, for the existing technology estate. The Committee concurred with management’s conclusions that,
after impairments and changes to useful lives, carrying values were appropriate and that asset lives were reasonable.
Pension scheme
accounting
Nationwide’s defined benefit pension scheme assets and liabilities are material to the financial statements, and a number of assumptions are made in determining the
value of the scheme’s liabilities. During the year, the Committee scrutinised assumptions made by management in calculating the surplus relating to the scheme.
Pension asset valuations were also considered in light of current market conditions. Particular focus was given to those assets where a market valuation is not readily
available, which included consideration of the valuation of illiquid assets and the Nationwide Pension Fund’s longevity swap transaction, which was entered into to manage
the scheme’s longevity risk. The Committee was satisfied with the assumptions and judgements made.
Control environment
The Committee continued to monitor the overall effectiveness of the Society’s internal control environment. This included oversight of the continuing work undertaken by management to
strengthen and enhance the Society’s control framework. The Committee was updated regularly on the status of important work to streamline the approach to control ownership,
including biannual updates from the Chief Controls Officer (CCO).
Financial controls
The Committee reviewed management reporting on the effectiveness of the financial control framework. A key area of focus for the Committee during the year continued to be the
enhanced internal control requirements under the revised UK Corporate Governance Code, published by the Financial Reporting Council (FRC) in January 2024. The Society will be
expected to comply with these enhanced requirements from financial year 2026/27.
Security, IT controls and operational resilience
The Committee is responsible for oversight of the Society’s IT controls. During the year, it received updates from both management and EY regarding the testing undertaken of those
controls. The Committee also continued to monitor closely work to strengthen aspects of IT security management. Internal Audit completed several related audits during the year, and
the Committee discussed with the external auditors their view on controls over privileged access to IT systems and data management.
Model risk management
The Board Risk Committee retains responsibility for model risk oversight. However, at the request of that committee, the Audit Committee oversaw the steps taken by management in
readiness for the implementation of new regulatory requirements relating to model risk management under the PRA’s SS1/23: Model Risk Management Principles for UK Banks. The
Committee received regular updates on the progress made against compliance with these requirements, which came into effect on 17 May 2024.
Capital and distributions
The Committee is responsible for advising the Board on the affordability of making payments of distributions and interest to holders of the Society’s core capital deferred shares (CCDS)
and AT1 securities, respectively, as well as Fairer Share payments to eligible members. During the year, the Committee recommended to the Board that the payments proposed by
management be approved.
Tax
The Director of Financial Reporting and Tax presented an annual update on tax matters to the Committee, and the Committee reviewed the management of Nationwide’s tax affairs and
discussed the management of tax risk in business activities. The Committee also reviewed tax-related judgements in the financial statements.
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Internal Audit
The Committee works closely with the Chief Internal Auditor, who reports directly to the Chair of the Committee. The Chief Internal Auditor reports to the Committee on a quarterly basis
on the progress of the Internal Audit function. Internal Audit’s strategic themes for the year took a holistic view of the Society, rather than focus on a particular area of the business. This
year’s strategic themes included: the impacts of the macroeconomic and political environment; areas of regulatory focus; the Society’s cyber and security response capabilities; and large-
scale technology change.
The Committee continued to focus on the steps being taken by management to support the prompt and effective resolution of issues raised by Internal Audit. Whilst this remains an area
of focus, particularly in respect of complex issues which require extended time to resolve, the Committee has observed an overall marked improvement in this area.
The Committee undertook a quarterly review of the resourcing of the Internal Audit function and was satisfied that the resources remained appropriate. The quality of Internal Audit’s
work was monitored by a quality control function which reported findings directly to the Committee Chair; no major issues were reported.
External Audit
A key responsibility of the Committee is to oversee the Society’s relationship with its external auditor. EY has acted as the Society’s external audit firm since its appointment at the AGM
in July 2019. Nationwide’s policy for auditor rotation and audit tender follows regulatory requirements, as well as the requirements of the FRC’s ‘Audit Committees and the External Audit:
Minimum Standard’ (FRC Audit Committee Standard), which was published in May 2023. Accordingly, the audit firm will be required to be rotated after no more than 20 years, with an
audit tender to be held after no more than 10 years. EY’s report can be found on pages 221 to 234.
Audit quality and materiality
The Committee is responsible for reviewing the quality and effectiveness of the external audit. The Committee approved both the audit’s materiality level and the annual audit plan in
advance of the commencement of the annual audit process. Materiality determines the threshold at which the auditor would consider a misstatement to compromise the truth or fairness
of the financial statements. For 2023/24, overall Group and Society materiality was set at £69 million and £55 million respectively (2022/23: £50 million for both Group and Society).
Auditor independence
The Committee is responsible for monitoring EY’s independence and acknowledges the provisions contained in both the Code and the FRC Audit Committee Standard, as well as
applicable UK legislation relating to mandatory audit rotation and audit tendering.
Javier Faiz of EY became Nationwide’s senior statutory auditor for the financial year 2019/20. Under regulation, Javier Faiz’s term as senior statutory auditor should not normally exceed a
maximum duration of five years and EY operates a policy of senior statutory auditor rotation which complies with these regulatory requirements. Accordingly, our new senior statutory
auditor, Manprit Dosanjh, will assume responsibility for the 2024/25 financial year.
EY has confirmed that it has complied with applicable regulatory and professional requirements and its objectivity is not impaired. The Committee is satisfied that EY remained
independent throughout the year.
The Board has an established policy setting out the non-audit services that can be provided by the external auditor. The aim of the policy, which is reviewed annually, is to safeguard the
independence and objectivity of the external auditors and comply with the ethical standards of the FRC. The policy specifies non-audit services provided by the external auditor that are
either permitted or prohibited and requires all non-audit work to be approved by the Committee following a detailed assessment of the nature of the work, availability of alternative
suppliers, and implications for auditor independence
.
Audit and non-audit fees
During the year, the Committee reviewed and approved EY’s terms of engagement for the statutory audit and the audit fee. In addition, the Committee approves any fees for non-audit
services in accordance with the Society’s policy.
In line with the Society’s non-audit fees policy, all non-audit work is approved by the Committee where the fee is over £50,000, or by the Committee Chair and the Chief Financial Officer
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with ratification at the next Committee meeting where the fee is below £50,000. Where aggregate non-audit fees reach 50% of the statutory audit fee in any given year, all non-audit
work must receive prior approval from the Committee. During the year, the Committee considered a number of proposals from management to use the external auditors for non-audit
services, ensuring that management had considered alternative suppliers and scrutinising analysis of any potential threats to auditor independence. The annual value of Nationwide’s non-audit
fees is subject to a regulatory cap. This cap is the amount equal to 70% of the average of the audit fees paid by Nationwide in the preceding three financial years. During the year, the
Committee reviewed the cumulative value of non-audit work quarterly to ensure that Nationwide was compliant with this regulatory requirement.
The fees paid to EY in total for the year ended 4 April 2024 were £6.9 million (2023: £7.1 million), of which £1.2 million (2023: £1.7 million) were for non-audit services. Non-audit services
which fall within scope of the 70% regulatory cap represented 17% (2023: 15%) of the average statutory audit fee for the previous three years.
During the year, approval was granted for the external auditors to undertake two engagements which related to: (1) the provision of limited assurance on the 2023/24 Principles for
Responsible Banking report; and (2) the verification of Nationwide’s scope 1, 2 and 3 CO
2
emissions. The Committee was satisfied that these engagements did not impact EY’s
independence. The remainder of non-audit services provided by EY related mainly to treasury funding activity.
The value of audit and non-audit fees in respect of the financial year are disclosed in note 8 to the financial statements.
Having reviewed both the quantum of the non-audit fees and the nature of the work undertaken by the external auditor, the Committee is satisfied that the non-audit work does not
detract from EY’s audit independence
.
Effectiveness of the external audit
Each year, the Committee reviews the effectiveness of the external audit process. The Committee received a report on the effectiveness of EY’s audit of the 2022/23 financial
statements, the findings of which were based on an assessment of EY’s compliance with the requirements of both the Code and the FRC Revised Ethical Standard for Audits, as well as
responses to a questionnaire regarding the audit process, which was completed by a number of representatives of the Board (including Committee members), management and EY. The
findings of the review indicated that the external auditor was performing its duties in an independent and effective manner.
Annual Report and Accounts 2024
Audit Committee report
(continued)
Internal Audit
The Committee works closely with the Chief Internal Auditor, who reports directly to the Chair of the Committee. The Chief Internal Auditor reports to the Committee on a quarterly basis
on the progress of the Internal Audit function. Internal Audit’s strategic themes for the year took a holistic view of the Society, rather than focus on a particular area of the business. This
year’s strategic themes included: the impacts of the macroeconomic and political environment; areas of regulatory focus; the Society’s cyber and security response capabilities; and large-
scale technology change.
The Committee continued to focus on the steps being taken by management to support the prompt and effective resolution of issues raised by Internal Audit. Whilst this remains an area
of focus, particularly in respect of complex issues which require extended time to resolve, the Committee has observed an overall marked improvement in this area.
The Committee undertook a quarterly review of the resourcing of the Internal Audit function and was satisfied that the resources remained appropriate. The quality of Internal Audit’s
work was monitored by a quality control function which reported findings directly to the Committee Chair; no major issues were reported.
External Audit
A key responsibility of the Committee is to oversee the Society’s relationship with its external auditor. EY has acted as the Society’s external audit firm since its appointment at the AGM
in July 2019. Nationwide’s policy for auditor rotation and audit tender follows regulatory requirements, as well as the requirements of the FRC’s ‘Audit Committees and the External Audit:
Minimum Standard’ (FRC Audit Committee Standard), which was published in May 2023. Accordingly, the audit firm will be required to be rotated after no more than 20 years, with an
audit tender to be held after no more than 10 years. EY’s report can be found on pages 221 to 234.
Audit quality and materiality
The Committee is responsible for reviewing the quality and effectiveness of the external audit. The Committee approved both the audit’s materiality level and the annual audit plan in
advance of the commencement of the annual audit process. Materiality determines the threshold at which the auditor would consider a misstatement to compromise the truth or fairness
of the financial statements. For 2023/24, overall Group and Society materiality was set at £69 million and £55 million respectively (2022/23: £50 million for both Group and Society).
Auditor independence
The Committee is responsible for monitoring EY’s independence and acknowledges the provisions contained in both the Code and the FRC Audit Committee Standard, as well as
applicable UK legislation relating to mandatory audit rotation and audit tendering.
Javier Faiz of EY became Nationwide’s senior statutory auditor for the financial year 2019/20. Under regulation, Javier Faiz’s term as senior statutory auditor should not normally exceed a
maximum duration of five years and EY operates a policy of senior statutory auditor rotation which complies with these regulatory requirements. Accordingly, our new senior statutory
auditor, Manprit Dosanjh, will assume responsibility for the 2024/25 financial year.
EY has confirmed that it has complied with applicable regulatory and professional requirements and its objectivity is not impaired. The Committee is satisfied that EY remained
independent throughout the year.
The Board has an established policy setting out the non-audit services that can be provided by the external auditor. The aim of the policy, which is reviewed annually, is to safeguard the
independence and objectivity of the external auditors and comply with the ethical standards of the FRC. The policy specifies non-audit services provided by the external auditor that are
either permitted or prohibited and requires all non-audit work to be approved by the Committee following a detailed assessment of the nature of the work, availability of alternative
suppliers, and implications for auditor independence
.
Audit and non-audit fees
During the year, the Committee reviewed and approved EY’s terms of engagement for the statutory audit and the audit fee. In addition, the Committee approves any fees for non-audit
services in accordance with the Society’s policy.
In line with the Society’s non-audit fees policy, all non-audit work is approved by the Committee where the fee is over £50,000, or by the Committee Chair and the Chief Financial Officer
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Board Risk Committee report
Annual Report and Accounts 2024
Board Risk Committee report
Dear fellow member,
I am pleased to present this report for the financial year ended 4 April 2024.
During the year, we have continued to give detailed consideration to the current and emergent risks facing Nationwide.
This enables us to monitor proactively, manage and mitigate risk through the use of the Society’s Enterprise Risk
Management Framework, thereby ensuring that our customers continue to receive the level of service and financial
stability they expect from us.
Since the Board appointed me as its Consumer Duty Champion in the 2022/23 financial year, I have ensured that the
Society’s implementation, planning and reporting on the FCA’s Consumer Duty is reviewed regularly by the Committee.
During the second half of this year, the Committee has focused on challenging management to ensure that the Consumer
Duty continues to embed across the Society ahead of the presentation of the first annual assessment to the Board in July
2024.
The Committee continued its critical review of the Society’s financial stress testing, modelling and its recovery and
resolution frameworks. We continue to work closely with the Audit Committee on subjects of common interest
including our joint oversight of the work undertaken by the Risk and Internal Audit functions and the discussion of
matters relating to remuneration.
The Committee ensured that sufficient meeting time was given to enable consistent review and monitoring of material non-
financial risks. The Committee is responsible for IT resilience and related technology risks, including cyber and security
risks.
This year, the Committee has focused on monitoring the Society’s exposure to risks arising from its third-party suppliers,
with particular attention having been paid to the steps taken by the Society in response to the failure of one of its material
suppliers.
The Committee has also continued to establish its monitoring of economic crime and fraud-related risks, which were
previously overseen by the Audit Committee, and also considered the annual report from the Money Laundering Reporting
Officer.
Looking to the year ahead, we will continue to focus on embedding the FCA’s Consumer Duty and how the Committee
continues to review and oversee the delivery of good customer outcomes. The Committee will also monitor operational
resilience and cyber risk in readiness for the regulatory deadline in March 2025 to ensure our business service lines can
withstand significant challenges to their operations and ensure continuity of service to our customers.
In addition, the ever-changing macroeconomic environment and its impact on the Society, its members and other key
stakeholders, and how that influences the risk landscape, will determine the Committee’s focus.
Alan Keir Chair – Board Risk Committee
Key activities of the Committee:
• Considered the current and emergent risks
facing Nationwide, with particular focus given
to monitoring and managing the Society’s
exposure to risks arising from its third-party
suppliers.
• Focused on challenging management to
ensure that the FCA’s Consumer Duty
continues to embed across the Society.
• Reviewed the Society’s financial stress
testing modelling, and its recovery and
resolution frameworks.
12%
45%
32%
10%
1%
How the Committee spent its time in the year
Prudential risk
Non-financial risk
Enterprise risk
Governance
Other (including meeting
administration)
Annual Report and Accounts 2024
Board Risk Committee report
Dear fellow member,
I am pleased to present this report for the financial year ended 4 April 2024.
During the year, we have continued to give detailed consideration to the current and emergent risks facing Nationwide.
This enables us to monitor proactively, manage and mitigate risk through the use of the Society’s Enterprise Risk
Management Framework, thereby ensuring that our customers continue to receive the level of service and financial
stability they expect from us.
Since the Board appointed me as its Consumer Duty Champion in the 2022/23 financial year, I have ensured that the
Society’s implementation, planning and reporting on the FCA’s Consumer Duty is reviewed regularly by the Committee.
During the second half of this year, the Committee has focused on challenging management to ensure that the Consumer
Duty continues to embed across the Society ahead of the presentation of the first annual assessment to the Board in July
2024.
The Committee continued its critical review of the Society’s financial stress testing, modelling and its recovery and
resolution frameworks. We continue to work closely with the Audit Committee on subjects of common interest
including our joint oversight of the work undertaken by the Risk and Internal Audit functions and the discussion of
matters relating to remuneration.
The Committee ensured that sufficient meeting time was given to enable consistent review and monitoring of material non-
financial risks. The Committee is responsible for IT resilience and related technology risks, including cyber and security
risks.
This year, the Committee has focused on monitoring the Society’s exposure to risks arising from its third-party suppliers,
with particular attention having been paid to the steps taken by the Society in response to the failure of one of its material
suppliers.
The Committee has also continued to establish its monitoring of economic crime and fraud-related risks, which were
previously overseen by the Audit Committee, and also considered the annual report from the Money Laundering Reporting
Officer.
Looking to the year ahead, we will continue to focus on embedding the FCA’s Consumer Duty and how the Committee
continues to review and oversee the delivery of good customer outcomes. The Committee will also monitor operational
resilience and cyber risk in readiness for the regulatory deadline in March 2025 to ensure our business service lines can
withstand significant challenges to their operations and ensure continuity of service to our customers.
In addition, the ever-changing macroeconomic environment and its impact on the Society, its members and other key
stakeholders, and how that influences the risk landscape, will determine the Committee’s focus.
Alan Keir Chair – Board Risk Committee
Key activities of the Committee:
• Considered the current and emergent risks
facing Nationwide, with particular focus given
to monitoring and managing the Society’s
exposure to risks arising from its third-party
suppliers.
• Focused on challenging management to
ensure that the FCA’s Consumer Duty
continues to embed across the Society.
• Reviewed the Society’s financial stress
testing modelling, and its recovery and
resolution frameworks.
12%
45%
32%
10%
1%
How the Committee spent its time in the year
Prudential risk
Non-financial risk
Enterprise risk
Governance
Other (including meeting
administration)
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Board Risk Committee report (continued)
Annual Report and Accounts 2024
Board Risk Committee report (continued)
How the Committee works
Committee purpose
The Committee was established by the Board to oversee, and provide advice on, risk-related matters. This includes the oversight and challenge of the Society’s day-to-day IT and
resilience risk, control and oversight arrangements. More detail on the duties and responsibilities of the Committee can be found within its terms of reference, available at
nationwide.co.uk. The Committee oversees the Executive Risk Committee, which is the management committee responsible for ensuring a co-ordinated risk management approach
across all the Society’s risks. Membership comprises at least three independent non-executive directors. The Committee also draws on the expertise of advisors specialising in specific
aspects of risk management on an ad hoc basis.
Committee meetings
During the year, the Committee held six scheduled meetings. The attendance record of Committee members is set out on page 82. In addition to Committee members, regular attendees
of Committee meetings included the Society Chairman, Chief Executive Officer, Chief Financial Officer, Chief Risk Officer, Chief Internal Auditor, and representatives of the Society’s
external auditors, EY. Subject matter experts were also invited to meetings to present on a variety of topics. At each meeting, the Chief Risk Officer shares the Society’s current and
emerging risk profile. Following each meeting, updates are provided to the Board by the Chair of the Committee, which are supplemented by regular reports to the Board from the Chief
Risk Officer.
The Committee additionally held two joint meetings with the Audit Committee to consider matters of common interest, including providing input to the Remuneration Committee to
assist that committee in its consideration of any potential risk adjustments to senior executive variable remuneration. Updates on the steps being taken to support a more coordinated
approach to working between the Society’s second and third lines of defence were also provided at these joint meetings.
The Committee also met privately throughout the course of the year with the Chief Risk Officer, without management present.
Committee performance, skills and expertise
A review of the Committee’s performance, its terms of reference and activities during the year is undertaken annually. The purpose of this review is to ensure that the terms of reference
remain aligned with the Committee’s remit and purpose, and continue to reflect all applicable governance codes, guidelines, legislation and best practice. As in previous years, the 2023
performance review was undertaken by the Society’s Secretariat function with assistance from Lintstock Limited, as part of the three-year Board and committee performance review process
agreed in 2021. Feedback on the Committee’s performance was provided to both the Committee and the Board. The review findings indicate that Committee members are satisfied with
the performance of the Committee. The 2023 performance review, including actions and next steps, is described on pages
94 to 95.
A review of the qualifications and experience of each member of the Committee is also undertaken on a periodic basis as part of the Board and committee succession planning process.
Details of the skills and experience of the Committee members can be found in their biographies on pages
77 to 80.
What the Committee did in the year
The principal purpose of the Committee is to provide oversight on behalf of, and advice to, the Board in relation to risk-related matters. This role is fulfilled through the provision of
advice, oversight and challenge to enable management to promote, embed and maintain a strong awareness of risk throughout the Society. More detail on the Society’s approach to the
management of risk can be found in the Risk Report on pages
144 to 147.
A key responsibility of the Committee is the monitoring of the Society’s current and emerging risk exposures. In addition, the Committee considered issues which may present risks to
the Society’s strategy as well as issues which may crystallise into future risk events.
The Board considers the appropriateness of the Society’s strategic plan in the context of its risk appetite. During the year, the Committee endorsed the Society’s Board Risk Appetite
to the Board and monitored performance against it, including undertaking appropriate reviews of material risks.
An outline of the key topics considered by the Committee during the year is broken down by risk category and set out below.
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Board Risk Committee report (continued)
Annual Report and Accounts 2024
Board Risk Committee report (continued)
Across all principal risks, the Committee continued to oversee and monitor the effectiveness of the Society’s internal controls designed to manage and mitigate risk, and challenged
management on its work to further enhance the Society’s control environment.
Non-financial risk
The Society seeks to minimise customer disruption, financial loss and reputational damage by providing sustainable services and resilient systems. During the year, the Committee
reviewed and challenged key areas of non-financial risk, as set out below.
Consumer Duty
The Committee received regular reports on the implementation of the FCA’s Consumer Duty and its ongoing embedding across the organisation. The Committee continued to champion
the Society’s approach to customer service, ensuring that customers are treated fairly throughout the lifecycle of our products by offering products and services that meet their needs
and expectations, perform as represented and provide value for money. The Committee will continue to receive and monitor reports on customer outcomes.
Economic crime and fraud related risks
Keeping our customers’ money safe is a priority and therefore the prevention of economic crime remains an area of focus for the Society. During the year, the Committee has continued to
establish its monitoring of economic crime and fraud-related risks, which were previously overseen by the Audit Committee. Economic crime is a broad term that includes bribery and
corruption, money laundering, fraud (including fraud scams), theft from customers’ accounts, card-related thefts and Authorised Push Payment scams. The Committee considered cyber
and fraud-related risks, both external and internal, and received quarterly fraud updates, as well as periodic updates on work being undertaken by management to enhance the Society’s
economic crime operations. In addition, the Committee considered the annual report from the Money Laundering Reporting Officer.
Third parties and outsourcing
The Committee has continued to monitor the Society’s risk exposure arising from its third-party supply chain. During the year, one of the Society’s material suppliers failed financially,
which resulted in steps being taken by management to ensure an orderly process for transitioning the services previously provided by that third party whilst minimising disruption to our
customers. Regular updates on this were provided to the Committee, and the Committee considered the learnings taken by management following this process.
IT, Cyber and security risk
The Committee received regular reports from the Chief Operating Officer and Chief Security and Resilience Officer in relation to progress made against the March 2025 regulatory
deadline to maintain Impact Tolerances for all Important Business Service Lines. The Committee also received reports in relation to broader operational resilience matters and how
Nationwide would respond to, and support our customers in the event of, a large-scale operational resilience incident to ensure continuity of service for our customers.
The Committee received the annual Data Protection Officer’s report, detailing the adequacy of data protection policies, procedures and governance arrangements to mitigate data
protection risks and comply with data protection legislation, including the General Data Protection Regulation. The Committee reviewed and challenged the migration of Nationwide’s
payments platform to ensure that customers did not suffer any detriment or inconvenience during the transition.
Prudential risk (includes credit, model, liquidity and funding, market, capital and pension risks)
The Society lends in a responsible, affordable and sustainable way to ensure we safeguard customers’ interests and maintain financial strength through the credit cycle. The
Committee reviewed and challenged the plans to ensure that the Society maintains sufficient capital and liquidity resources to support current business activity and to remain
resilient to significant stress.
During the year, the Committee reviewed a number of
aspects of prudential risk as required by the Bank of England and the PRA. This included scrutiny of the Society’s resolution
framework, capital and liquidity adequacy (as reported in the ICAAP and ILAAP, respectively), the Recovery Plan, the 2023 Climate Stress Test and the 2023 Reverse Stress Test
results.
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Board Risk Committee report (continued)
Annual Report and Accounts 2024
Board Risk Committee report (continued)
The Committee monitored the impact of the current macroeconomic and political environment, including the impact on both owner-occupiers and renters of cost of living challenges, the
current geopolitical environment, rising inflation, house prices and higher interest rates.
Whilst the Committee retains overall responsibility for model risk oversight, during the year the Audit Committee oversaw the steps taken by management in readiness for new
regulatory requirements relating to model risk management, which came into effect on 17 May 2024.
Enterprise risk (includes business risk)
The Committee has challenged the Society’s business model to ensure that it is sustainable and remains within the constraints of the Building Societies Act 1986. Below are examples of
how it has done this:
• The Committee considered and endorsed the Board Risk Appetite which establishes the amount and type of risk that the Board is comfortable with the Society taking. This is to
ensure that the Society remains sustainable in the long term for the benefit of its members. The Committee regularly reviewed the Society’s risk performance against the Board Risk
Appetite to ensure that appropriate action was being taken. It also approved the results of the review of the Society’s Enterprise Risk Management Framework – the system of risk
management and internal controls which the Society operates within. The review concluded that the Society’s system of risk management and internal controls were adequate when
assessed against the Board Risk Appetite.
• The Committee encourages a culture that considers both risk and reward in decision-making. The Committee reviewed the Society’s culture through a risk lens in the context of
progress made against the Society’s strategy.
• The Committee discussed the longer-term risks that could impact the Society’s strategy.
• The Committee considered the potential propositional, operational and margin implications of interest rate and inflation rate changes on the Society.
During the year, the Committee received regular updates from the Society’s second line oversight functions. The Committee is confident that the Society’s division of duties between the first,
second and third lines of defence is sufficiently robust to ensure that the Society’s operational decisions receive timely and appropriate challenge.
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Nomination and Governance Committee report
Annual Report and Accounts 2024
Key activities of the Committee:
• Challenged the Society’s Board and
Executive Committee succession plans to
be sufficiently robust and diverse to meet
Nationwide’s future needs.
• Discussed the succession planning and
embedding of Nationwide culture within
individual executive management
functions.
• Considered results of, and made
recommendations in response to, the
Board Performance Review.
• Reviewed the independence, external
interests and time commitments of all
Board members.
Nomination and Governance Committee report
Dear fellow member,
I am pleased to report on the work of the Nomination and Governance Committee during the financial year ended 4 April 2024.
The Committee continues to play a critical role in promoting the long-term sustainable success of the Society for the
benefit of its members, customers and other stakeholders by ensuring that the Society is led by a Board and executive
management that possess the appropriate combination of skills and experience.
Ensuring that the Society’s Board continues to be balanced in terms of its structure, skills, knowledge, experience and
diversity, is a key role of the Committee in enabling the Society to achieve its objectives and successfully pursue its long-
term strategy. Changes to the Board and executive management have been limited during the year and the Committee has
focused on ensuring that the Society’s leadership has the skills and capabilities to meet the needs of a modern mutual and
embed the customer first culture throughout the organisation. The Committee ensures that succession planning at board
and executive level is sufficiently robust and diverse to serve the best interests of the Society’s customers and members,
both now and in the future. My introduction to the Governance report on page 76 outlines the changes to the Board during
the year, all of which have been overseen by this Committee.
This is the second year in which the Society is required to disclose certain diversity data relating to both its Board and
executive management and report on its performance against three diversity targets set by the FCA in its Annual Report
and Accounts. This information can be found on page 92. The Committee was pleased to note the Society appeared fourth
in the Financial Times-Statista Diversity Leaders
1
list published in December 2023. The List comprised 850 European
companies and Nationwide was placed top for banking and financial services companies. Additionally, Nationwide ranked
sixth for “Women on Boards – Top Ten Best Performers” of the top 50 private companies in the FTSE Women Leaders
Review
2
, published in February 2024.
As part of its remit, the Committee provides oversight of the Society’s governance framework on behalf of the Board, to
ensure that it remains effective and aligned with best practice. The Committee is satisfied that the current governance
framework has continued to operate effectively and efficiently throughout the year.
Kevin Parry Chairman – Nomination and Governance Committee
1
The FT-Statista ranking of Europe’s Diversity Leaders is based on independent surveys of more than 100,000 employees across Europe, on their perceptions of their organisation’s diversity and inclusion practices. For the 2024 list,
the employee surveys accounted for 70% of the final score, and three new indicators accounted for 30% of the score (the share of women in management positions, the communications made in favour of diversity, and a diversity score
calculated by data provider Denominator).
2
FTSE Women Leaders Review (February 2024).
47%
28%
16%
9%
How the Committee spent its time in the year
Executive resourcing, leadership,
talent and succession
Board composition,
effectiveness and succession
Governance and regulatory
requirements
Other (including meeting
administration)
Annual Report and Accounts 2024
Key activities of the Committee:
• Challenged the Society’s Board and
Executive Committee succession plans to
be sufficiently robust and diverse to meet
Nationwide’s future needs.
• Discussed the succession planning and
embedding of Nationwide culture within
individual executive management
functions.
• Considered results of, and made
recommendations in response to, the
Board Performance Review.
• Reviewed the independence, external
interests and time commitments of all
Board members.
Nomination and Governance Committee report
Dear fellow member,
I am pleased to report on the work of the Nomination and Governance Committee during the financial year ended 4 April 2024.
The Committee continues to play a critical role in promoting the long-term sustainable success of the Society for the
benefit of its members, customers and other stakeholders by ensuring that the Society is led by a Board and executive
management that possess the appropriate combination of skills and experience.
Ensuring that the Society’s Board continues to be balanced in terms of its structure, skills, knowledge, experience and
diversity, is a key role of the Committee in enabling the Society to achieve its objectives and successfully pursue its long-
term strategy. Changes to the Board and executive management have been limited during the year and the Committee has
focused on ensuring that the Society’s leadership has the skills and capabilities to meet the needs of a modern mutual and
embed the customer first culture throughout the organisation. The Committee ensures that succession planning at board
and executive level is sufficiently robust and diverse to serve the best interests of the Society’s customers and members,
both now and in the future. My introduction to the Governance report on page 76 outlines the changes to the Board during
the year, all of which have been overseen by this Committee.
This is the second year in which the Society is required to disclose certain diversity data relating to both its Board and
executive management and report on its performance against three diversity targets set by the FCA in its Annual Report
and Accounts. This information can be found on page 92. The Committee was pleased to note the Society appeared fourth
in the Financial Times-Statista Diversity Leaders
1
list published in December 2023. The List comprised 850 European
companies and Nationwide was placed top for banking and financial services companies. Additionally, Nationwide ranked
sixth for “Women on Boards – Top Ten Best Performers” of the top 50 private companies in the FTSE Women Leaders
Review
2
, published in February 2024.
As part of its remit, the Committee provides oversight of the Society’s governance framework on behalf of the Board, to
ensure that it remains effective and aligned with best practice. The Committee is satisfied that the current governance
framework has continued to operate effectively and efficiently throughout the year.
Kevin Parry Chairman – Nomination and Governance Committee
1
The FT-Statista ranking of Europe’s Diversity Leaders is based on independent surveys of more than 100,000 employees across Europe, on their perceptions of their organisation’s diversity and inclusion practices. For the 2024 list,
the employee surveys accounted for 70% of the final score, and three new indicators accounted for 30% of the score (the share of women in management positions, the communications made in favour of diversity, and a diversity score
calculated by data provider Denominator).
2
FTSE Women Leaders Review (February 2024).
47%
28%
16%
9%
How the Committee spent its time in the year
Executive resourcing, leadership,
talent and succession
Board composition,
effectiveness and succession
Governance and regulatory
requirements
Other (including meeting
administration)
Annual Report and Accounts 2024
Key activities of the Committee:
• Challenged the Society’s Board and
Executive Committee succession plans to
be sufficiently robust and diverse to meet
Nationwide’s future needs.
• Discussed the succession planning and
embedding of Nationwide culture within
individual executive management
functions.
• Considered results of, and made
recommendations in response to, the
Board Performance Review.
• Reviewed the independence, external
interests and time commitments of all
Board members.
Nomination and Governance Committee report
Dear fellow member,
I am pleased to report on the work of the Nomination and Governance Committee during the financial year ended 4 April 2024.
The Committee continues to play a critical role in promoting the long-term sustainable success of the Society for the
benefit of its members, customers and other stakeholders by ensuring that the Society is led by a Board and executive
management that possess the appropriate combination of skills and experience.
Ensuring that the Society’s Board continues to be balanced in terms of its structure, skills, knowledge, experience and
diversity, is a key role of the Committee in enabling the Society to achieve its objectives and successfully pursue its long-
term strategy. Changes to the Board and executive management have been limited during the year and the Committee has
focused on ensuring that the Society’s leadership has the skills and capabilities to meet the needs of a modern mutual and
embed the customer first culture throughout the organisation. The Committee ensures that succession planning at board
and executive level is sufficiently robust and diverse to serve the best interests of the Society’s customers and members,
both now and in the future. My introduction to the Governance report on page 76 outlines the changes to the Board during
the year, all of which have been overseen by this Committee.
This is the second year in which the Society is required to disclose certain diversity data relating to both its Board and
executive management and report on its performance against three diversity targets set by the FCA in its Annual Report
and Accounts. This information can be found on page 92. The Committee was pleased to note the Society appeared fourth
in the Financial Times-Statista Diversity Leaders
1
list published in December 2023. The List comprised 850 European
companies and Nationwide was placed top for banking and financial services companies. Additionally, Nationwide ranked
sixth for “Women on Boards – Top Ten Best Performers” of the top 50 private companies in the FTSE Women Leaders
Review
2
, published in February 2024.
As part of its remit, the Committee provides oversight of the Society’s governance framework on behalf of the Board, to
ensure that it remains effective and aligned with best practice. The Committee is satisfied that the current governance
framework has continued to operate effectively and efficiently throughout the year.
Kevin Parry Chairman – Nomination and Governance Committee
1
The FT-Statista ranking of Europe’s Diversity Leaders is based on independent surveys of more than 100,000 employees across Europe, on their perceptions of their organisation’s diversity and inclusion practices. For the 2024 list,
the employee surveys accounted for 70% of the final score, and three new indicators accounted for 30% of the score (the share of women in management positions, the communications made in favour of diversity, and a diversity score
calculated by data provider Denominator).
2
FTSE Women Leaders Review (February 2024).
47%
28%
16%
9%
How the Committee spent its time in the year
Executive resourcing, leadership,
talent and succession
Board composition,
effectiveness and succession
Governance and regulatory
requirements
Other (including meeting
administration)
Annual Report and Accounts 2024
Key activities of the Committee:
• Challenged the Society’s Board and
Executive Committee succession plans to
be sufficiently robust and diverse to meet
Nationwide’s future needs.
• Discussed the succession planning and
embedding of Nationwide culture within
individual executive management
functions.
• Considered results of, and made
recommendations in response to, the
Board Performance Review.
• Reviewed the independence, external
interests and time commitments of all
Board members.
Nomination and Governance Committee report
Dear fellow member,
I am pleased to report on the work of the Nomination and Governance Committee during the financial year ended 4 April 2024.
The Committee continues to play a critical role in promoting the long-term sustainable success of the Society for the
benefit of its members, customers and other stakeholders by ensuring that the Society is led by a Board and executive
management that possess the appropriate combination of skills and experience.
Ensuring that the Society’s Board continues to be balanced in terms of its structure, skills, knowledge, experience and
diversity, is a key role of the Committee in enabling the Society to achieve its objectives and successfully pursue its long-
term strategy. Changes to the Board and executive management have been limited during the year and the Committee has
focused on ensuring that the Society’s leadership has the skills and capabilities to meet the needs of a modern mutual and
embed the customer first culture throughout the organisation. The Committee ensures that succession planning at board
and executive level is sufficiently robust and diverse to serve the best interests of the Society’s customers and members,
both now and in the future. My introduction to the Governance report on page 76 outlines the changes to the Board during
the year, all of which have been overseen by this Committee.
This is the second year in which the Society is required to disclose certain diversity data relating to both its Board and
executive management and report on its performance against three diversity targets set by the FCA in its Annual Report
and Accounts. This information can be found on page 92. The Committee was pleased to note the Society appeared fourth
in the Financial Times-Statista Diversity Leaders
1
list published in December 2023. The List comprised 850 European
companies and Nationwide was placed top for banking and financial services companies. Additionally, Nationwide ranked
sixth for “Women on Boards – Top Ten Best Performers” of the top 50 private companies in the FTSE Women Leaders
Review
2
, published in February 2024.
As part of its remit, the Committee provides oversight of the Society’s governance framework on behalf of the Board, to
ensure that it remains effective and aligned with best practice. The Committee is satisfied that the current governance
framework has continued to operate effectively and efficiently throughout the year.
Kevin Parry Chairman – Nomination and Governance Committee
1
The FT-Statista ranking of Europe’s Diversity Leaders is based on independent surveys of more than 100,000 employees across Europe, on their perceptions of their organisation’s diversity and inclusion practices. For the 2024 list,
the employee surveys accounted for 70% of the final score, and three new indicators accounted for 30% of the score (the share of women in management positions, the communications made in favour of diversity, and a diversity score
calculated by data provider Denominator).
2
FTSE Women Leaders Review (February 2024).
47%
28%
16%
9%
How the Committee spent its time in the year
Executive resourcing, leadership,
talent and succession
Board composition,
effectiveness and succession
Governance and regulatory
requirements
Other (including meeting
administration)
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Nomination and Governance Committee report
(continued)
Annual Report and Accounts 2024
Nomination and Governance Committee report (continued)
How the Committee works
Committee purpose
The Committee provides oversight and advice to the Board on the succession planning for the Board and its committees and executive level appointments. It also reviews the Board’s
governance arrangements ensuring they are consistent with best practice and oversee the implementation of the Society’s inclusion, diversity and wellbeing (ID&W) strategy and
objectives. More detail on the duties and responsibilities of the Committee can be found in its terms of reference, available at nationwide.co.uk.
The Committee comprises the Society Chairman (who chairs the Committee except when his own succession is being considered) and three independent non-executive directors,
including the Senior Independent Director. Details of the skills and experience of the Committee members can be found in their biographies on pages
77 to 80.
In addition to the members, regular attendees of the Committee include: the CEO, Chief People Officer, and the Society Secretary.
Committee meetings
The Committee meets at least twice a year and otherwise as required. During the year, the Committee held six scheduled meetings. The attendance record of Committee members is
set out on page
82.
Committee performance, skills and expertise
The performance of the Committee is reviewed annually, along with the Committee’s terms of reference and its activities over the previous year.
The purpose of this review is to confirm that the terms of reference align with the Committee’s remit and purpose, and continue to reflect all applicable governance codes, guidelines,
legislation and best practice. The 2023 performance review was undertaken by the Society’s Secretariat with the assistance of Lintstock Limited, as part of the three-year Board and
committee performance review process agreed in 2021. Feedback on the performance and effectiveness of the Committee was provided to both the Committee and the Board. The
results of the review indicate that Committee members are satisfied with the performance and effectiveness of the Committee. The 2023 performance review, including Board actions
and next steps that the Committee is monitoring, is described on pages
94 to 95.
What the Committee did in the year
Executive resourcing, leadership, talent, and succession
A key focus of the Committee has been to ensure the Society’s leadership has the talent needed for the future.
The Committee received regular updates on the Society’s executive succession management, including reviews of emergency succession plans and talent management development
plans for longer-term succession. This provided the Committee with a view of the talent pipeline of potential leaders as well their key strengths and development areas. There is a
continued focus on encouraging diversity to senior roles. It was noted that longer-term succession planning requires early focus to address capability requirements and diverse
representation.
The Committee received deep dives from each of the Society’s individual business functions during the year. Function leaders reported on the challenges and opportunities faced by their
functions in resourcing, capability, diversity and succession planning and the work which was ongoing to address these challenges and opportunities.
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Nomination and Governance Committee report (continued)
Inclusion and diversity (I&D)
The Board is committed to ensuring that it has a membership which is diverse and reflects the communities that it represents. It aims to achieve this by ensuring there is
diversity of ethnicity, age, gender, disability and sexual orientation, as well as socio-economic, educational and professional backgrounds within the Board’s membership.
Additionally, the Committee oversees the development and implementation of the Society’s I&D strategy and objectives.
Throughout the year, the Committee received updates on the significant I&D initiatives undertaken throughout the organisation and the progress made in achieving the Society’s
I&D ambitions. These updates covered:
• A review of the profile of senior leadership across the Society to ensure the Society has robust, enduring and diverse leadership;
• The design and launch of new leadership programmes to develop high performing and diverse teams by improving representation and inclusivity, following research into the key
capabilities required from our people managers and senior leaders to deliver the strategy and Blueprint for a modern mutual;
• The introduction of an I&D dashboard to the Executive leadership team, providing transparency on progress across the business and driving accountability; and
• Information to ensure leadership accountability for the delivery of the I&D agenda.
Good progress has been made in the last year; however, the Society’s diversity outcomes are not yet where we want them to be and I&D will remain a critical focus for the
Committee. More information on the Society’s I&D strategy, measures and progress made can be found on pages 50 to 51.
Existing efforts will be built on and considered in the development of a diverse pipeline for Board succession. Selecting the best candidate is paramount and all appointments are
based on merit and objective criteria, with due regard for the benefits of diversity on the Board. This benefits the effectiveness of the Board by creating diversity of thought and
breadth of perspective among our directors.
Our 2023 Annual Report and Accounts was the first year in which the Society was required to disclose certain diversity data relating to both its Board and executive management,
including performance against three diversity targets set by the FCA. This diversity information, as well as detail relating to the approach taken in the collation of this diversity data,
has been updated for this year and can be found on page 92. The Society has separately provided data to The Parker Review on the ethnic diversity of its Board.
The Board’s gender and ethnicity targets in respect of individuals at senior levels within the Society have been set to go beyond those prescribed by the FCA through alignment with
the Society’s gender (50%) and ethnicity (12%) targets. Whilst recognising that short-term challenges may exist owing to the size of the Board during periods of change, these targets
seek to strengthen the Board’s commitment to ensuring diversity at senior levels within the Society.
As part of this commitment, the Committee continues to review the development of the pipeline of both ethnically diverse and female executive management within the Society and,
as a signatory to the Women in Finance Charter, the Society is committed to supporting the progression of women into senior roles. In addition, the Society is a signatory of the Race at
Work Charter, which involves a Board-level commitment to zero tolerance of harassment and bullying, particularly racial.
To increase our focus on disability inclusion, the Society is a member of the Valuable 500, a global collective of 500 chief executive officers and their organisations which uses the
power of business to ensure that disability is discussed at Board level and make business more inclusive of those living with a disability. Signatories are required to put disability
inclusion on their leadership agenda and to publish a firm pledge for action.
The Society is a partner of Progress Together, a membership body centred on progression, retention and socio-economic diversity in financial services. With its support and input the
Society was able to benchmark its socio-economic diversity against its peers to help inform its future inclusion and diversity priorities. The Society introduced a social mobility employee
network during 2023 and social mobility questions, including focus on progression and retention, have been added into employee satisfaction surveys to understand better socio-
economic diversity.
More information on the Society’s diversity initiatives can be found in its Sustainability Report at nationwide.co.uk. The Board’s Diversity Statement is set out in the Board Composition
and Succession Policy which can also be found at nationwide.co.uk.
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Nomination and Governance Committee report (continued)
Board composition and effectiveness
As part of its remit, the Committee is required to assist the Society Chairman in subjecting the composition of the Board and its committees to regular review. The purpose of these
reviews is to identify the current and likely future needs of the Board and to lead the appointments process for nominations to the Board. This includes ensuring that the Society has the
right mix of knowledge, skills and behaviours on the Board for it to be effective in delivering its responsibilities to provide oversight and governance of the Society and to safeguard the
interests of its members. In determining the Board’s needs, the Committee considers a range of factors including the diversity of the Board in its widest sense, the Society’s strategy,
current and future challenges and opportunities facing the Society and the need to balance continuity and knowledge of the Society with progressive changes to the membership of the
Board and its committees. The recruitment process for directors is designed to ensure that the Board possesses a diverse range of skills and appropriate objectivity.
It also involves detailed referencing and other checks to establish the candidate’s credentials, including suitability, fitness and propriety. Regulatory approval is required for certain Board
roles which are subject to the Senior Manager and Certification Regime (SM&CR).
Selection process for new non-executive director
Following a review of the composition of the Board and the planned retirement of Mai Fyfield and Gunn Waersted at the 2023 AGM, the Committee identified a potential gap on
the Board and the need for an independent non-executive director with extensive and recent financial knowledge and audit experience. As such, the Committee oversaw and
recommended to the Board the appointment of Sally Orton as independent non-executive director and member of the Audit Committee.
The Committee engaged Korn Ferry, an independent executive search firm, to assist with the search. Korn Ferry is independent and has no connection with the Society or any of
the directors other than to assist with searches for executive and non-executive talent. The Committee, supported by Korn Ferry, prepared a candidate specification based on
objective criteria, setting out the knowledge, skills, experience and attributes required. From the candidate specification, a longlist of potential candidates was drawn up and
considered by the Society Chairman and Society Secretary from which a shortlist of three was compiled. Following interviews with the three shortlisted candidates, conducted by
the Society Chairman, Audit Committee Chair, Board Risk Committee Chair, Remuneration Committee Chair, CEO and CFO, one preferred candidate emerged for the role.
Following due and careful consideration and taking into account the current needs of the Board, Sally Orton was the preferred candidate for the role. The Committee agreed that
her appointment fulfils the need to further strengthen the Board with a non-executive director with recent and relevant financial experience and Sally was appointed to the Board
and to the Audit Committee with effect from 1 June 2023.
Board performance review
The Code requires the Society Chairman to lead an annual Board review. In 2023 the review was conducted by the Society’s Secretariat with the assistance of Lintstock Limited,
as part of the three-year Board and committee performance review process agreed in 2021. The Committee oversaw the work undertaken by Secretariat and Lintstock Limited,
which looked at the overall performance of the Board and its committees and provided an objective assessment of the strengths, capabilities, effectiveness, and dynamics of the
Board. More information on the performance review can be found on pages
94 to 95. The Committee considered the arrangements for the performance reviews from 2024
onwards.
Corporate governance
As part of its remit, the Committee is responsible for the oversight of the Society’s governance arrangements on behalf of the Board. The Committee reviewed and approved the
Nationwide Governance Manual, Delegated Authorities Framework and reviewed the corporate governance disclosures in the 2023 and 2024 Annual Report and Accounts.
Individual accountability regimes
The SM&CR was introduced by the Society’s regulators to encourage senior managers working within the financial services industry to take greater responsibility for their
actions. SM&CR aims to reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence. In addition, it
enables regulators to take action against individuals in cases where significant wrongdoing has been identified. The Committee continues to focus on regulatory requirements to
ascertain suitability, fitness and propriety of relevant individuals and to ensure that SM&CR responsibilities are allocated appropriately through the Society’s well established
mapping process. Overall, the Society’s processes and controls in relation to both the accountability regimes and the assessment of the Financial Conduct Authority Conduct
Rules continue to operate effectively.
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Report of the directors on remuneration
Annual Report and Accounts 2024
32%
23%
15%
10%
15%
5%
Pay Strategy and approach
Performance award
outcomes
Oversight of remuneration
across the Society
Regulatory reporting
Procedural matters
Governance
Report of the directors on
remuneration
For the year ended 4 April 2024
Dear fellow member,
I am pleased to share the Remuneration Committee’s report for the year ended 4 April 2024. This report includes details of
directors’ pay for the year, together with our new forward-looking directors’ remuneration policy and how the Society intends to
implement the policy during 2024/25.
Our directors’ remuneration report for the year ended 4 April 2023 received strong support at the 2023 Annual General Meeting
(AGM) (with 95% of votes ‘FOR’), and I would like to thank members for their ongoing support. We will be seeking an advisory vote on
the directors’ remuneration report for the year ended 4 April 2024 and the new directors’ remuneration policy at the 2024 AGM.
The key matters discussed by the Committee during the year are set out below. I would like to thank my fellow Committee members
for their continued support and contribution.
Supporting our wider workforce
Our colleagues are integral to the Society’s success and the Committee’s oversight of remuneration across the workforce has
featured prominently on its agenda during 2023/24.
The pay package agreed with the Nationwide Group Staff Union (NGSU) for 2024/25 covers the Society’s wider workforce,
excluding our most senior population. Eligible colleagues will receive a salary increase of the greater of 4.5% of current salary or
£1,300 (pro-rated), effective from 1 July 2024, and the Society’s minimum salary will increase to £23,000. Around 9,000 colleagues
will benefit from the £1,300 minimum increase, making the average total award delivered through the 2024/25 pay package 5.4%,
higher than the average of 3.1% for our most senior population, demonstrating our continued investment in lower-earning roles. In
combination with the 2022/23 pay package, salaries for eligible colleagues will have increased by at least 11% since April 2023.
Our new directors’ remuneration policy
During 2023/24 the Committee undertook a detailed review of the directors’ remuneration policy to ensure it continues to support
the Society’s strategic priorities and is appropriately positioned to recruit, motivate and retain executives of the calibre required to
manage a systemically important institution. In conducting this review, the Committee also aimed to ensure strong alignment
between reward and our customers’ interests, maintaining a focus on long-term performance.
Overall, the Committee was satisfied the current remuneration structures in place at Nationwide remain fit for purpose, with variable pay for executive directors made up of a mix of
short-term (through the Annual Performance Pay (APP) plan) and long-term (through the Long-Term Performance Pay (LTPP) plan) reward.
The Committee reviewed competitive market data and the positioning of our executive directors’ total remuneration relative to our peers, which highlighted that the total remuneration
opportunity for the Chief Executive Officer (CEO) currently sits substantially below UK banking peers and other firms (both listed and private) of a similar size and complexity. The
Committee also considered the Society's performance since the CEO’s appointment in June 2022 and key performance highlights delivered in this period, including developing a long-
term strategy to safeguard the future strength of the Society, and introducing the Nationwide Fairer Share Payment, rewarding our members who have the deepest relationships with us.
Key activities of the Committee:
• Reviewed the directors’ remuneration policy.
• Continued to oversee the remuneration and
performance framework for all colleagues.
•
Approved performance pay outcomes for
2022/23 and the design of performance pay
plans for 2024/25.
How the Committe spent its time in the year
Annual Report and Accounts 2024
32%
23%
15%
10%
15%
5%
Pay Strategy and approach
Performance award
outcomes
Oversight of remuneration
across the Society
Regulatory reporting
Procedural matters
Governance
Report of the directors on
remuneration
For the year ended 4 April 2024
Dear fellow member,
I am pleased to share the Remuneration Committee’s report for the year ended 4 April 2024. This report includes details of
directors’ pay for the year, together with our new forward-looking directors’ remuneration policy and how the Society intends to
implement the policy during 2024/25.
Our directors’ remuneration report for the year ended 4 April 2023 received strong support at the 2023 Annual General Meeting
(AGM) (with 95% of votes ‘FOR’), and I would like to thank members for their ongoing support. We will be seeking an advisory vote on
the directors’ remuneration report for the year ended 4 April 2024 and the new directors’ remuneration policy at the 2024 AGM.
The key matters discussed by the Committee during the year are set out below. I would like to thank my fellow Committee members
for their continued support and contribution.
Supporting our wider workforce
Our colleagues are integral to the Society’s success and the Committee’s oversight of remuneration across the workforce has
featured prominently on its agenda during 2023/24.
The pay package agreed with the Nationwide Group Staff Union (NGSU) for 2024/25 covers the Society’s wider workforce,
excluding our most senior population. Eligible colleagues will receive a salary increase of the greater of 4.5% of current salary or
£1,300 (pro-rated), effective from 1 July 2024, and the Society’s minimum salary will increase to £23,000. Around 9,000 colleagues
will benefit from the £1,300 minimum increase, making the average total award delivered through the 2024/25 pay package 5.4%,
higher than the average of 3.1% for our most senior population, demonstrating our continued investment in lower-earning roles. In
combination with the 2022/23 pay package, salaries for eligible colleagues will have increased by at least 11% since April 2023.
Our new directors’ remuneration policy
During 2023/24 the Committee undertook a detailed review of the directors’ remuneration policy to ensure it continues to support
the Society’s strategic priorities and is appropriately positioned to recruit, motivate and retain executives of the calibre required to
manage a systemically important institution. In conducting this review, the Committee also aimed to ensure strong alignment
between reward and our customers’ interests, maintaining a focus on long-term performance.
Overall, the Committee was satisfied the current remuneration structures in place at Nationwide remain fit for purpose, with variable pay for executive directors made up of a mix of
short-term (through the Annual Performance Pay (APP) plan) and long-term (through the Long-Term Performance Pay (LTPP) plan) reward.
The Committee reviewed competitive market data and the positioning of our executive directors’ total remuneration relative to our peers, which highlighted that the total remuneration
opportunity for the Chief Executive Officer (CEO) currently sits substantially below UK banking peers and other firms (both listed and private) of a similar size and complexity. The
Committee also considered the Society's performance since the CEO’s appointment in June 2022 and key performance highlights delivered in this period, including developing a long-
term strategy to safeguard the future strength of the Society, and introducing the Nationwide Fairer Share Payment, rewarding our members who have the deepest relationships with us.
Key activities of the Committee:
• Reviewed the directors’ remuneration policy.
• Continued to oversee the remuneration and
performance framework for all colleagues.
•
Approved performance pay outcomes for
2022/23 and the design of performance pay
plans for 2024/25.
How the Committe spent its time in the year
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Report of the directors on remuneration
(continued)
The new directors’ remuneration policy is intended to apply for three years to the AGM in 2027. The Committee has updated the policy to increase the maximum LTPP opportunity that
may be awarded from 100% to 300% of salary. While this increase will provide headroom to make LTPP awards up to a maximum of 300%, the Committee does not intend to use the full
flexibility this year. Reflecting on performance and market positioning, the Committee determined the first LTPP awards granted under the policy will have a maximum opportunity of
190% of salary for the CEO and 100% of salary for the Chief Financial Officer (CFO). The CEO’s LTPP award is the maximum award level available under the current remuneration
framework, which limits the maximum ratio between total variable pay (including both APP and LTPP) and total fixed pay to 2:1. At this level of award, the CEO’s total remuneration
opportunity will continue to be positioned behind our peers and other companies of a similar size and complexity, however, the Committee feels that this approach will go some way to
addressing the competitive gap.
The Committee believes that the increase to LTPP opportunity is appropriate as it will ensure greater alignment between reward and the successful delivery of our long-term strategy.
LTPP awards are subject to performance conditions over a forward-looking three-year period, subject to which any payments will be made in instalments between three and seven years
from the grant date. The Committee intends to keep LTPP grant levels under review over the course of the three-year policy to ensure they remain appropriate.
Alongside the change to the LTPP opportunity, the Committee has also introduced an enhanced approach to assessing performance for the executive directors’ APP awards for 2024/25,
capturing a wider range of the Society’s financial and non-financial key performance indicators. A portion of APP awards will continue to be based on individual performance,
with the
remaining portion based on Society performance measures that apply for all colleagues.
The directors’ remuneration policy is set out in full in this report. No other material changes to the policy are proposed.
2023/24 performance and pay outcomes
Annual Performance Pay (APP)
APP outcomes for 2023/24 for all eligible colleagues were determined by reference to consistent Society gateways, performance measures and two separate individual performance
ratings, reflecting both delivery and behaviours. The Society gateway measures of profit before tax, leverage ratio and conduct risk were passed in 2023/24 and, as a result of the
Society’s strong performance in the year, the Committee approved an above target outcome against the APP Society measure scorecard.
For the executive directors, taking account of Society performance and individual contribution, the Committee agreed APP outcomes of 91.88% for the CEO and 86.88% for the CFO.
Details of the measures, individual performance assessments and the overall APP awards delivered to our executive directors are set out later in this report.
Long-Term Performance Pay (LTPP)
As described above, the Committee approved the LTPP awards to be granted to the executive directors in 2024, based on a pre-grant assessment of performance delivered in 2023/24.
The Committee agreed these awards would be subject to forward-looking performance measures and targets relating to: financial goals, customer satisfaction, Environmental, Social and
Governance (ESG) goals, risk and compliance, and transformation objectives linked to the Society’s strategic priorities. Further details on the LTPP awards are set out later in this report.
Looking ahead to 2024/25
In the context of the base pay package agreed for the wider workforce, the Committee approved base salary increases of 2.94% for the CEO and 2.48% for the CFO, effective from
1 April 2024, lower than the average percentage increase received by the wider workforce. Further details on the pay arrangements of the executive directors are set out later in this
report.
During the year, the Committee noted the publication of the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) statement confirming the removal of the
regulatory limit on variable pay. We will review the impact of the revised rules during 2024/25 and consider if any changes to our remuneration framework are appropriate.
Member voting on remuneration
This year there will be advisory votes on both the directors’ remuneration report and the directors’ remuneration policy. Details are set out for your consideration on the following pages.
On behalf of the Remuneration Committee, I would like to thank members for their continued support and encourage you to vote in favour of both resolutions.
I hope you find the information in this report clear; if you have any questions please contact me via the Society Secretary.
Tracey Graham Chair – Remuneration Committee
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How the Committee works
Committee Purpose
The Committee is responsible for determining on behalf of the Board the remuneration strategy, the broad policy for remuneration and the specific remuneration packages for the
Society Chairman, executive directors, members of the Executive Committee and any other employees who are deemed to fall within scope of the PRA / FCA Remuneration Codes. The
Committee also provides oversight and advice to the Board on the appropriateness and relevance of the remuneration policy and pay practices for the workforce across the Society. More
detail on the duties and responsibilities of the Committee can be found within its terms of reference (available at nationwide.co.uk).
Committee meetings
All members of the Committee are non-executive directors of the Society. The Committee held 6 scheduled meetings during the year, and the attendance record of Committee members
is set out on page 82 of the Governance report.
Regular attendees of the Committee include the Society Chairman, CEO, Chief People Officer, the Director of Performance & Reward and a partner of Deloitte LLP, in their capacity as
independent advisors to the Committee. In no case is any person present when their own remuneration is discussed. The Chair of the Committee reported to the Board on the matters
considered at each meeting. Additionally, the Chair attended meetings with the PRA and FCA.
The Committee is supported by the Board Risk and Audit committees on risk-related matters. Further details can be found in the reports of those committees on pages 97 to 107.
Committee performance, skills, and expertise
The performance of the Committee is reviewed annually, along with the Committee’s terms of reference and its activities over the previous year, to confirm that these activities align with
its remit and purpose, and continue to reflect all applicable governance codes, guidelines, legislation and best practice. As in previous years, in 2023, the performance review was
undertaken by the Society’s Secretariat function with the assistance of Lintstock Limited, as part of the three-year Board and committee performance review process agreed in 2021.
Feedback on the Committee’s performance was provided to both the Committee and the Board. The results of the review indicate that the Committee’s members are satisfied with the
performance and effectiveness of the Committee. The 2023 performance review, including actions and next steps, is described on pages 94 to 95.
Committee advisor
The Committee agreed to retain Deloitte LLP during 2023/24 after a review of its fees and quality of the service provided. The Committee reviews annually all other services provided by
Deloitte to ensure they continue to be independent and objective. Deloitte is a founding member of the Remuneration Consultants Group and voluntarily operates under the code of
conduct in relation to executive remuneration consulting in the UK. Deloitte’s advisory team has no connection with any individual director of Nationwide. Their fees for advice provided to
the Committee during 2023/24 were £136,400 (excluding VAT), typically charged on a time-and-materials basis. Deloitte also provided tax, risk, internal audit and consulting services to
the Society during 2023/24.
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What the Committee did in the year
Pay strategy and approach
One of the main activities of the Committee was to undertake a detailed review of the directors’ remuneration policy, following a robust process which sought input from both
management and external advisors to develop the policy set out in this report.
The Committee approved the approach to variable pay across the Society for 2024/25, to ensure it continues to support the Society’s strategy and purpose, enabling recognition of
exceptional colleague performance and customer service.
Performance award outcomes
The Committee approved both the outcome of the APP plan and the grant of LTPP awards in respect of 2022/23. In April 2023 the Committee also made decisions on risk adjustment,
including for variable payments due in June 2023.
Oversight of remuneration across the Society
In making executive pay decisions, the Committee took account of remuneration practices across the Society. In addition to information received on Nationwide’s wider workforce pay
practices throughout the year, the Board received an annual update from the general secretary of the Nationwide Group Staff Union in November 2023 and regular updates from the
Employee Voice non-executive director, Tamara Rajah. More information on Board engagement with colleagues can be found on pages 28 to 31.
The Committee also received updates on how remuneration is a part of creating a healthy culture in the workplace and considered how remuneration policies are aligned with the
Society’s purpose, strategy and values. The Committee considered wider colleague analysis, including pay decisions by diversity characteristic and the outputs of internal survey data on
pay and benefits.
Regulatory reporting
The Committee reviewed and approved the report of the directors on remuneration for the year ended 4 April 2023. It also reviewed and approved all relevant remuneration submissions
made to the PRA and FCA over the course of the year.
Procedural matters
The Committee agreed the base pay and variable pay arrangements for all employees in scope of the PRA and FCA Remuneration Codes.
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Report of the directors on remuneration
(continued)
Alignment between wider workforce and executive directors’ remuneration
Our reward framework is designed to attract, motivate and retain colleagues who are inspired to do their best for our customers every day, and to reward all colleagues fairly across the
Society. The framework for executive directors is aligned with the wider workforce except for the LTPP plan. This difference ensures our executive directors have a significant proportion
of their remuneration linked to the Society’s longer-term priorities.
All colleagues Executive Committee
Base salary and pension Benefits Annual Performance Pay plan Long-Term Performance Pay plan
Salaries are set to reflect the work colleagues
do and the contribution they make, informed
by external market benchmarking and the
salary of colleagues doing similar roles. We
are a principal partner of the Living Wage
Foundation.
If our employees contribute 4% of base salary
to their pension, we will contribute 13% and
match any additional contributions up to a
maximum employer contribution of 16%.
Executive directors’ contributions are aligned
to the wider workforce.
We offer a range of contractual benefits
specific to role and all colleagues have access
to a benefits programme, to help meet
personal needs at varying stages of life.
Colleagues can make choices to purchase a
range of benefits, including protection (will
writing, critical illness cover), technology,
lifestyle (buying or selling holiday days,
discounted gyms, electric cars) and
healthcare (cancer screenings, health
assessments, private dental cover).
Colleagues have access to a range of other
benefits which include life assurance and
holidays (25-30 days dependent on role and
service), as well as access to policies that
support family leave, flexible ways of working
and wellbeing (including a comprehensive
support package to help victims of domestic
abuse).
All of our colleagues who meet individual
conduct requirements are eligible to
participate in the APP plan.
Our consistent Society led-performance
measures are communicated to all
participants, ensuring clear alignment and
focus across the Society in delivering against
our strategic drivers and for our customers.
APP outcomes for the year are linked to the
outturn of Society performance measures
and individual reward outcomes are
differentiated based on colleague
performance ratings, reflecting both delivery
and behaviours.
Awards are generally paid in cash. However,
for more senior colleagues, awards are paid in
a mixture of cash and an element linked to the
Society’s core capital deferred shares (CCDS),
subject to relevant deferral criteria.
Our executive directors and other Executive
Committee members are invited to participate
in the LTPP plan. This plan supports the
delivery of sustainable customer value, with
performance measures aligned to the Society’s
longer-term priorities and the achievement of
our financial and strategic aims, including our
sustainability commitments.
LTPP awards are deferred over the long-term
and will only be paid subject to sustained
satisfactory Society and individual performance.
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Report of the directors on remuneration
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Directors’ remuneration policy
This section sets out the new remuneration policy for our executive directors and non-executive directors. We will seek member approval for this policy by way of an advisory vote at the
2024 AGM. The policy is intended to apply for three years to the AGM in 2027 unless amendments to the policy are required, in which case a further advisory vote will be sought. It is
intended that no payments to directors will be made outside of this policy.
2024 policy changes
During 2023/24 the Committee undertook a detailed review of the directors’ remuneration policy. The Committee focused on whether the policy remains appropriate in the context of
evolving regulation and market developments, and continues to enable Nationwide to recruit, retain and motivate the skill sets needed to deliver our strategic priorities and exceptional
service to our customers.
The Committee followed a robust decision-making process over a series of meetings, with input sought from the Society’s Chairman, the Committee’s independent external advisors and
management, while ensuring that conflicts of interests were appropriately mitigated. The Committee aimed to ensure strong alignment between reward and the interests of our
customers, maintaining a focus on long-term performance, and being appropriately positioned relative to the market.
The Committee also assessed the policy against the principles of
clarity, simplicity, risk management, predictability, proportionality and alignment to culture.
As discussed in the Committee Chair’s letter, under the new policy the maximum LTPP opportunity that may be awarded will increase from 100% to 300% of salary. The increased
opportunity takes account of the competitive talent market and will enhance the alignment of reward with the Society’s long-term performance, with awards only payable where strong
performance for customers has been delivered. In line with regulatory requirements, LTPP awards are paid in instalments over a period of up to seven years following the date of the
initial grant, subject to the achievement of performance conditions assessed over the first three years.
The first awards granted under the policy will have a maximum opportunity of 190% of salary for the CEO and 100% of salary for the CFO. These awards will be granted in July 2024. The
Committee intends to keep LTPP grant levels under review over the course of the three-year policy to ensure they remain appropriate.
The policy has also been updated to formalise both the removal of the prescribed regulatory limit on the ratio between the variable and fixed components of remuneration, and the
changes to our approach highlighted in the Annual Report and Accounts 2023, including the simplification of the structure of the APP plan and modifications to the use of the Society’s
core capital deferred shares (CCDS) for remuneration purposes. Further details can be found in the policy table below.
Other than the above, and a few minor changes to simplify elements of wording or improve the operation and effectiveness of the policy over its term, it is proposed that the policy
remains as approved in 2022.
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Remuneration policy for executive directors
Element Operation Opportunity Performance metrics
Fixed pay
Base salary
Supports the
recruitment and
retention of key talent.
Base salaries are market
competitive and reflect
the size and complexity
of the role
Base salaries are normally reviewed on an annual basis. Any
changes are normally effective from 1 April.
Base salaries are set taking into account market data for
similar roles in comparable organisations. Other factors
considered include the individual’s skills, experience and
performance in the role, additional responsibilities, and the
approach being taken on salaries in the wider organisation.
There is no maximum base salary.
Not applicable
Benefits
Provide a market
competitive and cost-
effective benefits
package as part of fixed
remuneration
Benefits may include a car allowance, access to drivers when
required, security when required, healthcare and insurance
benefits. Business related expenses are also reimbursed,
including any associated tax.
The Committee retains the right to provide additional benefits
depending on individual circumstances, where considered
reasonable and appropriate, including but not limited to enable
recruitment, retention or relocation.
Benefits are reviewed regularly to ensure they remain
appropriate to role and location to assist individuals in
carrying out their duties effectively.
The value of benefits may vary depending on service
providers, cost and market conditions. There is no maximum
value to the benefits provided.
Not applicable
Pension
Provides post-retirement
benefits in a cost-
efficient manner
Executive directors may receive a cash allowance and/or
contribution to a defined contribution scheme.
Pension allowances are set as a percentage of base salary.
The maximum allowance payable is aligned with the
maximum pension benefit available to the wider employee
population, which is currently 16% of base salary.
Not applicable
Variable pay
Annual Performance
Pay (APP) plan
Rewards the
achievement of
stretching Society, team
and individual targets for
a single financial year
APP awards are discretionary and determined by the Committee
following the end of the one-year performance period, reflecting
achievement against targets set.
To ensure alignment across the Society, a portion of the awards
for executive directors is based on the same Society
performance measures as all eligible colleagues. The executive
directors may also have a portion of their awards based on the
achievement of other Society-wide, strategic and / or individual
objectives.
Alongside awards under the Long-Term Performance Pay (LTPP)
plan, the payment and deferral of APP awards are determined at
the time of award and in compliance with regulatory
requirements (which currently require that at least 60% of total
variable remuneration in respect of any year is deferred for
between three and seven years). To the extent the minimum level
of deferral is not met via the LTPP award, a proportion of the
APP award may be deferred in line with regulatory requirements.
Any non-deferred portion is normally paid upfront following the
end of the performance year.
The targets reflected in the Society’s Plan need to be
achieved to generate a ‘target’ award against the Society
measures, and considerably exceeded to generate the
maximum award.
The normal maximum APP opportunity for the executive
directors is 100% of base salary.
Normally, 67% of the maximum opportunity is payable for
target performance and at the threshold level of
performance, 33.5% of the maximum opportunity will be
paid. No portion of the award will be paid where threshold
performance is not achieved.
The award levels above may be varied in exceptional
circumstances.
Performance measures and targets are
normally set on an annual basis by the
Committee.
These will normally reflect a mix of financial
and non-financial measures, relating to the
strategic priorities of the Society as well as
regulatory obligations, risk performance and
individual performance (including conduct and
behaviours).
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Element Operation Opportunity Performance metrics
Awards are normally paid in cash, usually with a minimum of 50%
of both the upfront and deferred elements delivered in or linked
to the value of the Society’s core capital deferred shares (CCDS),
or an alternative instrument that, subject to regulatory
requirements, is appropriate for use as variable remuneration,
and subject to a 12 month retention period. For these purposes,
the value of CCDS may be adjusted to remove the impact of long-
term interest rates and any other items as agreed by the
Committee from time to time to ensure they remain an
appropriate instrument for the purposes of remuneration.
Participants will be entitled to the value of CCDS distributions
(or equivalent) to the extent permitted by regulations. Where
distributions (or equivalent) cannot be paid due to regulatory
requirements, the number of deferred instruments awarded may
be adjusted by reference to an expected yield over the relevant
period.
The Committee may reduce, freeze, suspend or cancel payments
under the APP plan if it believes that outcomes are not
representative of the overall performance of the Society (note i).
Long-Term Performance
Pay (LTPP) plan
Incentivises sustainable
long-term performance
and alignment with
customer interests
Awards are made
annually and only pay out
where challenging
performance measures
are met, normally
measured over a three-
year period
LTPP awards are discretionary and normally granted subject to
the achievement of satisfactory performance over the year prior
to grant (the initial performance period).
Awards are then normally subject to a forward-looking three year
performance period from the start of the financial year in which
the grant is made.
For each forward-looking performance measure, the Committee
will determine targets by reference to the Society’s Plan that
need to be achieved to generate a ‘threshold’, ‘target’ and
‘maximum’ level of award. Performance targets will normally be
set annually for each award cycle.
The Committee will determine the extent of achievement based
on actual performance against the targets set and any other
relevant factors the Committee considers appropriate to take
account of.
Payment of the awards will not start until after the end of the
three-year performance period and is subject to the achievement
of the performance conditions. The payment of awards will be
deferred in compliance with regulatory requirements, which
currently apply such that awards will pay out in instalments
between three and seven years following the date of the initial
grant.
Awards are normally paid in cash, usually with a minimum of 50%
of any award delivered in or linked to the value of the Society’s
core capital deferred shares (CCDS), or an alternative instrument
that, subject to regulatory requirements, is appropriate for use
as variable remuneration, and subject to a 12 month retention
period. For these purposes, the value of CCDS may be adjusted
to remove the impact of long-term interest rates and any other
LTPP awards may be granted up to a maximum value of
300% of base salary. Maximum opportunities may vary by
role.
Normally, 67% of the maximum opportunity is payable for
target performance and at the threshold level of
performance, 33.5% of the maximum opportunity will be
paid. No portion of the award will be paid where threshold
performance is not achieved. Maximum awards will only be
paid where there has been outstanding performance.
The award levels above may be varied in exceptional
circumstances.
The Committee takes into consideration
performance over the initial performance
period when determining whether LTPP grants
will be made. The pre-grant conditions will
normally include an assessment of both
Society and individual performance to ensure
that the granting of awards is sustainable
according to the financial position of
Nationwide and justified on the basis of
individual performance, conduct and
behaviours.
Forward-looking performance will be
measured against a long-term scorecard
normally determined by the Committee on an
annual basis and set to align with the long-term
objectives of the Society. The measures will
normally reflect a mix of financial and non-
financial measures drawn from the Society’s
Plan and be subject to the satisfaction of risk
performance and regulatory obligations.
The measures used will typically comprise:
• customer outcomes (to include financial
goals);
• sustainability (to include Environmental,
Social and Governance measures); and
• transformation (to include delivery of key
strategic milestones).
The specific performance measures will be
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Element Operation Opportunity Performance metrics
items as agreed by the Committee from time to time to ensure
they remain an appropriate instrument for the purposes of
remuneration.
Participants will be entitled to the value of CCDS distributions
(or equivalent) to the extent permitted by regulations. Where
distributions (or equivalent) cannot be paid due to regulatory
requirements, the number of deferred instruments awarded may
be adjusted by reference to an expected yield over the relevant
period.
The Committee may reduce, freeze, suspend or cancel payments
under the LTPP plan if it believes that outcomes are not
representative of the overall performance of the Society (note i).
disclosed in the remuneration report for the
relevant year.
Notes:
i. Discretion, risk adjustment, malus and clawback: In determining variable pay awards, the Committee has the ability to apply independent judgement to ensure that the outcome is a fair reflection of the
performance of the Society and the individual over the relevant period. In applying this judgement, the Committee has scope to consider any such factors it deems relevant.
The Committee normally takes into account performance against a broad set of financial and non-financial performance measures and considers performance on a risk-adjusted basis, evaluating progress
against defined measures within the context of our risk appetite, including conduct risk. This is a formal process, which also includes input and feedback from the Audit and Board Risk committees. In this
manner, the Committee has discretion to reduce an executive director’s variable pay in relation to risk-related matters.
The Committee also retains the discretion to adjust awards made under the APP and the LTPP in line with the discretions within the relevant plan rules, including but not limited to adjusting performance
conditions attached to awards for significant items, changes in working patterns, treatment on cessation of employment and treatment in the event of a change of control.
In certain circumstances, the Committee has the discretion to operate malus and clawback provisions under the APP and LTPP plans. Such circumstances may include, but are not limited to: participation
in, or responsibility for, conduct that results in significant losses; failure to meet appropriate standards of fitness and propriety; employee misbehaviour, fraud, material dishonesty or material error; a
material downturn in financial performance; a material failure of risk management; material corporate failure; as well as other circumstances required by regulatory obligations or deemed appropriate by
the Committee. Clawback can normally be applied for a period of seven years from the date of award. This may be extended to 10 years in the event of ongoing internal or regulatory investigation at the
end of the seven-year period.
ii. Regulatory changes or resolution: In the event that regulatory standards change, the Committee has discretion to make such changes to our remuneration policy as to ensure regulatory compliance, even
if a revised policy has not been put to members for an advisory vote. Any such changes would normally be included in the policy report at the next AGM. This includes any changes as may be considered
appropriate in the event of resolution to reflect the nature of the roles and responsibilities in this context and to support the resolution process.
iii. Prior arrangements: The Committee reserves the right to honour remuneration payments, notwithstanding that they are not in line with the policy set out in this report, where the terms of the payment
were agreed in accordance with any previous member-approved policy, before the Society’s first member-approved policy came into effect, or at a time when the relevant individual was not a director of
Nationwide and, in the opinion of the Committee, the payment was not in consideration for the individual becoming a director of Nationwide.
Choice of performance measures and targets
The performance measures selected for APP and LTPP awards are reviewed and set on an annual basis by the Committee to reflect the priorities of the Society, providing a clear link with
customers’ interests and our short and long-term financial and strategic aims, as well as our regulatory obligations.
The Committee retains the discretion to amend the performance measures or weightings of performance measures for APP and LTPP awards to take account of the Society’s Plan,
emerging best practice and regulatory expectations.
Normally, no less than 60% of executive directors’ APP awards will be based on Society performance measures.
The Committee sets performance targets at a level which it considers appropriately stretching in relation to the Society’s Plan and overall risk appetite, taking into account a number of
wider factors, including our strategic priorities, the economic environment, and market conditions and expectations. Maximum performance will only be achieved for exceptional
performance across all measures.
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What our executive directors could earn based on performance
The charts below illustrate the amounts that each of the executive directors could earn in different performance scenarios, including the percentage of the total made up by each element
of remuneration, under the proposed remuneration policy. The charts reflect a maximum LTPP opportunity of 190% of salary for D A Crosbie and 100% of salary for C S Rhodes, as will
apply for the first awards granted under the policy. The Committee intends to keep LTPP grant levels under review over the course of the three year policy to ensure they remain
appropriate, and therefore the values illustrated below may be subject to change; however will not exceed the limits provided under this policy.
A significant proportion of the potential remuneration of the executive directors is payable based on the achievement of stretching performance conditions, and subject to deferral, malus
and clawback. No payments relating to LTPP awards will be made until the end of the forward-looking three-year performance period.
Notes:
i. The charts are based on the following scenarios:
• Minimum opportunity: only fixed pay elements are payable (base salary, pension and benefits).
• Target opportunity: fixed pay elements are payable and target APP and LTPP outcomes are achieved.
• Maximum opportunity: fixed pay elements are payable and maximum APP and LTPP outcomes are achieved.
ii. The value of benefits for D A Crosbie and C S Rhodes is estimated based on the benefits paid to them in respect of 2023/24, as set out in the single total figure of remuneration table. Additional benefits may arise
but will always be provided in line with the approved policy.
iii. The charts have been prepared using the annual salaries that will apply during 2024/25 and, therefore, APP and LTPP opportunities have been calculated as percentages of these salaries.
25%
32%
84%
1%
1%
3%
4%
5%
13%
24%
21%
46%
41%
£4,797k
£3,678k
£1,404k
£0k £1,000k £2,000k £3,000k £4,000k £5,000k
D A Crosbie
Minimum opportunity
Target opportunity
Maximum opportunity
31%
38%
77%
4%
6%
11%
5%
6%
12%
30%
25%
30%
25%
£2,475k
£1,980k
£975k
£0k £1,000k £2,000k £3,000k
C S Rhodes
Salary Benefits Pension APP LTPP
Minimum opportunity
Target opportunity
Maximum opportunity
Annual Report and Accounts 2024
Report of the directors on remuneration
(continued)
What our executive directors could earn based on performance
The charts below illustrate the amounts that each of the executive directors could earn in different performance scenarios, including the percentage of the total made up by each element
of remuneration, under the proposed remuneration policy. The charts reflect a maximum LTPP opportunity of 190% of salary for D A Crosbie and 100% of salary for C S Rhodes, as will
apply for the first awards granted under the policy. The Committee intends to keep LTPP grant levels under review over the course of the three year policy to ensure they remain
appropriate, and therefore the values illustrated below may be subject to change; however will not exceed the limits provided under this policy.
A significant proportion of the potential remuneration of the executive directors is payable based on the achievement of stretching performance conditions, and subject to deferral, malus
and clawback. No payments relating to LTPP awards will be made until the end of the forward-looking three-year performance period.
Notes:
i. The charts are based on the following scenarios:
• Minimum opportunity: only fixed pay elements are payable (base salary, pension and benefits).
• Target opportunity: fixed pay elements are payable and target APP and LTPP outcomes are achieved.
• Maximum opportunity: fixed pay elements are payable and maximum APP and LTPP outcomes are achieved.
ii. The value of benefits for D A Crosbie and C S Rhodes is estimated based on the benefits paid to them in respect of 2023/24, as set out in the single total figure of remuneration table. Additional benefits may arise
but will always be provided in line with the approved policy.
iii. The charts have been prepared using the annual salaries that will apply during 2024/25 and, therefore, APP and LTPP opportunities have been calculated as percentages of these salaries.
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Remuneration arrangements throughout the Society
The remuneration policy for our executive directors is designed to align with the remuneration philosophy and principles that underpin remuneration for the wider Society. Within this
framework, whilst there are differences in reward opportunity under the APP plan depending on level of seniority, a proportion of the APP for all employees (including the executive
directors) is based on consistent Society performance measures. Having consistent goals for a proportion of the award helps make sure everyone works together to put our customers’
needs first.
Certain employees, based on their role and seniority, are eligible to participate in the LTPP plan, which provides a clear link between remuneration outcomes and the long-term
performance of our most senior population in their stewardship of the Society and overseeing the delivery of the Society Plans.
Consideration of employment conditions elsewhere in the Society
The pay and conditions of all employees are taken into account when determining executive remuneration and the Committee appreciates the importance of this relationship. The
Committee reviews base salary levels, other elements of fixed remuneration and details of performance pay plans offered to all employees each year and is always mindful of ensuring
that the pay policy for senior roles is consistent with the culture and values of the Society as a whole. Our policy is to offer packages which are competitive with the financial services
market in which we operate and to reward individuals for delivering value to customers. The individual elements of remuneration offered, for example benefits provision, may vary
between the different roles, reflecting typical market practice. Employees who are members of the Society will be able to vote on the
directors’ remuneration policy and directors’
remuneration report.
Recruitment policy
On the appointment of a new executive director, the Committee will as far as possible determine the ongoing remuneration package in accordance with the policy described in the policy
table above. It would aim not to pay more than necessary to secure the right candidate. New appointments will be eligible to be considered for variable pay consisting of an APP and LTPP
award (or any other element which the Committee considers appropriate), subject to the maximum opportunity being no more than the maximum ratio of fixed to variable pay in
operation within the Society as determined by the Committee from time to time.
The Committee may also consider whether it is necessary to offer any one-off arrangements on the recruitment of a new executive director to replace previously awarded variable
remuneration and any other remuneration arrangements forfeited upon leaving a previous employer. In making any such offer, the Committee will seek to ensure that the replacement
arrangements are on materially similar terms to the arrangements being forfeited in terms of value and vesting schedule and take into account the extent to which performance
conditions applied to the original awards, whilst taking into consideration all regulatory requirements. Where possible, the replacement arrangements will be structured within the
parameters of the Society’s existing performance pay plans. If necessary, an individually tailored plan may be put in place. In line with regulatory requirements, the replacement
arrangements may continue to be subject to malus and clawback provisions, at the discretion of the individual’s previous employer. The Committee may award guaranteed variable
remuneration in exceptional circumstances for new hires. Such awards would be limited to the individual’s first year of employment only. The exceptional circumstances would typically
involve a critical new hire and would also depend on factors such as the seniority of the individual and the timing of the hire during the performance year.
Although our intention would be to offer any new director benefits in line with the policy set out in the policy table, if individual circumstances required this, the Committee may consider
offering a new recruit such additional benefits as might be required to secure their services. This may include, but is not limited to, travel allowances or relocation expenses for a limited
period following their appointment.
On the appointment of a new non-executive director, fees will be on similar terms to those of the existing non-executive directors and in accordance with the policy set out in this report.
Service contracts and policy on payments to departing directors
Executive director
D A Crosbie
C S Rhodes
Service contract effective from 2 June 2022 20 April 2009
Date first appointed to the Board 2 June 2022 20 April 2009
Executive directors’ terms and conditions of employment are detailed in their individual contracts or service agreements which include a notice period of 12 months from the Society to
the individual and a notice period of 12 months from the individual to the Society for any new executive directors. The terms set out in the service agreements for the current executive
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directors do not provide for any payments that are not in line with this policy. Service agreements include a provision for a termination payment in lieu of notice, which will normally be
subject to mitigation, up to a maximum of 12 months’ base salary and statutory redundancy in the event of redundancy. Such a payment might also cover benefits and pension allowance.
The Society Chairman and non-executive directors are appointed for fixed terms not exceeding three years, which may be renewed subject to their re-election by members at AGMs.
There are no obligations in the non-executive directors’ letters of appointment that could give rise to remuneration payments or payments for loss of office. The dates of appointment to
the Board for the Society Chairman and non-executive directors are set out in the Governance report.
Leaver provisions for executive directors
If an executive director leaves in eligible leaver circumstances (including redundancy, retirement, ill health, death, by mutual consent or any other reason at the discretion of the
Committee), they may, subject to approval by the Committee on an individual basis, remain eligible for performance pay awards as described below.
For APP awards:
• Where an executive director leaves during the performance year in eligible leaver circumstances they may, at the Committee’s discretion, receive a pro-rata performance award for
the period of time served during the current performance period in accordance with the plan rules. Such awards would be subject to deferral, retention, malus and clawback as normal.
• Where an executive director leaves in certain defined eligible leaver circumstances, they will normally be eligible to continue to receive the deferred portion of any outstanding award
in full (subject to any risk or performance adjustment, including by way of malus and/or clawback).
• In other eligible leaver circumstances, the treatment of outstanding deferred payments will normally be subject to time-prorating for months served in continued employment over
the first four years of the plan cycle, including the initial performance period.
The treatment for eligible leavers of APP awards in respect of performance years prior to 2022/23 will be in accordance with the relevant policy.
For LTPP awards :
• Where an executive director leaves during the financial year prior to the year in which the grant is made, they would normally be ineligible to receive any LTPP award in respect of that
year.
• Where an executive director leaves during the forward-looking LTPP performance period in eligible leaver circumstances, awards will normally be pro-rated for time served during the
relevant performance period. The extent to which an award will pay out will normally be subject to the achievement of the applicable performance conditions. Such awards would
normally remain subject to the deferral, retention, risk and performance adjustment provisions that would otherwise have applied, including malus and clawback.
• Where an executive director leaves in eligible leaver circumstances following the end of the forward-looking LTPP performance period and during the additional deferral or retention
period, they will normally be eligible to continue to receive the deferred and retained portions of any outstanding awards in full (subject to any risk or performance adjustment,
including by way of malus and/or clawback).
Under both the APP and LTPP plans, the Committee retains the discretion to adjust the proportion of the outstanding or deferred payments that are retained by a leaver based on the
facts and circumstances of the departure. Furthermore, following departure, the Committee may still also reduce or cancel payments if it believes that the variable pay plan outcomes are
not representative of the overall performance of the Society.
Any variable pay awards subject to deferral or retention periods, as well as any ‘in-flight’ LTPP awards, will continue to be paid at the usual payment date although the Committee will have
discretion to accelerate any payments to the leaving date in exceptional circumstances.
Individuals who leave in other circumstances (e.g. resignation) and are not determined to be ‘eligible leavers’ would receive only contractual payments to which they are entitled and would
not receive any payment in respect of performance pay plans, unless the Committee determines there is a robust case for discretion.
Depending on individual circumstances, the Committee may also make additional payments in connection with an executive director’s cessation of office or employment. For example, this
may include outplacement costs, legal fees and costs of settling any potential claim where appropriate.
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Mitigation
Mitigation means that after leaving Nationwide, should an executive director start employment elsewhere, any outstanding payments in lieu of notice due from Nationwide may be
reduced or lapse altogether. The Committee’s policy is that payments in lieu of notice should be made in monthly instalments and be subject to mitigation (where contractually
enforceable), although the Committee has discretion to waive mitigation if this is considered appropriate in individual circumstances. The current executive director contracts allow for
mitigation.
Consideration of member views
At recent AGMs we have received a significant majority vote in favour of our remuneration reports. We are also mindful of views expressed by individual members regarding specific
aspects of the policy. When taking decisions on remuneration policy, the Committee is also always conscious of the need to balance members’ views whilst ensuring executives are
motivated and rewarded to deliver value for our customers.
Remuneration policy for non-executive directors
The table below sets out the remuneration policy for our non-executive directors.
Element Operation Opportunity
Society Chair and non-
executive director fees
Provide a market
competitive fee level for
the role at Nationwide
The Society Chair’s fee is normally reviewed and approved by the Remuneration Committee on an annual basis.
Non-executive director fees are normally reviewed and approved by the executive directors and the Society Chair on an annual
basis.
Any changes are typically effective from 1 April.
Non-executive directors are paid a basic fee, with an additional supplement paid for additional roles or responsibilities, including
in respect of the Senior Independent Director or Employee Voice role, or for serving on or chairing a Board Committee.
Additional fees may be payable for additional time commitment or responsibilities.
The Society Chair and non-executive directors do not take part in any performance pay plans or in any pension arrangements.
Benefits may be provided if considered appropriate including reimbursement of any reasonable expenses (together with any tax
thereon where these are deemed to be taxable benefits).
Fees are set taking into account
practice at other organisations as
well as the time commitment for
the role at Nationwide. There is no
maximum level.
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Informed by two separate performance ratings,
ensuring colleagues are rewarded based on both
delivery and behaviours.
Individual performance
Annual report on remuneration for 2023/24
This section provides information on how the directors’ remuneration policy, as approved by members at the 2022 AGM, was implemented during 2023/24. A revised policy will be
subject to member approval by way of an advisory vote at the 2024 AGM.
Base salary and pension
The effective base salaries in the year for D A Crosbie and C S Rhodes were £1,136,585 and £731,854, respectively. The pension allowance of our executive directors is 16% of salary, which
is the maximum benefit available to the wider employee population.
Annual Performance Pay (APP) for 2023/24
APP awards for 2023/24 were aligned with the attainment of challenging strategic and financial measures drawn from the Society’s Plan for 2023/24, as set out below. Consistent Society
measures applied for all colleagues, including the executive directors, ensuring clear alignment and focus across the Society in delivering for our customers. APP awards were also
assessed by reference to two separate individual performance ratings, reflecting both delivery and behaviours.
The maximum potential APP award level for 2023/24 was 100% of base salary for both the CEO and CFO, with 30% of the overall award based on individual performance. An illustration of
the pay-out schedule of the executive directors' APP awards can be found on page 129. The Society has the ability to claw back APP awards for up to ten years after they were awarded in
certain circumstances.
Society performance
Number of engaged customers
Customer experience score
Total costs
Heard good things about Nationwide
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Report of the directors on remuneration
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Outcomes for APP 2023/24
Three gateways must be passed before any payment is made under the plan. The three gateways are based on measures of profit before tax, leverage ratio and conduct risk. These
gateways were passed in 2023/24. In determining executive directors’ APP outcomes for 2023/24, the Committee assessed the Society’s performance against the four measures set out
below. The Committee must also be satisfied that there are no significant conduct, risk, reputational, financial, operational or other reasons why awards should not be made, taking into
account input from the Board Risk and Audit committees.
Measure Performance target range: threshold, target and maximum, and performance outcome achieved for 2023/24
Performance pay achieved /
Maximum achievable
(% of salary paid in 2023/24)
(Audited)
D A Crosbie C S Rhodes
Number of engaged
customers
17.5% / 17.5% 17.5% / 17.5%
Customer experience
score (note i)
9.38% / 17.5% 9.38% / 17.5%
Total costs
(note ii)
17.5% / 17.5% 17.5% / 17.5%
Heard good things
about Nationwide
(note iii)
17.5% / 17.5% 17.5% / 17.5%
Individual performance element (see further detail below) 30.0% / 30.0% 25.0% / 30.0%
Remuneration Committee discretionary performance and risk assessment
The Committee carefully considered the outcomes for the executive directors to ensure they were a fair reflection of performance. This took
account of a broad range of factors including the Society’s performance against wider key performance indicators and risk factors. Overall, the
Committee was satisfied that the outcomes were a fair reflection of performance and no discretionary adjustment was applied.
0% 0%
Total performance pay achieved based on Society and individual performance 91.88% 86.88%
Out of a maximum opportunity (as a % of salary paid in 2023/24) of 100% 100%
Notes:
i. Our customer experience score measure is based on a 12-month average score over the 12 months ending 31 March 2024, and is calculated by weighting the aggregated scores across channels, reflecting the way
customers interact with us. Digital channels include our mobile banking app, internet bank, webchat and our website (nationwide.co.uk).
ii. As per the design of the APP plan, Nationwide’s total costs outcome for 2023/24 of £2,422 million was adjusted to £2,402 million for the purposes of determining the APP outcome to exclude employee costs driven
by the overall APP outcome being above the target level.
iii. Based on a study conducted by an international market research company commissioned by Nationwide Building Society. Based on non-customer responses as at the six months ending March 2024. Financial
brands included are Nationwide, Barclays, Co-operative Bank, First Direct, Halifax, HSBC, Lloyds, Monzo, NatWest, Santander, Starling Bank and TSB.
3.27m
3.38m
Outcome: 3.53m -
Maximum
3.33m
£2,574m
£2,428m
Outcome: £2,402m - Maximum
£2,501m
4
th
within peer group
2
nd
within peer group
Outcome: 1
st
-
Maximum
3
rd
within peer group
75.6%
79.6%
Outcome: 76.8% - Above threshold
77.6%
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Report of the directors on remuneration
(continued)
For the element based on individual performance, performance was assessed by reference to two separate individual performance ratings, rewarding both delivery against goals set in
the context of our strategic drivers and the display of customer first behaviours. The tables below provide an overview of the individual performance for 2023/24 achieved by the CEO
and CFO based on their objectives. This assessment is also informed by delivery against the Society’s performance scorecard which contains a number of Environmental Social and
Governance (ESG) factors, including improving sustainability and our inclusion and diversity measures
.
Note:
i. © Ipsos 2024, Financial Research Survey (FRS), for the 12 months ending 31 March 2013 to the 12 months ending 31 March 2024. For more information, see footnote 1 on page 5.
D A Crosbie’s and C S Rhodes’s 2023/24 achievement of individual objectives
Objectives D A Crosbie C S Rhodes
Financial and operational performance
• Strong and sustainable financial performance.
• Resilient business operations.
• Financial Plan delivered and effective cost management.
• Record member financial benefit, robust profit performance, and
steady progress on operational resilience.
• Careful management of savings and mortgage pricing to protect the
Financial Plan and operational performance balanced with
stakeholder engagement and customers’ cost of living challenges.
• Cost management performance exceeded plan.
• Record member financial benefit achieved as a result of additional
value delivered through savings rates.
• Capital and liquidity remain above Board Risk Appetite with growth
in capital enabling strategic developments.
• Established strong management of IT costs linked to business
service lines and improved Executive Committee and Board visibility
of costs.
Strategic development and delivery
• Ambitious and achievable strategy to grow the
Society and deliver value for members.
• Society’s Purpose and Blueprint for a modern mutual
embedded throughout the Society and driving
increased performance.
• First phase of ambitious business strategy delivered.
• Foundations fixed for long-term and sustainable growth.
• More rewarding relationships prioritised – industry leading current
account switching level.
• Ambitious Financial Plan with continued focus on delivering value to
members through the Fairer Share Payment.
• Exit criteria for first stage of strategy met and second stage
aspirations are included in updated financial plans.
Robust risk and control
• Effective risk and control framework embedded
throughout the organisation.
• Timely resolution of actions and effective conclusion
of any regulator interventions.
• Significant progress on non-financial risk and strengthening our
control environment.
• Developed and implemented Vulnerable Customer support and
readiness for the FCA’s Consumer Duty.
• Financial controls remain effective, with auditors placing reliance on a
growing number of our controls.
• Projects to streamline staff structures implemented and cost
impacts tracked.
Inspiring team and leadership performance
• High performing and effective ExCo team that
inspires strategic progress across the Society.
Increased leadership capacity and capability at ExCo-
1 level.
• Cultural transformation across the Society in line
with business strategy and Blueprint for a modern
mutual.
• New purpose and Blueprint launched and embedding with good early
progress on cultural transformation.
• Successfully embedded new colleague performance framework to
incentivise and drive both delivery and customer first behaviours.
• Strong commercial experience and instinct to guide and challenge
the rest of Executive Committee.
• Increased pricing support provided by finance function along with
more effective cost engagement, stress testing and planning. Good
quality financial reporting work delivered to Audit Committee.
Service excellence and member value
• Recognised for service excellence and member value.
Increasing value for members with leading personal
financial service products that meet member needs,
and all Consumer Duty requirements.
• First amongst peer group for customer satisfaction (note i).
• Delivered Nationwide Fairer Share Bond and Payment
• Delivered actions to significantly improve customer experience,
including new mobile app and retiring the card reader.
• Branch Promise extended and brand refresh launched successfully.
• Inaugural Fairer Share Payment distributed.
• Overall pricing decisions have supported the delivery of value to
members as well as growth in our core markets.
• Passed a greater proportion of Bank rate increases through to
depositors than the market average.
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Report of the directors on remuneration
(continued)
Long-Term Performance Pay (LTPP) awards in respect of 2023/24
LTPP awards in respect of 2023/24 will be granted in July 2024. LTPP awards are discretionary and are granted subject to a pre-grant performance assessment over the year prior to
grant based on:
• Individual conduct and performance – must be satisfactory, including an assessment of individual delivery, behaviours and conduct during the year;
•
Leverage ratio and statutory profit before tax – both gateways must be assessed and passed in respect of the period prior to grant.
After taking into account performance over 2023/24, the Committee agreed to grant D A Crosbie and C S Rhodes LTPP awards of 190% and 100% of base salary, respectively. The
Committee is satisfied that the granting of these awards is sustainable according to the financial position of the Society and justified on the basis of individual performance, conduct and
behaviours.
The 2023/24 LTPP awards will be subject to a three-year forward-looking performance period commencing 5 April 2024. During this period, performance will be assessed based on a
scorecard comprising the elements below. During 2023/24 the Committee reviewed the LTPP performance measures to ensure they remain appropriate. The chosen performance
measures continue to be aligned to the Society’s longer-term priorities and provide a clear link with customers’ interests and the achievement of our financial and strategic aims, including
our sustainability commitments. At the end of the three-year performance period the Committee will also satisfy itself that there are no significant conduct, risk, reputational, financial,
operational or other reasons why the awards should not be released, taking into account input from the Board Risk and Audit committees. Targets are deemed by the Committee to be
commercially sensitive and will be disclosed, along with performance achieved, in the Annual Report and Accounts 2027.
2024/25 – 2026/27 LTPP scorecard
Rationale for inclusion within the scorecard Weighting
Customer outcomes
(financial goals)
Return on equity employed (note i)
Ensuring the Society’s continued financial security for the benefit of its customers via
efficient profit generation and sustainable balance sheet management over the long term
20%
Profit before tax 20%
Sustainability
Financial Research Survey (FRS) satisfaction Rewarding ‘best-in-class’ customer service 10%
Environmental, Social and Governance (ESG) objectives Providing alignment with the Society’s Scope 1 and 2 emissions and diversity targets 10%
Risk and compliance Ensuring continued focus on the strength of the Society’s control environment 20%
Transformation Basket of measures aligned with strategic objectives Providing alignment with the Society’s long-term strategic priorities 20%
Note:
i. Defined as the return (profit after tax) as a percentage of the minimum amount of capital required to stay above Board Risk Appetite throughout a Bank of England defined stress test.
D A Crosbie’s and C S Rhodes’s 2023/24 achievement of individual objectives (continued)
Objectives
D A Crosbie
C S Rhodes
Effective Board engagement
• Good engagement between ExCo and Board with
strong and effective overall Society governance.
• Simplified and improved executive governance to support delivery at
pace and reduce complexity.
• Regular Board engagement with members and feedback to Board
from Member Connect Panel and external research.
• Sound Board engagement on financial planning, reporting, stress
testing and capital and liquidity assessment.
• Strong financial governance and control, including engagement with
Board Risk Committee and Audit Committee.
Impactful stakeholder engagement
• Strong and productive relationships with regulators,
governments, political, media and other key
stakeholders that help secure the Society’s policy
objectives.
• Positive engagement with regulators and stakeholders to promote
Branch Promise, benefits of mutuality, support for homeowners and
first-time buyers and customer fraud protection.
• Society’s diversity recognised by the Financial Times-Statista
Diversity Leaders list (ranked fourth).
• Regular positive engagement with PRA and Bank of England.
• Positive feedback on stress testing and no material issues raised
through external auditor reporting.
Weighting 30% 30%
Outcome
30%
25%
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Report of the directors on remuneration
(continued)
How awards will be released to executive directors
The illustration below shows how APP and LTPP awards will typically be released to executive directors. Across both APP and LTPP elements, a minimum of 60% will be deferred for
between three and seven years. Where the minimum level of deferral is not met via the LTPP award, a proportion of the APP award will be deferred.
For awards in respect of 2023/24, the LTPP will be used to satisfy the minimum deferral requirements for D A Crosbie. For C S Rhodes, a small proportion of his APP award will also be
deferred for between three and seven years. In line with the directors’ remuneration policy, 50% of APP and, subject to the achievement of the forward-looking performance measures,
60% of LTPP awards will be linked to the value of the Society’s CCDS, with the balance paid in cash. The CCDS element will be subject to a twelve-month retention period, which is
reflected in the timing of payment illustrated below.
Note:
i. All references to CCDS above are payments that are linked to the value of the Society’s CCDS.
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Annual Report and Accounts 2024
Report of the directors on remuneration
(continued)
Executive directors’ remuneration
Where indicated, the tables in the following sections have been audited. These disclosures are included in compliance with the Building Societies Act 1986 and other mandatory reporting
regulations, as well as the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended), which the Society has voluntarily adopted. The table
below shows the total remuneration for each executive director who served during the year ended 4 April 2024.
Amounts of variable remuneration shown below consist of the awards under the APP plan. LTPP awards are subject to the achievement of performance conditions over three years from
grant and, to the extent the performance measures are met, details will be included in the relevant directors’ remuneration report (for example, any amounts delivered relating to the
LTPP awards granted in June 2023 will be disclosed within the Annual Report and Accounts 2026).
Single total figure of remuneration for each executive director
(Audited)
D A Crosbie
C S Rhodes
2024
£’000
2023
£’000
2024
£’000
2023
£’000
Salary 1,137
889 732
690
Pension allowance 182
142 117
110
Travel and other taxable benefits (note i) 47
32 105
81
Total fixed remuneration
1,366
1,063
954
881
Annual performance pay 1,044
687 636
496
Total variable remuneration 1,044
687 636
496
Total pay package excluding replacement awards 2,410
1,750 1,590
1,377
Replacement awards (note ii) -
1,705 -
-
Total pay package including replacement awards
2,410
3,455
1,590
1,377
Notes:
i. Travel and other taxable benefits include travel, accommodation and other business-related costs for directors, incurred in connection with the performance of their duties, including any tax due under
HMRC regulations, as well as medical insurance, car allowance and security. These amounts are included as fixed remuneration for the calculation of the variable pay ratio in meeting our regulatory
requirements.
ii. D A Crosbie succeeded J D Garner as CEO on 2 June 2022. As announced in the Annual Report and Accounts 2022, the Committee agreed to compensate D A Crosbie for the forfeiture of variable pay
awards from her previous employment at TSB. In line with regulatory requirements, these replacement awards are not more generous in terms or amounts than she would otherwise have received.
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Annual Report and Accounts 2024
Report of the directors on remuneration
(continued)
Society Chairman and non-executive directors’ remuneration
The total fees paid to each non-executive director who served during the year ended 4 April 2024 are shown below.
Single total figure of remuneration for non-executive directors
(Audited)
2024
2023
Society and Group
fees
£’000
Travel and
other
taxable
benefits
(note i)
£’000
Total fees
and taxable
benefits
£’000
Society and Group
fees
£’000
Travel and
other taxable
benefits
(note i)
£’000
Total fees
and taxable
benefits
£’000
K A H Parry (Society Chairman)
557
18
575
525
6
531
T Graham (Senior Independent Director) (note ii)
218
19
237
72
4
76
R M Fyfield (note iii)
44
3
47
138
2
140
A Hitchcock
148
23
171
122
9
131
A M Keir
192
20
212
144
10
154
D Klein
119
2
121
100
2
102
S Orton (note iv)
99
3
102
-
-
-
T Rajah
103
1
104
94
-
94
G Riley
150
30
180
95
10
105
P G Rivett
192
1
193
155
1
156
G Waersted (note v)
42
8
50
131
9
140
Total
1,864
128
1,992
1,576
53
1,629
Pension payments to past non-executive directors (note vi)
218
231
Notes:
i. Taxable benefits for non-executive directors relate to travel, accommodation and other business-related costs in connection with their duties and attendance at Board and committee meetings. Where
these expenses are deemed taxable, the Society settles the tax on behalf of the non-executive directors and this is included in the amounts shown. Where a non-UK director is not UK domiciled, their
reimbursed cost of travel into and out of the UK is not a taxable benefit.
ii. T Graham joined the Board on 28 September 2022 and was appointed Chair of the Remuneration Committee on 1 January 2023 and Senior Independent Director on 20 July 2023.
iii. R M Fyfield stepped down from the Board on 19 July 2023.
iv. S Orton joined the Board on 1 June 2023.
v. G Waersted stepped down from the Board on 19 July 2023.
vi. The Society stopped granting pension rights to non-executive directors who joined the Board after January 1990.
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Report of the directors on remuneration
(continued)
Additional disclosures
CEO remuneration for the past ten years
The table below shows details of the CEO’s remuneration for the previous ten years.
Financial year
Total remuneration
Annual performance pay earned as % of
maximum available
Medium term performance pay earned
as % of maximum available (note i)
£’000
%
%
2023/24 2,410 91.9 -
2022/23 (note ii) 3,455 / 301 77.2 / 42.6 -
2021/22 2,114 67.2 -
2020/21 (note iii) 1,236 72.3 -
2019/20 1,286 - -
2018/19 2,372 75.1 -
2017/18 2,317 69.5 -
2016/17 (note iv) 3,386 71.9 -
2015/16 (note v) 3,413 75.8 80.8
2014/15 (note v) 3,397 74.4 84.5
Notes:
i. Medium term performance pay ceased at the end of 2015/16.
ii. Figures shown for 2022/23 are those relating to D A Crosbie and J D Garner, respectively. D A Crosbie commenced her role as CEO on 2 June 2022. Her total remuneration for 2022/23 was £3,455,452
including the value of replacement awards on joining (£1,704,844). These awards did not form part of ongoing remuneration. The annual performance pay earned by D A Crosbie for 2022/23 was 77.2% of
the maximum opportunity. J D Garner stepped down as CEO and from the Board on 1 June 2022. His total remuneration for 2022/23 shown above reflected the period of time he served on the Board. The
annual performance pay earned by J D Garner for 2022/23 was 42.6% of the maximum opportunity.
iii. The performance pay opportunity for 2020/21 was reduced by around two thirds.
iv. J D Garner commenced his role as CEO on 5 April 2016. His total remuneration for 2016/17 included the value of replacement awards on joining (£1,070,752). These awards did not form part of ongoing
remuneration.
v. The CEO in 2015/16 and 2014/15 was G J Beale. His total remuneration includes annual performance pay awards as well as legacy payouts under the directors’ previous medium term pay plan as a result of
the transition period between plans.
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Report of the directors on remuneration (continued)
Annual Report and Accounts 2024
Report of the directors on remuneration
(continued)
Comparison of annual change in executive directors’ pay with average employee
The following table shows the annual percentage change in remuneration (base salary, benefits and annual performance pay) for each of the executive directors that served during the
year ended 4 April 2024 for the last four financial years, compared with the average for all other employees. For the purposes of the below, in the year that an executive director was
appointed to or stepped down from the Board, remuneration for that year is annualised to a full-year equivalent for the purposes of comparison.
% change in remuneration
Base salary Benefits (note i) Annual performance pay
2022/23 to 2023/24
D A Crosbie (note ii) 6.0% 24.1% 26.2%
C S Rhodes 6.0% 29.6% 28.2%
All employees (note iii) 7.2% 2.5% 24.4%
2021/22 to 2022/23
C S Rhodes 3.4% 55.8% (15.9%)
All employees (note iii and iv) 3.1% (0.7%) 1.3%
2020/21 to 2021/22
C S Rhodes (note v) 2.0% 73.3% 208.9%
All employees (notes iii and v) 3.0% 14.1% 143.1%
2019/20 to 2020/21
C S Rhodes (notes vi and vii) 3.2% (52.4%) -
All employees (notes iii and vii) 3.2% (5.3%) 41.9%
Notes:
i. Benefits shown in the table above reflect travel and other taxable benefits and exclude pension allowance.
ii. D A Crosbie joined the Board on 2 June 2022.
iii. Data for all employees has been calculated on a full-time equivalent basis and reflects all employees on 1 March of each relevant year, excluding executive directors.
iv. The average all employee data between 2021/22 and 2022/23 has been restated to reflect an update to the calculation.
v. The increase in annual performance pay between 2020/21 and 2021/22 is reflective of the return to previous levels of opportunity following a reduction of around two thirds in 2020/21.
vi. There was no annual performance pay awarded to C S Rhodes for 2019/20 and therefore no percentage change is shown.
vii. The reduction in benefits between 2019/20 and 2020/21 reflects reduced travel costs in the year as a result of a significant reduction in travel due to the pandemic.
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Annual Report and Accounts 2024
Report of the directors on remuneration
(continued)
Annual change in non-executive directors’ pay
The following table shows the annual percentage change in fees for the Chairman and the non-executive directors that served during the year ended 4 April 2024 for the last four
financial years. For the purposes of the below, in the year that a non-executive director was appointed to or stepped down from the Board, fees for that year are annualised to a full-year
equivalent for the purposes of comparison.
Non-executive directors (note i) 2022/23 to 2023/24 2021/22 to 2022/23 2020/21 to 2021/22 2019/20 to 2020/21
K A H Parry (note ii) 6.0% 148.8% 47.6% 10.9%
T Graham (note iii) 34.6% - - -
R M Fyfield (0.7)% 7.8% (1.5%) 9.2%
A Hitchcock 21.3% 27.1% 2.1% 0.0%
A M Keir (note iv) 33.3% 44.0% - -
D Klein (note v) 19.0% 25.0% 17.6% -
S Orton (note vi) - - - -
T Rajah (note vii) 9.6% (5.1%) 5.3% -
G Riley (note viii) 57.9% - - -
P G Rivett 23.9% 24.0% 14.7% 0.0%
G Waersted (0.8)% 23.6% 12.8% 0.0%
Notes:
i. Non-executive directors are not eligible to participate in the annual performance pay plan. Non-executive directors may receive taxable benefits relating to travel, accommodation and other business-
related costs in connection with their duties and attendance at Board and committee meetings. These benefits are not included in the table above.
ii. K A H Parry was appointed Chairman on 1 February 2022.
iii. T Graham joined the Board on 28 September 2022.
iv. A M Keir joined the Board on 1 March 2022.
v. D Klein joined the Board on 1 March 2021.
vi. S Orton joined the Board on 1 June 2023.
vii. T Rajah joined the Board on 1 September 2020.
viii. G Riley joined the Board on 1 April 2022.
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Annual Report and Accounts 2024
Report of the directors on remuneration
(continued)
Relative importance of spend on pay
The chart below shows the cost of remuneration for all employees of the Society, compared with retained earnings.
Remuneration cost for all employees
2023/24 2022/23
£m £m
All-employee remuneration
997
918
Retained earnings 1,125 1,478
Payroll costs represent 41.16% (2023: 39.52%) of total administrative expenses. Nationwide’s profit after member reward payments and tax for the year was £1,300 million, of which
£175 million was paid as distributions to holders of core capital deferred shares and Additional Tier 1 capital, and the remaining £1,125 million is held as retained earnings.
Payments for loss of office
No payments for loss of office were made to any directors in the year ended 4 April 2024.
Payments to past directors
No payments were made to any past directors in the year ended 4 April 2024.
Pay gap reporting
The Society is fully committed to promoting a diverse and inclusive workplace. Pay gaps are the difference in average hourly pay, when comparing different groups of people within an
organisation. Our latest gender and ethnicity pay gaps report was published in March 2024 and can be found at nationwide.co.uk, together with an update of progress on our inclusion and
diversity ambition, and Women in Finance Charter commitments. Within the report we have again voluntarily published our ethnicity pay gap, comparing the pay of all employees who have
identified as black, asian and minority ethnic (ethnically diverse), with the pay for white (non-ethnically diverse) employees across Nationwide.
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Annual Report and Accounts 2024
Report of the directors on remuneration
(continued)
CEO pay ratio reporting
The table below compares the total remuneration of the CEO against the total remuneration of the median employee and those who sit at the 25
th
and 75
th
percentiles (lower and upper
quartiles). This reporting will build annually to cover a rolling ten-year period.
The CEO pay ratio for 2023/24 has increased year-on-year. It is noted that the pay ratio for 2022/23 reflected part-year remuneration data for D A Crosbie, who commenced her role as
CEO on 2 June 2022, and J D Garner, who stepped down as CEO on 1 June 2022. The increase in ratio is otherwise primarily driven by the CEO’s increased Annual Performance Pay
outcome for 2023/24, reflecting strong Society and individual performance for the year.
Year Method 25
th
percentile pay ratio Median pay ratio 75
th
percentile pay ratio
2023/24 Option A 78:1 64:1 38:1
2022/23 Option A 71:1 56:1 35:1
2021/22 Option A 80:1 54:1 35:1
2020/21 Option A 51:1 38:1 24:1
2019/20 Option A 53:1 41:1 26:1
2018/19 Option A 99:1 77:1 48:1
The total remuneration and salary values for the 25
th
, median and 75
th
percentile employees for 2023/24 are:
25
th
percentile
Median
75
th
percentile
Total remuneration £30,986 £37,832 £63,145
Salary £21,247 £27,710 £47,599
Supplementary information on the tables above:
i. The calculation is based on Option A as set out in the regulations, which is considered to be the most statistically accurate methodology.
ii. Employee data includes full time equivalent total remuneration for all UK employees as at 1 March 2024. For each employee, remuneration was calculated based on all components of pay including base pay,
performance pay for 2023/24, core benefits including medical insurance and car allowance, and pension payments.
iii. The CEO pay ratio for 2022/23 above excludes the one-off replacement awards granted to D A Crosbie upon her appointment as CEO.
iv. For 2018/19, 2019/20 and 2020/21, whilst most employees participated in a defined contribution scheme with a fixed maximum employer contribution, there were other pension arrangements in place for
some employees, including a defined benefit pension scheme which has been closed to new participants since 2007. Although it would have been possible to recognise a higher value under the defined
benefit scheme, in order to ensure accurate year on year comparative data, a fixed value equal to the maximum employer contribution available to the defined contribution scheme members was included for
all defined benefit scheme members. From 2021/22 there is only one defined contribution scheme available; therefore, the actual employer contribution value has been used for all employees.
v. The Committee has considered the pay data for the three individuals identified for 2023/24 and confirms that the ratios reasonably represent the Society’s approach to pay and reward for employees taken
as a whole.
Voting at AGM
Resolutions to approve the 2022/23 Report of the directors on remuneration and the current directors' remuneration policy were passed at the 2023 AGM and 2022 AGM, respectively.
In each case votes were cast as follows
:
Vote
Report of the directors on remuneration (2023 AGM)
Remuneration policy (2022 AGM)
For
503,024 (95.07%)
487,138 (93.53%)
Against
26,079 (4.93%)
33,707 (6.47%)
Withheld
8,081
8,851
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Annual Report and Accounts 2024
Report of the directors on remuneration
(continued)
Remuneration policy implementation for 2024/25
The directors’ remuneration policy is subject to member approval by way of an advisory vote at the 2024 AGM. The policy will be implemented as follows in 2024/25:
Element Implementation in 2024/25 for executive directors
Base salary The Committee determined base salaries from 1 April 2024 of:
• D A Crosbie: £1,170,000 (increase of 2.94%)
• C S Rhodes: £750,000 (increase of 2.48%)
Benefits No change for 2024/25.
Pension Aligned with the rate available to the wider employee population of 16% of salary – no change for 2024/25.
Annual Performance Pay
(APP) plan
For awards made in respect of 2024/25, the target opportunity for D A Crosbie and C S Rhodes will be 67% of salary, with a maximum opportunity of 100% of salary.
Performance measures:
• Awards made in respect of 2024/25 will be subject to stretching performance conditions aligned with our strategic objectives. The Committee has determined
an enhanced approach to assessing performance for the executive directors’ APP awards for 2024/25 via the introduction of the Executive Scorecard element.
Performance measures and weightings are set out below:
• More rewarding relationships: Number of engaged customers (12.5%)
• Simply brilliant service: Customer Experience Score (12.5%)
• Continuous improvement: Total costs (12.5%)
• Beacon for mutual good: Heard good things about Nationwide (12.5%)
• Executive Scorecard: For this element the Committee will assess performance against a comprehensive scorecard capturing a wide range of the Society’s
financial and non-financial key performance indicators (30%)
• The remaining 20% of the award will be assessed based on individual contribution, behaviours and conduct.
• Gateway measures based on profit before tax, leverage ratio and conduct risk will also apply.
Long-Term Performance
Pay (LTPP) plan
LTPP awards in respect of 2024/25 will be made following the year subject to the achievement of satisfactory Society performance and individual delivery,
behaviours and conduct. The Committee intends to keep LTPP grant levels under review over the course of the three-year policy to ensure they remain appropriate.
It is intended that any awards made will be subject to a subsequent three-year performance period (2025/26 to 2027/28).
Performance measures:
Forward-looking performance will be measured against a long-term scorecard determined by the Committee on an annual basis and set to align with the long-term
strategic objectives of the Society.
The measures for the 2023/24 LTPP awards (for the performance period 2024/25 to 2026/27) can be found on page 128. Targets for the 2023/24 LTPP awards are
commercially sensitive and so will be disclosed, along with performance achieved, in the Annual Report and Accounts 2027.
Details of the performance measures for the 2024/25 LTPP awards (for the performance period 2025/26 to 2027/28) will be included in next year’s remuneration
report.
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Report of the directors on remuneration (continued)
Annual Report and Accounts 2024
Report of the directors on remuneration
(continued)
Society Chairman and non-executive directors
The annual review of non-executive director fees for 2024/25 has been undertaken and fees adjusted with effect from 1 April 2024. Fees have been adjusted to ensure they continue to
align with the market and also take account of the expected workload for the non-executive directors. The level of adjustment is generally in line with the salary increase awarded to the
executive directors and lower than the average percentage increase received by the wider workforce.
Society Chairman and non-executive director fees for 2024/25
Annual fees for
2024/25
Annual fees for
2023/24
£’000
£’000
Society Chairman (note i)
570.5
556.5
Basic fee for non-executive directors 92.0 90.0
Senior Independent Director
38.0
37.0
Chair of the Audit, Board Risk or Remuneration Committee 62.0 60.5
Member of the Audit, Board Risk or Remuneration Committee 29.5 28.8
Member of the Nomination and Governance Committee
13.6
12.8
Employee Voice 13.6 13.3
Member of the Technology Advisory Forum (note ii) 10.0 10.0
Notes:
i. The Society Chairman’s annual fee for 2023/24 has been restated to correct an inaccuracy in the previously reported figure of £565,000.
ii. The Technology Advisory Forum was established in November 2023 following the 2023 Board performance review, with membership fees payable from January 2024.
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Directors’ report
Annual Report and Accounts 2024
Directors’ report
for the year ended 4 April 2024
Information for the ‘Content’ items listed in the table below can be found in the section of the Annual Report and Accounts as shown. These items are required to be included in the
Directors’ report by the Building Societies Act 1986 and are incorporated into the Directors’ report by this cross referencing.
Content
Section
Pages
Business objectives and future plans
Strategic report
6-8 and 12-22
Key performance indicators
Strategic report
23-25
Chief Executive review including performance updates
Strategic report
12-22
Employee involvement, engagement, development, inclusion and diversity
Strategic report
28-31 and 50-51
Viability statement
Strategic report
65-66
Environment, greenhouse gas emissions (GHG), energy consumption
Strategic report
53-61
Directors’ remuneration
Governance – Report of the directors on remuneration
112-138
Mortgage arrears
Risk report
165-166
Risk management
Risk report
144-147
Principal risks
Risk report
62-63 and 148
Emerging risks
Strategic report – Risk overview
64
Directors’ share options
Annual business statement
319
CRD IV country-by-country reporting
Other information
320
Distributions on CCDS instruments
Financial statements – note 31
307
Business relationships
Strategic report – Engaging with our stakeholders
26-40
Financial instruments
Financial statements – note 15
282-284
Corporate Governance statement
Governance – Statement of compliance with the UK Corporate Governance Code 2018
81
Board of directors
The names of the directors of the Society who were in office at the date of signing the financial statements, along with their biographies, are set out on pages 77 to 80.
The changes in the year and up to the date of signing the financial statements are as follows:
• the appointment of Sally Orton (non-executive director) on 1 June 2023;
• the retirement from the Board of Mai Fyfield (non-executive director) on 19 July 2023; and
• the retirement from the Board of Gunn Waersted (non-executive director) on 19 July 2023.
None of the directors have any beneficial interest in equity shares in, or debentures of, any connected undertaking of the Society.
The Board has agreed that in accordance with the UK Corporate Governance Code, all the directors will stand for election or re-election on an annual basis.
Political donations
The Society is politically neutral and does not support, or seek to influence public support for, any political party, nor make donations, contributions or pay subscriptions to any party.
However, the Society will from time to time make payments to third parties to
facilitate event space at party conferences and/or to participate in events organised by them at party
conferences and which are related to matters of interest to the Society and its members so as to communicate its position and understand that of others. These activities are not intended
or considered to be in the nature of party political campaigning, activity or support.
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Directors’ report (continued)
Annual Report and Accounts 2024
Directors’ report (continued)
Charitable donations
The Society paid charitable donations of £13.6 million (2023: £9.3 million) in the year ended 4 April 2024.
Participation in the unclaimed assets scheme
The Society participates in the Government-backed unclaimed assets scheme, under which savings accounts that have been inactive for 15 years, and where the account holder cannot be
traced, are eligible to be transferred into a central reclaim fund. The central reclaim fund has the responsibility for retaining sufficient monies to meet the costs of future reclaims for any
previously transferred dormant account balances, and to transfer any surplus to the Big Lottery Fund for the benefit of good causes which have a social or environmental purpose. On 29
November 2023, the Society made a transfer of £17,568,510 to Reclaim Fund Ltd, the administrators of the unclaimed assets scheme. This is higher than the previous transfer the Society
made in November 2022 of £2,885,728, reflecting that a large number of accounts acquired in the Portman Building Society merger in 2007 reached 15 years of inactivity within the
Society in 2022. The total contributions from inception to November 2023 are £102,577,333.
Creditor payment policy
The Group’s policy is to agree the terms of payment with suppliers at the start of trading, ensure that suppliers are aware of the terms of payment, and pay in accordance with its
contractual and other legal obligations. The Group’s policy is to settle the supplier’s invoice for the complete provision of goods and services (unless there is an express provision for
stage payments), when in full conformity with the terms and conditions of the purchase, within the agreed payment terms. The Society’s creditor days, calculated based on year-end
creditor balances and total spend, were 5 days as at 4 April 2024 (2023: 7 days).
New activities
There were no new activities in which the Society or any of its subsidiaries engaged during the financial year of a different nature from those in which the Society previously engaged.
Research and development
In the ordinary course of business, the Society regularly develops new products and services.
Directors’ responsibilities in respect of the preparation of the Annual Report and Accounts
The following statement, which should be read in conjunction with the Independent auditor’s report on pages 221 to 234, is made by the directors to explain their responsibilities in
relation to the preparation of the Annual Report and Accounts, the directors’ emoluments disclosures within the Report of the directors on remuneration, the Annual business statement
and the Directors’ report.
The Group and Society financial statements included within the Annual Report and Accounts are prepared in accordance with international accounting standards in conformity with the
requirements of the Building Societies Act 1986 and with those parts of the Building Societies (Accounts and Related Provisions) Regulations 1988 (as amended) that are applicable.
International accounting standards which have been adopted for use within the UK have also been applied in these financial statements. The Group financial statements are also prepared
in accordance with International Financial Reporting Standards (IFRS) adopted by the European Union.
The Group financial statements are prepared in the European single electronic format in accordance with the requirements as set out in Commission Delegated Regulation (EU) 2019/815
with regard to regulatory technical standards on the specification of a single electronic reporting format.
A copy of the Annual Report and Accounts can be found on Nationwide Building Society’s website at nationwide.co.uk (Results and accounts section). The directors are responsible for the
maintenance and integrity of statutory and audited information on the website. Information published on the internet is accessible in many countries with different legal requirements.
Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
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Directors’ report (continued)
Annual Report and Accounts 2024
Directors’ report (continued)
Building Societies Act 1986 (the Act)
As required by regulations made under the Act, the directors have prepared an Annual Report and Accounts which gives a true and fair view of the income and expenditure of the Society
and the Group for the financial year and of the state of the affairs of the Society and the Group as at the end of the financial year, and which provides details of directors’ emoluments in
accordance with Part VIII of the Act and regulations made under it. The Act states that the requirements under international accounting standards achieve a fair presentation.
In preparing the Annual Report and Accounts, the directors have:
• Selected appropriate accounting policies and applied them consistently;
• Made judgements and estimates that are reasonable;
• Stated whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
• Prepared the financial statements on the going concern basis.
In addition to the Annual Report and Accounts, as required by the Act, the directors have prepared an Annual business statement and a Directors’ report, each containing prescribed
information relating to the business of the Society and its connected undertakings.
UK Finance Code for Financial Reporting Disclosure
The Group has continued to adopt the UK Finance Code for Financial Reporting Disclosure and its Annual Report and Accounts 2024 has been prepared in compliance with its principles.
Going Concern
The Group’s business activities and financial position, the factors likely to affect its future development and performance, its objectives and policies in managing the financial risks to
which it is exposed, and its capital, funding and liquidity positions are set out in the Financial review and the Risk report.
The directors have assessed the Group’s ability to continue as a going concern, with reference to current and anticipated market conditions including the current geopolitical
environment. The Group’s projections, stress testing and scenario analysis show that the Group will be able to operate at adequate levels of both liquidity and capital for the next 12
months. Furthermore, the Group’s capital ratios and its total capital resources are comfortably in excess of Prudential Regulation Authority requirements.
The going concern assessment has considered the current Nationwide Group and the impact of the proposed acquisition of Virgin Money, which is expected to complete within the 12-
month time horizon, albeit the acquisition is subject to regulatory approval.
The directors confirm they are satisfied that the Group has adequate resources to continue in business for a period of at least 12 months from the date of approval of the consolidated
financial statements and that it is therefore appropriate to adopt the going concern basis in preparing these accounts.
Fair, balanced and understandable
The directors are satisfied that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable, and provides the information necessary for members and other
stakeholders to assess the Group’s position and performance, business model and strategy. Details of the governance procedures that have been embedded to support this can be found
in the Audit Committee report.
Taskforce on Climate-related Financial Disclosures (TCFD)
The TCFD, established by the Financial Stability Board (FSB) in 2017, made recommendations designed to enable financial firms to produce clear, comprehensive, high-quality disclosures
on the impacts of climate change. Further enhancements were made in 2021, through issuance of guidance on climate-related metrics, targets and transition plans. In 2023, the FSB asked
the International Financial Reporting Standards (IFRS) Foundation to take over the monitoring of the progress of firms’ climate-related disclosures. Nationwide publishes its TCFD-
aligned Climate-related Financial Disclosures annually, alongside its preliminary results. Nationwide also provides summary information consistent with the TCFD recommendations in the
Strategic report within its Annual Report and Accounts, aligned to the requirements of the Companies Act.
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Directors’ report (continued)
Annual Report and Accounts 2024
Directors’ report (continued)
Enhanced Disclosure Task Force (EDTF)
The EDTF, established by the Financial Stability Board, published its report ‘Enhancing the Risk Disclosures of Banks’ in October 2012, with an update in November 2015 covering IFRS 9
expected credit losses. The Taskforce on Disclosures about Expected Credit Losses (DECL), jointly established by the Financial Conduct Authority, Financial Reporting Council and the
Prudential Regulation Authority, published its third report in September 2022. EDTF and DECL recommendations are reflected in either the Group’s Annual Report and Accounts or Pillar
3 Disclosures.
Directors’ statement pursuant to the disclosure guidance and transparency rules
As required by the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, the directors have included a fair review of the business and a description of the
principal risks and uncertainties facing the Group. The directors confirm that, to the best of each director’s knowledge and belief:
• The Chief Executive review and the Financial review contained in the Strategic report include a fair review of the development and performance of the business and the position of the
Group and Society. In addition, the Strategic report contains a description of the principal risks and uncertainties.
• The financial statements, prepared in accordance with international accounting standards which have been adopted for use within the UK, give a true and fair view of the assets,
liabilities, financial position and profit of the Group and Society.
Directors’ responsibilities in respect of accounting records and internal control
The directors are responsible for ensuring that the Society and its connected undertakings:
• Keep accounting records which disclose with reasonable accuracy the financial position of the Society and the Group and which enable them to ensure that the Annual Report and
Accounts comply with the Building Societies Act 1986.
• Take reasonable care to establish, maintain, document and review such systems and controls as are appropriate to the Society.
The directors have general responsibility for safeguarding the assets of the Group and for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors who held office at the date of approval of this report confirm that, so far as they are each aware, there is no relevant audit information of which the Group’s auditors are
unaware, and each director has taken all the steps that they ought to have taken as a director to make themselves aware of any relevant audit information and to establish that the
Group’s auditors are aware of that information.
The auditors
A resolution to re-appoint Ernst & Young LLP as external auditor will be proposed at the Annual General Meeting.
Kevin Parry
Society Chairman
22 May 2024
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Risk report
Introduction 144
Managing risk 144
Principal risks and uncertainties 148
Credit risk 149
• Overview 149
• Residential mortgages 154
• Consumer banking 170
• Commercial lending 178
• Treasury assets 182
Liquidity and funding risk 187
Capital risk 199
Market risk 205
Pension risk 212
Business risk 214
Operational and conduct risk 215
Model risk 219
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Introduction and Managing risk
Annual Report and Accounts 2024
Risk report
Introduction
Effective risk management helps to ensure that we keep Nationwide’s customers’ money safe and secure and is therefore critical to delivering our purpose:
Banking - but fairer, more
rewarding, and for the good of society
. Nationwide adopts a prudent approach to risk management, taking only those risks which support our strategy and managing those risks
rigorously through a consistent methodology.
All business activities involve some degree of risk. Nationwide's risk management processes ensure the risks that arise from its activities are managed by:
• identifying risks through a robust assessment of principal risks and uncertainties facing Nationwide, including those that would threaten its business model, future performance,
solvency or liquidity, or increase the potential for customer harm;
• effective decision making, ensuring the right risks are taken, in a way that is considered and supports the strategy, maintaining a reputation for high standards of business conduct;
• ensuring the risks taken are understood and controlled; and
• maintaining an appropriate balance between delivering customer value and remaining a prudent and responsible lender.
Managing risk
Enterprise Risk Management Framework (ERMF)
The Enterprise Risk Management Framework (ERMF) sets out the approach to risk management. The framework is based on eight principal risk categories, establishing risk appetite, and
implementing risk management through the three lines of defence model. The ERMF is underpinned by processes, policies and standards that are specific to individual risk categories
and focus on the responsibilities of key executives and risk practitioners. The outputs of the ERMF are governed through the Society’s risk committee structure.
Nationwide’s risk management and internal control system design has been enhanced to reflect changes to the internal and external risk profile, allowing tailored responses to be
developed where further maturity or improvements are considered appropriate. To ensure the ERMF remains fit for purpose, the strengthening of the operational and conduct risk and
control environment, including economic crime and anti-money laundering controls, will continue to be a focus in 2024.
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Managing risk (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Managing risk (continued)
The ERMF consists of the following core components: risk appetite, policies and controls, risk management, risk reporting, and enablers and governance. These ensure effective and
consistent risk and control management is delivered across the risk areas.
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Managing risk (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Managing risk (continued)
Three lines of defence
Risk management activities are structured along a three lines of defence model, tailored to reflect Nationwide’s size, complexity and business model. Though everyone has a role to play in
risk management, the overall responsibilities and accountabilities are outlined through the three lines of defence model.
Accountabilities
•
Providing expert risk advice on business initiatives
•
Providing advice on the setting of risk appetite
•
Reporting aggregate enterprise level risks to the
Board
•
Providing independent and risk-based assurance
Accountabilities
•
Performing independent audits of the effectiveness
of first line risk management and control, and
second line risk oversight, support and challenge
•
Taking a risk-based approach to the programme of
audit work
•
Preparing an annual opinion of the risk
management and controls framework across the
Society to present to the Audit Committee
•
Interpreting regulatory change
•
Setting the Society’s minimum standards for risk
management
•
Identifying future threats and risks
Accountabilities
•
Setting business objectives
•
Defining risk appetite for Board approval
•
Identifying, owning, and managing risks
•
Defining, operating, and testing controls
•
Identifying future threats and risks
•
Implementing and maintaining regulatory
compliance
• Adhering to the Society’s minimum standards for
risk management and associated policies
•
Testing controls
•
Conduct outcomes testing
•
Control framework and reporting
First line: Risk and control ownership
Second line: Oversight, support, and challenge
Third line: Assurance
Responsibilities
Designing and running business operations,
owning, and operating
most controls to manage the Society’s risks and meet regulatory
requirements.
Responsibilities
Overseeing, through support, challenge and the provision of advice,
the effectiveness of risk
management by the first line.
Responsibilities
Providing assurance to the Board on the effectiveness of
the
control
environment.
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Managing risk (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Managing risk (continued)
Risk committee structure
The Board is responsible for assessing the principal risks facing Nationwide. To achieve this, the Board approves Nationwide’s risk appetite and metrics following consideration by the
Board Risk Committee (BRC). The Board receives regular reports and assessments of Nationwide’s risk and control processes and recommendations from BRC on matters spanning all
risk categories, including the appropriate level of risk appetite. The Board has delegated responsibility to BRC for approval of the ERMF.
The BRC and Audit Committee provide oversight and advice to the Board. It is important that the correct committees review the relevant risk management information in a thorough and
timely manner. Matters such as risk appetite breaches and associated actions are reported to the relevant management committee and, where appropriate, these are escalated to the
Executive Risk Committee (ERC) chaired by the Chief Risk Officer. The ERC ensures a coordinated management approach across all risks and provides regular updates to the Board
members on areas where it has challenged management and key decisions.
Audit Committee
Provides oversight and advice to the Board in relation to
financial and non-financial reporting, internal and external
audit, and the adequacy and effectiveness of internal
controls and risk management systems.
Management
Committees
Principal
Committees
Nationwide’s Board
Board Risk Committee (BRC)
Provides oversight and advice to the Board in relation to
current and potential future risk exposures and future risk
strategy, including determination of risk appetite.
Executive Risk Committee (ERC)
Determines and amends Nationwide’s attitude to risk for endorsement by the Board.
Exercises responsibility for controlling risk across Nationwide, ensuring controls are
adequately designed and operating effectively.
Credit
Committee
Determines and amends the Society’s
attitude to credit risk and sets
thresholds for recommendation to
ERC.
Assets and Liabilities
Committee
Determines the Society’s approach to
market, capital, pension, liquidity, and
funding risk and sets thresholds for
each risk for recommendation to ERC.
Conduct and Operational Risk
Committee
Monitors the Society’s actual and
future operational, regulatory and
conduct risk appetite and profile to
ensure alignment with the Society’s
strategy. Sets thresholds for each risk
for recommendation to ERC.
Economic Crime Risk
Committee
Determines and amends the Society’s
attitude to economic crime risk and
sets thresholds for recommendation
to ERC.
Model Risk Oversight
Committee
Reviews, challenges and promotes
best practice for the Society’s use and
management of models to manage
model risk. Sets thresholds for
recommendation to ERC.
Annual Report and Accounts 2024
Risk report
(continued)
Managing risk (continued)
Risk committee structure
The Board is responsible for assessing the principal risks facing Nationwide. To achieve this, the Board approves Nationwide’s risk appetite and metrics following consideration by the
Board Risk Committee (BRC). The Board receives regular reports and assessments of Nationwide’s risk and control processes and recommendations from BRC on matters spanning all
risk categories, including the appropriate level of risk appetite. The Board has delegated responsibility to BRC for approval of the ERMF.
The BRC and Audit Committee provide oversight and advice to the Board. It is important that the correct committees review the relevant risk management information in a thorough and
timely manner. Matters such as risk appetite breaches and associated actions are reported to the relevant management committee and, where appropriate, these are escalated to the
Executive Risk Committee (ERC) chaired by the Chief Risk Officer. The ERC ensures a coordinated management approach across all risks and provides regular updates to the Board
members on areas where it has challenged management and key decisions.
Audit Committee
Provides oversight and advice to the Board in relation to
financial and non-financial reporting, internal and external
audit, and the adequacy and effectiveness of internal
controls and risk management systems.
Management
Committees
Principal
Committees
Nationwide’s Board
Board Risk Committee (BRC)
Provides oversight and advice to the Board in relation to
current and potential future risk exposures and future risk
strategy, including determination of risk appetite.
Executive Risk Committee (ERC)
Determines and amends Nationwide’s attitude to risk for endorsement by the Board.
Exercises responsibility for controlling risk across Nationwide, ensuring controls are
adequately designed and operating effectively.
Credit
Committee
Determines and amends the Society’s
attitude to credit risk and sets
thresholds for recommendation to
ERC.
Assets and Liabilities
Committee
Determines the Society’s approach to
market, capital, pension, liquidity, and
funding risk and sets thresholds for
each risk for recommendation to ERC.
Conduct and Operational Risk
Committee
Monitors the Society’s actual and
future operational, regulatory and
conduct risk appetite and profile to
ensure alignment with the Society’s
strategy. Sets thresholds for each risk
for recommendation to ERC.
Economic Crime Risk
Committee
Determines and amends the Society’s
attitude to economic crime risk and
sets thresholds for recommendation
to ERC.
Model Risk Oversight
Committee
Reviews, challenges and promotes
best practice for the Society’s use and
management of models to manage
model risk. Sets thresholds for
recommendation to ERC.
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Principal risks and uncertainties
Annual Report and Accounts 2024
Risk report
(continued)
Principal risks and uncertainties
The principal risks set out in the table below are the key risks relevant to the Society’s business model and achievement of its strategic objectives. Where under the control of Nationwide,
these risks have a defined risk appetite consisting of statements supported by metrics, including rationale, limits, and triggers. The principal risks are further sub-divided into more
detailed categories of risk, for which management risk appetite is set in the context of the Board’s risk appetite. The relationship between principal risks and emerging risks is set out on
pages 62 to 64.
Principal Risk
Definition
Risk Committee
Further Detail
Credit risk
The risk of loss as a result of a customer or counterparty failing to meet their financial obligations.
Credit Committee
Page 149
Liquidity and
funding risk
Liquidity risk is the risk that Nationwide is unable to meet its liabilities as they fall due and maintain
member and other stakeholder confidence. Funding risk is the risk that Nationwide is unable to
maintain diverse funding sources in wholesale and retail markets and manage retail funding risk that
can arise from excessive concentrations of higher risk deposits.
Assets and Liabilities Committee
Page 187
Capital risk
The risk that Nationwide fails to maintain sufficient capital to absorb losses throughout a full
economic cycle and sufficient to maintain the confidence of current and prospective investors,
members, the Board, and regulators.
Page 199
Market risk
The risk that the net value of, or net income arising from, the Group's assets and liabilities is impacted
as a result of market price or rate changes. Nationwide does not have a trading book; therefore
market risk only arises in the banking book.
Page 205
Pension risk
The risk that the value of the pension schemes’ assets will be insufficient to meet the estimated
liabilities, creating a pension deficit.
Page 212
Business risk
The risk that volumes decline, margins shrink, or losses increase relative to the cost or capital base,
affecting the sustainability of the business and the ability to deliver the strategy due to external
factors (macroeconomic, geopolitical, industry, regulatory or other external events) or internal factors
(including the development and execution of the strategy).
Executive Risk Committee Page 214
Operational and
conduct risk
The risk of impacts resulting from inadequate or failed internal processes, conduct and compliance
management, people and systems, or from external events.
Conduct and Operational Risk Committee
Economic Crime Risk Committee
Page 215
Model risk
The risk of adverse consequences from model errors or the inappropriate use of modelled outputs.
Model outputs may be affected by the quality of data inputs, choice and suitability of methodology
and the integrity of implementation. The adverse consequences include financial loss, poor business
or strategic decision making, or damage to Nationwide’s reputation.
Model Risk Oversight Committee Page 219
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Credit risk – Overview
Annual Report and Accounts 2024
Risk report
(continued)
Credit risk – Overview
Credit risk is the risk of loss as a result of a customer or counterparty failing to meet their financial obligations. Credit risk encompasses:
• borrower/counterparty risk – the risk of loss arising from a borrower or counterparty failing to pay, or becoming increasingly likely not to pay the interest or principal on a loan, or on a
financial product, or for a service, on time;
• security/collateral risk – the risk of loss arising from deteriorating security/collateral quality;
• concentration risk – the risk of loss arising from insufficient diversification of region, sector, counterparties or other significant factor; and
• refinance risk – the risk of loss arising when a repayment of a loan or other financial product occurs later than originally anticipated.
Nationwide manages credit risk for the following portfolios:
Portfolio
Definition
Residential mortgages Loans secured on residential property
Consumer banking Unsecured lending comprising current account overdrafts, personal loans and credit cards
Commercial lending Loans to registered social landlords, Private Finance Initiative projects, and commercial real estate lending
Treasury Treasury liquidity, derivatives and discretionary investment portfolios
Management of credit risk
Nationwide lends in a responsible, affordable and sustainable way to ensure safeguarding of customers and the financial strength of the Society throughout the credit cycle.
To this end, the Board Risk Committee sets the level of risk appetite it is willing to take in pursuit of the Society’s strategy, which is articulated as Board risk appetite statements and
underlying principles:
Safeguarding our customers and counterparties by lending responsibly:
• Only lending to customers or counterparties who demonstrate that they can afford to borrow.
• Supporting customers buying mortgageable properties of wide-ranging types and qualities.
• Working with customers and counterparties to recover their financial position should there be a delay, or risk of delay, in meeting their financial obligations.
Safeguarding the Society’s financial performance, strength and reputation:
• Managing asset quality so that losses through an economic cycle will not undermine profitability, financial strength and our standing with external stakeholders.
• Ensuring that no material segment of our lending exposes the Society to excessive loss.
• Proactively managing credit risk and complying with regulations.
Nationwide operates with a commitment to responsible lending and a focus on championing good conduct and fair outcomes. In this respect, the Society formulates appropriate credit
criteria and policies which are aimed at mitigating risk from individual transactions and ensuring that the Society’s credit risk exposure remains within risk appetite. Under a governed
delegated mandate structure from the Board Risk Committee, the Credit Committee, individual Material Risk Takers and underwriters holding personal lending mandates make credit
decisions, based on a thorough credit risk assessment, to ensure that customers and counterparties are able to meet their obligations.
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Credit risk – Overview (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Credit risk – Overview (continued)
Credit risk is managed within the risk appetite set by the Board. Performance against this appetite is measured across a range of metrics and is reported to Credit Committee on a monthly
basis. Corrective action is taken when metrics move towards or beyond defined thresholds to ensure performance remains or returns to appetite within an appropriate timescale.
Nationwide is committed to helping customers who may anticipate, or find themselves experiencing a period of financial difficulty, offering a range of forbearance options tailored to their
individual circumstances. Accounts in arrears, or where the borrower is in financial difficulty, are managed by specialist teams within Nationwide or referred to debt charities to ensure an
optimal outcome for our customers and the Society.
Forbearance
Forbearance occurs when concessions are made to the contractual terms of a loan when the customer is facing or about to face difficulties in meeting their financial commitments. A
concession is where the customer receives assistance, which could be a modification to the previous terms and conditions of a facility or a total or partial refinancing of debt, either mid-
term or at maturity. Requests for concessions are principally attributable to:
• temporary cash flow problems;
• breaches of financial covenants; or
• an inability to repay at contractual maturity.
Consistent with the European Banking Authority reporting definitions, loans are reported as forborne until they meet the regulatory forbearance exit criteria. The concession events used
to classify balances subject to forbearance for residential mortgages, consumer banking and commercial lending are described in the relevant sections of this report.
Impairment provisions
Impairment provisions on financial assets are calculated on an expected credit loss (ECL) basis for assets held at amortised cost and at fair value through other comprehensive income
(FVOCI). ECL impairment provisions are based on an assessment of the probability of default (PD), exposure at default (EAD) and loss given default (LGD), discounted to give a net present
value. Provision calculations for retail portfolios are typically performed on a collective rather than individual loan basis. For collective assessments, whilst each loan will have an
associated ECL calculation, the calculation will be based on cohort level data for assets with shared credit risk characteristics (e.g. origination date, origination loan to value, term).
Impairment provisions are calculated using a three-stage approach depending on changes in credit risk since original recognition of the assets:
• an asset which is not credit impaired on initial recognition and has not subsequently experienced a significant increase in credit risk is categorised as being within stage 1, with a
provision equal to a 12-month ECL (losses arising on default events expected to occur within 12 months);
• where a loan’s credit risk increases significantly, it is moved to stage 2. The provision recognised is equal to the lifetime ECL (losses on default events expected to occur at any point
during the life of the asset);
• if a loan meets the definition of credit impaired, it is moved to stage 3 with a provision equal to its lifetime ECL.
For loans and advances held at amortised cost, the stage distribution and the provision coverage ratios are shown in this report for each individual portfolio. The provision coverage ratio
is calculated by dividing the provisions by the gross balances for each main lending portfolio. Loans remain on the balance sheet, net of associated provisions, until they are repaid or
deemed no longer recoverable, when such loans are written off.
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Credit risk – Overview (continued)
Governance and oversight of impairment provisions
The models used in the calculation of impairment provisions are governed in accordance with the Society’s Model Risk Framework as described in the Model risk section of this report.
PD, EAD and LGD models are subject to regular monitoring and back testing and are reviewed annually. Where necessary, adjustments are approved for risks not captured in model
outputs, for example where insufficient historic data exists. The economic scenarios used in the calculation of impairment provisions and associated probability weightings are proposed
by our Chief Economist. Details of these economic assumptions and material adjustments are included in note 10 to the financial statements.
Governance and oversight of economic assumptions, weightings applied to economic scenarios and all key judgements relating to impairment provisions are through a formal monthly
meeting including the Chief Financial Officer and Chief Credit Officer. Impairment provisions are regularly reported to the Audit Committee, which reviews and challenges the key
judgements and estimates made by management.
Developments in the year
During the period the UK has seen interest rates remain elevated with a view to steadily reducing the rate of inflation towards the Bank of England’s 2% target. The cost of borrowing has
declined following an increase earlier in the financial year, which has slightly eased affordability pressures and prompted a partial recovery in the housing market; however, uncertainty
remains due to the unclear future path of interest rates.
Residential mortgage arrears have increased from historically low levels, driven by elevated interest rates, but remain well below the industry average. Consumer banking arrears have
similarly increased from a low base during the year but remain at historically low levels.
Nationwide has supported the Mortgage Charter initiatives introduced by the Government to mitigate the increase in mortgage costs for customers and provide help and support to
those who are in financial difficulty. The first concessions under the charter expired in early 2024 and, to date, the number of customers requiring further support has been low.
Provisions have increased to £781 million (2023: £765 million) and include a modelled adjustment for economic uncertainty totalling £145 million (2023: £177 million). This modelled
adjustment captures the affordability risks caused by recent inflation and increased mortgage interest rates, combined with adjustments to model inputs relating to improvements in
borrower credit quality which are expected to reverse.
The Group has progressed the quantitative assessment of the credit risks resulting from climate change during the year; the Group’s view is that the impact of climate change on
modelled impairment provisions is not currently material. For further information, please see note 10 to the financial statements.
Outlook
The Group expects limited growth in the UK economy, with inflation reducing towards its target level and house prices increasing slowly. However, Bank rate is now expected to remain at
an elevated level for longer than previously forecast and this, coupled with wider geopolitical uncertainties, will put continued pressure on borrowers through higher mortgage rates. To
date borrowers have remained resilient to affordability pressures and whilst arrears are expected to rise from their current levels, they are expected to remain relatively low.
Nationwide remains vigilant to the uncertainties within the geopolitical and economic landscape, assessing its impact on borrowers and the credit risks affecting our lending portfolios to
ensure appropriate actions are taken to support our customers.
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Credit risk – Overview (continued)
Maximum exposure to credit risk
Nationwide’s maximum exposure to credit risk at 4 April 2024 was £283 billion (2023: £279 billion).
Credit risk largely arises from loans and advances to customers, which account for 80% (2023: 79%) of Nationwide’s total credit risk exposure. Within this, the exposure relates primarily
to residential mortgages, which account for 95% (2023: 95%) of total loans and advances to customers and comprise high-quality assets with historically low occurrences of arrears and
repossessions.
In addition to loans and advances to customers, Nationwide is exposed to credit risk on all other financial assets. For all financial assets recognised on the balance sheet, the maximum
exposure to credit risk represents the balance sheet carrying value after allowance for impairment, plus off-balance sheet commitments. For off-balance sheet commitments, the
maximum exposure is the maximum amount that Nationwide would have to pay if the commitments were to be called upon. For loan commitments and other credit-related commitments
that are irrevocable over the life of the respective facilities, the maximum exposure is the full amount of the committed facilities.
Maximum exposure to credit risk
2024
Gross
balances
Impairment
provisions
Carrying
value
Commitments
(note i)
Maximum
credit risk
exposure
% of total
credit risk
exposure
(Audited)
£m
£m
£m
£m
£m
%
Amortised cost loans and advances to customers:
Residential mortgages
204,427
(321)
204,106
11,526
215,632
76
Consumer banking
4,263
(436)
3,827
18
3,845
2
Commercial lending
5,139
(24)
5,115
1,795
6,910
2
Fair value adjustment for micro hedged risk (note ii)
350
-
350
-
350
-
214,179
(781)
213,398
13,339
226,737
80
FVTPL loans and advances to customers:
Residential mortgages (note iii)
40
-
40
-
40
-
Commercial lending
2
-
2
-
2
-
42
-
42
-
42
-
Other items:
Cash
23,817
-
23,817
-
23,817
9
Loans and advances to banks and similar institutions
2,478
-
2,478
-
2,478
1
Investment securities – FVOCI
26,522
-
26,522
-
26,522
9
Investment securities – Amortised cost
4
-
4
-
4
-
Investment securities – FVTPL
6
-
6
5
11
-
Derivative financial instruments
6,290
-
6,290
-
6,290
2
Fair value adjustment for portfolio hedged risk (note ii)
(3,330)
-
(3,330)
-
(3,330)
(1)
55,787
-
55,787
5
55,792
20
Total
270,008
(781)
269,227
13,344
282,571
100
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Credit risk – Overview (continued)
Maximum exposure to credit risk
2023
Gross
balances
Impairment
provisions
Carrying
value
Commitments
(note i)
Maximum
credit risk
exposure
% of total
credit risk
exposure
(Audited)
£m
£m
£m
£m
£m
%
Amortised cost loans and advances to customers:
Residential mortgages
201,615
(280)
201,335
8,952
210,287
75
Consumer banking
4,408
(469)
3,939
28
3,967
2
Commercial lending
4,994
(16)
4,978
1,353
6,331
2
Fair value adjustment for micro hedged risk (note ii)
430
-
430
-
430
-
211,447
(765)
210,682
10,333
221,015
79
FVTPL loans and advances to customers:
Residential mortgages (note iii)
47
-
47
-
47
-
Commercial lending
53
-
53
-
53
-
100
-
100
-
100
-
Other items:
Cash
25,635
-
25,635
-
25,635
9
Loans and advances to banks and similar institutions
2,860
-
2,860
-
2,860
1
Investment securities – FVOCI
27,562
-
27,562
-
27,562
10
Investment securities – Amortised cost
40
-
40
-
40
-
Investment securities – FVTPL
13
-
13
-
13
-
Derivative financial instruments
6,923
-
6,923
-
6,923
3
Fair value adjustment for portfolio hedged risk (note ii)
(5,011)
-
(5,011)
-
(5,011)
(2)
58,022
-
58,022
-
58,022
21
Total
269,569
(765)
268,804
10,333
279,137
100
Notes:
i. In addition to the amounts shown above, Nationwide has revocable commitments of £10,394 million (2023: £10,444 million) in respect of credit card and overdraft facilities. These commitments represent
agreements to lend in the future, subject to certain considerations. Such commitments are cancellable by Nationwide, subject to notice requirements, and given their nature are not expected to be drawn
down to the full level of exposure.
ii. The fair value adjustment for portfolio hedged risk and the fair value adjustment for micro hedged risk (which relates to the commercial lending portfolio) represent hedge accounting adjustments.
iii. FVTPL residential mortgages include equity release and shared equity loans.
Commitments
Irrevocable undrawn commitments to lend are within the scope of provision requirements. The commitments in the table above consist of overpayment reserves and separately
identifiable irrevocable commitments for the pipeline of residential mortgages, personal loans, commercial loans and investment securities. These commitments are not recognised on
the balance sheet; the associated provision of £0.3 million (2023: £0.2 million) is included within provisions for liabilities and charges.
Revocable commitments relating to overdrafts and credit cards are included in the calculation of impairment provisions, with the allowance for future drawdowns included in the estimate
of the exposure at default.
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Credit risk – Residential mortgages
Annual Report and Accounts 2024
Risk report
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Credit risk – Residential mortgages
Summary
Nationwide’s residential mortgages comprise owner-occupied, buy to let and legacy loans. Owner-occupied residential mortgages are mainly Nationwide-branded advances made through
intermediary channels and the branch network. Since 2008, all new buy to let mortgages have been originated under The Mortgage Works (UK) plc (TMW) brand. Legacy mortgages are
smaller owner-occupied portfolios in run-off.
Residential mortgage arrears have seen gradual increases, with the proportion of cases more than 3 months in arrears increasing to 0.41% (2023: 0.32%), as inflation and rising interest
rates have placed greater pressure on household finances.
Mortgage lending has been robust during the year, with residential mortgage balances increasing to £204.5 billion (2023: £201.7 billion), maintaining our market share of mortgage
balances.
Residential mortgage gross balances
2024 2023
(Audited)
%
%
Owner-occupied
79
78
Buy to let and legacy:
Buy to let (note i)
21
21
Legacy (note ii)
-
1
21
22
Amortised cost loans and advances to customers
100
100
FVTPL loans and advances to customers
Total residential mortgages
Notes:
i. Buy to let mortgages include £41,577 million (2023: £41,805 million) originated under the TMW brand, with other brands now closed to new originations.
ii. Legacy includes self-certified, near prime and sub-prime owner-occupied lending, all of which were discontinued in 2009.
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Risk report
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Credit risk – Residential mortgages (continued)
Impairment charge and write-offs for the year
2023
(Audited)
£m
Owner-occupied
11
Buy to let and legacy
37 83
Total impairment charge
94
%
Impairment charge as a % of average gross balance
0.05
£m
Gross write-offs
5
Balance sheet provisions have increased to £321 million (2023: £280 million). This includes a modelled adjustment totalling £72 million (2023: £77 million) to reflect an increase to the PD
to account for ongoing economic uncertainty, including the risks related to higher interest rates. Further information is included in note 10. The impairment charge of £44 million (2023:
£94 million) is lower than the prior year due to a larger increase in balance sheet provisions during 2023, driven by affordability risks recognised in relation to rising inflation and higher
interest rates.
The following table shows residential mortgage lending balances carried at amortised cost, the stage allocation of the loans, impairment provisions and the resulting provision coverage
ratios.
Residential mortgages staging analysis
2024
Stage 1
Stage 2
total
Stage 2
Up to date
Stage 2
1 – 30 DPD
(note i)
Stage 2
>30 DPD
(note i)
Stage 3
POCI
(note ii)
Total
(Audited)
£m
£m
£m
£m
£m
£m
£m
£m
Gross balances
Owner-occupied
147,573
12,676
11,597
785
294
692
-
160,941
Buy to let and legacy
19,922
22,910
22,371
362
177
541
113
43,486
Total
167,495
35,586
33,968
1,147
471
1,233
113
204,427
Provisions
Owner-occupied
7
46
31
7
8
37
-
90
Buy to let and legacy
15
151
126
15
10
65
-
231
Total
22
197
157
22
18
102
-
321
Provisions as a % of total balance %
% % % %
%
%
%
Owner-occupied
0.00
0.36
0.27
0.89
2.72
5.37
-
0.06
Buy to let and legacy
0.07
0.66
0.56
4.28
5.55
12.03
-
0.53
Total
0.01
0.55
0.46
1.96
3.78
8.29
-
0.16
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Credit risk – Residential mortgages (continued)
Annual Report and Accounts 2024
Risk report
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Credit risk – Residential mortgages (continued)
Residential mortgages staging analysis
2023
Stage 1
Stage 2
total
Stage 2
Up to date
Stage 2
1 – 30 DPD
(note i)
Stage 2
>30 DPD
(note i)
Stage 3
POCI
(note ii)
Total
(Audited)
£m £m £m
£m
£m £m £m £m
Gross balances
Owner-occupied
138,670
18,200
17,134
811
255
641
-
157,511
Buy to let and legacy
26,211
17,345
16,875
294
176
425
123
44,104
Total
164,881
35,545
34,009
1,105
431
1,066
123
201,615
Provisions
Owner-occupied
10
48
39
5
4
26
-
84
Buy to let and legacy
13
143
127
8
8
41
(1)
196
Total
23
191
166
13
12
67
(1)
280
Provisions as a % of total balance
%
%
%
%
%
%
%
%
Owner-occupied
0.01
0.26
0.23
0.60
1.51
4.04
-
0.05
Buy to let and legacy
0.05
0.83
0.75
2.85
4.70
9.76
-
0.44
Total
0.01
0.54
0.49
1.20
2.81
6.30
-
0.14
Notes:
i. Days past due (DPD) is a measure of arrears status.
ii. POCI loans are those which were credit impaired on purchase or acquisition. The POCI loans shown in the table above were recognised on the balance sheet when the Derbyshire Building Society was
acquired in December 2008. These balances, which are mainly interest-only, were 90 days or more in arrears when they were acquired and so have been classified as credit impaired on acquisition. The
gross balance for POCI is shown net of the lifetime ECL on transition to IFRS 9 of £5 million (2023: £5 million).
Total residential mortgage provisions have increased to £321 million (2023: £280 million), as stage 3 provisions have increased due to the growth in the number of cases more than three
months in arrears and adjustments for economic uncertainty being largely maintained.
Stage 2 balances total £35.6 billion (2023: £35.5 billion), which includes £12.8 billion (2023: £16.6 billion) of balances where the PD has been uplifted to recognise the increased risk of
default in a period of economic uncertainty. Owner-occupied stage 2 balances have reduced as a result of updates to the PD uplift for economic uncertainty adjustment. Buy to let and
legacy stage 2 balances have increased during the year as the portfolio is more sensitive to changes in interest rates.
Credit performance continues to be strong. Stage 3 loans in the residential mortgage portfolio equate to 0.6% (2023: 0.5%) of the total residential mortgage exposure. Of the total
£1,233 million (2023: £1,066 million) stage 3 loans, £800 million (2023: £562 million) is in respect of loans which are more than 90 days past due, with the remainder being impaired due
to other indicators of unlikeliness to pay such as forbearance. For loans subject to forbearance, accounts are transferred from stage 3 to stages 1 or 2 only after being up to date and
meeting contractual obligations for a period of 12 months; £164 million (2023: £179 million) of the stage 3 balances in forbearance are in this probation period.
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Credit risk – Residential mortgages (continued)
Annual Report and Accounts 2024
Risk report
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Credit risk – Residential mortgages (continued)
The table below summarises the movements in, and stage allocations of, the Group’s residential mortgages held at amortised cost, including the impact of ECL impairment provisions.
The movements within the table compare the position at 4 April 2024 to that at the start of the reporting period.
Reconciliation of net movements in residential mortgage balances and impairment provisions (note i)
Non-credit impaired Credit impaired (note ii)
Subject to 12-month ECL
Subject to lifetime ECL
Subject to lifetime ECL
Total
Stage 1
Stage 2
Stage 3 and POCI
Gross
balances
Provisions
Gross
balances
Provisions
Gross
balances
Provisions
Gross
balances
Provisions
(Audited)
£m
£m
£m
£m
£m
£m
£m
£m
At 5 April 2023
164,881
23
35,545
191
1,189
66
201,615
280
Stage transfers:
Transfers from stage 1 to stage 2
(15,657)
1
15,657
(1)
-
-
-
-
Transfers to stage 3
(143)
-
(500)
(10)
643
10
-
-
Transfers from stage 2 to stage 1
12,782
31
(12,782)
(31)
-
-
-
-
Transfers from stage 3
69
-
160
5
(229)
(5)
-
-
Net remeasurement of ECL arising from transfer of stage
-
(29)
-
54
-
33
-
58
Net movement arising from transfer of stage
(2,949)
3
2,535
17
414
38
-
58
New assets originated or purchased (note iii)
23,728
3
1,196
11
3
1
24,927
15
Net impact of further lending and repayments
(7,134)
(1)
(625)
(2)
(2)
2
(7,761)
(1)
Changes in risk parameters in relation to credit quality
-
(4)
-
(6)
-
14
-
4
Other items impacting income statement (including recoveries)
-
-
-
-
-
(5)
-
(5)
Redemptions
(11,031)
(2)
(3,065)
(14)
(233)
(11)
(14,329)
(27)
Income statement charge for the year
44
Decrease due to write-offs
-
-
-
-
(25)
(8)
(25)
(8)
Other provision movements
-
-
-
-
-
5
-
5
At 4 April 2024
167,495
22
35,586
197
1,346
102
204,427
321
Net carrying amount
167,473
35,389
1,244
204,106
Notes:
i. The basis of preparation for this table has been updated. Previously, the table was presented on a gross basis, with the reported values representing an aggregation of monthly movements over the period.
To present more directly the change in credit quality compared to the previous reporting period, the table is now prepared on a net basis.
ii. Gross balances of credit impaired loans include £113 million (2023: £123 million) of POCI loans, which are presented net of lifetime ECL on transition to IFRS 9 of £5 million (2023: £5 million).
iii. If a new asset is originated in the period, the values included are the closing gross balance and provision for the period. The stage in which the addition is shown reflects the stage of the account at the end
of the period.
Further information on movements in total gross loans and advances to customers and impairment provisions, including the methodology applied in preparing the table, is included in
note 14.
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Credit risk – Residential mortgages (continued)
Annual Report and Accounts 2024
Risk report
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Credit risk – Residential mortgages (continued)
Reason for residential mortgages being reported in stage 2 (note i)
2024
Owner-occupied
Buy to let and legacy
Total
Gross
balances
Provisions
Provisions
as a % of
balance
Gross
balances
Provisions
Provisions
as a % of
balance
Gross
balances
Provisions
Provisions
as a % of
balance
£m
£m
%
£m
£m
%
£m
£m
%
Quantitative criteria:
Payment status (greater than 30 DPD)
294
8
2.72
177
10
5.55
471
18
3.78
Increase in PD since origination (less than 30 DPD)
12,192
38
0.31
21,298
124
0.58
33,490
162
0.48
Qualitative criteria:
Forbearance (less than 30 DPD)
148
-
0.01
2
-
0.45
150
-
0.02
Interest only – significant risk of inability to refinance at maturity (less than 30 DPD)
-
-
-
1,430
17
1.22
1,430
17
1.22
Other qualitative criteria
42
-
0.02
3
-
0.23
45
-
0.04
Total stage 2 gross balances
12,676
46
0.36
22,910
151
0.66
35,586
197
0.55
Reason for residential mortgages being reported in stage 2 (note i)
2023
Owner-occupied
Buy to let and legacy
Total
Gross
balances
Provisions
Provisions
as a % of
balance
Gross
balances
Provisions
Provisions
as a % of
balance
Gross
balances
Provisions
Provisions
as a % of
balance
£m £m
%
£m £m
%
£m £m
%
Quantitative criteria:
Payment status (greater than 30 DPD)
255
4
1.51
176
8
4.70
431
12
2.81
Increase in PD since origination (less than 30 DPD)
17,769
44
0.25
15,952
105
0.66
33,721
149
0.44
Qualitative criteria:
Forbearance (less than 30 DPD)
137
-
0.17
5
-
0.21
142
-
0.02
Interest only – significant risk of inability to refinance at maturity (less than 30 DPD)
-
-
-
1,203
30
2.46
1,203
30
2.46
Other qualitative criteria
39
-
0.02
9
-
1.12
48
-
0.23
Total stage 2 gross balances
18,200
48
0.26
17,345
143
0.83
35,545
191
0.54
Note:
i. Where loans satisfy more than one of the criteria for determining a significant increase in credit risk, the corresponding gross balance has been assigned in the order in which the categories are presented
above.
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Credit risk – Residential mortgages (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Credit risk – Residential mortgages (continued)
Loans which are reported within stage 2 are those which have experienced a significant increase in credit risk since origination, determined through both quantitative and qualitative
indicators, as shown in the table below.
Criteria
Detail
Quantitative
The primary quantitative indicators are the outputs of internal credit risk assessments. For residential mortgage exposures, PDs are derived using models, which use external
information such as that from credit reference agencies, as well as internal information such as known instances of arrears or other financial difficulty. Current and historical
data relating to an exposure are combined with forward-looking macroeconomic information to determine the likelihood of default. 12-month and lifetime PDs are calculated
for each loan.
The 12-month and lifetime PDs are compared to pre-determined benchmarks at each reporting date to ascertain whether a relative or absolute increase in credit risk has
occurred. The indicators for a significant increase in credit risk are:
• Absolute measures:
- The 12-month PD exceeds the 12-month PD threshold that is indicative, at the assessment date, of an account being in arrears.
- The residual lifetime PD exceeds the residual lifetime PD threshold, set at inception, which represents the maximum credit risk that would have been accepted at that
point.
• Relative measure:
- The residual lifetime PD has increased by at least 75 basis points and has at least doubled.
Qualitative
Qualitative indicators include the increased risk associated with interest only loans which may not be able to refinance at maturity.
Also included are forbearance events where full repayment of principal and interest is still anticipated, on a discounted basis.
Backstop
In addition to the primary criteria for stage allocation described above, accounts that are more than 30 days past due are also transferred to stage 2.
At 4 April 2024, stage 2 balances were £35.6 billion (2023: £35.5 billion). Of these, only 1% (2023: 1%) are in arrears by 30 days or more, with the majority of balances in stage 2 due to an
increase in PD since origination. This category includes £12.8 billion (2023: £16.6 billion) of loans where the PD has been uplifted to recognise the increased risk of default in a period of
economic uncertainty. The impact of this uplift in PD has resulted in these loans breaching existing quantitative PD thresholds.
Stage 2 loans include all loans greater than 30 days past due (DPD), including those where the original reason for being classified as stage 2 was other than arrears greater than 30 DPD.
The total value of loans in stage 2 due solely to payment status is less than 0.1% (2023: <0.1%) of total stage 2 balances.
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Credit risk – Residential mortgages (continued)
Credit quality
The residential mortgage portfolio comprises many small loans which are broadly homogenous, have low volatility of credit risk outcomes and are geographically diversified. The table
below shows the loan balances and provisions for residential mortgages held at amortised cost, by PD range. The PD distributions shown are based on 12-month IFRS 9 PDs at the
reporting date.
Loan balance and provisions by PD
2024 Gross balances (note i) Provisions
Provision
coverage
(Audited)
Stage 1
Stage 2
Stage 3
and POCI
Total
Stage 1
Stage 2
Stage 3
and POCI
Total
12-month IFRS 9 PD Range
£m
£m
£m
£m
£m
£m
£m
£m
%
0.00 to < 0.15%
128,032
3,099
32
131,163
4
3
-
7
0.01
0.15 to < 0.25%
14,654
1,888
7
16,549
2
4
-
6
0.04
0.25 to < 0.50%
13,712
5,865
10
19,587
6
11
-
17
0.08
0.50 to < 0.75%
5,148
3,779
8
8,935
2
9
-
11
0.12
0.75 to < 2.50%
5,525
10,733
41
16,299
4
38
-
42
0.26
2.50 to < 10.00%
389
6,491
53
6,933
3
49
-
52
0.75
10.00 to < 100%
35
3,731
191
3,957
1
83
10
94
2.37
100% (default)
-
-
1,004
1,004
-
-
92
92
9.15
Total
167,495
35,586
1,346
204,427
22
197
102
321
0.16
Loan balance and provisions by PD
2023
Gross balances (note i)
Provisions
Provision
coverage
(Audited)
Stage 1
Stage 2
Stage 3
and POCI
Total
Stage 1
Stage 2
Stage 3
and POCI
Total
12-month IFRS 9 PD Range
£m
£m
£m
£m
£m
£m
£m
£m
%
0.00 to < 0.15%
126,387
5,620
48
132,055
4
19
-
23
0.02
0.15 to < 0.25%
20,845
5,133
17
25,995
9
19
-
28
0.11
0.25 to < 0.50%
12,556
6,566
29
19,151
5
26
-
31
0.16
0.50 to < 0.75%
3,020
3,981
19
7,020
1
16
-
17
0.24
0.75 to < 2.50%
1,937
8,180
62
10,179
2
39
-
41
0.40
2.50 to < 10.00%
120
3,663
77
3,860
1
31
1
33
0.86
10.00 to < 100%
16
2,402
141
2,559
1
41
4
46
1.76
100% (default)
-
-
796
796
-
-
61
61
7.61
Total
164,881
35,545
1,189
201,615
23
191
66
280
0.14
Note:
i. Includes POCI loans of £113 million (2023: £123 million).
At 4 April 2024, 94% (2023: 96%) of the portfolio had a 12-month IFRS 9 PD of less than 2.5%, reflecting the high quality of the residential mortgage portfolio.
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Credit risk – Residential mortgages (continued)
Distribution of new business by borrower type (by value)
Distribution of new business by borrower type (by value) (note i)
2023
%
Owner-occupied:
First time buyers
31
29
Home movers
28
29
Remortgages
28
24
Other
1
1
Total owner-occupied
88
83
Buy to let:
Buy to let new purchases
5
7
Buy to let remortgages
7
10
Total buy to let
12
17
Total new business
100
Note:
i. All new business measures exclude further advances and product switches.
The proportion of new owner-occupied lending increased to 88% (2023: 83%), with the proportion of buy to let lending reducing to 12% (2023: 17%). This is due to the volume of both house
purchases and remortgages reducing in the buy to let market due to increased interest rates, which have adversely affected landlord sentiment.
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Credit risk – Residential mortgages (continued)
LTV and credit risk concentration
Loan to value (LTV) is calculated by weighting the borrower level LTV by the individual loan balance to arrive at an average LTV. This approach is considered to reflect most appropriately
the exposure at risk.
LTV distribution of new business (by value) (note i)
2024 2023
0% to 60%
28
28
60% to 75%
29
35
75% to 80%
9
9
80% to 85%
13
13
85% to 90%
16
12
90% to 95%
5
3
Over 95%
-
-
Total
Notes:
i. The LTV of new business excludes further advances and product switches.
ii. The average LTV of loan stock includes both amortised cost and FVTPL balances. There have
been no new FVTPL advances during the year.
Average LTV of new business (by value) (note i)
2023
%
Owner-occupied
71
70
Buy to let
62
66
Group
69
Average LTV of loan stock (by value) (note ii)
2023
%
Owner-occupied
55
54
Buy to let and legacy
56
56
Group
55
The Nationwide House Price Index has shown a 1.6% year on year increase in house prices, resulting in limited movements in the average LTV of loan stock. Owner-occupied new lending
average LTV has increased modestly to 71% (2023: 70%) due to support for the first time buyer segment. Buy to let new lending average LTV has reduced to 62% (2023: 66%) due to
increased interest rates reducing available loan amounts.
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Credit risk – Residential mortgages (continued)
Residential mortgage balances by LTV and region
Geographical concentration by stage
The following table shows residential mortgages, excluding FVTPL balances, by LTV and region across stages 1 and 2 (non credit impaired) and stage 3 and POCI (credit impaired). The
LTV is calculated using the latest indexed valuation based on the Nationwide House Price Index.
Residential mortgage gross balances by LTV and region
2024
Greater
London
Central
England
Northern
England
South East
England
South West
England
Scotland
Wales
Northern
Ireland
Total
Provision
Coverage
(Audited)
£m
£m
£m
£m
£m
£m
£m
£m
£m
%
Stage 1 and 2 loans
Fully collateralised
LTV ratio:
Up to 50%
24,865
14,422
11,819
9,016
7,515
4,186
2,543
1,100
75,466
0.05
50% to 60%
11,941
7,343
6,440
4,474
3,750
2,240
1,326
446
37,960
0.10
60% to 70%
13,155
7,641
6,753
5,025
3,985
2,469
1,226
457
40,711
0.12
70% to 80%
10,501
5,050
4,409
3,330
2,466
1,615
832
324
28,527
0.16
80% to 90%
4,424
2,915
2,835
1,867
1,350
1,048
592
219
15,250
0.15
90% to 100%
1,152
1,164
502
990
744
238
207
70
5,067
0.21
66,038
38,535
32,758
24,702
19,810
11,796
6,726
2,616
202,981
0.10
Not fully collateralised
Over 100% LTV
5
14
8
14
21
23
1
14
100
14.81
Collateral value
4
13
7
14
20
19
1
13
91
Negative equity
1
1
1
-
1
4
-
1
9
Total stage 1 and 2 loans
66,043
38,549
32,766
24,716
19,831
11,819
6,727
2,630
203,081
0.11
Stage 3 and POCI loans
Fully collateralised
LTV ratio:
Up to 50%
256
102
80
64
49
21
20
10
602
3.52
50% to 60%
88
59
54
35
29
13
12
3
293
5.86
60% to 70%
59
39
54
24
19
14
10
5
224
8.56
70% to 80%
43
19
34
12
8
10
3
6
135
10.73
80% to 90%
11
6
17
4
2
4
1
4
49
27.03
90% to 100%
3
3
4
1
3
1
-
4
19
22.15
460
228
243
140
110
63
46
32
1,322
6.78
Not fully collateralised
Over 100% LTV
3
3
7
1
1
3
-
6
24
51.79
Collateral value
3
2
6
1
1
2
-
5
20
Negative equity
-
1
1
-
-
1
-
1
4
Total stage 3 and POCI loans
463
231
250
141
111
66
46
38
1,346
7.58
Total residential mortgages
66,506
38,780
33,016
24,857
19,942
11,885
6,773
2,668
204,427
0.16
Total geographical concentrations
33%
19%
16%
12%
10%
6%
3%
1%
100%
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Credit risk – Residential mortgages (continued)
Residential mortgage gross balances by LTV and region
2023
Greater
London
Central
England
Northern
England
South East
England
South West
England
Scotland
Wales
Northern
Ireland
Total
Provision
Coverage
(Audited)
£m
£m
£m
£m
£m
£m
£m
£m
£m
%
Stage 1 and 2 loans
Fully collateralised
LTV ratio:
Up to 50%
25,295
14,722
11,214
9,433
7,969
3,944
2,512
1,074
76,163
0.03
50% to 60%
11,743
7,396
6,162
4,572
3,882
2,127
1,338
421
37,641
0.08
60% to 70%
12,937
7,878
6,956
5,108
4,142
2,478
1,299
504
41,302
0.13
70% to 80%
11,411
4,977
4,601
3,406
2,239
1,875
791
345
29,645
0.21
80% to 90%
3,704
2,072
2,132
1,368
952
766
418
206
11,618
0.18
90% to 100%
866
718
817
551
351
330
175
86
3,894
0.26
65,956
37,763
31,882
24,438
19,535
11,520
6,533
2,636
200,263
0.10
Not fully collateralised
Over 100% LTV
7
23
21
20
21
36
5
30
163
6.90
Collateral value
6
22
20
20
20
32
5
28
153
Negative equity
1
1
1
-
1
4
-
2
10
Total stage 1 and 2 loans
65,963
37,786
31,903
24,458
19,556
11,556
6,538
2,666
200,426
0.11
Stage 3 and POCI loans
Fully collateralised
LTV ratio:
Up to 50%
225
99
77
59
50
24
18
11
563
1.95
50% to 60%
82
51
48
29
25
12
11
3
261
3.30
60% to 70%
48
36
46
18
15
12
7
5
187
5.47
70% to 80%
29
18
29
12
4
11
3
4
110
11.53
80% to 90%
9
3
12
2
1
5
1
3
36
22.39
90% to 100%
3
1
5
-
1
1
-
3
14
31.00
396
208
217
120
96
65
40
29
1,171
4.67
Not fully collateralised
Over 100% LTV
1
1
5
1
-
2
-
8
18
71.68
Collateral value
1
1
3
1
-
2
-
7
15
Negative equity
-
-
2
-
-
-
-
1
3
Total stage 3 and POCI loans
397
209
222
121
96
67
40
37
1,189
5.53
Total residential mortgages
66,360
37,995
32,125
24,579
19,652
11,623
6,578
2,703
201,615
0.14
Total geographical concentrations
33%
19%
16%
12%
10%
6%
3%
1%
100%
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Annual Report and Accounts 2024
Risk report
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Credit risk – Residential mortgages (continued)
Over the year, the geographical distribution of residential mortgages across the UK has remained stable. The highest concentration for both the owner-occupied and buy to let and legacy
portfolios is in Greater London, with proportions broadly stable at 29% and 45% (2023: 29% and 46%) respectively.
In addition to balances held at amortised cost shown in the table above, £40 million (2023: £47 million) of residential mortgages are held at FVTPL. These have an average LTV of 34%
(2023: 35%). The largest geographical concentration within the FVTPL balances is also in Greater London, at 63% (2023: 61%) of total FVTPL balances.
Arrears and possessions
Residential mortgage lending continues to have a low risk profile as demonstrated by the low level of arrears compared to the industry average.
Number of cases more than 3 months in arrears as % of total book (note i)
2024 2023
%
%
Owner-occupied
0.36
0.29
Buy to let and legacy 0.60
0.44
Total
0.41
0.32
UK Finance (UKF) industry average
0.94
0.72
Notes:
i. The methodology for calculating mortgage arrears is based on the UKF definition of arrears,
where months in arrears is determined by dividing the arrears balance outstanding by the
latest monthly contractual payment.
Number of properties in possession as % of total book
2024
2023
Number of
properties
%
Number of
properties
%
Owner-occupied
137
0.01
117
0.01
Buy to let and legacy
232
0.07
129
0.04
Total
369
0.02
246
0.02
UKF industry average 0.03 0.02
The proportion of cases more than 3 months in arrears across all residential lending has increased during the year to 0.41% (2023: 0.32%) as a result of the rising cost of living, including
higher mortgage payments, but remains low relative to the industry average. The performance of the open buy to let book originated under the TMW brand remains strong, with 0.23%
(2023: 0.15%) of cases more than 3 months in arrears.
The number of properties in possession has increased to 369 (2023: 246), reflective of increased arrears volumes over 2023. The possession of a borrower’s property is only undertaken
where all reasonable attempts to resolve the situation have been unsuccessful.
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Risk report
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Credit risk – Residential mortgages (continued)
Residential mortgages by payment status
The following table shows the payment status of all residential mortgages.
Residential mortgages gross balances by payment status
2024 2023
Owner-
occupied
Buy to let and
legacy
Total
Owner-occupied
Buy to let and
legacy
Total
(Audited)
£m
£m
£m
%
£m
£m
£m
%
Not past due
159,036
42,524
201,560
98.6
155,849
43,270
199,119
98.7
Past due 0 to 1 month
1,080
418
1,498
0.7
1,044
376
1,420
0.7
Past due 1 to 3 months
352
207
559
0.3
310
213
523
0.3
Past due 3 to 6 months
213
121
334
0.2
155
108
263
0.1
Past due 6 to 12 months
173
101
274
0.1
111
65
176
0.1
Past due over 12 months
110
79
189
0.1
76
50
126
0.1
Possessions
17
36
53
-
13
22
35
-
Total residential mortgages
160,981
43,486
204,467
100
157,558
44,104
201,662
100
The balance of cases past due by more than 3 months has increased to £850 million (2023: £600 million) reflecting economic conditions, including rising interest rates. Increases remain
well below the levels expected in our provisioning calculations.
As at 4 April 2024, the mortgage portfolios include 1,634 (2023: 1,329) mortgage accounts, including those in possession, where payments were more than 12 months in arrears. The total
principal outstanding in these cases was £218 million (2023: £147 million), and the total value of arrears was £35 million (2023: £26 million).
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Credit risk – Residential mortgages (continued)
Interest only mortgages
At 4 April 2024, interest only balances of £6,240 million (2023: £6,812 million) account for 4% (2023: 4%) of the owner-occupied residential mortgage portfolio. Nationwide re-entered the
owner-occupied market for interest only lending under a newly established credit policy in April 2020; however, 78% of current interest only mortgage balances relate to historical
accounts which were originally advanced as interest only mortgages or where a subsequent change in terms to an interest only basis was agreed. Maturities on interest only mortgages
are managed closely, with regular engagement with borrowers to ensure the loan is redeemed or to agree a strategy for repayment.
Of the buy to let and legacy portfolio, £39,619 million (2023: £40,126 million) relates to interest only balances, representing 91% (2023: 91%) of balances. Buy to let remains open to new
interest only lending under standard terms.
There is a risk that a proportion of interest only mortgages will not be redeemed at their contractual maturity date, because a borrower does not have a means of capital repayment or has
been unable to refinance the loan. Interest only loans which are judged to have a significantly increased risk of inability to refinance at maturity are transferred to stage 2. The ability of a
borrower to refinance is calculated using current lending criteria which consider LTV and affordability assessments. The impact of recognising this risk is to increase provisions by
£35 million (2023: £45 million).
Interest only mortgages (gross balance) – term to maturity (note i)
Term expired
(still open)
Due within one
year
Due after one
year and before
two years
Due after two
years and before
five years
Due after more
than five years
Total
% of
book
2024
£m
£m
£m
£m
£m
£m
%
Owner-occupied
69
187
223
981
4,780
6,240
3.9
Buy to let and legacy
174
191
356
1,679
37,219
39,619
91.1
Total
243
378
579
2,660
41,999
45,859
22.4
2023
£m
£m
£m
£m
£m
£m
%
Owner-occupied
69
209
261
1,023
5,250
6,812
4.3
Buy to let and legacy
190
195
269
1,729
37,743
40,126
91.0
Total
259
404
530
2,752
42,993
46,938
23.3
Note:
i. Balances subject to forbearance with agreed term extensions are presented based on the latest agreed contractual term.
Past term interest only loans are not considered to be past due where contractual interest payments continue to be met, pending renegotiation of the facility. These loans are, however,
treated as credit impaired and categorised as stage 3 balances from three months after the maturity date.
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Credit risk – Residential mortgages (continued)
Forbearance
Nationwide is committed to supporting borrowers facing financial difficulty by working with them to find a solution through proactive arrears management and forbearance. The Group
applies the European Banking Authority (EBA) definition of forbearance.
The following concession events are included within the forbearance reporting for residential mortgages:
Past term interest only concessions
Nationwide works with borrowers who are unable to repay the capital at term expiry of their interest only mortgage. Where a borrower is unable to renegotiate the facility within six
months of maturity, but no legal enforcement is pursued, the account is considered forborne. Should another concession event such as a term extension occur within the six month period,
this is also classed as forbearance.
Interest only concessions
Where a temporary interest only concession is granted the loans do not accrue arrears for the period of the concession and these loans are categorised as impaired.
Capitalisation
When a borrower emerges from financial difficulty, provided they have made at least six full monthly instalments, they are offered the option to capitalise arrears. This results in the
account being repaired and the loans are categorised as not impaired provided contractual repayments are maintained.
Capitalisation following notification of death of a borrower
On notification of death, a 12-month capitalisation concession is offered to allow time for the estate to redeem the account. The loan does not accrue arrears for the period of the
concession although interest will continue to be added. Accounts subject to this concession will be classed as forborne if the full contractual payment is not received.
Term extensions (within term)
Customers in financial difficulty may be allowed to extend the term of their mortgage. On a capital repayment mortgage this will reduce their monthly commitment; interest only
borrowers will benefit by having a longer period to repay the capital at maturity.
Permanent interest only conversions
In the past, some borrowers in financial difficulty were granted a permanent interest only conversion, normally reducing their monthly commitment. This facility was withdrawn in March
2012; it remains available for buy to let lending in line with Nationwide’s new business credit policy.
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Credit risk – Residential mortgages (continued)
The table below provides details of residential mortgages held at amortised cost subject to forbearance, including balances which are within stage 1 for provision purposes but which
continue to meet the EBA definition of forbearance. Accounts that are currently subject to a concession are all assessed as either stage 2, or stage 3 (credit impaired) where full
repayment of principal and interest is no longer anticipated.
Gross balances subject to forbearance (note i)
2024
2023
Owner-occupied
Buy to let and
legacy
Total
Owner-occupied
Buy to let and
legacy
Total
£m
£m
£m
£m
£m
£m
Past term interest only (note ii)
97
140
237
101
149
250
Interest only concessions
360
20
380
503
25
528
Capitalisation
76
17
93
85
22
107
Capitalisation following notification of death of borrower
79
118
197
75
105
180
Term extensions (within term)
48
13
61
41
18
59
Permanent interest only conversions
1
31
32
1
29
30
Total forbearance (note iii)
661
339
1,000
806
348
1,154
Of which stage 2
206
66
272
289
74
363
Of which stage 3
320
263
583
383
253
636
%
%
%
%
%
%
Total forbearance as a % of total gross balances
0.4
0.8
0.5
0.5
0.8
0.6
£m
£m
£m
£m
£m
£m
Impairment provisions on forborne loans
15
29
44
11
20
31
Notes:
i. Where more than one concession event has occurred, balances are reported under the latest event.
ii. Includes interest only mortgages where a customer is unable to renegotiate the facility within six months of maturity and no legal enforcement is pursued. Should a concession event such as a term
extension occur within the six-month period, this will also be classed as forbearance.
iii. For loans subject to concession events, accounts are transferred back to stage 1 or 2 only after being up to date and meeting contractual obligations for a period of 12 months.
As part of our ongoing commitment to support our borrowers facing financial difficulty, Nationwide has signed up to HM Government’s Mortgage Charter. This offers borrowers who are
up to date on their mortgage payments the option to switch to interest only payments for a six-month period. As at 31 March 2024, £1,384 million of outstanding balances have a live
concession. £45 million of these balances are included in the table above, as they were in a forbearance probation period when the option was taken up. The remainder are not classified as
forborne.
As a result of this new option available to borrowers, total balances subject to forbearance have reduced to £1,000 million (2023: £1,154 million), largely due to a reduction in non-
Mortgage Charter interest only concessions.
The average LTV for forborne accounts is 47% (2023: 47%). In addition to the amortised cost balances above, £3 million (2023: £4 million) of FVTPL balances are also forborne.
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Credit risk – Consumer banking
Annual Report and Accounts 2024
Risk report
(continued)
Credit risk – Consumer banking
Summary
The consumer banking portfolio comprises balances on unsecured retail banking products: overdrawn current accounts, personal loans and credit cards. Over the year, total balances
have reduced to £4,263 million (2023: £4,408 million), driven by reduced new business and repayments of the existing personal loan book.
Arrears levels have remained low during the year. Excluding charged off accounts, balances more than 3 months in arrears represent 1.36% (2023: 1.21%) of the portfolio. During the year
there has also been an increase in early arrears, which the Group will continue to monitor. Arrears levels are expected to increase over the short to medium term due to continued high
interest rates and ongoing household affordability pressures.
Consumer banking gross balances
2024
2023
(Audited)
%
£m
%
Overdrawn current accounts
8
7
Personal loans
55
58
Credit cards
37
35
Total consumer banking
100
100
All consumer banking loans are classified and measured at amortised cost.
Impairment charge/(release) and write-offs for the year
2024
2023
(Audited)
£m
Overdrawn current accounts
9
Personal loans
28
Credit cards
(6)
Total impairment charge
31
%
Impairment charge as a % of average gross balance
0.68
£m
Overdrawn current accounts
15
Personal loans
47
Credit cards
35
Total gross write-offs
97
Balance sheet provisions reduced in the year to £436 million (2023: £469 million), primarily due to write offs of £89 million, offset by impairment charges recognised of £51 million (2023:
£31 million). Provisions include a modelled adjustment totalling £73 million (2023: £100 million) to reflect ongoing economic uncertainty, including the risks related to borrower
affordability. This adjustment has reduced during the year by £27 million (2023: £46 million) due to a combination of wage growth and a lower rate of inflation.
The impairment charge of £51 million (2023: £31 million) is higher than the prior year, reflecting the smaller release of modelled adjustments in the current year as compared to the prior
year. Further information is included in note 10 to the financial statements.
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Credit risk – Consumer banking (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Credit risk – Consumer banking (continued)
The following table shows consumer banking balances by stage, with the corresponding impairment provisions and resulting provision coverage ratios.
Consumer banking product and staging analysis
2024
2023
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
(Audited)
£m
£m
£m
£m
£m
£m
£m
£m
Gross balances
Overdrawn current accounts
187
120
40
347
160
91
59
310
Personal loans
1,274
950
129
2,353
1,378
1,063
133
2,574
Credit cards
1,099
380
84
1,563
845
591
88
1,524
Total
2,560
1,450
253
4,263
2,383
1,745
280
4,408
Provisions
Overdrawn current accounts
5
23
36
64
5
21
38
64
Personal loans
10
54
113
177
9
54
117
180
Credit cards
16
105
74
195
11
136
78
225
Total
31
182
223
436
25
211
233
469
Provisions as a % of total balance
%
%
%
%
%
%
%
%
Overdrawn current accounts
2.81
18.89
90.00
18.39
3.10
22.90
64.80
20.57
Personal loans
0.76
5.82
86.93
7.54
0.67
5.09
87.66
7.00
Credit cards
1.43
27.52
88.26
12.46
1.25
22.96
88.85
14.73
Total
1.20
12.58
87.86
10.23
1.04
12.07
83.25
10.63
Stage 2 balances total £1,450 million (2023: £1,745 million), which includes £473 million (2023: £585 million) of balances where the PD has been uplifted to recognise the increased risk of
default in a period of economic uncertainty. The reduction in balances impacted by this PD uplift, combined with an update to the credit card PD model, has driven the reduction in stage 2
balances.
Credit performance continues to be strong, with the proportion of total balances in stage 3 decreasing to 5.9% (2023: 6.4%). The reduction in stage 3 balances is primarily due to up-to-
date current account customers, who were granted a six-month 0% interest rate concession during 2023 and thus moved to stage 3, returning to stage 1 or 2 after reaching 12 months
from when the concession was granted. Consumer banking stage 3 gross balances and provisions include charged off balances. These are accounts which are closed to future transactions
and are held on the balance sheet for an extended period (up to 36 months) whilst recovery activities take place. Excluding these charged off balances and related provisions, provisions
amount to 6.5% (2023: 6.9%) of gross balances.
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Credit risk – Consumer banking (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Credit risk – Consumer banking (continued)
The table below summarises the movements in, and stage allocations of, the Group’s consumer banking balances held at amortised cost, including the impact of ECL impairment
provisions. The movements within the table compare the position at 4 April 2024 to that at the start of the reporting period.
Reconciliation of net movements in consumer banking balances and impairment provisions (note i)
Non-credit impaired
Credit impaired
Subject to 12-month ECL
Subject to lifetime ECL
Subject to lifetime ECL
Total
Stage 1
Stage 2
Stage 3
Gross
balances
Provisions
Gross
balances
Provisions
Gross
balances
Provisions
Gross
balances
Provisions
(Audited)
£m
£m £m £m
£m £m
£m
£m
At 5 April 2023
2,383
25
1,745
211
280
233
4,408
469
Stage transfers:
Transfers from stage 1 to stage 2
(270)
(4)
270
4
-
-
-
-
Transfers to stage 3
(17)
(1)
(64)
(22)
81
23
-
-
Transfers from stage 2 to stage 1
648
69
(648)
(69)
-
-
-
-
Transfers from stage 3
7
1
16
5
(23)
(6)
-
-
Net remeasurement of ECL arising from transfer of stage
-
(53)
-
47
-
42
-
36
Net movement arising from transfer of stage
368
12
(426)
(35)
58
59
-
36
New assets originated or purchased (note ii)
644
8
445
28
9
6
1,098
42
Net impact of further lending and repayments
(469)
(13)
(110)
(23)
(4)
-
(583)
(36)
Changes in risk parameters in relation to credit quality
-
2
-
6
-
14
-
22
Other items impacting income statement (including recoveries)
-
-
-
-
-
(5)
-
(5)
Redemptions
(366)
(3)
(204)
(5)
(1)
-
(571)
(8)
Income statement charge for the year
51
Decrease due to write-offs
-
-
-
-
(89)
(89)
(89)
(89)
Other provision movements
-
-
-
-
-
5
-
5
At 4 April 2024
2,560
31
1,450
182
253
223
4,263
436
Net carrying amount
2,529
1,268
30
3,827
Notes:
i. The basis of preparation for this table has been updated. Previously, the table was presented on a gross basis, with the reported values representing an aggregation of monthly movements over the year.
To present more directly the change in credit quality compared to the previous reporting period, the table is now prepared on a net basis.
ii. If a new asset is originated in the period, the values included are the closing gross balance and provision for the period. The stage in which the addition is shown reflects the stage of the account at the end
of the period.
Further information on movements in total gross loans and advances to customers and impairment provisions, including the methodology applied in preparing the table, is included in
note 14.
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Credit risk – Consumer banking (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Credit risk – Consumer banking (continued)
Reason for consumer banking balances being reported in stage 2 (note i)
2024
Overdrawn current accounts
Personal loans
Credit cards
Total
Gross
balances
Provisions
Provisions
as a % of
balance
Gross
balances
Provisions
Provisions
as a % of
balance
Gross
balances
Provisions
Provisions
as a % of
balance
Gross
balances
Provisions
Provisions
as a % of
balance
£m
£m
%
£m
£m
%
£m
£m
%
£m
£m
%
Quantitative criteria:
Payment status (greater than 30 DPD) (note ii)
4
3
68
12
7
63
5
4
86
21
14
69
Increase in PD since origination (less than 30 DPD)
108
19
18
935
47
5
347
95
27
1,390
161
12
Qualitative criteria:
Forbearance (less than 30 DPD) (note iii)
-
-
14
-
-
9
-
-
14
-
-
13
Other qualitative criteria (less than 30 DPD)
8
1
8
3
-
4
28
6
20
39
7
16
Total stage 2 gross balances
120
23
19
950
54
6
380
105
28
1,450
182
13
Reason for consumer banking balances being reported in stage 2 (note i)
2023
Overdrawn current accounts
Personal loans
Credit cards
Total
Gross
balances
Provisions
Provisions
as a % of
balance
Gross
balances
Provisions
Provisions
as a % of
balance
Gross
balances
Provisions
Provisions
as a % of
balance
Gross
balances
Provisions
Provisions
as a % of
balance
£m
£m
%
£m
£m
%
£m
£m
%
£m
£m
%
Quantitative criteria:
Payment status (greater than 30 DPD) (note ii)
2
2
98
11
6
52
4
4
84
17
12
65
Increase in PD since origination (less than 30 DPD)
81
18
22
1,049
48
5
576
130
23
1,706
196
12
Qualitative criteria:
Forbearance (less than 30 DPD) (note iii)
-
-
17
1
-
10
-
-
19
1
-
13
Other qualitative criteria (less than 30 DPD)
8
1
10
2
-
4
11
2
18
21
3
13
Total stage 2 gross balances
91
21
23
1,063
54
5
591
136
23
1,745
211
12
Notes:
i. Where loans satisfy more than one of the criteria for determining a significant increase in credit risk, the corresponding balance has been assigned in the order in which the categories are presented above.
ii. This category includes all loans greater than 30 DPD, including those whose original reason for being classified as stage 2 was not arrears greater than 30 DPD.
iii. Stage 2 forbearance relates to cases where full repayment of principal and interest is still anticipated.
Balances reported within stage 2 represent loans which have experienced a significant increase in credit risk since origination. The significant increase is determined through both
quantitative and qualitative indicators. Of the £1,450 million (2023: £1,745 million) stage 2 balances, only 1% (2023: 1%) are in arrears by 30 days or more, with the majority of balances in
stage 2 due to an increase in PD since origination. This category includes £473 million (2023: £585 million) of loans where the PD has been uplifted to recognise the increased risk of
default in a period of economic uncertainty. The impact of this uplift in PD has resulted in these loans breaching existing quantitative PD thresholds.
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Credit risk – Consumer banking (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Credit risk – Consumer banking (continued)
The table below outlines the main criteria used to determine whether a significant increase in credit risk since origination has occurred.
Criteria
Detail
Quantitative
The primary quantitative indicators are the outputs of internal credit risk assessments. For consumer banking exposures, PDs are derived using models, which use external
information such as that from credit reference agencies, as well as internal information such as known instances of arrears or other financial difficulty. Current and historical
data relating to the exposure are combined with forward-looking macroeconomic information to determine the likelihood of default. 12-month and lifetime PDs are calculated
for each loan.
The 12-month and lifetime PDs are compared to pre-determined benchmarks at each reporting date to ascertain whether a relative or absolute increase in credit risk has
occurred. The indicators for a significant increase in credit risk are:
• Absolute measures:
- The 12-month PD exceeds the 12-month PD threshold that is indicative, at the assessment date, of an account being in arrears.
- The residual lifetime PD exceeds the residual lifetime PD threshold, set at inception, which represents the maximum credit risk that would have been accepted at that
point.
• Relative measure:
- The residual lifetime PD has increased by at least 75 basis points and has at least doubled.
Qualitative
Qualitative criteria include both forbearance events and, within the credit card portfolio, recognition of the risk related to borrowers in persistent debt.
Backstop
In addition to the primary criteria for stage allocation described above, accounts that are more than 30 days past due are also transferred to stage 2.
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Credit risk – Consumer banking (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Credit risk – Consumer banking (continued)
Credit quality
Nationwide adopts robust credit management policies and processes designed to recognise and manage the risks arising from the portfolio.
The following table shows gross balances and provisions for consumer banking balances held at amortised cost by PD range. The PD distributions shown are based on 12-month IFRS 9
PDs at the reporting date.
Consumer banking gross balances and provisions by PD
2024
Gross balances
Provisions
Provision
coverage
(Audited)
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
12-month IFRS 9 PD range £m
£m
£m
£m
£m
£m
£m
£m
%
0.00 to <0.15%
684
24
-
708
2
2
-
4
0.52
0.15 to < 0.25%
307
24
-
331
1
1
-
2
0.70
0.25 to < 0.50%
408
121
-
529
2
3
-
5
0.96
0.50 to < 0.75%
227
126
-
353
2
3
-
5
1.31
0.75 to < 2.50%
555
444
-
999
7
20
-
27
2.73
2.50 to < 10.00%
354
427
1
782
14
53
-
67
8.61
10.00 to < 100%
25
284
3
312
3
100
1
104
33.42
100% (default)
-
-
249
249
-
-
222
222
88.80
Total
2,560
1,450
253
4,263
31
182
223
436
10.23
Consumer banking gross balances and provisions by PD
2023
Gross balances
Provisions
Provision
coverage
(Audited)
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
12-month IFRS 9 PD range
£m
£m
£m
£m
£m
£m
£m
£m
%
0.00 to <0.15%
644
7
-
651
2
-
-
2
0.30
0.15 to < 0.25%
338
26
-
364
1
1
-
2
0.48
0.25 to < 0.50%
397
136
-
533
2
2
-
4
0.77
0.50 to < 0.75%
225
157
-
382
1
3
-
4
1.13
0.75 to < 2.50%
482
554
3
1,039
6
21
-
27
2.60
2.50 to < 10.00%
270
552
13
835
10
69
2
81
9.70
10.00 to < 100%
27
313
9
349
3
115
4
122
34.79
100% (default)
-
-
255
255
-
-
227
227
89.38
Total
2,383
1,745
280
4,408
25
211
233
469
10.63
The credit quality of the consumer banking portfolio has remained strong. 87% (2023: 86%) of the portfolio has a 12-month IFRS 9 PD of less than 10%.
175
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Credit risk – Consumer banking (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Credit risk – Consumer banking (continued)
Consumer banking balances by payment due status
Credit risk in the consumer banking portfolio is primarily monitored and reported based on arrears status which is set out below.
Consumer banking gross balances by payment due status
2024
2023
Overdrawn
current
accounts
Personal
loans
Credit
cards
Total
Overdrawn
current
accounts
Personal
loans
Credit
cards
Total
(Audited)
£m
£m
£m
£m
%
£m
£m
£m
£m
%
Not past due
292
2,164
1,460
3,916
91.9
265
2,386
1,423
4,074
92.4
Past due 0 to 1 month
13
53
18
84
2.0
8
49
14
71
1.6
Past due 1 to 3 months
5
16
9
30
0.7
4
15
8
27
0.6
Past due 3 to 6 months
8
12
6
26
0.6
5
11
6
22
0.5
Past due 6 to 12 months
4
9
1
14
0.3
4
11
1
16
0.4
Past due over 12 months
2
13
-
15
0.3
2
11
-
13
0.3
Charged off (note i)
23
86
69
178
4.2
22
91
72
185
4.2
Total
347
2,353
1,563
4,263
100.0
310
2,574
1,524
4,408
100.0
Note:
i. Charged off balances relate to accounts which are closed to future transactions and are held on the balance sheet for an extended period (up to 36 months, depending on the product) whilst recovery
procedures take place.
Of total balances excluding charged off accounts, arrears greater than three months are £55 million (2023: £51 million), representing 1.36% (2023: 1.21%) of these balances. Arrears
balances of less than three months have increased to £114 million (2023: £98 million). Arrears levels are expected to increase further due to the ongoing affordability pressures for
borrowers.
Forbearance
Nationwide is committed to supporting customers facing financial difficulty by working with them to find a solution through proactive arrears management and forbearance. The Group
applies the European Banking Authority definition of forbearance.
The following concession events are included within the forbearance reporting for consumer banking:
Payment concession
This concession consists of reductions to the monthly payments or interest rate charged over an agreed period and may be offered to customers with an overdraft or credit card. For
credit cards subject to such a concession, arrears do not increase provided the payments are made.
176
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Credit risk – Consumer banking (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Credit risk – Consumer banking (continued)
Interest suppressed payment arrangement
This temporary interest payment concession results in reduced monthly payments and may be offered to customers with an overdraft, credit card or personal loan. Interest payments are
suppressed during the period of the concession and arrears do not increase. Cases subject to this concession are classified as impaired.
Balances re-aged/re-written
As customers repay their debt in line with the terms of their new arrangement, their accounts are re-aged, bringing them into an up to date and performing position. For personal loans
the loan will be re-written to extend the term and thus maintain a reduced monthly payment. For credit cards the account is re-aged and the payment status set to ‘up to date’, at which
point the customer is treated in the same way as any other performing account.
The table below provides details of consumer banking balances subject to forbearance, including balances which are within stage 1 for provision purposes but which continue to meet the
EBA definition of forbearance. Accounts that are currently subject to a concession are all assessed as either stage 2, or stage 3 (credit impaired) where full repayment of principal and
interest is no longer anticipated.
Gross balances subject to forbearance (note i)
2024 2023 (note ii)
Overdrawn
current
accounts
Personal
loans
Credit
cards
Total
Overdrawn
current
accounts
Personal
loans
Credit
cards
Total
£m
£m
£m
£m
£m
£m
£m
£m
Payment concession
4
-
11
15
4
-
13
17
Interest suppressed payment concession
26
28
8
62
28
33
9
70
Balance re-aged/re-written
-
2
2
4
-
2
2
4
Total forbearance (note iii)
30
30
21
81
32
35
24
91
Of which stage 2
16
2
12
30
3
3
14
20
Of which stage 3
9
27
9
45
29
31
9
69
%
%
%
%
%
%
%
%
Total forbearance as a % of total gross balances
8.6
1.3
1.3
1.9
10.3
1.4
1.6
2.1
£m
£m
£m
£m
£m
£m
£m
£m
Impairment provisions on forborne loans
12
24
10
46
12
28
12
52
Notes:
i. Where more than one concession event has occurred, balances are reported under the latest event.
ii. The 2023 values for credit cards have been restated to reflect an update to forbearance definitions during the current year, which has resulted in £12 million of payment concessions being classified as
forbearance.
iii. For loans subject to concession events, accounts are transferred back to stage 1 or 2 only after being up to date and meeting contractual obligations for a period of 12 months.
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Credit risk – Commercial lending
Annual Report and Accounts 2024
Risk report
(continued)
Credit risk – Commercial lending
Summary
The commercial portfolio comprises loans which have been provided to meet the funding requirements of registered social landlords, project finance initiatives and commercial real
estate investors. The project finance and commercial real estate portfolios are closed to new business and are in run-off.
Commercial gross balances
2024
2023
(Audited)
£m
£m
Registered social landlords (note i)
4,386
4,131
Project finance (note ii)
496
537
Commercial real estate (CRE)
257
326
Commercial balances at amortised cost
5,139
4,994
Fair value adjustment for micro hedged risk (note iii)
350
430
Commercial balances – FVTPL (note iv)
2
53
Total
5,491
5,477
Notes:
i. Loans to registered social landlords are secured on residential property.
ii. Loans advanced in relation to project finance are secured on cash flows from government or local authority backed contracts under the Private Finance Initiative.
iii. Micro hedged risk relates to loans hedged on an individual basis.
iv. FVTPL balances have reduced to £2 million (2023: £53 million) following CRE loan redemptions, with the remaining balance relating to loans to registered social landlords.
Impairment charge and write-offs for the year
2024
2023
(Audited)
£m £m
Total impairment charge
17 1
Gross write-offs
9
15
Commercial provision charges have increased due to updated case assessments for a small number of individually assessed exposures.
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Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Credit risk – Commercial lending (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Credit risk – Commercial lending (continued)
The following table shows commercial balances carried at amortised cost on the balance sheet, with the stage allocation of the exposures, impairment provisions and resulting provision
coverage ratios.
Commercial portfolio and staging analysis
2024
2023
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
(Audited)
£m
£m
£m
£m
£m
£m
£m
£m
Gross balances
Registered social landlords
4,182
204
-
4,386
4,061
70
-
4,131
Project finance
402
42
52
496
459
78
-
537
CRE
221
21
15
257
274
19
33
326
Total
4,805
267
67
5,139
4,794
167
33
4,994
Provisions
Registered social landlords
1
-
-
1
1
-
-
1
Project finance
-
2
15
17
-
8
-
8
CRE
-
-
6
6
1
-
6
7
Total
1
2
21
24
2
8
6
16
Provisions as a % of total balance
%
%
%
%
%
%
%
%
Registered social landlords
0.01
0.13
-
0.02
0.01
0.26
-
0.02
Project finance
0.03
4.21
30.39
3.57
0.02
10.65
-
1.57
CRE
0.25
0.33
35.69
2.33
0.19
1.31
18.94
2.13
Total
0.03
0.79
31.58
0.48
0.02
5.26
18.94
0.32
Impaired loans have increased, reflecting a small number of defaults, whilst the credit quality of the wider book remains stable. Overall, 94% (2023: 96%) of balances are in stage 1. Of the
£267 million (2023: £167 million) stage 2 loans, which represent 5.2% (2023: 3.3%) of total balances, £1 million (2023: £nil) were in arrears by 30 days or more.
The increase in stage 2 balances reflects idiosyncratic risk events considered capable of remedy with a low risk of loss. Stage 2 exposures are subject to increased monitoring and
supported via forbearance measures where appropriate. The increase in stage 3 balances and provisions is due to a distressed project finance exposure where a restructure remains
under negotiation.
179
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Credit risk – Commercial lending (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Credit risk – Commercial lending (continued)
Credit quality
Nationwide applies robust credit management policies and processes to identify and manage the risks arising from the portfolio.
The credit risk of the registered social landlord portfolio is managed through risk appetite and risk limits reflected in approved credit risk frameworks, policies, and controls. Ongoing
monitoring of the project finance and CRE portfolios is undertaken to identify signs of risk deterioration.
The remaining CRE portfolio continues to be spread across the retail, office, residential, industrial and leisure sectors. The largest exposure is to the residential sector which represents
47% (2023: 39%) of total balances, with a weighted average LTV of 34% (2023: 35%). Where a loan is secured on assets crossing different sectors, the sector allocation is based upon the
value of the underlying assets in each sector. The LTV distribution of balances has remained stable with 91% (2023: 91%) of the portfolio having an LTV of 75% or less, and 58% (2023: 47%)
of the portfolio having an LTV of 50% or less. Balances with arrears have reduced to £14 million (2023: £18 million). Of these, £9 million (2023: £10 million) have arrears greater than 3
months and relate to loans that are in recovery or are being actively managed.
Risk grades
The registered social landlord portfolio is risk rated using an internal PD rating model, with the major drivers being financial strength, evaluations of the borrower’s oversight and
management, and their type and size. The distribution of exposures is weighted towards the stronger risk ratings and against a backdrop of zero defaults in the portfolio, the credit
quality remains strong, with an average 12-month PD of 0.04% (2023: 0.04%) across the portfolio.
Risk grades for the project finance portfolio are based upon the IRB supervisory slotting approach for specialised lending exposures, with 84% (2023: 85%) of the exposure rated strong
or good.
Risk grades for the CRE portfolio use the same slotting approach as for project finance lending. Exposures are classified into categories depending on the underlying credit risk, with the
assessment based upon financial strength, property characteristics, strength of sponsor and any other forms of security. 88% of the CRE balances are rated as strong, good, or
satisfactory (2023: 73%).
180
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Credit risk – Commercial lending (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Credit risk – Commercial lending (continued)
Forbearance
Nationwide is committed to supporting borrowers facing financial difficulty by working with them to find a solution through proactive arrears management and forbearance.
Forbearance is recorded and reported at borrower level and applies to all commercial lending, including impaired exposures and borrowers subject to enforcement and recovery action.
The Group applies the European Banking Authority definition of forbearance.
The table below provides details of commercial loans that are currently subject to forbearance by concession event.
Gross balances subject to forbearance (notes i and ii)
2024
£m
Modifications:
Payment concession
7
Extension at maturity
14
Breach of covenant
163
Total
184
Total impairment provision on forborne loans
23
Notes:
i. Balances include micro hedging.
ii. Loans where more than one concession event has occurred are reported under the latest event.
Total forborne balances (excluding FVTPL) have increased to £184 million (2023: £116 million), comprising registered social landlord balances of £41 million (2023: £nil), project finance
balances of £112 million (2023: £66 million) and CRE lending of £31 million (2023: £50 million). The increase is driven by a small number of exposures in the registered social landlord and
project finance portfolios, reflecting support measures in response to idiosyncratic risk events. A £67 million project finance exposure has moved from the payment concession category
following a breach of covenant.
There are no FVTPL commercial balances which are forborne (2023: £36 million).
181
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Credit risk – Treasury assets
Annual Report and Accounts 2024
Risk report
(continued)
Credit risk – Treasury assets
Summary
The treasury portfolio is held primarily for operational purposes, liquidity management and, in the case of derivatives, for market risk management. As at 4 April 2024, treasury assets
represented 21.7% (2023: 23.2%) of total assets. The classification of treasury asset balances is set out below.
Notes:
i. The majority of this balance is collateral placed with the Bank of England to cover requirements for payments systems.
ii. Investment securities at FVOCI include £57 million (2023: £44 million) and investment securities at FVTPL include £6 million (2023: £13 million) which relate to investments not included within the Group’s
liquidity portfolio. These investments primarily relate to investments made in Fintech companies which are being held for strategic purposes.
iii. Derivatives are classified as assets where their fair value is positive and liabilities where their fair value is negative. As at 4 April 2024, derivative liabilities were £1,451 million (2023: £1,524 million).
Investment activity remains focused on high-quality liquid assets, including assets eligible for central bank operations. Fixed rate investment securities are fully swapped to floating rate
sterling receipts for the duration of the holding. The £4 million (2023: £40 million) of investment securities classified as amortised cost are residential mortgage backed securities (RMBS),
which are expected to have paid down fully by December 2024. Derivatives are used to economically hedge financial risks inherent in core lending and funding activities and are not used
for trading or speculative purposes. There are no exposures to emerging markets, hedge funds or credit default swaps.
Managing treasury credit risks
Credit risk within the treasury portfolio arises from the instruments held. In addition, counterparty credit risk arises from the use of derivatives to reduce exposure to market risks; these
are only transacted with highly-rated organisations and are collateralised under market standard documentation. There were no impairment losses for the year ended 4 April 2024
(2023: £nil). For financial assets held at amortised cost or at FVOCI, all exposures within the table below are classified as stage 1, reflecting the strong and stable credit quality of treasury
assets.
Impairment provisions on treasury assets
2024
2023
Gross balances Provisions Gross balances
Provisions
(Audited)
£m £m £m £m
Loans and advances to banks and similar institutions
2,478
-
2,860 -
Investment securities – FVOCI
26,522
-
27,562
-
Investment securities – amortised cost
4
-
40
-
Treasury asset balances
Classification
2024 2023
(Audited)
£m £m
Cash
Amortised cost
25,635
Loans and advances to banks and similar institutions (note i)
Amortised cost
2,860
Investment securities (note ii)
FVOCI
27,562
Investment securities (note ii)
FVTPL
13
Investment securities
Amortised cost
40
Liquidity and investment portfolio
52,827
56,110
Derivative instruments (note iii)
FVTPL
6,923
Treasury assets
63,033
182
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Credit risk – Treasury assets (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Credit risk – Treasury assets (continued)
Liquidity and investment portfolio
The liquidity and investment portfolio of £52,827 million (2023: £56,110 million) comprises liquid assets and other securities as set out below.
Liquidity and investment portfolio by credit rating (note i)
2024
AAA
AA
A
Other
UK
US & Canada
Europe
Japan
Other
(Audited)
£m
%
%
%
%
%
%
%
%
%
Liquid assets:
Cash and reserves at central banks
23,817
-
100
-
-
100
-
-
-
-
Government bonds (note ii)
19,080
5
81
14
-
39
35
14
12
-
Supranational bonds
3,093
44
56
-
-
-
-
-
-
100
Covered bonds
2,980
99
1
-
-
46
29
17
-
8
Residential mortgage backed securities (RMBS)
631
100
-
-
-
63
-
37
-
-
Other asset backed securities
137
100
-
-
-
100
-
-
-
-
Liquid assets total
49,738
12
83
5
-
67
15
7
4
7
Other securities (note iii):
RMBS FVOCI
544
100
-
-
-
100
-
-
-
-
RMBS amortised cost
4
100
-
-
-
100
-
-
-
-
Other investments (note iv)
63
-
-
-
100
100
-
-
-
-
Other securities total
611
90
-
-
10
100
-
-
-
-
Loans and advances to banks and similar institutions
2,478
-
84
16
-
80
16
4
-
-
Total
52,827
13
81
6
-
68
15
7
4
6
2023
(Audited)
£m % % % % % % % % %
Liquid assets:
Cash and reserves at central banks
25,635
-
99
1
-
99
-
1
-
-
Government bonds (note ii) 20,130 31 54 15
- 37 37 14 12
-
Supranational bonds
2,838
46
54
-
-
-
-
-
-
100
Covered bonds
2,843
100
-
-
-
46
30
16
-
8
Residential mortgage backed securities (RMBS)
618
100
-
-
-
69
-
31
-
-
Other asset backed securities
197
100
-
-
-
94
-
6
-
-
Liquid assets total
52,261
22
72
6
-
67
16
7
4
6
Other securities (note iii):
RMBS FVOCI
885
100
-
-
-
100
-
-
-
-
RMBS amortised cost
40
100
-
-
-
100
-
-
-
-
Other investments (note iv)
64
-
11
-
89
89
-
11
-
-
Other securities total
989
93
1
-
6
99
-
1
-
-
Loans and advances to banks and similar institutions
2,860
-
85
14
1
82
13
5
-
-
Total 56,110 22 71 7 - 68
16
7 4
5
Notes:
i. Ratings used are obtained from Standard & Poor’s (S&P), Moody’s or Fitch. For loans and advances to banks and similar institutions, internal ratings are used.
ii. Balances classified as government bonds include government guaranteed, agency and government sponsored bonds.
iii. Includes RMBS (UK buy to let and UK non-conforming) not eligible for the Liquidity Coverage Ratio (LCR).
iv. Includes investment securities held at FVTPL of £6 million (2023: £13 million).
183
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Credit risk – Treasury assets (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Credit risk – Treasury assets (continued)
Country exposures
The following table summarises the exposure (shown at the balance sheet carrying value) to institutions outside of the UK.
Country exposures
2024
Government
Bonds (note i)
Residential
mortgage backed
securities
Covered
bonds
Supranational
bonds
Loans and advances
to banks and
similar institutions
Other
assets Total
(Audited)
£m
£m
£m
£m
£m
£m
£m
Austria
479
-
-
-
-
-
479
Belgium
454
-
-
-
-
-
454
Denmark
59
-
9
-
-
-
68
Finland
441
-
23
-
-
-
464
France
1,033
-
179
-
32
-
1,244
Germany
151
-
52
-
71
-
274
Netherlands
69
236
-
-
-
-
305
Norway
-
-
130
-
-
-
130
Sweden
-
-
107
-
-
-
107
Total Europe
2,686
236
500
-
103
-
3,525
Australia
41
-
176
-
-
-
217
Canada
2,587
-
848
-
1
-
3,436
Japan
2,311
-
-
-
-
-
2,311
Singapore
-
-
70
-
-
-
70
USA
4,075
-
-
-
380
-
4,455
Supranational entities (note ii)
-
-
-
3,093
-
-
3,093
Total
11,700
236
1,594
3,093
484
-
17,107
184
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Credit risk – Treasury assets (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Credit risk – Treasury assets (continued)
Country exposures (continued)
Country exposures
2023
Government
Bonds (note i)
Residential
mortgage backed
securities
Covered
bonds
Supranational
bonds
Loans and advances
to banks and
similar institutions
Other
assets Total
(Audited)
£m
£m
£m
£m
£m
£m
£m
Austria
418
-
-
-
-
-
418
Belgium
360
-
-
-
-
-
360
Denmark
105
-
9
-
-
-
114
Finland
355
-
23
-
-
-
378
France
939
-
139
-
60
7
1,145
Germany
274
-
57
-
72
12
415
Netherlands
306
191
-
-
-
-
497
Norway - - 128
- - -
128
Sweden
11
-
107
-
-
-
118
Total Europe
2,768
191
463
-
132
19
3,573
Australia
43
-
153
-
-
-
196
Canada
2,506
-
852
-
6
-
3,364
Japan
2,383
-
-
-
-
-
2,383
Singapore
-
-
76
-
-
-
76
USA
4,959
-
-
-
384
-
5,343
Supranational entities (note ii)
-
-
-
2,838
-
-
2,838
Total
12,659
191
1,544
2,838
522
19
17,773
Notes:
i. Balances classified as government bonds include government guaranteed, agency and government sponsored bonds.
ii. Exposures to Supranational entities are made up of bonds issued by highly-rated multilateral development banks (MDBs) and international organisations (IOs).
185
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Credit risk – Treasury assets (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Credit risk – Treasury assets (continued)
Derivative financial instruments
Derivatives are used for market risk management, and not for trading or speculative purposes, although the application of accounting rules can create volatility in the income statement
in an individual financial year. The fair value of derivative assets at 4 April 2024 was £6.3 billion (2023: £6.9 billion) and the fair value of derivative liabilities was £1.5 billion (2023: £1.5
billion).
Nationwide, as a direct member of a central clearing counterparty (CCP), has the capability to clear standardised derivatives. Where derivatives are not cleared at a CCP they are
transacted under the International Swaps and Derivatives Association (ISDA) Master Agreement. A Credit Support Annex (CSA) is always executed in conjunction with the ISDA Master
Agreement. Under the terms of a CSA, collateral is passed between parties to mitigate the market-contingent counterparty risk inherent in the outstanding positions. CSAs are two-way
agreements where both parties post collateral dependent on the exposure of the derivative. Collateral is paid or received on a regular basis (typically daily) to mitigate the mark-to-
market exposures. Market standard CSA collateral agreements allow GBP, EUR and USD cash, and in some cases high-grade sovereign debt securities to be posted; both cash and
securities can be held as collateral by the Society.
Nationwide’s CSA documentation for derivatives grants legal rights of set-off for transactions with the same counterparty. Accordingly, the credit risk associated with such positions is
reduced to the extent that negative mark-to-market values offset positive mark-to-market values in the calculation of credit risk within each netting agreement.
Under the terms of CSA netting agreements, outstanding transactions with the same counterparty can be offset and settled on a net basis following a default, or another predetermined
event. Under these arrangements, netting benefits of £1.3 billion (2023: £1.3 billion) were available and £5.0 billion (2023: £5.6 billion) of collateral was held.
This table shows the exposure to counterparty credit risk for derivative contracts after netting benefits and collateral.
Derivative credit exposure
2024
2023
Counterparty credit quality
AA
A
Total
AA
A
Total
(Audited)
£m
£m
£m
£m
£m
£m
Derivative assets as per balance sheet
584
5,706
6,290
636
6,287
6,923
Netting benefits
(156)
(1,109)
(1,265)
(182)
(1,104)
(1,286)
Net current credit exposure
428
4,597
5,025 454
5,183
5,637
Collateral (cash)
(422)
(4,587)
(5,009)
(451)
(5,183)
(5,634)
Net derivative credit exposure
6
10
16
3
-
3
Outlook
The treasury portfolio will continue to be held primarily for liquidity management and to hedge market risks taken in the normal course of business. Risk appetite remains low, ensuring
new credit exposure taken is high credit quality. No material change to risk appetite is anticipated.
186
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Liquidity and funding risk
Annual Report and Accounts 2024
Risk report
(continued)
Liquidity and funding risk
Summary
Liquidity risk is the risk that Nationwide is unable to meet its liabilities as they fall due and maintain member and other stakeholder confidence. Funding risk is the risk that Nationwide is
unable to maintain diverse funding sources in wholesale and retail markets and manage retail funding risk that can arise from excessive concentrations of higher risk deposits.
Liquidity and funding risks are managed within a comprehensive risk framework which includes policies, strategy, limit setting and monitoring, stress testing and robust governance
controls. This framework ensures that Nationwide maintains stable and diverse funding sources and a sufficient holding of high-quality liquid assets such that there is no significant risk
that liabilities cannot be met as they fall due.
Nationwide’s Liquidity Coverage Ratio (LCR), which ensures that sufficient high-quality liquid assets are held to survive a short-term severe but plausible liquidity stress, averaged 191%
over the 12 months ended 4 April 2024 (2023: 180%). Nationwide continues to manage its liquidity against internal risk appetite which is more prudent than regulatory requirements;
under the most severe internal 30 calendar day stress test, the average ratio of the liquid asset buffer to stressed net outflows over the 12 months ended 4 April 2024 equated to 167%
(2023: 155%).
The position against the longer-term funding metric, the Net Stable Funding Ratio (NSFR), is also monitored. Nationwide’s average NSFR for the four quarters ended 4 April 2024 was
151% (2023: 147%), well in excess of the 100% minimum requirement.
Funding risk
Funding strategy
Nationwide’s funding strategy is to remain predominantly retail funded, as set out below.
Funding profile
Assets
2024
2023
Members’ interests, equity and liabilities
2024
2023
(note i)
£bn
£bn
£bn
£bn
Retail mortgages
204.1
201.4 Retail funding
193.4
187.1
Treasury assets (including liquidity portfolio)
52.8
56.1 Wholesale funding
50.5
57.9
Commercial lending
5.5
5.5 Other liabilities
2.9
3.1
Consumer banking
3.8
3.9 Capital and reserves (note ii)
25.1
23.8
Other assets
5.7
5.0
Total
271.9
271.9 Total
271.9
271.9
Notes:
i. Figures are stated net of impairment provisions where applicable.
ii. Includes all subordinated liabilities and subscribed capital.
At 4 April 2024, Nationwide’s loan to deposit ratio, which represents loans and advances to customers divided by the total of shares and other deposits, was 107.9% (2023: 109.6%). Included
within shares and other deposits, which are reported in the retail and wholesale funding categories above, is £37 billion (4 April 2023: £35 billion
1
) of deposits that exceed the £85,000 per
customer Financial Services Compensation Scheme (FSCS) limit.
1
The 4 April 2023 comparative for deposits that exceed the £85,000 threshold has been restated to reflect improved data quality since originally reported.
Annual Report and Accounts 2024
Risk report
(continued)
Liquidity and funding risk
Summary
Liquidity risk is the risk that Nationwide is unable to meet its liabilities as they fall due and maintain member and other stakeholder confidence. Funding risk is the risk that Nationwide is
unable to maintain diverse funding sources in wholesale and retail markets and manage retail funding risk that can arise from excessive concentrations of higher risk deposits.
Liquidity and funding risks are managed within a comprehensive risk framework which includes policies, strategy, limit setting and monitoring, stress testing and robust governance
controls. This framework ensures that Nationwide maintains stable and diverse funding sources and a sufficient holding of high-quality liquid assets such that there is no significant risk
that liabilities cannot be met as they fall due.
Nationwide’s Liquidity Coverage Ratio (LCR), which ensures that sufficient high-quality liquid assets are held to survive a short-term severe but plausible liquidity stress, averaged 191%
over the 12 months ended 4 April 2024 (2023: 180%). Nationwide continues to manage its liquidity against internal risk appetite which is more prudent than regulatory requirements;
under the most severe internal 30 calendar day stress test, the average ratio of the liquid asset buffer to stressed net outflows over the 12 months ended 4 April 2024 equated to 167%
(2023: 155%).
The position against the longer-term funding metric, the Net Stable Funding Ratio (NSFR), is also monitored. Nationwide’s average NSFR for the four quarters ended 4 April 2024 was
151% (2023: 147%), well in excess of the 100% minimum requirement.
Funding risk
Funding strategy
Nationwide’s funding strategy is to remain predominantly retail funded, as set out below.
Funding profile
Assets
2024
2023
Members’ interests, equity and liabilities
2024
2023
(note i)
£bn
£bn
£bn
£bn
Retail mortgages
204.1
201.4
Retail funding
193.4
187.1
Treasury assets (including liquidity portfolio)
52.8
56.1
Wholesale funding
50.5
57.9
Commercial lending
5.5
5.5
Other liabilities
2.9
3.1
Consumer banking
3.8
3.9
Capital and reserves (note ii)
25.1
23.8
Other assets
5.7
5.0
Total
271.9
271.9
Total
271.9
271.9
Notes:
i. Figures are stated net of impairment provisions where applicable.
ii. Includes all subordinated liabilities and subscribed capital.
At 4 April 2024, Nationwide’s loan to deposit ratio, which represents loans and advances to customers divided by the total of shares and other deposits, was 107.9% (2023: 109.6%). Included
within shares and other deposits, which are reported in the retail and wholesale funding categories above, is £37 billion (4 April 2023: £35 billion
1
) of deposits that exceed the £85,000 per
customer Financial Services Compensation Scheme (FSCS) limit.
1
The 4 April 2023 comparative for deposits that exceed the £85,000 threshold has been restated to reflect improved data quality since originally reported.
187
Strategic report Risk reportGovernance Financial statements Other informationAnnual Report and Accounts 2024
Liquidity and funding risk (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Liquidity and funding risk (continued)
Wholesale funding
The wholesale funding portfolio comprises a range of secured and unsecured instruments to ensure that a stable and diversified funding base is maintained across a range of
instruments, currencies, maturities, and investor types. Part of Nationwide’s wholesale funding strategy is to remain active in core markets and currencies. A funding risk limit framework
also ensures that a prudent funding mix and maturity concentration profile is maintained and limits the level of encumbrance to ensure enough contingent funding capacity is retained in
the event of a stress.
Wholesale funding has decreased by £7.4 billion to £50.5 billion during the year, primarily due to the repayment of £7.9 billion of drawings from the Bank of England’s Term Funding
Scheme with additional incentives for SMEs (TFSME). The wholesale funding ratio (on-balance sheet wholesale funding as a proportion of total funding liabilities) at 4 April 2024 was
22.5% (2023: 25.0%).
The table below sets out Nationwide’s wholesale funding by currency.
Wholesale funding by currency
2024
2023
GBP
EUR
USD
Other
Total
% of
total
GBP
EUR
USD
Other
Total
% of
total
£bn £bn £bn £bn £bn £bn £bn £bn £bn £bn
Repos 0.1
1.7
0.1
-
1.9
4
1.4 0.1 0.6 - 2.1 4
Deposits
9.7
-
-
-
9.7
19
11.0
-
-
-
11.0
19
Certificates of deposit 1.5
- - - 1.5 3
1.0 - - - 1.0 2
Covered bonds 5.7
7.4
1.2
1.2
15.5
31
6.0 7.2 - 1.2 14.4 25
Medium term notes
1.5
5.9
2.9
1.3
11.6
23
1.1
4.8
3.9
1.3
11.1
19
Securitisations 1.9
- 0.1 - 2.0 4
2.3 - 0.2 - 2.5 4
TFSME
9.3
-
-
-
9.3
18
17.2
-
-
-
17.2
29
Other (note i)
-
(0.8)
(0.2)
-
(1.0)
(2)
-
(1.1)
(0.2)
(0.1)
(1.4)
(2)
Total 29.7
14.2 4.1 2.5 50.5
100 40.0 11.0 4.5 2.4 57.9 100
Note:
i. Other consists of fair value adjustments to debt securities in issue for micro hedged risks.
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Risk report
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Liquidity and funding risk (continued)
The table below sets out Nationwide’s residual maturity of wholesale funding, on a contractual maturity basis.
Wholesale funding – residual maturity
2024
Not more than
one month
Over one
month but not
more than
three months
Over three
months but
not more than
six months
Over six
months but
not more than
one year
Subtotal less
than one year
Over one
year but not
more than
two years
Over two years
Total
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
Repos
1.9
-
-
-
1.9
-
-
1.9
Deposits
6.5
1.6
1.2
0.4
9.7
-
-
9.7
Certificates of deposit
1.5
-
-
-
1.5
-
-
1.5
Covered bonds
0.1
0.5
-
0.6
1.2
1.5
12.8
15.5
Medium term notes
-
0.1
0.1
0.8
1.0
3.2
7.4
11.6
Securitisations
0.1
-
-
0.1
0.2
0.2
1.6
2.0
TFSME
-
-
-
4.0
4.0
5.3
-
9.3
Other (note i)
-
-
-
-
-
(0.1)
(0.9)
(1.0)
Total
10.1
2.2
1.3
5.9
19.5
10.1
20.9
50.5
Of which secured
2.1
0.5
-
4.7
7.3
7.0
13.8
28.1
Of which unsecured
8.0
1.7
1.3
1.2
12.2
3.1
7.1
22.4
% of total
20.0
4.3
2.6
11.7
38.6
20.0
41.4
100.0
Wholesale funding – residual maturity
2023
Not more than
one month
Over one
month but not
more than
three months
Over three
months but not
more than
six months
Over six
months but not
more than
one year
Subtotal less
than one year
Over one
year but not
more than
two years
Over two years
Total
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
Repos
2.1
-
-
-
2.1
-
-
2.1
Deposits
7.6
1.6
1.4
0.3
10.9
0.1
-
11.0
Certificates of deposit
1.0
-
-
-
1.0
-
-
1.0
Covered bonds
0.8
0.1
-
1.6
2.5
1.1
10.8
14.4
Medium term notes
0.7
-
-
1.4
2.1
0.8
8.2
11.1
Securitisations
0.7
-
0.2
0.2
1.1
0.3
1.1
2.5
TFSME
-
-
-
-
-
11.9
5.3
17.2
Other (note i)
-
-
-
-
-
(0.1)
(1.3)
(1.4)
Total
12.9
1.7
1.6
3.5
19.7
14.1
24.1
57.9
Of which secured
3.6
0.1
0.2
1.8
5.7
13.3
16.4
35.4
Of which unsecured
9.3
1.6
1.4
1.7
14.0
0.8
7.7
22.5
% of total
22.3
2.9
2.8
6.0
34.0
24.4
41.6
100.0
Note:
i. Other consists of fair value adjustments to debt securities in issue for micro hedged risks.
At 4 April 2024, cash, government bonds and supranational bonds included in the liquid asset buffer represented 220% (2023: 229%) of wholesale funding maturing in less than one year,
assuming no rollovers.
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Liquidity and funding risk (continued)
Annual Report and Accounts 2024
Risk report
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Liquidity and funding risk (continued)
Liquidity risk
Liquidity strategy
The Society’s risk appetite, as set by the Board, defines the size and mix of the liquid asset buffer and is translated into a set of liquidity risk limits. Sufficient liquid assets, both in terms of
amount and quality, are held to meet daily cash flow needs as well as simulated stressed requirements driven by the Society’s risk appetite and regulatory assessments. This includes
prudent management of the currency mix of liquid assets to ensure there is no undue reliance on currencies not consistent with the profile of stressed outflows.
Liquid assets are held and managed centrally by the Treasury function. A high-quality liquidity portfolio is maintained, predominantly comprising reserves held at central banks and
highly-rated debt securities issued by a restricted range of governments, central banks and supranationals.
Nationwide also holds a portfolio of high-quality, central bank-eligible covered bonds, residential mortgage backed securities (RMBS) and asset-backed securities. Other securities are
held that are not eligible for central bank operations but can be monetised through sale and repurchase (repo) agreements with third parties or through sale.
Nationwide undertakes securities financing transactions in the form of repo agreements. This demonstrates the liquid nature of the assets held in its liquid asset buffer as well as
satisfying regulatory requirements. Cash is borrowed in return for pledging assets as collateral and because settlement is on a simultaneous ‘delivery versus payment’ basis, the main
credit risk arises from intra-day changes in the value of the collateral. This is largely mitigated by Nationwide’s collateral management processes.
Repo market capacity is regularly assessed and tested to ensure there is sufficient capacity to monetise the liquid asset buffer rapidly in a stress.
For contingency purposes, Nationwide prepositions unencumbered mortgage assets at the Bank of England which can be used in the Bank of England’s liquidity operations if market
liquidity is severely disrupted.
Nationwide has met its most recent investment target of holding £1.5 billion of Environmental, Social and Governance (ESG) assets for 2023/24, with ESG assets defined as comprising
bonds issued by multilateral development banks and green bonds issued by selected governments. Going forward, Nationwide aims to hold at least £2.0 billion of ESG assets, with the
definition of ESG assets widened to comprise bonds issued by multilateral development banks and all green, social, and sustainable-labelled bonds.
190
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Liquidity and funding risk (continued)
Annual Report and Accounts 2024
Risk report
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Liquidity and funding risk (continued)
Liquid assets
The table below sets out the sterling equivalent fair value of the liquidity portfolio, by issuing currency. It includes off-balance sheet liquidity, such as securities received through reverse
repo agreements, and excludes securities encumbered through repo agreements and for other purposes.
Liquid assets
2024
2023
GBP EUR USD JPY
Other
(note i)
Total GBP EUR USD JPY
Other
(note i)
Total
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
Cash and reserves at central banks
23.8
-
-
-
-
23.8
25.5 - 0.1 - - 25.6
Government bonds (note ii)
6.8
2.5
5.0
1.7
1.0
17.0
5.9 3.2 5.3 1.3 1.1 16.8
Supranational bonds
0.1
1.6
0.4
-
- 2.1
0.1 2.2 0.5 - - 2.8
Covered bonds
0.9
1.8
0.2
-
-
2.9
1.1 1.6 0.1 - - 2.8
RMBS (note iii)
0.9
0.3
-
-
-
1.2
1.3 0.2 - - - 1.5
Asset-backed securities and other securities
0.1
-
-
-
-
0.1
0.2
-
-
-
-
0.2
Total
32.6
6.2
5.6
1.7
1.0
47.1
34.1 7.2 6.0 1.3 1.1 49.7
Notes:
i. Other currencies primarily consist of Canadian dollars.
ii. Balances classified as government bonds include government guaranteed, agency and government sponsored bonds.
iii. Balances include all RMBS held by the Society which can be monetised through sale or repo.
The table above primarily comprises LCR eligible high-quality liquid assets which averaged £56.1 billion for the 12 months ended 4 April 2024 (2023: £53.3 billion). Further details can be
found in the Group’s annual Pillar 3 Disclosure 2024 at nationwide.co.uk.
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Liquidity and funding risk (continued)
Annual Report and Accounts 2024
Risk report
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Liquidity and funding risk (continued)
Residual maturity of financial assets and liabilities
The table below segments the carrying value of financial assets and financial liabilities into relevant maturity groupings based on the final contractual maturity date (residual maturity):
Residual maturity (note i)
2024
Due less
than
one month
(note ii)
Due between
one and
three
months
Due between
three and
six months
Due between
six and
nine months
Due between
nine and
twelve months
Due between
one and
two years
Due between
two and
five years
Due after
more than
five years
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
Financial assets
Cash
23,817
-
-
-
-
-
-
-
23,817
Loans and advances to banks and similar institutions
2,378
-
-
-
-
-
-
100
2,478
Investment securities
58
212
272
239
325
2,016
10,639
12,771
26,532
Derivative financial instruments
20
41
51
11
276
1,736
2,170
1,985
6,290
Fair value adjustment for portfolio hedged risk
(41)
(18)
(140)
(185)
(171)
(814)
(1,698)
(263)
(3,330)
Loans and advances to customers
2,806
1,321
1,953
1,925
1,927
7,664
22,460
173,384
213,440
Total financial assets
29,038
1,556
2,136
1,990
2,357
10,602
33,571
187,977
269,227
Financial liabilities
Shares
139,238
4,595
14,887
12,006
8,486
12,126
1,128
900
193,366
Deposits from banks and similar institutions
7,129
7
1
1
3,980
5,270
-
-
16,388
Of which repo
1,943
-
-
-
-
-
-
-
1,943
Of which TFSME
-
4
-
-
3,980
5,270
-
-
9,254
Other deposits
1,283
1,585
1,167
223
192
75
5
-
4,530
Fair value adjustment for portfolio hedged risk
1
3
16
17
7
6
-
-
50
Secured funding – ABS and covered bonds
176
533
49
54
659
1,652
7,663
6,488
17,274
Senior unsecured funding
1,527
73
75
20
748
3,101
6,189
592
12,325
Derivative financial instruments
21
42
43
-
59
158
574
554
1,451
Subordinated liabilities
37
2
30
15
-
827
4,265
2,049
7,225
Subscribed capital (note iii)
1
-
1
-
-
-
-
171
173
Total financial liabilities
149,413
6,840
16,269
12,336
14,131
23,215
19,824
10,754
252,782
Off-balance sheet commitments (note iv)
13,344
-
-
-
-
-
-
-
13,344
Net liquidity difference
(133,719)
(5,284)
(14,133)
(10,346)
(11,774)
(12,613)
13,747
177,223
3,101
Cumulative liquidity difference
(133,719)
(139,003)
(153,136)
(163,482)
(175,256)
(187,869)
(174,122)
3,101
-
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Liquidity and funding risk (continued)
Annual Report and Accounts 2024
Risk report
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Liquidity and funding risk (continued)
Residual maturity (note i)
2023
Due less than
one month
(note ii)
Due between
one and
three months
Due between
three and
six months
Due between
six and
nine months
Due between
nine and
twelve months
Due between
one and
two years
Due between
two and
five years
Due after
more than
five years
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
Financial assets
Cash
25,635
-
-
-
-
-
-
-
25,635
Loans and advances to banks and similar institutions
1,887
-
-
-
-
-
-
973
2,860
Investment securities
81
151
41
68
402
772
8,880
17,220
27,615
Derivative financial instruments
77
1
59
44
243
450
3,904
2,145
6,923
Fair value adjustment for portfolio hedged risk
(16)
(31)
(297)
(26)
(314)
(1,118)
(2,829)
(380)
(5,011)
Loans and advances to customers
2,784
1,371
2,127
2,053
2,076
7,957
23,489
168,925
210,782
Total financial assets
30,448
1,492
1,930
2,139
2,407
8,061
33,444
188,883
268,804
Financial liabilities
Shares
149,642
2,153
6,955
8,292
6,473
10,116
2,581
931
187,143
Deposits from banks and similar institutions
7,882
13
1
-
-
11,890
5,270
-
25,056
Of which repo
2,075
-
-
-
-
-
-
-
2,075
Of which TFSME
-
6
-
-
-
11,890
5,270
-
17,166
Other deposits
1,806
1,559
1,374
224
103
116
9
-
5,191
Fair value adjustment for portfolio hedged risk
-
1
1
-
-
-
-
-
2
Secured funding – ABS and covered bonds
1,501
41
264
233
1,592
1,328
5,930
5,142
16,031
Senior unsecured funding
1,685
12
53
200
1,126
805
5,757
1,957
11,595
Derivative financial instruments
56
-
2
1
24
134
405
902
1,524
Subordinated liabilities
8
2
31
14
-
795
3,225
2,680
6,755
Subscribed capital (note iii)
1
-
1
-
-
-
-
171
173
Total financial liabilities
162,581
3,781
8,682
8,964
9,318
25,184
23,177
11,783
253,470
Off-balance sheet commitments (note iv)
10,333
-
-
-
-
-
-
-
10,333
Net liquidity difference
(142,466)
(2,289)
(6,752)
(6,825)
(6,911)
(17,123)
10,267
177,100
5,001
Cumulative liquidity difference
(142,466)
(144,755)
(151,507)
(158,332)
(165,243)
(182,366)
(172,099)
5,001
-
Notes:
i. The analysis excludes certain financial assets and liabilities relating to accruals, trade receivables, trade payables and settlement balances which are generally short-term in nature and lease liabilities.
Further information on lease liabilities is shown in note 28 to the financial statements.
ii. Due less than one month includes amounts repayable on demand.
iii. The principal amount for undated subscribed capital is included within the due after more than five years column.
iv. Off-balance sheet commitments include amounts payable on demand for undrawn loan commitments, customer overpayments on residential mortgages where the borrower can draw down the amount
overpaid, and commitments to acquire financial assets.
In practice, customer behaviours mean that liabilities are often retained for longer than their contractual maturities and assets are repaid earlier. This gives rise to funding mismatches on
the balance sheet. The balance sheet structure and risks are managed and monitored by Nationwide’s Assets and Liabilities Committee (ALCO). Judgement and past behavioural
performance of each asset and liability class are used to forecast likely cash flow requirements.
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Liquidity and funding risk (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Liquidity and funding risk (continued)
Financial liabilities – gross undiscounted contractual cash flows
The tables below provide an analysis of gross contractual cash flows. The totals differ from the analysis of residual maturity as they include estimated future interest payments, calculated
using balances outstanding at the balance sheet date, contractual maturities, and appropriate forward-looking interest rates.
Amounts are allocated to the relevant maturity band based on the timing of individual contractual cash flows.
Gross contractual cash flows
2024
Due less
than
one month
(note i)
Due between
one and
three
months
Due between
three and
six months
Due between
six and
nine months
Due between
nine and
twelve
months
Due between
one and
two years
Due between
two and
five years
Due after
more than
five years
Total
(Audited)
£m
£m
£m
£m
£m
£m
£m
£m
£m
Shares
139,238
5,206
15,376
12,327
8,679
12,442
1,284
900
195,452
Deposits from banks and similar institutions
7,129
128
122
122
4,067
5,281
-
-
16,849
Other deposits
1,283
1,612
1,179
227
194
77
5
-
4,577
Secured funding – ABS and covered bonds
191
564
153
208
835
2,238
8,740
7,222
20,151
Senior unsecured funding
1,530
85
148
63
845
3,479
6,814
1,143
14,107
Subordinated liabilities
41
4
87
91
74
1,153
5,021
2,324
8,795
Subscribed capital (note ii)
1
-
4
1
4
11
33
188
242
Total non-derivative financial liabilities
149,413
7,599
17,069
13,039
14,698
24,681
21,897
11,777
260,173
Derivative financial liabilities:
Gross settled derivative outflows
366
841
1,328
268
1,216
3,085
11,863
7,758
26,725
Gross settled derivative inflows
(314)
(787)
(1,256)
(219)
(1,150)
(2,906)
(11,480)
(7,670)
(25,782)
Gross settled derivatives – net flows
52
54
72
49
66
179
383
88
943
Net settled derivative liabilities
254
695
1,132
937
808
2,570
3,363
3,442
13,201
Total derivative financial liabilities
306
749
1,204
986
874
2,749
3,746
3,530
14,144
Total financial liabilities
149,719
8,348
18,273
14,025
15,572
27,430
25,643
15,307
274,317
Off-balance sheet commitments (note iii)
13,344
-
-
-
-
-
-
-
13,344
Total financial liabilities including off-balance sheet
commitments
163,063 8,348 18,273 14,025 15,572 27,430 25,643 15,307 287,661
194
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Liquidity and funding risk (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Liquidity and funding risk (continued)
Gross contractual cash flows (note iv)
2023
Due less than
one month
(note i)
Due between
one and
three months
Due between
three and
six months
Due between
six and
nine months
Due between
nine and
twelve months
Due between
one and
two years
Due between
two and
five years
Due after
more than
five years
Total
(Audited)
£m
£m
£m
£m
£m
£m
£m
£m
£m
Shares
149,642
2,430
7,194
8,468
6,587
10,335
2,749
931
188,336
Deposits from banks and similar institutions
7,882
195
183
182
182
12,437
5,280
-
26,341
Other deposits
1,806
1,573
1,380
226
104
117
9
-
5,215
Secured funding – ABS and covered bonds
1,516
56
346
322
1,777
1,741
6,748
6,568
19,074
Senior unsecured funding
1,688
17
109
210
1,252
1,064
6,496
2,261
13,097
Subordinated liabilities
9
-
94
59
90
1,040
3,957
3,072
8,321
Subscribed capital (note ii)
1
-
4
1
4
11
35
181
237
Total non-derivative financial liabilities
162,544
4,271
9,310
9,468
9,996
26,745
25,274
13,013
260,621
Derivative financial liabilities:
Gross settled derivative outflows
1,477
106
267
232
404
3,634
8,336
10,934
25,390
Gross settled derivative inflows
(1,439)
(89)
(244)
(205)
(381)
(3,555)
(8,154)
(10,422)
(24,489)
Gross settled derivatives – net flows
38
17
23
27
23
79
182
512
901
Net settled derivative liabilities
237
370
917
918
932
3,039
4,207
3,842
14,462
Total derivative financial liabilities
275
387
940
945
955
3,118
4,389
4,354
15,363
Total financial liabilities
162,819
4,658
10,250
10,413
10,951
29,863
29,663
17,367
275,984
Off-balance sheet commitments (note iii)
10,333
-
-
-
-
-
-
-
10,333
Total financial liabilities including off-balance sheet
commitments
173,152 4,658 10,250 10,413 10,951 29,863 29,663 17,367 286,317
Notes:
i. Due less than one month includes amounts repayable on demand.
ii. The principal amount for undated subscribed capital is included within the due more than five years column.
iii. Off-balance sheet commitments include amounts payable on demand for undrawn loan commitments, customer overpayments on residential mortgages where the borrower is able to draw down the
amount overpaid and commitments to acquire financial assets.
iv. Prior year comparatives for derivative financial liabilities have been restated to reflect outflows as a positive and inflows as a negative, consistent with the convention applied in the remainder of the table.
Total financial liabilities including off-balance sheet commitments have been restated from £255,591 million to £286,317 million.
Asset encumbrance
Encumbrance arises where assets are pledged as collateral against secured funding and other collateralised obligations and therefore cannot be used for other purposes. The majority of
asset encumbrance arises from the use of owner-occupied mortgage pools to collateralise the Covered Bond and securitisation programmes (further information is included in note 14 to
the financial statements) and from participation in the Bank of England’s TFSME.
Certain unencumbered assets are readily available to secure funding or meet collateral requirements. These include owner-occupied mortgages and cash and securities held in the liquid
asset buffer. Other unencumbered assets, such as buy to let mortgages, are capable of being encumbered with a degree of further management action. Assets which do not fall into either
of these categories are classified as not being capable of being encumbered.
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Liquidity and funding risk (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Liquidity and funding risk (continued)
An analysis of Nationwide’s encumbered and unencumbered on-balance sheet assets is set out below. This disclosure is not intended to identify assets that would be available in the event
of a resolution or bankruptcy.
Asset encumbrance
2024
Assets encumbered as a result of transactions with
counterparties other than central banks
Other assets (comprising assets encumbered at the
central bank and unencumbered assets)
Total
As a result of
covered bonds
As a result of
securitisations
Other
Total
Assets positioned at
the central bank
(i.e. prepositioned
plus encumbered)
Assets not positioned
at the central bank
Readily available
for encumbrance
Other assets that
are capable of
being encumbered
Cannot be
encumbered
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Cash
558
394
-
952
-
22,625
-
240
22,865
23,817
Loans and advances to banks and similar institutions
-
-
352
352
1,449
-
-
677
2,126
2,478
Investment securities (note i)
-
-
3,873
3,873
-
22,596
-
63
22,659
26,532
Derivative financial instruments
-
-
-
-
-
-
-
6,290
6,290
6,290
Loans and advances to customers (note ii)
23,581
7,321
-
30,902
67,206
51,983
62,999
350
182,538
213,440
Non-financial assets
-
-
-
-
-
-
-
2,690
2,690
2,690
Fair value adjustment for portfolio hedged risk
-
-
-
-
-
-
-
(3,330)
(3,330)
(3,330)
Total
24,139
7,715
4,225
36,079
68,655
97,204
62,999
6,980
235,838
271,917
2023
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Cash
522
637
-
1,159
-
23,972
-
504
24,476
25,635
Loans and advances to banks and similar institutions
-
-
589
589
1,944
-
-
327
2,271
2,860
Investment securities (note i)
-
-
4,508
4,508
-
23,050
-
57
23,107
27,615
Derivative financial instruments
-
-
-
-
-
-
-
6,923
6,923
6,923
Loans and advances to customers (note ii)
20,254
8,705
-
28,959
66,591
52,908
61,894
430
181,823
210,782
Non-financial assets
-
-
-
-
-
-
-
3,089
3,089
3,089
Fair value adjustment for portfolio hedged risk
-
-
-
-
-
-
-
(5,011)
(5,011)
(5,011)
Total
20,776
9,342
5,097
35,215
68,535
99,930
61,894
6,319
236,678
271,893
Notes:
i. Encumbered investment securities primarily relate to repo transactions and collateral pledged for derivatives.
ii. Loans and advances to customers ‘readily available for encumbrance’ are expected to be immediately eligible to use in existing secured funding programmes or at the central bank. Any fair value micro
hedge balance is reported as ‘cannot be encumbered’. Prior year reporting has been updated to reflect this refinement in definition.
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Liquidity and funding risk (continued)
Managing liquidity and funding risk
Nationwide’s management of liquidity and funding risks aims to ensure that there are sufficient liquid assets at all times, both as to amount and quality, to:
• cover cash flow mismatches and fluctuations in funding;
• retain public confidence; and
• meet financial obligations as they fall due, even during episodes of stress.
This is achieved through the management and stress testing of business cash flows, and through the translation of Board Risk Appetite into appropriate risk limits. This ensures
Nationwide maintains a prudent funding mix and maturity profile, sufficient levels of high-quality liquid assets, and appropriate encumbrance levels.
The liquidity and funding risk framework is reviewed by the Board as part of the annual Internal Liquidity Adequacy Assessment Process (ILAAP). ALCO is responsible for managing the
balance sheet structure, including the Funding Plan, and its risks. A consolidated cash flow forecast is maintained and reviewed weekly to support ALCO in monitoring key risk metrics.
A Liquidity Contingency Plan (LCP), which is part of the wider recovery plan framework, is maintained which describes early warning triggers for indicating an emerging liquidity or
funding stress as well as escalation procedures and a range of actions that could be taken in response to ensure sufficient liquidity is maintained. The LCP is tested annually to ensure it
remains robust. Nationwide’s Recovery Plan describes potential actions that could be utilised in a more extreme stress.
Liquidity stress testing
To mitigate liquidity and funding risks generated by its business activities, Nationwide aims to maintain a liquid asset buffer of at least 100% of the anticipated outflows seen under
internal stress test scenarios and the regulatory-prescribed LCR.
Potential contractual and behavioural stress outflows are assessed across a range of liquidity risk drivers over 30 calendar days, with the key assumptions shown below. An assessment
over three months is also performed against which LCP capacity is assessed. Internal stress assumptions are reviewed regularly, with changes approved by ALCO, and approved annually
by the Board as part of the ILAAP.
Liquidity risk driver Modelling assumptions used
Retail funding Significant unexpected outflows are experienced with no new deposits received.
Wholesale funding Following a credit rating downgrade:
• zero roll-over of maturing long-term wholesale funding;
• zero roll-over of maturing short-term funding received from financial counterparties and partial roll-over from non-financial
counterparties; and
•
no new wholesale funding received.
Off-balance sheet Contractual outflows occur in relation to secured funding programmes due to credit rating downgrades.
Lending commitments continue to be met.
Collateral outflows arise due to adverse movements in market rates.
Expected inflows from mortgages or retail and commercial loans are recognised.
Intra-day Liquidity is needed to pre-fund outgoing payments.
Liquid assets Asset values are reduced in recognition of the stressed conditions assumed.
Under the most severe internal 30 calendar day stress test (a combined market-wide and Nationwide-specific stress scenario), the average ratio of the liquid asset buffer to stressed net
outflows over the 12 months ended 4 April 2024 equated to 167% (2023: 155%).
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Risk report
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Liquidity and funding risk (continued)
External credit ratings
The Group’s long-term and short-term credit ratings are shown in the table below. The long-term rating for both Standard & Poor’s (S&P) and Moody’s is the senior preferred rating. The
long-term rating for Fitch is the senior non-preferred rating.
Credit ratings
Senior
preferred
Short-term
Senior
non-preferred
Tier 2
Date of last rating
action / confirmation
Outlook
Standard & Poor’s
A+
A-1
BBB+
BBB
March 2024
Stable
Moody’s
A1
P-1
A3
Baa1
March 2024
Stable
Fitch
A+
F1
A
BBB+
March 2024
Stable
The table below sets out Nationwide’s additional contractual collateral requirement in the event of a one and two notch downgrade by external credit rating agencies.
Collateral sensitivity
Cumulative adjustment for
a one notch downgrade
Cumulative adjustment for
a two notch downgrade
£bn
£bn
2024
-
0.7
2023
-
0.6
The contractually required cash outflow would not necessarily match the actual cash outflow, because of management actions that could be taken to reduce the impact of the
downgrades.
Outlook
Nationwide continues to hold a diversified high-quality liquid asset buffer which will evolve in line with Nationwide’s liquidity requirements. Nationwide’s funding plans include the refinancing
of TFSME through a continued presence in wholesale funding markets.
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Capital risk
Annual Report and Accounts 2024
Risk report
(continued)
Capital risk
Capital risk is the risk that Nationwide fails to maintain sufficient capital to absorb losses throughout a full economic cycle and sufficient to maintain the confidence of current and
prospective investors, members, the Board and regulators. Capital is held to protect customers, cover inherent risks, provide a buffer for stress events and support the business strategy.
In assessing the adequacy of capital resources, risk appetite is considered in the context of the material risks to which Nationwide is exposed and the appropriate strategies required to
manage those risks.
Managing capital risk
The Board is responsible for setting risk appetite with respect to capital risk, which is articulated through its risk appetite statements, and it defines minimum levels of capital surplus
above regulatory requirements that it is willing to operate with. These are translated into specific risk metrics, which are monitored by the Board Risk Committee (BRC), the Assets and
Liabilities Committee (ALCO) and other internal management reviews.
The capital structure is managed to ensure that the minimum regulatory requirements and the expectations of other key stakeholders continue to be met. As part of the risk appetite
framework, strong capital ratios are targeted relative to both regulatory requirements and major banking peers. Any planned changes to the balance sheet, potential regulatory
developments and other factors (such as trading outlook, movements in the fair value through other comprehensive income reserve and defined benefit pension deficit) are all
considered.
The capital strategy is to manage capital ratios through retained earnings, supplemented by external capital where appropriate. Since general reserves form the majority of capital
resources, profitability is an important factor when considering the ability to meet capital requirements. A return on capital framework is in place, based upon an allocation of overall
capital requirements, which forms part of the Society’s Board Risk Appetite metrics as well as its performance monitoring activity for individual product segments. In line with
Nationwide’s capital management practices, opportunities have been taken to reduce excess capital resources through liabilities and equity management exercises, including a core
capital deferred shares (CCDS) repurchase of £0.1 billion in June 2023.
Capital is held to meet Pillar 1 requirements for credit, counterparty credit and operational risks. In addition, the Prudential Regulation Authority (PRA) requires firms to hold capital to
meet Pillar 2A requirements which are firm-specific. This is a point-in-time estimate, set by the PRA on an annual basis, based on the submission of the results of the annual Internal
Capital Adequacy Assessment Process (ICAAP). This process confirms the amount of capital required to be held to meet risks partly covered by Pillar 1 such as operational risk, and risks
not covered by Pillar 1 such as pension and interest rate risk. The combination of Pillar 1 and Pillar 2A requirements form Nationwide’s Total Capital Requirement (TCR).
Nationwide’s latest Pillar 2A requirements were approved in December 2023 and were equivalent to 5.1% of risk weighted assets (RWAs) at 4 April 2024 (2023: 4.5% of RWA). This is equal
to a capital requirement of £2.8 billion, of which at least £1.6 billion must be met by Common Equity Tier 1 (CET1) capital. The Pillar 2A percentage is above the majority of banking peers
due to the low average RWA density of Nationwide’s balance sheet, given that 82% (2023: 82%) of total assets, excluding central bank reserves, are in the form of secured residential
mortgages.
To protect against the risk of falling below Pillar 1 and Pillar 2A requirements (thereby breaching TCR), firms are subject to regulatory capital buffers which are set out in UK Capital
Requirements Directive V (UK CRD V). The PRA may set an additional firm-specific PRA buffer based upon supervisory judgement informed by the results of the Bank of England’s stress
testing scenarios. This Bank of England assessment considers the impacts of the stress scenarios on a firm’s capital requirements and resources and other factors including leverage,
systemic importance and any weaknesses in firms’ risk management and governance procedures. The ICAAP also considers appropriate internal capital buffers to ensure that the impact
of a severe but plausible stress can be absorbed.
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Risk report
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Capital risk (continued)
Stress Testing
Regular stress tests are undertaken, covering Nationwide and its subsidiaries, to enhance the understanding of potential vulnerabilities and how management actions might be deployed
in the event of stressed conditions developing. These stress tests project capital resources and requirements over a multi-year period, reflecting severe but plausible scenarios that cover
a range of macroeconomic or market-wide stresses, and idiosyncratic scenarios that test particular risks to Nationwide’s business model. Stress test results are reported to the Board
Risk Committee.
Nationwide aims to be in a position to maintain strong capital and leverage ratios in the event of a severe but plausible economic or idiosyncratic stress. Embedded in the risk appetite
framework is an expectation to maintain CET1 and leverage ratios in excess of regulatory minima under stressed conditions.
The Bank of England returned to the Annual Cyclical Scenario (ACS) Stress Test framework in September 2022. This followed two years of Covid-19 pandemic-related stress testing and
its decision to postpone the test in March 2022. The 2022/23 ACS tested the resilience of the UK banking system to deep simultaneous recessions in the UK and global economies, large
falls in asset prices and higher global interest rates, as well as a separate stress of misconduct costs. Nationwide’s low point CET1 ratio through the scenario was 20.3% before strategic
management actions. This was in excess of that of peers, showing Nationwide is well capitalised and positioned to meet stressed economic conditions. The leverage ratio low point was
5.6%, remaining in excess of the 3.6% regulatory requirement at that time.
On 10 October 2023, the Bank of England confirmed it intends to run a desk-based stress test exercise in 2024, rather than an ACS, which will use Bank of England models and expertise
to test the UK banking system’s resilience to multiple adverse macroeconomic scenarios. This is in order to support the Financial Policy Committee (FPC) and PRA monitoring and
assessment of the resilience of the UK banking system to potential downside risks.
Recovery planning and resolvability
Nationwide maintains a recovery plan under UK regulatory rules implementing the European Bank Recovery and Resolution Directive (BRRD). This contains a set of management actions
that would be available to support Nationwide’s capital and liquidity position in the event of a breach of one or more of the Group’s internal risk appetite metrics. Nationwide submits its
Recovery Plan to the PRA on a two-year cycle, with the latest scheduled submission due in June 2024. In October 2023, Nationwide submitted its second resolvability self-assessment to
the Bank of England. This documented the capabilities that are designed to achieve the resolvability outcomes as prescribed within the Bank of England Resolvability Assessment
Framework, and included enhancements made since the first self-assessment submission in 2021. A summary of Nationwide’s approach to resolvability is available within the Resolvability
Assessment Framework disclosure at nationwide.co.uk with the latest disclosures available in June 2024. The next self-assessment submission will be made in October 2025 with
disclosures to follow in June 2026.
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Annual Report and Accounts 2024
Risk report
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Capital risk (continued)
Capital position
The capital disclosures included in this report are in line with UK Capital Requirements Directive V (UK CRD V) with IFRS 9 transitional arrangements applied. In addition, the disclosures
are on a consolidated Group basis, including all subsidiary entities, unless otherwise stated.
Capital ratios and requirements
2024
2023
Capital ratios % %
CET1 ratio
27.1
26.5
Total Tier 1 ratio 29.5
29.1
Total regulatory capital ratio 32.6
32.7
Leverage ratio 6.5
6.0
Capital requirements £m £m
Risk weighted assets (RWAs)
54,628
51,731
Leverage exposure
249,263
249,299
Risk-based capital ratios remain in excess of regulatory requirements with the CET1 ratio at 27.1% (2023: 26.5%), above Nationwide’s CET1 capital requirement of 12.9%. The CET1 capital
requirement includes a 7.4% minimum Pillar 1 and Pillar 2A requirement and the UK CRD V combined buffer requirements of 5.5% of RWAs.
The CET1 ratio increased to 27.1% (2023: 26.5%) as a result of an increase in CET1 capital of £1.1 billion, partially offset by an increase in RWAs of £2.9 billion. The CET1 capital resources
increase was driven by £1.3 billion profit after tax, partially offset by £0.2 billion of capital distributions. The RWA increase was predominantly driven by an increase in residential
mortgage credit risk RWAs.
UK CRD V requires firms to calculate a leverage ratio, which is non-risk-based, to supplement risk-based capital requirements. Nationwide’s leverage ratio is 6.5% (2023: 6.0%), with Tier 1
capital increasing by £1.1 billion as a result of the CET1 capital movements outlined above, and leverage exposure remaining at £249 billion.
The leverage ratio remains in excess of Nationwide’s leverage capital requirement of 4.3%, which comprises a minimum Tier 1 capital requirement of 3.25% and buffer requirements of
1.05%. The buffer requirements include a 0.7% UK countercyclical leverage ratio buffer, in force from July 2023, and a 0.35% additional leverage ratio buffer.
Leverage requirements continue to be Nationwide’s binding Tier 1 capital measure, as the combination of minimum and regulatory buffer requirements are in excess of the risk-based
equivalent. The risk of excessive leverage is managed through regular monitoring and reporting of the leverage ratio, which forms part of risk appetite.
Further details of the leverage exposure can be found in the Group’s annual Pillar 3 Disclosure 2024 at
nationwide.co.uk.
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Annual Report and Accounts 2024
Risk report
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Capital risk (continued)
The table below shows how the components of members’ interests and equity contribute to total regulatory capital and does not include non-qualifying instruments.
Total regulatory capital
2024
2023
(Audited)
£m
£m
General reserve
15,119
14,184
Core capital deferred shares (CCDS) (note i)
1,334
1,334
Revaluation reserve
36
38
Fair value through other comprehensive income (FVOCI) reserve
(38)
(14)
Cash flow hedge and other hedging reserves
76
129
Regulatory adjustments and deductions:
Cash flow hedge and other hedging reserves (note ii)
(76)
(129)
Direct holdings of CET1 instruments (note i)
(177)
(101)
Foreseeable distributions (note iii)
(63)
(67)
Prudent valuation adjustment (note iv)
(73)
(119)
Own credit and debit valuation adjustments (note v)
(11)
(27)
Intangible assets (note vi)
(812)
(839)
Goodwill (note vi)
(12)
(12)
Defined-benefit pension fund asset (note vi)
(454)
(614)
Excess of regulatory expected losses over impairment provisions (note vii)
(51)
(45)
IFRS 9 transitional arrangements (note viii)
-
15
Total regulatory adjustments and deductions
(1,729)
(1,938)
CET1 capital
14,798
13,733
Other equity instruments (Additional Tier 1)
1,336
1,336
Total Tier 1 capital
16,134
15,069
Dated subordinated debt (note ix)
1,650
1,835
Excess of impairment provisions over regulatory expected losses (note vii)
24
14
IFRS 9 transitional arrangements (note viii)
-
(10)
Tier 2 capital
1,674
1,839
Total regulatory capital
17,808
16,908
Notes:
i. The CCDS amount does not include the deductions for the Group’s repurchase exercises completed in February and June 2023. This is presented separately as a regulatory adjustment in line with UK
Capital Requirements Regulation (CRR) article 42.
ii. In accordance with CRR article 33, institutions do not include the fair value reserves related to gains or losses on cash flow hedges of financial instruments that are not valued at fair value.
iii. Foreseeable distributions in respect of CCDS and AT1 securities are deducted from CET1 capital under UK CRD V rules.
iv. A prudent valuation adjustment (PVA) is applied in respect of fair valued instruments as required under UK CRD V rules.
v. Own credit and debit valuation adjustments are applied to remove balance sheet gains or losses of fair valued liabilities and derivatives that result from changes in own credit standing and risk, as per UK
CRD V rules.
vi. Intangible, goodwill and defined benefit pension fund assets are deducted from capital resources after netting associated deferred tax liabilities.
vii. Where capital expected loss exceeds accounting provisions, the excess balance is removed from CET1 capital, gross of tax. In contrast, where provisions exceed capital expected loss, the excess amount is
added to Tier 2 capital, gross of tax. This calculation is not performed for equity exposures, in line with Article 159 of CRR. The expected loss amounts for equity exposures are deducted from CET1 capital,
gross of tax.
viii. The IFRS 9 transitional adjustments to capital resources apply scaled relief until 4 April 2025 due to the impact of the introduction of IFRS 9 and anticipated increases in expected credit losses as a result
of the Covid-19 pandemic. The relief for the introduction of IFRS 9 ended in the financial year, which led to the reduction of the IFRS 9 transitional arrangements adjustment to zero. Further detail is
provided in the Group’s Pillar 3 disclosure 2024 at nationwide.co.uk.
ix. Subordinated debt includes fair value adjustments relating to changes in market interest rates, adjustments for unamortised premiums and discounts that are included in the consolidated balance sheet,
and any amortisation of the capital value of Tier 2 instruments required by regulatory rules for instruments with fewer than five years to maturity.
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Capital risk (continued)
Annual Report and Accounts 2024
Risk report
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Capital risk (continued)
As part of the Bank Recovery and Resolution Directive, the Bank of England, in its capacity as the UK resolution authority, has published its policy for setting the minimum requirement for
own funds and eligible liabilities (MREL). From 1 January 2024, Nationwide’s requirement is to hold twice the minimum capital requirements (6.5% of leverage exposure), plus the
applicable capital requirement buffers, which amount to 1.05% of leverage exposure. This equals a total loss-absorbing requirement of 7.55%.
At 4 April 2024, total MREL resources were 9.4% (2023: 8.8%) of leverage exposure, in excess of the loss-absorbing requirement of 7.55% (2023: 7.2%) described above.
Risk weighted assets
The table below shows the breakdown of risk weighted assets (RWAs) by risk type and business activity. Market risk has been set to zero as permitted by the UK CRR, as the exposure is
below the threshold of 2% of own funds.
Risk weighted assets
2024
2023
Credit risk
(note i)
Operational
risk (note ii)
Total risk
weighted assets
Credit risk
(note i)
Operational
risk (note ii)
Total risk
weighted assets
£m £m £m £m £m £m
Retail mortgages
37,373
2,188
39,561
34,609
2,991
37,600
Retail unsecured lending
4,750
1,270
6,020
5,145
1,114
6,259
Commercial loans
1,818
77
1,895
1,883
60
1,943
Treasury
1,736
266
2,002
1,559
290
1,849
Counterparty credit risk (note iii)
777
-
777
989
-
989
Other (note iv)
1,676
2,697
4,373
1,715
1,376
3,091
Total
48,130
6,498
54,628
45,900
5,831
51,731
Notes:
i. This column includes credit risk exposures, securitisations, counterparty credit risk exposures and exposures below the thresholds for deduction that are subject to a 250% risk weight.
ii. RWAs have been allocated according to the business lines within the standardised approach to operational risk, as per article 317 of UK CRR.
iii. Counterparty credit risk relates to derivative financial instruments, securities financing transactions (repurchase agreements) and exposures to central counterparties.
iv. Other relates to equity, fixed, intangible software and other assets.
RWAs increased by £2.9 billion, predominantly driven by a £2.8 billion increase in retail mortgage credit risk RWAs. This was due to an increase in residential mortgage balances, in
conjunction with a higher portfolio average loss given default (LGD) linked to property valuations. This was partly offset by reductions to credit risk RWAs across other portfolios.
Operational risk RWAs increased due to higher average total income over the previous three years, by reference to which they are calculated.
In line with the prior year, a model adjustment continues to be included within RWAs to ensure outcomes are consistent with the revised Internal Ratings Based (IRB) regulations in force
from 1 January 2022. The impact of this is a £23.3 billion (2023: £21.4 billion) increase in risk weighted assets, mainly in relation to retail mortgages. In line with other industry participants,
Nationwide continues to engage with the PRA regarding approval and implementation timings for Hybrid IRB mortgage models.
More detailed analysis of RWAs is included in the Group’s annual Pillar 3 Disclosure 2024 at nationwide.co.uk.
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Capital risk (continued)
Annual Report and Accounts 2024
Risk report
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Capital risk (continued)
IRB model risk
The performance and accuracy of IRB models is critical to the calculation of credit risk capital requirements. The effectiveness of the models is achieved through clear allocation and
segregation of roles and responsibilities covering model ownership, approval and governance, ongoing model monitoring, review and independent validation. Further information can be
found in the ‘Use of the IRB Approach to credit risk’ section of the Group’s annual Pillar 3 Disclosure 2024 at
nationwide.co.uk.
Outlook
The Basel Committee published its final reforms to the Basel III framework in December 2017, now denoted by the PRA as Basel 3.1. The amendments include changes to the standardised
approaches for credit and operational risks, including the introduction of an RWA standardised output floor to restrict the use of internal models. On 30 November 2022, the Bank of
England issued CP16/22 ‘Implementation of the Basel 3.1 standards’. The consultation paper, although materially similar to the original Basel reforms, includes interpretations and some
divergence from Basel standards. A near-final policy statement covering market, counterparty credit and operational risks was published on 12 December 2023. Near-final rules covering
credit risk and the output floor are due in Q2 2024.
The reforms may lead to an increase in Nationwide’s RWAs relative to the current position, mainly due to the application of the standardised RWA output floor. The expected
implementation date is 1 July 2025, with a phased introduction of the standardised RWA output floor until fully implemented by 2030. Based on Nationwide’s latest interpretation of the
draft rules, there will not be a material day-one impact on Nationwide’s CET1 ratio. However, if Nationwide's CET1 ratio was restated to an endpoint position, reflecting full implementation
of the standardised RWA output floor, it would reduce to a low to mid 20% range compared to the 27.1% reported at 4 April 2024.
Nationwide will remain engaged in the development of the regulatory approach to ensure it is prepared for any resulting change.
During 2024, Nationwide repurchased CCDS at a gross cost of £76 million (2023: £101 million). For further information see note 31 to the financial statements. The PRA has granted a
renewed 12 month general prior permission to repurchase CCDS up to 2% of existing CET1 capital resources (£296 million at 4 April 2024), though this does not mean further repurchase
exercises will necessarily follow. The permission will expire in January 2025.
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Market risk
Annual Report and Accounts 2024
Risk report
(continued)
Market risk
Summary
Market risk is the risk that the net value of, or net income arising from, the Group’s assets and liabilities is impacted as a result of market price or rate changes, specifically interest rates
or currency rates. Nationwide has limited appetite for market risk and does not have a trading book. Market risk is closely monitored and managed to ensure the level of risk remains
within appetite. Market risks are not taken unless they are essential to core business activities and they provide stability of earnings, minimise costs or enable operational efficiency.
The principal market risks that affect Nationwide are listed below together with the types of risk reporting measures used:
Market risk exposure
Definition
Reporting measure
Interest rate risk
The impact of market movements in interest rates, which affects interest rate margin realised from lending and
borrowing activities. Volatility in short-term interest rates can also impact net income contribution from rate insensitive
liabilities.
Value sensitivity / Value at risk / Net interest
income sensitivity / Economic value of
equity sensitivity
Basis risk
The impact on earnings of relative changes in short-term interest rate benchmarks, for example between Bank rate and
Sterling Overnight Index Average (Sonia).
Earnings sensitivity
Swap spread risk
The impact on the market value of treasury investments arising from changes in the spread between bond yields and
swap rates.
Value at risk
Inflation risk
The impact on the market value of treasury investments arising from changes in inflation swap rates and published
inflation indices.
Value sensitivity
Currency risk The impact on earnings and market value of treasury positions due to changes in exchange rates. Value sensitivity / Value at risk
Product option risk
The impact from changes to hedging which may be required when customer behaviour deviates from expectations,
principally resulting from early repayment of fixed rate loans or lower take up of reserved mortgages
Value at risk / Economic value of equity
sensitivity
Structural interest
rate risk
The impact of market movements in interest rates, which affect the income arising from those balance sheet items that
have stable balances, an interest rate that is fixed, are non-interest-bearing or insensitive to changes in market rates and
have no defined maturity date. This includes the asymmetric risk which arises in very low or negative interest rate
scenarios, mainly due to the different levels at which variable product rates can reach a minimum level.
Duration / Value at risk / Net interest
income sensitivity
Nationwide has a capital requirement for each of the above market risks. In addition, stress analysis is used to evaluate the impact of severe but plausible events.
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Market risk (continued)
The principal market risks, linked to Nationwide’s balance sheet assets, liabilities, capital and reserves, are listed in the table below, irrespective of materiality.
Notes:
i. Other assets encompass all other balance sheet asset line items not disclosed separately in this table. It includes the fair value adjustment for portfolio hedged risk of £(3.3) billion. Other assets also include
the net defined benefit asset of the Nationwide Pension Fund, being the surplus of plan assets in excess of plan obligations. The Nationwide Pension Fund is subject to pension risk, which includes exposure
to market risk factors such as interest rate risk, inflation risk, and equity risk (from changes to share prices). Pension risk is managed separately from the market risk arising from Nationwide’s core
business. Further information is detailed in the Pension risk section on page 212.
ii. Other liabilities encompass all other balance sheet liability line items not disclosed separately in this table.
Global market conditions
Although economic activity has remained weak and uncertainty remains, some of the cost of living pressures are easing. Market pricing suggests that interest rates have reached their
peak, with the Bank of England combating high inflation by increasing the Bank rate up to 5.25%. As a result of the Bank rate increases and the easing of other inflation drivers, the UK
Consumer Price Index fell from 10.1% in March 2023 to 3.2% by March 2024. Nationwide has some inflation exposure (to UK, EU and US inflation indices) from investment securities;
however, inflation risk is managed within tight limits and the financial impact from recent increases in inflation globally has therefore been limited.
Whilst economic conditions within the UK have an impact on the Group, market risk is managed prudently. This is demonstrated by the Society’s very low level of exposure to interest rate
risk as outlined below.
Market risk linkage to the balance sheet
2024
£bn
Market risk
Interest rate
risk
Basis risk
Swap spread
risk
Currency risk
Inflation risk
Product option
risk
Structural risk
Assets
Cash
23.8
Loans and advances to banks and similar institutions
2.5
Investment securities
26.5
Derivative financial instruments
6.3
Loans and advances to customers
213.4
Other assets (note i)
(0.6)
Total assets
271.9
Liabilities
Shares
193.4
Deposits from banks and similar institutions
16.4
Other deposits
4.5
Debt securities in issue
29.6
Derivative financial instruments
1.5
Subordinated liabilities
7.2
Other liabilities (note ii)
1.6
Total liabilities
254.2
Total members’ interests and equity
17.7
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Market risk (continued)
Regulation
USD Libor was published for the final time on 30 June 2023. Nationwide completed the transition of a small number of legacy derivative positions referencing USD Libor to risk-free rates
ahead of this date.
The Canadian Dollar Offered Rate (CDOR) will cease publication after 28 June 2024. Nationwide will transition a small number of legacy derivative positions referencing CDOR to risk-free
rates ahead of this date. These derivative positions largely offset and will leave an immaterial residual exposure for the Society.
Market risk appetite, measurement and management
Nationwide’s market risk exposure arises in the banking book; it does not have a trading book. Most of the exposure to market risk arises from fixed rate mortgages or savings and
changes in the market value of the liquidity portfolio. There is a limited amount of currency risk on non-sterling financial assets and liabilities held.
The Board is responsible for setting market risk appetite and the Assets and Liabilities Committee (ALCO) is responsible for managing Nationwide’s market risk profile within this defined
risk appetite. Market risk is managed within a comprehensive risk framework which includes policies, limit setting and monitoring, stress testing and robust governance controls. This
includes setting and monitoring more granular limits within Board limits, with relevant market risk metrics reported monthly to ALCO. The analytical techniques used to measure market
risk, and details of exposures during the year, are outlined below.
Value and earnings sensitivities
Sensitivity analysis is used to assess the change in value of the net exposure to defined parallel and non-parallel shifts in interest rates. For example, a one basis point (0.01%) shift is
measured using PV01. This analysis is performed daily for each currency. Earnings sensitivity metrics are used to measure and quantify exposure to interest rate risks, including basis risk.
These techniques assess the impact on earnings when rate shocks are applied to the rates paid on liabilities and to the rates earned on assets.
Nationwide also measures interest rate risk through Net Interest Income (NII) and Economic Value of Equity (EVE) measures, under a range of shock scenarios which include behavioural
assumptions for retail products as interest rates change. These measures are assessed based on the standard shocks prescribed, as well as against internally generated shock scenarios.
• NII sensitivities assess the impact to earnings under a range of interest rate shocks over a one-year period. Sensitivities are calculated based on a static balance sheet, where all assets
and liabilities maturing within the year are reinvested in like-for-like products. The sensitivity also includes the impact arising from off-balance sheet exposures.
• EVE sensitivities measure the change in value of interest rate sensitive items, both on and off-balance sheet, under a range of interest rate shocks. Sensitivities are calculated on a run-
off balance sheet basis.
Both NII and EVE sensitivities are measured regularly, with risk limits set against the various shocks.
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Market risk (continued)
Value at Risk (VaR)
VaR is a technique that estimates the maximum potential losses that could occur from risk positions because of future movements in market rates and prices, over a specified time
horizon, to a given level of statistical confidence. VaR is based on historic market behaviour and uses a series of recorded market rates and prices to derive plausible future scenarios. This
considers inter-relationships between different markets and rates.
The VaR model incorporates risk factors based on historic interest rate and currency movements using a ten-year historical data series. A two-week horizon and a 99% confidence level is
used in day-to-day VaR monitoring. VaR is used to monitor interest rate, swap spread, currency and product option risks and is not used to model income. Exposures against limits are
reviewed daily by management. Actual outcomes are monitored on an ongoing basis by management to test the validity of the assumptions and factors used in the VaR calculation.
Although VaR is a valuable risk measure, it needs to be viewed in the context of the following limitations which may mean that exposures could be higher than modelled:
• The use of a 99% confidence level, by definition, does not take account of changes in value that might occur beyond this level of confidence;
• VaR models often under-predict the likelihood of extreme events and over-predict the benefits of offsetting positions in those extreme events;
• The VaR model uses historical data to predict future events. Extreme market moves outside of those used to calibrate the model will deliver exceptions. In periods where volatility is
increasing, the model is likely to under-predict market risks and in periods where volatility is decreasing it is likely to over-predict market risks; and
• Historical data may not adequately predict circumstances arising from government interventions and stimulus packages, which increase the difficulty of evaluating risks.
The Society validates the VaR model on a monthly basis by back-testing the calculated VaR against a hypothetical profit and loss, which reflects the profit and loss that would have been
realised if positions were held constant over a two-week period. An exception is recognised where a loss over a two-week period exceeds the VaR calculated by the model. The number of
exceptions over a 12-month period is used to assess the performance of the VaR model, which in turn helps to decide whether it requires recalibration.
In addition, the model is subject to an annual review process to ensure it remains appropriate for risk reporting. The types of risks not captured in VaR include:
• Market liquidity risk – this has a limited impact because, whilst Nationwide requires an appropriate level of market liquidity to manage market risk, it does not have a high ongoing
dependency on liquidity for market risk purposes as it does not operate a trading book.
• Interest rate movements that can impact valuation adjustments, including credit, debit and funding valuation adjustments (CVA/DVA/FVA). These are not captured in the VaR or
sensitivity analysis but are negligible.
In addition, stressed VaR is used to estimate the potential loss arising from unfavourable market movements in a stressed environment. It is calculated in the same way as standard VaR,
calibrated with a 99% confidence level and on a two-week basis, but uses market data from a two-year period of significant financial stress.
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Market risk (continued)
Interest rate risk
Nationwide’s main market risk is interest rate risk. Market movements in interest rates affect the interest rate margin realised from lending and borrowing activities. To reduce the
impact of such movements, hedging activities are undertaken by Nationwide’s Treasury function. For example, interest rate risks generated by lending to and receiving deposits from
customers are offset against each other internally where possible. The remaining net exposure is managed using derivatives, within parameters set by ALCO. In addition to primary
lending and borrowing activities, income volatility arising from certain rate insensitive balances, including reserves and core capital deferred shares (CCDS), is structurally hedged.
Nationwide’s interest rate risk is measured using a combination of value-based assessments and earnings sensitivity assessments.
The table below highlights Nationwide’s limited exposure to interest rate risk, shown against a range of value-based assessments. The risk exposure is calculated each day and
summarised over the financial year:
Interest rate risk – Key management metrics
2024
2023
(Audited)
Average
High
Low
Average
High
Low
£m
£m
£m
£m
£m
£m
VaR (99%/10-day)
0.8
3.7
0.2
0.6
1.4
0.1
Sensitivity analysis (PV01)
0.0
0.1
0.0
0.0
0.1
0.0
The interest rate sensitivities in the table above do not include retail product behavioural changes, which are captured by other measures.
Net Interest Income (NII) sensitivity
The sensitivities presented below measure the extent to which Nationwide’s pre-tax earnings are exposed to changes in interest rates over a one-year period based on instantaneous
parallel rises and falls in interest rates, with the shifts applied to the prevailing interest rates at the reporting date.
The sensitivities are prepared based on a static balance sheet, with all assets and liabilities maturing within the year replaced with like-for-like products, and changes in interest rates
being fully passed through to variable rate retail products, unless a 0% floor is reached when rates fall. No management actions are included in the sensitivities.
The purpose of these sensitivities is to assess Nationwide’s exposure to interest rate risk and therefore the sensitivities should not be considered as a guide to future earnings
performance, with actual future earnings influenced by the extent to which changes in interest rates are passed through to product pricing, the timing of maturing assets and liabilities
and changes to the balance sheet mix. In practice, earnings changes from actual interest rate movements will differ from those shown below because interest rate changes may not be
passed through in full to those assets and liabilities that do not have a contractual link to Bank rate.
Potential (adverse)/favourable impact on annual pre-tax future earnings
2024
2023
(Audited)
£m
£m
+100 basis points shift
(16)
(30)
+25 basis points shift
(2)
(6)
-25 basis points shift
(9)
(5)
-100 basis points shift
(47)
(32)
The low levels of NII sensitivity reflect Nationwide’s prudent management of interest rate risk. The sensitivities also reflect that changes in rates are fully passed through in these
scenarios, and product margins are held static. The impact of take-up risk in the mortgage pipeline is included within the sensitivities, which contributes to the small negative sensitivities
in the +25 and +100 basis point shifts.
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Market risk (continued)
Economic Value of Equity (EVE)
Nationwide also measures interest rate risk through EVE sensitivity which identifies the change in value of interest rate sensitive items, both on and off-balance sheet, under a range of
interest rate shocks prescribed by the Prudential Regulation Authority (PRA). This measure includes behavioural assumptions using a run-off balance sheet basis. EVE is managed against
internal and regulatory risk limits and is monitored by ALCO.
Further details on EVE can be found in the Group’s annual Pillar 3 Disclosure for 2024 at nationwide.co.uk.
Basis risk
Basis risk arises where variable rate assets and liabilities re-price with reference to differing short-term interest rate benchmarks. The primary interest rates that Nationwide is exposed
to are the Bank rate and Sonia. If the difference between these interest rates changes over time, this may impact earnings.
Swap spread risk
A liquidity portfolio is held to manage Nationwide’s liquidity risk. The assets in this portfolio are predominantly fixed rate sovereign debt securities. Interest rate swaps are used to hedge
the interest rate risk associated with these assets. However, there remains a residual risk associated with the possible movement in the spread between sovereign debt yields and swap
rates. This swap spread risk reflects the fact that the market value of the liquidity portfolio assets can change due to movements in bond yields and the swaps due to movements in swap
rates. In economic terms, this risk is only realised if a bond is sold and the swap is cancelled ahead of maturity.
Swap spread risk is monitored using a historical VaR metric and the risk is controlled via internal limits linked to capital requirements. Exposures are monitored daily and are reported
monthly to ALCO.
Inflation risk
The risk arising from Nationwide’s inflation-linked investments are mitigated through the use of inflation swaps and the residual exposure monitored through IE01 metrics, which
measure the change in present value of future cashflows from a one basis point parallel shift in inflation swap rates. Inflation risk is captured within our swap spread VaR risk
measurement.
Currency risk
Currency exposure is managed through natural offsetting on the balance sheet, with derivatives used to maintain the net exposures within limits. ALCO sets and monitors limits on the
net currency exposure. The table below sets out the limited extent of the residual exposure to currency risk:
Currency risk – Key management metric
2024
2023
Average
High
Low
Average
High
Low
(Audited)
£m
£m
£m
£m
£m
£m
VaR (99%/10-day)
0.1
1.0
0.0
0.1
0.7
0.0
Product option risk
Market risk also arises when customers exercise options contained within fixed rate products which can require changes to hedging. The key product risks are repayment risk (early
redemption or under- or over-payment of fixed rate mortgages), access risk (early withdrawal of fixed rate savings), and take-up risk (higher or lower completions of fixed rate mortgage
reservations than expected). These risk exposures are quantified under a range of stress scenarios using models that predict customer behaviour in response to changes in interest rates.
The potential impacts are then closely monitored.
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Market risk (continued)
Structural interest rate risk
Nationwide has structural hedging programmes in place to stabilise earnings as interest rates change. Structural hedging is transacted to manage the interest rate risk from balance
sheet items that have stable balances, an interest rate that is fixed or rate insensitive and have no defined maturity date. The most material hedging programmes are in place to manage
liabilities, including reserves and customer deposits.
Without hedging, the returns earned on these balances are subject to the volatility of short-term interest rates. The structural hedging programme smooths the volatility in net interest
margin arising from changes in interest rates. The structural hedges convert the return, through a rolling hedge, into a more stable medium-term return.
Structural hedging is managed to a target duration. Nationwide applies a two and a half year target duration to eligible reserves and customer deposit balances, and assumes in financial
planning that structural hedging will be maintained in line with the target duration, with risk limits in place to mitigate deviation from the target duration.
In addition to the structural hedging programmes, Nationwide also undertakes other balance sheet hedging to mitigate the asymmetric risk which arises in very low or negative interest
rate scenarios, mainly due to the different levels at which variable product rates can reach a minimum floor level.
Outlook
Nationwide will continue to have a limited appetite for market risk, which will only be taken if essential to core business activities and if it provides or supports stability of earnings,
minimises costs or enables operational efficiency.
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Pension risk
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(continued)
Pension risk
Summary
Pension risk is defined as the risk that the value of the pension schemes’ assets will be insufficient to meet the estimated liabilities, creating a pension deficit. Pension risk could
negatively impact Nationwide’s capital position and may result in increased cash funding obligations to the pension schemes.
Nationwide has funding obligations to a number of defined benefit pension schemes, of which the Nationwide Pension Fund (the Fund) represents over 99% of the Society’s pension
obligations. The Fund has approximately 29,000 participants (Fund members), the majority of whom are deferred members (former and current employee members, not yet retired). The
Fund closed to new entrants in 2007 and closed to future accrual on 31 March 2021. Further detail is set out below and in note 30 to the financial statements.
In accordance with UK legislation, the assets of the Fund are held in a legally separate trust from Nationwide’s assets and are administered by a board of trustees (the Trustee) which has
fiduciary responsibilities to Fund members.
Nationwide has a specialist pension risk management team responsible for regularly monitoring the financial risk to the Group from the Fund. This includes analysis, insight, risk appetite
articulation and regular reporting to governance committees. The team maintains effective engagement with the Trustee in order to manage the long-term impact on Nationwide’s capital
and financial position. This is supported by Nationwide’s representation at the Trustee’s Investment and Funding Committee and investment working groups, and the sharing of
management information between Nationwide and the Trustee for the consideration of specific risk management initiatives.
Pension risk is embedded into Nationwide’s Enterprise Risk Management Framework and stress testing processes. Nationwide monitors the potential capital deterioration from the
retirement benefit position that might occur in a 1-in-200 year stress test. Nationwide considers all pension regulation and legislation change which may impact Nationwide’s obligations
to the Fund.
Risk factors
Volatility in investment returns from the assets and the value of the liabilities both affect the Fund’s net deficit or surplus position. The key risk factors which impact this position are set
out below. These factors can have a positive or negative effect on the position.
Asset performance
The Fund’s liabilities are calculated using a discount rate set with reference to high quality bond yields. This creates a risk that the Fund’s assets perform worse than those bond yields,
resulting in the Fund’s net position being volatile or worsening.
The Fund holds a proportion of return-seeking assets, including private equity, infrastructure, property and credit investments. Return-seeking assets are expected to outperform
liabilities in the long-term, but they are riskier and volatile in the short to medium-term. Investments in return-seeking assets are monitored by both the Trustee and Nationwide to ensure
they remain appropriate given the Fund’s long-term objectives. Further details are set out in note 30 to the financial statements.
Liabilities
There is a risk that the Fund’s liabilities increase to a level which is not supported by asset performance, whether through discount rate changes, increases in long-term inflation
expectations, or increases in the life expectancy (longevity) of Fund members.
Actuarial assumptions
There is a risk that a change in the methodology used to derive key actuarial assumptions (for example, the discount rate or longevity assumptions) results in a step change in the
assessment of the liabilities and therefore in the net surplus or deficit, potentially impacting Nationwide's capital and/or deficit funding requirements. The ultimate cost of providing
pension benefits over the life of the Fund will depend on actual future events, rather than assumptions made.
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Annual Report and Accounts 2024
Risk report
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Pension risk (continued)
Developments in the year
As the Fund is closed to future accrual, there were no employer contributions made in respect of future benefit accrual during the year. There were also no employer deficit contributions
into the Fund for the year ended 4 April 2024 and none are scheduled for the year ending 4 April 2025. As the 31 March 2022 Triennial Valuation indicated a funding surplus, a recovery
plan requiring employer deficit contributions was not needed. The effective date of the Fund’s next Triennial Valuation is 31 March 2025. Employer deficit contributions of £1 million were
made in respect of the Group’s defined benefit scheme in its Nationwide (Isle of Man) Limited subsidiary.
As at 4
April 2024, the value of the pension schemes’ assets is £4,679 million (2023: £5,281 million) and the value of liabilities is £4,072 million (2023: £4,335 million). The net defined
benefit asset on the balance sheet as at 4 April 2024 reflects a surplus of £607 million (2023: £946 million) as set out below:
Changes in the present value of net defined benefit asset
2024
2023
£m
£m
At 5 April
946
1,008
Pension charge (4) (4)
Net interest credit
44
26
Actuarial remeasurement
(380)
(85)
Employer contributions (including deficit contributions)
1
1
At 4 April
607
946
The movement in the net defined benefit asset is driven by a tightening in credit spreads, which in isolation increased the Fund's liabilities due to a lower discount rate, and had negligible
impact on the Fund's assets due to its limited holdings in corporate bonds and other credit investments. The continued increase in gilt yields over the period had a broadly neutral impact,
with a reduction in the Fund's liabilities broadly offset by decreases in the value of the Fund's liability matching assets.
The actuarial remeasurement quantifies the impact on the net defined benefit asset from updating financial assumptions (e.g. discount rate and long-term inflation), demographic
assumptions (e.g. longevity), and the return on the Fund’s assets being greater or less than expected. Further details can be found in note 30 to the financial statements.
In May 2023, the Fund entered into a longevity swap transaction to manage the scheme’s longevity risk in relation to £1.7 billion of pension liabilities, covering approximately 7,000
pensioners. This transaction will provide income to the Fund in the event that pensions are paid out for longer than expected, mitigating the financial impact and reducing the scheme’s
longevity risk exposure by approximately one third.
In June 2023, His Majesty’s High Court of Justice issued a ruling in respect of Virgin Media Limited versus NTL Pension Trustees II Limited (and others) challenging the validity of rule
amendments made to pension schemes contracted out on a Reference Scheme Test basis between 6 April 1997 and 5 April 2016. Nationwide has assessed the possible impact of this on
the Fund and is of the view that any potential impact is not expected to be material.
The Fund holds £67 million of freehold properties which include ground rents. In November 2023, the Government issued a consultation on potential options for how it could intervene to
cap ground rents, as part of its wider leasehold reforms. Developments on this will continue to be monitored to determine the potential impact on the Fund’s freehold properties.
Outlook
In the years ahead, the Trustee intends to further reduce the level of risk within the Fund, and Nationwide actively engages with the Trustee to ensure broad alignment on investment
objectives and implementation. Potential risk management initiatives include, but are not limited to, adjusting the asset allocation (reducing the allocation to return-seeking assets and
increasing the allocation to liability matching assets), longevity hedging and implementing derivative and other hedging strategies.
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Business risk
Annual Report and Accounts 2024
Risk report
(continued)
Business risk
Summary
Nationwide defines business risk as the risk that volumes decline, margins shrink, or losses increase relative to the cost or capital base, affecting the sustainability of the business and the
ability to deliver the strategy due to external factors (macroeconomic, geopolitical, industry, regulatory or other external events) or internal factors (including the development and
execution of the strategy). This risk is actively managed to ensure the Society provides value to, and can meet the needs of, current and future members, with a focus on long-term
sustainability rather than short-term benefit. Nationwide ensures that it can generate sustainable profits by focusing on recurrent sources of income that provide value commensurate
with risk appetite. This risk is monitored as part of ongoing business performance reporting to, and through regular discussion of business model risks by, senior management and the
Board.
Nationwide’s business model is reliant on generating net interest margin – primarily the difference between the interest rates paid to savers and those received from mortgage holders.
During 2023, the Bank of England’s response to high inflation led to the Bank rate increasing to a high of 5.25% by August 2023. This affected both mortgage and savings rates. Inflation
has since fallen towards the Bank of England’s target of 2%. While economic activity has remained weak, there are encouraging signs that cost of living pressures are easing. Nevertheless,
conditions for households are likely to remain challenging in the near term, as the effect of previous interest rate increases feed through and labour market conditions soften.
Competition from incumbent banks and digitally focused new entrants is strong, with improved service and product propositions being used to attract and retain customers. To mitigate
the impact of competition on the Society’s financial performance, there is an ongoing focus on operational and service excellence which promotes enhanced efficiency and productivity.
Furthermore, our continual refresh of customer propositions maintains the Society’s competitive position in the core mortgage, savings and personal current account markets in which it
operates.
Managing business risk
Business risks are assessed and identified as part of the Society’s strategy and financial planning processes and through regular horizon scanning exercises. This activity highlights
potential areas of strategic development and areas requiring further assessment through a range of sensitivities to the Society’s Financial Plan. Ongoing monitoring ensures the strategy
and associated execution plans continue to evolve to address business model risks by considering changes in the external environment, including technology innovation, consumer
behaviour, regulation, and market conditions. Business risk is managed and mitigated through a range of measures which include:
• Financial forecasting – As part of the financial planning process, income and costs are forecast over a five-year period with an updated forecast reviewed regularly by management,
taking into consideration the key risks and sensitivities.
• Monitoring of financial and business performance – Financial performance is monitored monthly against internal forecasts and key indicators across a variety of committees and
forums, which consider potential risks and possible mitigating actions. In addition, business areas monitor the demand for products and services to ensure we continue to provide
propositions that customers want and need, and which provide value to customers.
• Stress testing and sensitivity analysis – Business risk is regularly stress tested via upside and downside scenarios to the Financial Plan, the Internal Capital Adequacy Assessment
Process, and reverse stress tests. In addition, the Prudential Regulation Authority’s annual concurrent stress testing exercise provides a test of the business model through a stressed
economic scenario. As an output from these activities, actions are identified that can be taken if risks crystallise. To manage effectively more extreme events, a Recovery Plan is
maintained. To identify the emergence of a more extreme stress, a range of indicators are regularly monitored, and a list of strategic actions identified that could be taken, if
necessary, to protect the Society.
Outlook
Business risks are closely linked to the emerging risks outlined in the Risk overview on pages 62 to 64. The outlook for the UK economy, elevated geopolitical tensions and uncertainty
arising from elections in several large economies may create additional volatility and exacerbate business risk. Competition within the Society’s core markets is also expected to increase
through further competitor innovation and exploitation of emerging technologies. Delivery of the Society’s strategic priorities continues to be an important mitigant to the business risk
arising from uncertain macroeconomic and market conditions.
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Operational and conduct risk
Annual Report and Accounts 2024
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(continued)
Operational and conduct risk
Summary
Operational and conduct risk is the risk of impacts resulting from inadequate or failed internal processes, conduct and compliance management, people and systems, or from external
events. This risk is managed through proportionate controls designed to identify and prevent failures that could affect customers, colleagues or the Society. How the control environment
operates is covered in more detail in the Managing risk section of the Risk report on pages 144 to 147.
Nationwide recognises the importance of continuous improvement in the understanding of the operational and conduct risks it is exposed to and the associated control environment it
relies on to mitigate these risks. Nationwide has continued to mature its operational and conduct risk management processes and capabilities, with a particular focus on change
management, economic crime risk capabilities and strengthening the technology control environment. It is critical Nationwide remains safe and secure and does the right thing for its
customers, with a risk and control culture embedded across the Society.
Over the last year, there has been continued focus on achieving the high standards expected by customers and regulators across the key areas detailed below.
Operational resilience and technology
Customers, understandably, expect services to be available when they want to use them, with a demand for an ‘always on’ capability. To support customers, operational resilience is a
fundamental part of the Society’s strategy and continues to be a significant area of regulatory focus. Nationwide has identified the services that matter most to customers (Important
Business Services), defined unacceptable levels of customer disruption, and mapped the critical resources which include technology, premises, third-party suppliers and people required
to deliver those services. The Society continually assesses and tests for vulnerabilities that could impact the delivery of the Important Business Services, and the effectiveness of incident
recovery responses. Remediation of identified vulnerabilities will continue to be a priority focus area for the Society to ensure customers are provided with the services they expect.
The requirement to build and maintain effective technology underpins all Important Business Services. Therefore, a co-ordinated approach to prioritise investment is in place to enhance
and remediate any identified issues. This will enable Nationwide to meet the operational resilience expectations set by the Financial Conduct Authority (FCA) and Prudential Regulation
Authority (PRA) by the prescribed deadline of March 2025. Investments include upgrading legacy infrastructure, utilising latest technology to provide payments services and
strengthening support from specialist third-party suppliers.
Artificial Intelligence (AI)
The rapid growth of digitisation and demand for enhanced customer experience leads to greater volumes of data to control. This in turn leads to more complex challenges in ensuring that
data is used ethically and appropriately, including in relation to emerging developments in AI. This requires an evolving set of skills both to operate and maintain systems and ensure a
rigorous focus on customer outcomes. Alongside the benefits that new artificial technologies may bring, Nationwide is ensuring associated risks are appropriately identified and
managed. A governance framework is being developed to support AI experimentation in line with defined AI risk and control principles. These principles are designed to support the
responsible use of AI, meet regulatory expectations including the Consumer Duty, and deliver good customer outcomes.
Data
Nationwide collects, stores, and processes customer data to provide effective services and is committed to protecting personal data under its control, complying with its legal and
regulatory obligations such as the General Data Protection Regulation (GDPR) and the Basel Committee on Banking Supervision (BCBS) 239 guidelines. Through our data protection,
security, and data governance policies we seek to protect customer data, and to manage and enhance our end-to-end management of data risk. We undertake timely and active
remediation activities for any data issues we identify. The data governance framework has been refreshed and further embedded over the year, and as a result there is an enhanced focus
on data management in the Society.
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Operational and conduct risk (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Operational and conduct risk (continued)
Cyber security
A successful cyber attack on Nationwide could potentially cause significant disruption to business operations and prevent our customers accessing key services. The Society continues to
manage and further develop cyber risk and control capabilities, with ongoing investment in the detection and prevention of attacks. This includes testing Nationwide’s multi-layered
control approach using techniques practiced by the individuals and organisations that attempt attacks, and there is also regular testing of cyber response strategies which could be
invoked to maintain customer services should an attack be successful. As new technologies are implemented and external attack techniques strengthen, Nationwide constantly assesses
how to prevent future attacks. This includes ensuring resource is repositioned, the security culture is maintained, third parties are risk assessed, and investment is allocated
appropriately. To stay up to date and informed about the latest cyber threats, Nationwide works closely with the National Cyber Security Centre, other government bodies and peers in
financial services and other industries.
Supply chain
To provide services to customers and internal functions, Nationwide uses a network of third parties to support with areas such as IT infrastructure and back office processing. When
outsourcing activities to third parties, Nationwide retains responsibility for all services and the associated risks. The Society manages third-party risk in proportion to the criticality of the
service provided. This is achieved through controls to support the operational resilience of the Society, such as business continuity, exit management, regular ongoing performance
monitoring and robust contractual provisions. During the year, Nationwide was impacted by the financial failure of a material supplier. This prompted the successful transition of services
previously provided by the third party to mitigate the potential risk to service delivery and minimise disruption to customers. This incident highlighted the importance of robust controls
relating to the third-party supply chain and led to a further enhancement of the control framework.
We continue to focus on supply chain risk and this is also an area of increased regulatory focus as there are third parties that provide similar services to many banks and building societies,
and their failure could potentially impact on the UK’s financial stability, market integrity and consumer protection. Nationwide will continue to maintain and enhance internal continuity
strategies and participate with the Bank of England consultation papers which sets out its proposal to manage the systemic risks posed by critical third parties.
People
Our people are fundamental to the success of Nationwide, and it is important that we continue to attract and retain people with the right skills and capabilities. The external labour market
remains highly competitive and upward pressure on pay continues. Where change programmes are used to develop the shape and nature of the workforce, risks are carefully considered,
and support is made available to ensure any impacts on colleague wellbeing and sentiment are managed. Flexible working across the industry presents both opportunities and risks to the
attraction and retention of diverse talent, particularly in the post Covid-19 pandemic era as hybrid working becomes more common. The Society has evolved its hybrid working approach
to increase the time colleagues spend in the office, enabling people to come together to share ideas and solutions. Nationwide also focuses on improving diversity across all levels of the
workforce, ensuring it is a place where colleagues know they can be themselves and thrive at work.
Economic crime
Nationwide, as a UK-wide financial services firm, is exposed to economic crime risks across all its business lines. Criminal activity to which Nationwide is exposed includes money
laundering, terrorist financing, bribery and corruption, sanctions, tax evasion, and fraud, both external and internal. The Society may be adversely affected if its customers, employees or
third-party suppliers engage in criminal activity, or if the Society’s products or services are used to facilitate economic crime. Furthermore, the Society may incur significant remediation
costs to rectify issues, reimburse losses incurred by customers, and address regulatory concerns and potential penalties. Management's consideration of such matters and any associated
contingent liabilities or provisions is discussed further in notes 27 and 29 to the financial statements. The Society takes its obligations and responsibilities to reduce the risk of it being
used to further economic crime seriously. Accordingly, it operates a framework of controls, which is supported by a suite of policies, control standards and procedures.
The management of economic crime remains an important area of focus, with a combination of evolving legal and regulatory requirements, and changing criminal methods shaping the
nature of the threats Nationwide faces. The Economic Crime Risk Committee, chaired by the Director of Retail Products, is the core governance committee for economic crime. It
oversees economic crime risk management, operational performance, and transformation matters, including decision making, and escalates matters to the Executive Risk Committee and
Board Risk Committee as appropriate.
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Operational and conduct risk (continued)
Annual Report and Accounts 2024
Risk report
(continued)
Operational and conduct risk (continued)
Good customer outcomes and the Consumer Duty
Nationwide has implemented the requirements of the FCA’s Consumer Duty for new and existing products, which came into effect on 31 July 2023. The Consumer Duty requires a higher
standard of consumer care beyond the previous set of principles and rules set by the FCA and requires firms to be more proactive in the delivery of fair outcomes and more robust in
demonstrating and measuring them. A range of activity has been undertaken to ensure that Nationwide continues to deliver good customer outcomes and meets these increased
expectations, including the enhancement of our product governance, reviews of the value offered by our products and services, assessment of the support offered throughout our
customer journeys and an uplifted approach to designing and reviewing our customer communications. This is supported by improved monitoring of customer outcomes including Board
level monitoring. Work is ongoing to ensure the same standards are applied to products and services which are no longer on sale, prior to the FCA’s deadline of 31 July 2024.
Customer vulnerability
Nationwide is committed to ensuring good outcomes for all customers, and continuing to improve outcomes and offer the right support for our vulnerable customers remains a priority. A
programme of work is underway which will enhance our approach to identifying customers showing characteristics of vulnerability, improve our capabilities in offering appropriate,
tailored support to those customers, and allow more focused monitoring of outcomes for these customers.
Regulatory environment
There continues to be a high volume of complex regulatory change impacting the financial services industry, and Nationwide will respond to these changes while actively engaging with its
regulators. Key developments include the following:
• The PRA has progressed implementation of the remaining elements of the Basel 3.1 framework, with new requirements currently scheduled to begin on a phased basis from July 2025.
Further detail of the impact for Nationwide is provided in the ‘Capital risk’ and ‘Model risk’ sections of the Risk report.
• The PRA supervisory statement ‘Model risk management principles for banks’ came into effect from May 2024. This is discussed in more detail in the ‘Model risk’ section of the Risk
report.
• The FCA is consulting on the establishment of a new regulatory regime to ensure reasonable provision of cash deposit and withdrawal services for consumers. Nationwide is fully
supportive of the FCA’s aim of preserving access to cash for those who want it in a sustainable way, and will engage with the FCA and the wider industry as these proposals develop.
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Risk report
(continued)
Operational and conduct risk (continued)
Operational and conduct risk events
Operational and conduct risk events which have occurred are monitored and reported on to better understand those exposures and drive sustainable mitigation to prevent recurrence.
For the purposes of this report, events include only those where a financial loss arises from an incident. Events are recorded against internally defined risk categories, in addition to
reporting them against the categories defined by the Basel Committee on Banking Supervision in Basel II, which allows comparison of risk experience with our main banking peers.
Operational risk events by Basel risk category, % of total events by number (note i)
2024 2023 (note ii)
% %
Clients, products and business practices 0.6 0.2
External fraud 94.5 94.7
Execution, delivery and process management 4.1 4.4
Internal fraud 0.2 0.2
Business disruption and system failure - -
Damage to physical assets 0.1 0.1
Employment practices and workplace safety 0.5 0.4
Total 100.0 100.0
Notes:
i. Risk events with aggregated gross losses of £5,000 and over (before monies recovered); multiple losses related to the same event are counted once.
ii. Comparatives have been restated to include additional historic data where more information has been received.
The most material categories remain ‘Execution, delivery and process management’ and ‘External fraud’.
The value and number of losses against the ‘Execution, delivery and process management’ category is largely attributable to key customer remediation projects. Losses have decreased
this year as a result of several remediation projects winding down.
Operational losses arising from external fraud risk events, as a percentage of events by number, have remained stable. However, there has been a reduction in the percentage of events
by value due to a reduction in redress related to historic Authorised Push Payment scams recognised in 2024, compared to 2023.
Outlook
Nationwide’s operational and conduct risk outlook is impacted by the environment it operates in and its strategy. The drivers of operational and conduct risk are expected to remain
broadly consistent. Nationwide continues to invest to maintain and develop appropriate controls in all areas to ensure residual risk exposures are managed within appetite.
Operational risk events by Basel risk category, % of total events by value (note i)
2024 2023 (note ii)
% %
Clients, products and business practices
2.3 4.5
External fraud
32.5 41.9
Execution, delivery and process management
64.3
53.3
Internal fraud
0.1 0.1
Business disruption and system failure
- -
Damage to physical assets
0.1
-
Employment practices and workplace safety
0.7 0.2
Total 100.0 100.0
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Model risk
Annual Report and Accounts 2024
Risk report
(continued)
Model risk
Summary
Model risk is the risk of adverse consequences from model errors or the inappropriate use of modelled outputs. Model outputs may be affected by the quality of data inputs, choice and
suitability of methodology and the integrity of implementation. The adverse consequences include financial loss, poor business or strategic decision making, or damage to Nationwide’s
reputation. A model is a quantitative method, system, or approach that applies statistical, economic, financial, or mathematical theories, techniques, and assumptions to process input data
into output. There is an inherent risk associated with the use of models because they are imperfect and incomplete representations that rely on assumptions and theoretical methodologies
and use data which may not represent future outcomes.
The Society relies on models to support a broad range of business and risk management activities. Examples include the use of model outputs in credit approval, capital and liquidity
assessments, stress testing, loss provisioning, financial planning, and product pricing.
Managing model risk
Model risk is managed at an enterprise level through the Model Risk Framework and within a defined risk appetite set by the Board. The framework prescribes Society-wide requirements
including roles and responsibilities, governance, model development standards, independent oversight, monitoring and independent assurance.
Responsibility for oversight of model risk is delegated from the Executive Risk Committee to the Model Risk Oversight Committee (MROC). MROC assesses whether material models are
fit for purpose and monitors model risk exposure on a Society-wide aggregated basis.
Developments in the year
The Society’s model risk profile remains elevated as the inflationary and cost of living pressures, interest rate rises and market volatility are materially different to the periods upon which
some models were developed. This means reliance needs to be placed on the use of model adjustments to capture the risks and uncertainty arising from the effects of the economic
environment. Model adjustments are governed and monitored, with modifications made as appropriate.
The delivery of new capital models that comply with the Internal Ratings Based (IRB) roadmap regulations, which came into effect on 1 January 2022, remains a priority and is in line with
the PRA timetable. Temporary adjustments are currently made to risk weighted assets and expected loss amounts, ensuring the Society’s minimum capital requirements reflect IRB
roadmap expectations. Further information on capital impacts is detailed in the Capital risk section on page 199.
In May 2024, the PRA supervisory statement ‘Model risk management principles for banks’ came into effect. Readiness for this implementation date has been a key focus in 2023/24, with
a number of model risk management enhancements delivered in anticipation of the regulation.
Outlook
The PRA is expected to publish final rules on the implementation of Basel 3.1 in Q2 2024. Once published, these will inform Nationwide’s model redevelopment and maintenance plans for
capital models, including any required changes. Further information is detailed in the Capital risk section on page 199.
Nationwide will continue to evolve its model risk capabilities and governance approaches in response to emerging modelling techniques and technologies such as generative artificial
intelligence and machine learning.
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Financial statements
Independent auditor’s report 221
Income statements 235
Statements of comprehensive income 236
Balance sheets 237
Statements of movements in members’
interests and equity 238
Cash flow statements 240
Notes to the financial statements 241
• Note 1 – Statement of accounting policies
• Note 2 – Judgements in applying accounting
policies and critical accounting estimates
Performance
• Note 3 – Interest receivable and similar income
• Note 4 – Interest expense and similar charges
• Note 5 – Fee and commission income and expense
• Note 6 – Other operating income
• Note 7 – Gains/losses from derivatives and hedge
accounting
• Note 8 – Administrative expenses
• Note 9 – Employees
• Note 10 – Impairment charge and provisions on
loans and advances to customers
• Note 11 – Taxation
Financial assets and liabilities
• Note 12 – Classification and measurement
• Note 13 – Investment securities
• Note 14 – Loans and advances to customers
• Note 15 – Derivative financial instruments
• Note 16 – Deposits from banks and similar
institutions
• Note 17 – Other deposits
• Note 18 – Debt securities in issue
• Note 19 – Subordinated liabilities
• Note 20 – Subscribed capital
• Note 21 – Fair value hierarchy of financial
assets and liabilities held at fair value
• Note 22 – Fair value of financial assets and
liabilities held at fair value – Level 3
portfolio
• Note 23 – Fair value of financial assets and
liabilities measured at amortised
cost
• Note 24 – Offsetting financial assets and
financial liabilities
Other assets and investments
• Note 25 – Intangible assets
• Note 26 – Property, plant and equipment
Provisions, contingent and other liabilities
• Note 27 – Provisions for liabilities and charges
• Note 28 – Leasing
• Note 29 – Contingent liabilities
• Note 30 – Retirement benefit obligations
Capital and equity instruments
• Note 31 – Core capital deferred shares (CCDS)
• Note 32 – Other equity instruments
Scope of consolidation
• Note 33 – Investments in Group undertakings
• Note 34 – Structured entities
Other disclosure matters
• Note 35 – Related party transactions
• Note 36 – Notes to the cash flow statements
• Note 37 – Capital management
• Note 38 – Registered office
• Note 39 – Events after the balance sheet date
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Independent auditor’s report to the members of
Nationwide Building Society
Annual Report and Accounts 2024
Independent auditor’s report� to the members of Nationwide Building Society�
Report on the audit of the financial statements
Opinion
In our opinion:
• the Group’s financial statements and the Society’s financial statements (the “financial statements”) give a true and fair view of the state of the Group’s and the Society’s affairs as at
4 April 2024 and of the Group’s and the Society’s income and expenditure for the year then ended;
• the financial statements have been properly prepared in accordance with UK adopted International Accounting Standards; and as regards the Group financial statements,
International Financial Reporting Standards adopted by the European Union; and
• the financial statements have been prepared in accordance with the requirements of the Building Societies Act 1986.
We have audited the financial statements, included within the Annual Report and Accounts 2024 (the “Annual Report”) of Nationwide Building Society (the “Society”) and its subsidiaries
(together, the “Group”) for the year ended 4 April 2024, which comprise:
Group
Society
•
Consolidated balance sheet as at 4 April 2024;
• Consolidated income statement for the year then ended;
• Consolidated statement of comprehensive income for the year then ended;
• Consolidated statement of movements in members’ interests and equity for the year then
ended;
• Consolidated cash flow statement for the year then ended;
• Related notes 1 to 39 to the financial statements, including information on material
accounting policies;
• Information identified as ‘audited’ in the Report of the directors on remuneration;
• Information identified as ‘audited’ in the Risk report; and
• Information in the Capital Requirements (Country-by-country reporting) Regulations report.
•
Balance sheet as at 4 April 2024;
• Income statement for the year then ended;
• Statement of comprehensive income for the year then ended;
• Statement of movements in members’ interests and equity for the year then ended
• Cash flow statement for the year then ended; and
• Related notes 1 to 39 to the financial statements, including information on material
accounting policies.
The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards, and as regards the Group financial
statements, International Financial Reporting Standards adopted by the European Union.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under those standards are further described in
the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Independence
We are independent of the Group and the Society in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial
Reporting Council’s (“FRC’s”) Ethical Standard as applied to public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
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Annual Report and Accounts 2024
Independent auditor’s report to the members of Nationwide Building Society (continued)
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Society and we remain independent of the Group and the Society in conducting the
audit.
Conclusions relating to going concern
The directors have voluntarily complied with the UK Corporate Governance Code (the “Code”) and Listing Rule 9.8.6(R)(3)(a) of the Financial Conduct Authority (“FCA”) and provided a
viability and going concern statement, required for companies with a premium listing on the London Stock Exchange.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our
evaluation of the directors’ assessment of the Group’s and Society’s ability to continue to adopt the going concern basis of accounting included the following:
• We obtained management’s going concern assessment for the Group, including forecasts for the going concern period covering 12 months from the date of approval of the financial
statements by the Board, and compared historical budgeted financial information with actual results to form a view of the reliability of the forecasting process;
• We understood and evaluated the reasonableness of these forecasts, which included using EY financial modelling specialists to help assess the assumptions used to develop
forecasted results using relevant peer and sector comparatives, to challenge the reasonableness of the Bank rate assumptions and resultant impact on net interest margin,
operating costs and customer deposit growth, and to assess the refinancing risk of wholesale funding maturing in the 12 months from the date of approval of the financial statements
by the Board;
• We used EY economic specialists to assess the macroeconomic assumptions in the forecast, through benchmarking to institutional and HM Treasury consensus forecasts and Bank
of England fan charts;
• We reviewed the results of adverse scenarios modelled by management to incorporate unexpected changes to forecasted liquidity and capital positions of the Group, as well as its
reverse stress testing exercise, to identify whether they indicated significant issues that might impact the Group’s or Society’s ability to continue as a going concern;
• We understood and evaluated the reasonableness of financial projections relating to the potential acquisition of Virgin Money, including capital and liquidity stress scenarios for both
standalone entities and the combined group. We involved EY financial modelling and regulatory capital specialists to help assess the key assumptions and sensitivities underpinning
these forecasts and scenarios;
• We also understood the directors’ considerations of the current uncertain geopolitical and economic outlook and climate change, including both financial risks and impacts on
operational resilience; and
• We read and evaluated the adequacy of the disclosures included in the Annual Report in relation to going concern and considered whether there were other events subsequent to
the balance sheet date which could have a bearing on the going concern conclusion.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the
Group’s and Society’s ability to continue as a going concern for a period over the 12 months from the date the financial statements are approved for issue.
In relation to the Group’s and Society’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the
directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. However, because not all future events or
conditions can be predicted, this statement is not a guarantee as to the Group’s or Society’s ability to continue as a going concern.
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Annual Report and Accounts 2024
Independent auditor’s report to the members of Nationwide Building Society (continued)
Overview of our audit approach
Audit scope
•
We performed an audit of the complete financial information of two entities within the Nationwide Group and audit procedures on specific balances for a
further six entities; and
• The entities where we performed audit procedures over complete financial information or over specific balances accounted for 100% of the Group’s profit
before tax measure used to calculate materiality, 100% of revenue, and 97% of total assets.
Key audit matters
•
Measurement of IFRS 9 expected credit losses;
• Recoverability of capitalised software costs;
• Risk of fraud in revenue recognition relating to effective interest rate (“EIR”) accounting;
• Measurement of the net defined benefit pension asset; and
• IT general controls.
Materiality
•
Overall Group and Society materiality were set at £69 million and £55 million respectively, which represent 3.3% and 3.1% of profit before member reward
payments and tax.
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each entity within the Group. Taken together, this
enables us to form an opinion on the consolidated financial statements. We take into account size and risk profile when assessing the level of work to be performed for each entity.
In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage of significant accounts in the financial statements,
we selected eight entities, which represent the principal business units within the Group.
Of the eight entities selected, we performed an audit of the complete financial information of two entities (“full scope entities”) which were selected based on their size or risk
characteristics. For the remaining six entities (“specific scope components”), we performed audit procedures on specific accounts within that entity that we considered had the potential
for the greatest impact on the significant accounts in the financial statements either because of the size of these accounts or their risk profile. All audit work performed for the purposes
of the audit was undertaken by the Group audit team.
Climate change
Stakeholders are increasingly interested in how climate change will impact the Group and Society. Management of the Group and Society has determined that the most significant future
impacts from climate change on their operations will be from physical and transitional risks. These are explained on pages 53 to 61 in the Climate-related Financial Disclosures section of
the Strategic Report. All of these disclosures form part of the “Other information,” rather than the audited financial statements. Our procedures on these unaudited disclosures therefore
consisted solely of considering whether they are materially inconsistent with the financial statements and our knowledge obtained in the course of the audit or otherwise appear to be
materially misstated, in line with our responsibilities on “Other information”.
In planning and performing our audit we assessed the potential impacts of climate change on the Group’s and Society’s business and any consequential material impact on its financial
statements.
The Group has explained in Note 2 ‘Judgements in applying accounting polices and critical accounting estimates’ on page 252 how climate risks have been considered in the preparation
of the financial statements. The Group notes that management has considered the impact of climate-related risks on its financial position and performance. While the effects of climate
change represent a source of uncertainty, management does not consider there to be a material impact on its judgements and estimates from physical and transition risks of climate
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Independent auditor’s report to the members of Nationwide Building Society (continued)
change in the short to medium term. The Group has also explained within the Credit risk section of the Risk report their approach to quantifying the impact of climate risks on expected
credit losses.
Our audit effort in considering the impact of climate change on the financial statements was focused on evaluating management’s assessment of the impact of climate risk (physical and
transition), their climate commitments, the effects of material climate risks disclosed on pages 53 to 61 and the significant judgements and estimates disclosed in Note 2 and whether
these have been appropriately reflected in the financial statements, following the requirements of UK adopted International Accounting Standards. As part of this evaluation, we
performed our own risk assessment, supported by our EY climate change specialists, to determine the risks of material misstatement in the financial statements from climate change
which needed to be considered in our audit and assess whether the effects of potential climate risks have been appropriately reflected by management in reaching their judgements in
relation to the measurement of financial assets and liabilities.
We also challenged the directors’ considerations of climate change risks in their assessment of going concern and viability and associated disclosures. Where considerations of climate
change were relevant to our assessment of going concern, these are described above.
Based on our work, whilst we have not identified the impact of climate change on the financial statements to be a standalone key audit matter, we have considered the impact on the
following key audit matter: IFRS 9 expected credit losses. Details of the impact, our procedures and findings are included in our explanation of key audit matters below.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements
as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
Measurement of IFRS 9 expected credit losses
Group and Society: Refer to the Audit Committee report (page 97); Accounting policies (page 241); and note 10 of the consolidated financial statements (page 262)
Key audit matter
Our response to the key audit matter
IFRS 9 expected credit losses
(ECL)
:
£781 million (2023: £765 million)
The degree of subjectivity in the assumptions and
estimates used by management to measure IFRS
9 ECL is high due to significant uncertainty
associated with the assumptions used. These
include the impacts of the continuing uncertain
geopolitical and economic outlook, a higher for
longer interest rate environment, a protracted
period of inflation that is above the UK
Government policy target, stresses on
recoverable values, and potential impacts of
climate change, which were all considered in our
risk assessment.
Control testing:
We evaluated the design and operating effectiveness of controls across the processes relevant to ECL, including the controls around approval of
key judgements and development of the estimate. These controls included:
• Review of staging effectiveness;
• Model governance controls, including monitoring and model validation;
• Controls over the completeness and accuracy of data feeding into ECL provision calculations;
• Governance of statistical models used to develop the MES and their associated probability weights; and
• The governance and review of MES, post-model adjustments, and individual provisions.
In evaluating the controls, we obtained evidence of the governance process that is followed to review, challenge and approve all key assumptions
underpinning the IFRS 9 ECL provisions, and we involved EY risk modelling specialists where needed to assess the effective operation of
management’s controls.
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Independent auditor’s report to the members of Nationwide Building Society (continued)
Measurement of IFRS 9 expected credit losses
Group and Society: Refer to the Audit Committee report (page 97); Accounting policies (page 241); and note 10 of the consolidated financial statements (page 262)
The risk of material misstatement within the
measurement and timing of IFRS 9 ECL manifests
itself across the following five areas:
Staging:
The qualitative and quantitative criteria applied by
management may not completely and accurately
identify a significant increase in credit risk or
credit impairment on a timely basis.
Modelling:
Models that calculate the ECLs, including
probability of default (“PD”), loss given default
(“LGD”) and exposure at default (“EAD”) models,
may not appropriately apply accounting
interpretations, modelling assumptions, or data;
or may not be appropriately implemented.
Multiple Economic Scenarios (“MES”):
ECLs may be inaccurate because the range of
scenarios considered and the probability
weightings applied to them are not sufficient or
appropriate to capture all relevant factors
required, including the continuing uncertain
geopolitical and economic outlook, higher for
longer interest rates and protracted period of
inflation, or because the MES may not be
incorporated appropriately into the estimation of
PD, LGD, and EAD.
In-Model and Post Model Adjustments (“PMAs”):
In-model and post-model adjustments could be
inappropriate, incomplete, or in the case of in-
model adjustments, incorrectly incorporated into
the PD, LGD, and EAD models, and there is a risk
over the adequacy of disclosures in the financial
statements.
Staging:
We reviewed the Group’s accounting policies and tested how they were applied in allocating a financial asset to stage 1, 2 or 3, to ensure they
remained compliant with the requirements of IFRS 9. This included peer benchmarking to assess staging triggers and staging levels.
We assessed the appropriateness of the staging criteria and their logical application through the modelled environment, and then
independently recalculated staging results for the entire retail portfolio by recreating the staging model code and recreating the results in our
own environment. We also performed sensitivity analysis to consider the significance of potential impacts on staging (i) as a result of cohorts of
borrowers coming to the end of their fixed term contracts, thereby moving to higher interest rates; and (ii) as a result of collectively
downgrading exposures to industries and geographic regions at greater risk of climate change impacts. We also tested the staging of the
commercial portfolio on a sample basis to ensure the completeness and accuracy of loans classified in respective stages.
Modelling:
We involved EY model risk specialists to lead the qualitative and quantitative risk assessment of the models, and to perform a combination of
model methodology reviews, model implementation testing, model reperformance testing, model assumptions testing and model sensitivity
analysis, based on the risk designated to each model.
We tested the completeness and accuracy of data fields that drive ECL provisions through a combination of controls and substantive testing.
Key controls we tested included reconciliation and validation of data quality scorecards (“DQS”). We substantively tested the accuracy of data
underpinning the ECL provisions by testing lineage from the ECL models back to source systems for each critical data item, and a sample of
non-critical data items, and testing the completeness and accuracy of loan data lineage from source systems into the ECL models.
MES:
With the support of our EY economic specialists, we considered both the appropriateness of the scenario weightings and the underlying
macroeconomic variables, with specific focus on the continuing uncertain geoploticial and economic outlook, higher for longer interest rates and
the protracted period of inflation impacts, as well as the impacts of climate change on the economic variables. In addition, we evaluated
management’s approach in using statistical models to inform their judgement in determining the scenarios and their probability weightings.
We carried out comparisons to consensus forecasts and other independently derived assumptions. We also engaged our Economists and
Modelling teams to assess the reasonableness of the non-linearity in the scenarios and perform sensitivities on the weights and macroeconomic
variables to ensure they were reasonable. We also independently tested the appropriate application of the MES data within the models.
In-Model and PMAs:
We involved modelling specialists to assess whether the inventory of adjustments was complete considering the evolution of external factors,
and whether each adjustment included was appropriate. In performing the model methodology reviews for a sample of models, we considered
whether there were shortcomings that could require further adjustment. We reviewed risk registers and governance meeting materials, and
performed independent cohort analysis to ensure the completeness of management adjustments. Additionally we have performed a
benchmarking exercise by comparing the suite of model adjustments recognised by management to those seen in the industry and concluded
that they were complete.
We also evaluated the application of each adjustment and independently recalculated all material PMAs, the outputs of which we reconciled to
the reported balances.
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Annual Report and Accounts 2024
Independent auditor’s report to the members of Nationwide Building Society (continued)
Measurement of IFRS 9 expected credit losses
Group and Society: Refer to the Audit Committee report (page 97); Accounting policies (page 241); and note 10 of the consolidated financial statements (page 262)
Individually impaired assets:
Individual impairment may not be identified on a
timely basis, or the provisions recognised may be
incorrectly measured considering the impact of
geopolitical tensions on exit strategies, collateral
valuation and time to collect.
Individually impaired assets:
We assessed the completeness and reasonableness of impairment recorded for individually assessed loans by selecting a sample for which we
recalculated the expected credit loss. As part of this recalculation, we independently estimated the impact on ECLs of applying multiple
scenarios that impact collateral values estimated by management.
Overall stand-back assessment:
We performed a stand-back assessment of the ECL provisions and coverage at an overall level and by stage to determine if changes were
reasonable and internally consistent by considering the overall credit quality of the Group’s portfolios, their risk profile, and the impacts of the
current uncertain geopolitical and economic outlook and climate change. We performed peer benchmarking where available to assess overall
staging and provision coverage levels. We also assessed the adequacy of the disclosures made in the financial statements in comparison to
peers, including the appropriateness of the assumptions and sensitivities disclosed.
Key observations communicated to the Audit Committee
Based on the work we performed, we were satisfied that IFRS 9 ECL were reasonably stated. In particular:
• Independent model testing showed that IFRS 9 ECL models performed as expected with some immaterial differences and were aligned to the requirements of the standard, and that the
external data, internal data and assumption data feeding into the IFRS 9 ECL models were complete and accurate.
• Economic assumptions and probability weightings assigned to the multiple economic scenarios used within the models were concluded to be reasonable.
• Staging criteria were appropriate and the results of staging reperformance indicated their application was complete and accurate.
• Independent replication of PMA calculations confirmed they had been accurately recorded, and we were satisfied that they were complete and appropriate.
• Individual provisions recorded for the stage 3 commercial portfolio were in line with the industry-specific risks highlighted by our EY Real Estate specialists.
• Our stand-back assessment of the overall provision balance, in light of the current economic environment, through peer benchmarking and analysis of key indicators such as coverage
ratios, did not indicate the provision recorded as at year end was unreasonable.
Recoverability of capitalised software costs
Group and Society: Refer to the Audit Committee report (page 97); Accounting policies (page 241); and note 25 of the consolidated financial statements (page 296)
Key audit matter
Our response to the key audit matter
Intangible assets: £836 million
(2023: £850 million)
The Group capitalises significant software and IT
costs which are subsequently amortised over
their useful economic lives. Management
undertakes bi-annual impairment assessments to
determine whether the capitalised costs should
be written down to lower recoverable amounts.
Control testing:
We tested the design and operating effectiveness of key controls over the Group’s asset capitalisation, impairment, and amortisation processes.
These controls included:
• Project capitalisation and approvals;
• Project monitoring controls;
• Controls over amortisation and useful economic lives; and
• Impairment review controls.
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Annual Report and Accounts 2024
Independent auditor’s report to the members of Nationwide Building Society (continued)
Recoverability of capitalised software costs
Group and Society: Refer to the Audit Committee report (page 97); Accounting policies (page 241); and note 25 of the consolidated financial statements (page 296)
We identified the following risks associated with
capitalised software costs:
• Project costs capitalised for newly created
software could be inappropriate if economic
benefits to the Group have not been
established and therefore do not meet the
capitalisation criteria, or the amount
capitalised is incorrect.
• Amounts recorded for amortisation rely on
judgements made in determining useful
economic lives of capitalised software and
periodic impairment assessments undertaken
by management. There is therefore a risk that
management override of controls could result
in a material misstatement to amortisation.
Capitalisation:
We assessed the appropriateness of capitalised costs for a sample of asset additions during the year, including both externally and internally
generated costs, and assets in use as well as work in progress. We did this by obtaining evidence to challenge whether the asset will lead to
future economic benefit. This included assessment of cloud computing arrangements and software as a service to verify appropriate
capitalisation and accounting treatment.
Amortisation and impairment:
We assessed the reasonableness of the amortisation charge by testing and validating the underlying calculations, and performing substantive
analytical review.
We reviewed management’s assessment of impairments at both the individual project level and the cash generating unit (CGU) level. For project
asset impairments, we understood the rationale for impairment, recalculated impairment charges independently, and challenged the
completeness of impairments recorded.
We corroborated the reasonableness of useful economic lives by performing a stand back analysis to the Group’s broader IT strategy,
understanding pipeline projects and whether current assets would be replaced and/or become obsolete in the future.
We involved EY business valuation modelling specialists to assess the assumptions used by the Society in the prospective financial information
and forecasts used for their CGU impairment assessment. We considered whether the impacts of future plans were sufficiently reflected in the
forecast used, including changes to the technology strategy, likely future use of assets, impact of commitments including climate-related
commitments made by the Society and assessment of the impact of geopolitical tensions and cost of living pressures.
Key observations communicated to the Audit Committee
We are satisfied that the Group’s accounting policies and their application for capitalisation of new software assets and determination of related impairments are in compliance with the accounting
standards, IAS 38 and IAS 36, and we concluded that newly capitalised assets, impairments and amortisation in the current period are materially appropriate.
Risk of fraud in revenue recognition relating to effective interest rate (“EIR”) accounting
Group and Society: Refer to Accounting policies (page 241); and note 3 of the consolidated financial statements (page 253)
Key audit matter
Our response to the key audit matter
EIR adjustment to loans and advances:
£15 million (2023: £58 million)
Management judgement is required in initially
recognising financial instruments under the EIR
method, and assumptions made by management
will also impact subsequent amortisation of EIR
adjustments. This leads to a heightened risk that
management override of controls could result in a
material misstatement of the financial
statements.
Control testing:
We understood and tested the design and operating effectiveness of the Group’s controls over automated revenue recognition, including key
reconciliations and processes to ensure complete and accurate capture of fees, interest charges, customer payments and balances. We followed
a substantive approach to testing the EIR models and related balances.
Data accuracy and completeness:
We tested the data extracted from systems to be used in the EIR models, including historical data used to analyse customer behaviours. We
also involved EY model risk specialists in reviewing the code used to extract historical data from the mortgage systems, to verify that the data
used in the EIR models is complete and accurate.
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Annual Report and Accounts 2024
Independent auditor’s report to the members of Nationwide Building Society (continued)
Risk of fraud in revenue recognition relating to effective interest rate (“EIR”) accounting
Group and Society: Refer to Accounting policies (page 241); and note 3 of the consolidated financial statements (page 253)
We assessed two elements of the EIR calculation
as most critical and requiring increased audit
focus:
• The period over which to defer upfront fees
and costs, which is determined by reference to
analysis of historical customer behaviours; and
• The extent to which early redemption charges
(ERCs) and variable interest expected to be
collected in the future should be recognised as
revenue/assets now.
Model operation:
We involved EY business valuation modelling specialists in reviewing the functionality of the model, ensuring the consistency of the calculations
with the accounting policy.
Key assumptions and judgement:
We benchmarked key assumptions used within the EIR calculation to equivalent assumptions made by peers and performed sensitivity analysis
over key assumptions and judgements. We extended our analysis to reflect increased uncertainty and potential irregularities in borrowing and
switching activity attributable to changes in Bank rate. Further, we have assessed the reasonableness of the assumption for the future
propensity to redeem mortgages early through the performance of EY independent stress testing.
Key observations communicated to the Audit Committee
We concluded that the fees and costs being deferred are reasonable and complete; the average lives used in the EIR model are reasonable; the extent of ERC fees recognised upfront is
reasonable; and the data populating the EIR model is complete and accurate. We concluded that the resulting EIR adjustments made to revenue fall within our independent range of outcomes, and
complied with the requirements of IFRS 9.
Measurement of the defined benefit pension asset
Group and Society: Refer to the Audit Committee report (page 97); Accounting policies (page 241); and note 30 of the consolidated financial statements (page 302)
Key audit matter
Our response to the key audit matter
Net retirement benefit asset: £607 million
(2023: £946 million)
The Group has a defined benefit pension asset
which represents the fair value of pension plan
assets less the present value of defined benefit
obligations after applying the asset ceiling test as
required by IFRIC 14.
The net defined benefit pension asset is sensitive
to changes in key judgements and estimates.
Management uses specialists to inform the
valuation of the net defined benefit pension asset.
We identified the key audit matter as the
judgements and estimates used in valuing the
illiquid asset portfolio. Below are the key
We assessed the design and tested the effectiveness of controls in place over the valuation of the plan assets, and the process of setting
significant assumptions which are used in the calculation of the defined benefit obligation.
Valuations:
We tested the reasonableness of the fair valuation of plan assets by independently repricing 100% of the quoted bonds and equities, a sample
of the derivative financial instruments and a sample of the properties held by the pension fund. For complex and illiquid investments held, for
example unquoted infrastructure, private equity and private debt instruments, we involved our valuation specialists to assess the
appropriateness of management's valuation methodology including the judgements made in determining significant assumptions used in the
valuation of these investments. We independently valued illiquid and complex investments that had been valued using unobservable market
inputs, using alternative pricing sources where available, to evaluate management’s valuations.
We performed sectoral and geographical analysis to assess the potential impact of climate change risk on the illiquid assets to inform our
sampling of the assets during the testing of the valuation of the illiquid assets.
We considered the appropriateness of the Group’s recognition of a pension asset in accordance with IFRIC 14. Specifically, we assessed whether
the Group was entitled to an unconditional right of refund. We assessed this by reference to the terms of the pension agreement and confirmed
that the Group did have such a right.
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Independent auditor’s report to the members of Nationwide Building Society (continued)
Measurement of the defined benefit pension asset
Group and Society: Refer to the Audit Committee report (page 97); Accounting policies (page 241); and note 30 of the consolidated financial statements (page 302)
judgements and estimates used in deriving the
valuation of net defined benefit pension asset:
• Valuations - Pricing inputs and calibrations for
illiquid or complex valuations of certain
investments held by the pension scheme; and
• Assumptions - Actuarial assumptions and
inputs, including discount rate, inflation, and
longevity, which are used to determine the
valuation of the defined benefit pension
obligation.
Assumptions:
We evaluated the objectivity and competence of management’s specialists involved in the valuation of the defined benefit obligation and we
involved EY actuarial specialists to evaluate the actuarial assumptions used to calculate the defined benefit pension obligation by comparing
the assumptions to ranges we independently developed based on market observable indices and the knowledge of our actuarial specialists.
We assessed the impact on the defined benefit pension obligation of changes in financial, demographic and longevity assumptions over the
year, and the continued effects of the economic outlook, including market volatility. We then assessed whether these assumptions were
supported by objective external evidence and rationales.
We assessed the adequacy of the disclosures made in the financial statements, including the appropriateness of the assumptions and
sensitivities disclosed.
Key observations communicated to the Audit Committee
Based on the procedures performed and the evidence obtained, we found the key actuarial assumptions used in the valuation of the defined benefit pension obligation to be within a reasonable
range and no material differences were identified during our independent valuation of the pension assets. We were also satisfied that the net defined benefit pension asset was recognisable in
accordance with the terms of IFRIC 14 after applying the asset ceiling test.
IT general controls
Key audit matter
Our response to the key audit matter
The Group is highly dependent on technology due to the significant number of transactions that
are processed daily. Given the levels of automation in place, our audit focused on ensuring that
the Group has appropriate levels of IT general controls.
IT general controls are required to ensure that data transfers between applications operate as
expected, and that changes are authorised and tested. Access management controls reduce the
risk of unauthorised access to applications and data.
The Group also has a dependency on third parties and related business teams managing
associated IT controls.
We evaluated the design and operating effectiveness of IT general controls over the
applications, operating systems and databases that are relevant to financial reporting. This
includes testing change management, segregation of duties and data transfer controls.
We tested user access by assessing the controls in place for in-scope applications, in particular
testing the user access provisioning, de-provisioning, privileged access and periodic
recertification of users’ access.
Where control deficiencies were identified, we performed IT substantive procedures or
alternative audit procedures to mitigate any residual risk.
Some of the in-scope systems are outsourced to third-party service providers. For these
systems, we tested IT general controls through either direct testing or evaluation of the relevant
Service Organisation Controls (‘SOC’) reports (where available). This included assessing the
timing of the reports, the controls tested by the service auditor and whether the report
addresses relevant IT risks. We also tested required complementary user entity controls
performed by management. Where a SOC report was not available, we performed additional
procedures on the controls managed by the third party to address the relevant risks to financial
reporting.
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Annual Report and Accounts 2024
Independent auditor’s report to the members of Nationwide Building Society (continued)
IT general controls
Key observations communicated to the Audit Committee
We are satisfied that IT controls impacting financial reporting are designed and operating effectively. Improvements were made around user entitlement review execution and change controls.
The overall number of control deficiencies identified has reduced in these areas. Where control exceptions were noted, we have either relied on mitigating controls or performed IT substantive
procedures to ensure that the control exceptions identified did not impact our approach to the financial statement audit.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial
statements. Materiality provides a basis for determining the nature and extent of our audit procedures.
Having considered quantitative and qualitative factors and consultation with those charged with governance:
We determined materiality for the Group to be £69 million (2023: £50 million), which is 3.3% (2023: 2.2%) of profit before member reward payments and tax.
We determined materiality for the Society to be £55 million (2023: £50 million), which is 3.1% (2023: 2.0%) of Society’s profit before member reward payments and tax.
We believe that profit before member reward payments and tax provides us with an appropriate basis for materiality given the users of the financial statements, including the Group’s and
the Society’s members and regulators, as profit before member reward payments and tax is the more relevant measure in assessing the Group’s and the Society’s performance.
With the introduction of member rewards payments in the current year, we have revisited the basis of our materiality and updated it accordingly, as described above.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that performance materiality was 75% (2023: 75%) of
our planning materiality, namely £51.8 million and £41.3 million for the Group and the Society respectively (2023: £37.5 million for both the Group and the Society). We have set
performance materiality at this percentage based on our experience of misstatements and consistent effectiveness of the control environment.
Audit work relating to underlying entities for the purpose of obtaining audit coverage over significant financial statement accounts is undertaken based on a percentage of total
performance materiality. The performance materiality set for each entity is based on the relative scale and risk of the entity to the Group as a whole and our assessment of the risk of
misstatement within that entity. In the current year, the performance materiality allocated to entities was £51.8 million.
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Independent auditor’s report to the members of Nationwide Building Society (continued)
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £3.5 million (2023: £2.5 million) and £2.8 million (2023: £2.5 million) for
the Group and Society respectively, which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our
opinion.
Other information
The other information comprises the information included in the Annual Report other than the financial statements and our auditor’s report thereon. The directors are responsible for the
other information contained within the Annual Report, which includes reporting based on the Task Force on Climate-related Financial Disclosure (“TCFD”) recommendations.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the course of the audit,
or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material
misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
Opinion on other matters prescribed by the Building Societies Act 1986
In our opinion:
• The Annual business statement and the Directors’ report have been prepared in accordance with the requirements of the Building Societies Act 1986;
• The information given in the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
• The information given in the Annual business statement (other than the information upon which we are not required to report) gives a true representation of the matters in respect of
which it is given.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Building Societies Act 1986 requires us to report to you if, in our opinion:
• Proper accounting records have not been kept by the Society; or
• The Group’s or Society’s
financial statements are not in agreement with the accounting records; or
• We have not received all the information and explanations and access to documents we require for our audit.
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Independent auditor’s report to the members of Nationwide Building Society (continued)
Corporate Governance Statement
We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Group’s and Society’s
voluntary compliance with the provisions of the UK Corporate Governance Code specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement are materially consistent with the
financial statements or our knowledge obtained during the audit:
• The directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified, set out on page 141;
• The directors’ explanation as to their assessment of the Group’s prospects, the period this assessment covers and why the period is appropriate, set out on page 65;
• The directors’ statement on fair, balanced and understandable, set out on page 141;
• The Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks, set out on page 62;
• The section of the annual report that describes the review of effectiveness of risk management and internal control systems, set out on page 95; and
• The section describing the work of the Audit Committee, set out on page 97.
Report of the directors on remuneration
The Society voluntarily prepares a Report of the directors on remuneration in accordance with the provisions of the Companies Act 2006. The directors have requested that we audit the
part of the Report of the directors on remuneration specified by the Companies Act 2006, to be audited as if the Society were a quoted company.
In our opinion, the part of the Report of the directors’ on remuneration to be audited has been properly prepared in accordance with the Companies Act 2006.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 140, the directors are responsible for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and Society’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Society or to cease operations, or has no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined below, to detect irregularities,
including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud, is
detailed below.
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Independent auditor’s report to the members of Nationwide Building Society (continued)
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the Society and management.
Our approach was as follows:
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the most significant are the regulations, licence
conditions and supervisory requirements of the Prudential Regulation Authority (“PRA”) and the Financial Conduct Authority (“FCA”). We also considered those laws and
regulations that have a direct impact on the preparation of the financial statements, such as UK adopted International Accounting Standards and the Building Societies Act 1986.
• We understood how the Group is complying with those legal and regulatory frameworks by making enquiries of management, Internal Audit, and those responsible for legal and
compliance matters. We also reviewed correspondence between the Group and UK regulatory bodies; reviewed minutes of the Board and Board Risk Committee; and gained an
understanding of the Group's approach to governance, demonstrated by the Board's approval of the Group's governance framework and the Board's review of the Group's
operational risk framework and internal control processes.
• We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur by considering the controls that the Group has
established to address risks identified, or that otherwise seek to prevent, deter or detect fraud. We made enquiries of management and Internal Audit and held a fraud-focused
discussion with EY forensic specialists and members of the Board to supplement our assessment of how fraud might occur. We also considered performance and incentive plan
targets and their potential to influence management to manage earnings or influence the perceptions of investors and stakeholders. Our procedures to address the risks
identified also included incorporation of unpredictability into the nature, timing and/or extent of our testing, challenging assumptions and judgements made by management in
their significant accounting estimates, and testing year-end adjustments and other targeted journal entries posted with certain descriptions or unusual characteristics.
• Based on this understanding we designed our audit procedures to identify non-compliance with laws and regulations applicable to the Group. Our procedures involved inquiries
of internal and external legal counsel, executive management and Internal Audit, and reviewing the key policies, reports on the legal and regulatory frameworks and internal
whistleblowing logs. With involvement of the relevant specialists, we also conducted a review of correspondence with, and notices from, the regulators, including the FCA, and
gained an understanding of any regulatory investigations being undertaken. We also evaluated the appropriateness of the recognition and disclosure of provisions and the
contingent liability disclosures made in note 27 and note 29 to the financial statements.
•
The Group operates in the banking industry which is a highly regulated environment. As such the Senior Statutory Auditor considered the experience and expertise of the
engagement team to ensure that the team had the appropriate competence and capabilities, which included the use of specialists where appropriate.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at
https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters we are required to address
• We were appointed as auditors by the Society at the Annual General Meeting in July 2019 and engaged on 2 August 2019 to audit the financial statements for the year ending
4 April 2020 and subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments is five years, covering the years
ending 2020 to 2024.
• The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Society and we remain independent of the Group and the Society in
conducting the audit.
• The audit opinion is consistent with the additional report to the Audit Committee.
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Independent auditor’s report to the members of Nationwide Building Society (continued)
Use of our report
This report is made solely to the Society’s members, as a body, in accordance with Section 78 of the Building Societies Act 1986. Our audit work has been undertaken so that we might
state to the Society’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Society and the Society’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Javier Faiz
(Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London, United Kingdom
22 May 2024
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Income statements
Annual Report and Accounts 2024
Income statements
For the year ended 4 April 2024
Group
Society
2024
2023
2024
2023
Notes
£m
£m
£m
£m
Interest receivable and similar income:
Calculated using the effective interest rate method
3
13,962
8,776
13,255
8,180
Other
3
63
49
62
49
Total interest receivable and similar income
3
14,025
8,825
13,317
8,229
Interest expense and similar charges
4
(9,575)
(4,327)
(9,259)
(4,238)
Net interest income
4,450
4,498
4,058
3,991
Fee and commission income
5
426
432
423
427
Fee and commission expense
5
(292)
(311)
(288)
(304)
Income from investments
33
-
-
-
652
Other operating income
6
80
54
159
133
Gains/(losses) from derivatives and hedge accounting
7
117
(4)
133
(12)
Total income
4,781
4,669
4,485
4,887
Administrative expenses
8
(2,422)
(2,323)
(2,419)
(2,319)
Impairment charge on loans and advances to customers
10
(112)
(126)
(77)
(44)
Provisions for liabilities and charges
27
(127)
9
(124)
9
Profit before member reward payments and tax
2,120
2,229
1,865
2,533
Member reward payments
(344)
-
(344)
-
Profit before tax
1,776
2,229
1,521
2,533
Taxation
11
(476)
(565)
(415)
(496)
Profit after tax
1,300
1,664
1,106
2,037
The notes on pages 241 to 315 form part of these financial statements.
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Statements of comprehensive income
Annual Report and Accounts 2024
Statements of comprehensive income
For the year ended 4 April 2024
Group
Society
2024
2023
2024
2023
Notes
£m
£m
£m
£m
Profit after tax
1,300
1,664
1,106
2,037
Other comprehensive (expense)/income:
Items that will not be reclassified to the income statement
Retirement benefit obligations:
Remeasurement of net retirement benefit asset
30
(380)
(85)
(380)
(84)
Taxation
11
190
29
190
29
(190)
(56)
(190)
(55)
Revaluation reserve:
Revaluation of property
-
2
-
2
Taxation
11
(2)
(1)
(2)
(1)
(2)
1
(2)
1
Fair value through other comprehensive income reserve:
Revaluation gains/(losses) on equity instruments at fair value through
other comprehensive income
5 (3) 2 (1)
Taxation
11
(1)
1
-
-
4
(2)
2
(1)
(188)
(57)
(190)
(55)
Items that may subsequently be reclassified to the income statement
Cash flow hedge reserve:
Hedging net (losses)/gains arising during the year
(21)
40
(21)
50
Amount transferred to income statement
(48)
(50)
(16)
(39)
Taxation
11
20
2
10
(6)
(49)
(8)
(27)
5
Other hedging reserve:
Hedging net gains arising during the year
5
16
12
16
Amount transferred to income statement
(10)
(23)
(10)
(23)
Taxation
11
1
3
1
3
(4)
(4)
3
(4)
Fair value through other comprehensive income reserve:
Revaluation gains/(losses) on debt instruments at fair value through
other comprehensive income
8 (66) 8 (66)
Amount transferred to income statement
(47)
(74)
(47)
(74)
Taxation
11
11
39
11
39
(28)
(101)
(28)
(101)
(81)
(113)
(52)
(100)
Other comprehensive expense
(269)
(170)
(242)
(155)
Total comprehensive income
1,031
1,494
864
1,882
The notes on pages 241 to 315 form part of these financial statements.
236
Strategic report Risk report Financial statementsGovernance Other informationAnnual Report and Accounts 2024
Balance sheets
Annual Report and Accounts 2024
Balance sheets
At 4 April 2024
Group
Society
2024
2023
2024
2023
Notes
£m
£m
£m
£m
Assets
Cash
23,817
25,635
23,817
25,635
Approved by the Board of directors on 22 May 2024.
K A H Parry Chairman
D Crosbie Chief Executive Officer
C S Rhodes Chief Financial Officer
Loans and advances to banks and similar institutions
2,478
2,860
2,468
2,854
Investment securities
13
26,532
27,615
26,476
27,570
Derivative financial instruments
15
6,290
6,923
6,905
7,554
Fair value adjustment for portfolio hedged risk
(3,330)
(5,011)
(3,330)
(5,011)
Loans and advances to customers
14
213,440
210,782
169,996
166,696
Investments in Group undertakings
33
-
-
40,223
41,056
Intangible assets
25
848
862
836
850
Property, plant and equipment
26
656
744
656
745
Accrued income and prepaid expenses
294
302
464
637
Deferred tax
11
109
119
106
108
Current tax assets
54
15
46
13
Other assets
122
101
93
76
Retirement benefit asset
30
607
946
607
947
Total assets
271,917
271,893
269,363
269,730
Liabilities
Shares
193,366
187,143
193,366
187,143
Deposits from banks and similar institutions
16
16,388
25,056
16,388
25,054
Other deposits
17
4,530
5,191
4,752
5,617
Fair value adjustment for portfolio hedged risk
50
2
50
2
Debt securities in issue
18
29,599
27,626
28,255
25,993
Derivative financial instruments
15
1,451
1,524
1,640
1,718
Other liabilities
689
695
2,527
2,854
Provisions for liabilities and charges
27
149
82
145
82
Accruals and deferred income
405
334
398
328
Subordinated liabilities
19
7,225
6,755
7,225
6,755
Subscribed capital
20
173
173
173
173
Deferred tax
11
206
406
153
333
Total liabilities
254,231
254,987
255,072
256,052
Members’ interests and equity
Core capital deferred shares
31
1,157
1,233
1,157
1,233
Other equity instruments
32
1,336
1,336
1,336
1,336
General reserve
15,119
14,184
11,792
11,051
Revaluation reserve
36
38
36
38
Cash flow hedge reserve
127
176
6
33
Other hedging reserve
(51)
(47)
17
14
Fair value through other comprehensive income reserve
(38)
(14)
(53)
(27)
Total members’ interests and equity
17,686
16,906
14,291
13,678
Total members’ interests, equity and liabilities
271,917
271,893
269,363
269,730
The notes on pages 241 to 315 form part of these financial statements.
237
Strategic report Risk report Financial statementsGovernance Other informationAnnual Report and Accounts 2024
Group statement of movements in members’
interests and equity
Annual Report and Accounts 2024
Group statement of movements in members’ interests and equity
For the year ended 4 April 2024
Core capital
deferred
shares
Other equity
instruments
General
reserve
Revaluation
reserve
Cash flow
hedge
reserve
Other
hedging
reserve
FVOCI
reserve
Total
£m
£m
£m
£m
£m
£m
£m
£m
At 5 April 2023
1,233
1,336
14,184
38
176
(47)
(14)
16,906
Profit for the year
-
-
1,300
-
-
-
-
1,300
Net remeasurements of retirement benefit obligations
-
-
(190)
-
-
-
-
(190)
Net revaluation of property
-
-
-
(2)
-
-
-
(2)
Net movement in cash flow hedge reserve
-
-
-
-
(49)
-
-
(49)
Net movement in other hedging reserve
-
-
-
-
-
(4)
-
(4)
Net movement in FVOCI reserve
-
-
-
-
-
-
(24)
(24)
Total comprehensive income
-
-
1,110
(2)
(49)
(4)
(24)
1,031
Repurchase of core capital deferred shares
(76)
-
-
-
-
-
-
(76)
Distribution to the holders of core capital deferred shares
-
-
(97)
-
-
-
-
(97)
Distribution to the holders of Additional Tier 1 capital
-
-
(78)
-
-
-
-
(78)
At 4 April 2024
1,157
1,336
15,119
36
127
(51)
(38)
17,686
For the year ended 4 April 2023
Core capital
deferred
shares
Other equity
instruments
General
reserve
Revaluation
reserve
Cash flow
hedge
reserve
Other
hedging
reserve
FVOCI
reserve
Total
£m
£m
£m
£m
£m
£m
£m
£m
At 5 April 2022
1,334
1,336
12,753
46
184
(43)
89
15,699
Profit for the year
-
-
1,664
-
-
-
-
1,664
Net remeasurements of retirement benefit obligations
-
-
(56)
-
-
-
-
(56)
Net revaluation of property
-
-
-
1
-
-
-
1
Net movement in cash flow hedge reserve
-
-
-
-
(8)
-
-
(8)
Net movement in other hedging reserve
-
-
-
-
-
(4)
-
(4)
Net movement in FVOCI reserve
-
-
-
-
-
-
(103)
(103)
Total comprehensive income
-
-
1,608
1
(8)
(4)
(103)
1,494
Reserve transfer
-
-
9
(9)
-
-
-
-
Repurchase of core capital deferred shares
(101)
-
-
-
-
-
-
(101)
Distribution to the holders of core capital deferred shares
-
-
(108)
-
-
-
-
(108)
Distribution to the holders of Additional Tier 1 capital
-
-
(78)
-
-
-
-
(78)
At 4 April 2023
1,233
1,336
14,184
38
176
(47)
(14)
16,906
The notes on pages 241 to 315 form part of these financial statements.
238
Strategic report Risk report Financial statementsGovernance Other informationAnnual Report and Accounts 2024
Society statement of movements in members’
interests and equity
Annual Report and Accounts 2024
Society statement of movement in members’ interests and equity
For the year ended 4 April 2024
Core capital
deferred
shares
Other equity
instruments
General
reserve
Revaluation
reserve
Cash flow
hedge
reserve
Other
hedging
reserve
FVOCI
reserve
Total
£m
£m
£m
£m
£m
£m
£m
£m
At 5 April 2023
1,233
1,336
11,051
38
33
14
(27)
13,678
Profit for the year
-
-
1,106
-
-
-
-
1,106
Net remeasurements of retirement benefit obligations
-
-
(190)
-
-
-
-
(190)
Net revaluation of property
-
-
-
(2)
-
-
-
(2)
Net movement in cash flow hedge reserve
-
-
-
-
(27)
-
-
(27)
Net movement in other hedging reserve
-
-
-
-
-
3
-
3
Net movement in FVOCI reserve
-
-
-
-
-
-
(26)
(26)
Total comprehensive income
-
-
916
(2)
(27)
3
(26)
864
Repurchase of core capital deferred shares
(76)
-
-
-
-
-
-
(76)
Distribution to the holders of core capital deferred shares
-
-
(97)
-
-
-
-
(97)
Distribution to the holders of Additional Tier 1 capital
-
-
(78)
-
-
-
-
(78)
At 4 April 2024
1,157
1,336
11,792
36
6
17
(53)
14,291
For the year ended 4 April 2023
Core capital
deferred
shares
Other equity
instruments
General
reserve
Revaluation
reserve
Cash flow
hedge
reserve
Other
hedging
reserve
FVOCI
reserve
Total
£m
£m
£m
£m
£m
£m
£m
£m
At 5 April 2022
1,334
1,336
9,246
46
28
18
75
12,083
Profit for the year
-
-
2,037
-
-
-
-
2,037
Net remeasurements of retirement benefit obligations
-
-
(55)
-
-
-
-
(55)
Net revaluation of property
-
-
-
1
-
-
-
1
Net movement in cash flow hedge reserve
-
-
-
-
5
-
-
5
Net movement in other hedging reserve
-
-
-
-
-
(4)
-
(4)
Net movement in FVOCI reserve
-
-
-
-
-
-
(102)
(102)
Total comprehensive income
-
-
1,982
1
5
(4)
(102)
1,882
Reserve transfer
-
-
9
(9)
-
-
-
-
Repurchase of core capital deferred shares
(101)
-
-
-
-
-
-
(101)
Distribution to the holders of core capital deferred shares
-
-
(108)
-
-
-
-
(108)
Distribution to the holders of Additional Tier 1 capital
-
-
(78)
-
-
-
-
(78)
At 4 April 2023
1,233
1,336
11,051
38
33
14
(27)
13,678
The notes on pages 241 to 315 form part of these financial statements.
239
Strategic report Risk report Financial statementsGovernance Other informationAnnual Report and Accounts 2024
Cash flow statements
Annual Report and Accounts 2024
Cash flow statements
For the year ended 4 April 2024
Group
Society
2024 2023 2024
2023
Notes
£m
£m
£m
£m
Cash flows generated from/ (used in) operating activities
Profit before tax
1,776
2,229
1,521
2,533
Adjustments for:
Non-cash items included in profit before tax
36
965
839
907
773
Changes in operating assets and liabilities
36
(4,256)
(2,965)
(4,011)
(3,272)
Taxation
(479)
(558)
(407)
(485)
Net cash flows used in operating activities
(1,994)
(455)
(1,990)
(451)
Cash flows generated from/ (used in) investing activities
Purchase of investment securities
(8,598)
(14,039)
(8,591)
(14,038)
Investment in subsidiary share capital
-
-
(15)
(1)
Sale and maturity of investment securities
9,736
12,097
9,736
12,096
Proceeds on sale of investment advice business
33
-
33
-
Purchase of property, plant and equipment
(85)
(63)
(85)
(63)
Sale of property, plant and equipment
4
21
4
21
Purchase of intangible assets
(298)
(283)
(298)
(283)
Net cash flows generated from/ (used in) investing activities
792
(2,267)
784
(2,268)
Cash flows generated from/ (used in) financing activities
Distributions paid to the holders of core capital deferred
shares
(97) (108) (97) (108)
Repurchase of core capital deferred shares
(76)
(101)
(76)
(101)
Distributions paid to the holders of Additional Tier 1 capital
(78)
(78)
(78)
(78)
Issuance of subordinated liabilities
1,385
646
1,385
646
Redemption of subordinated liabilities
(771)
(2,197)
(771)
(2,197)
Interest paid on subordinated liabilities
(470)
(260)
(470)
(260)
Interest paid on subscribed capital
(11)
(6)
(11)
(6)
Repayment of lease liabilities
(34)
(33)
(34)
(33)
Net cash flows used in financing activities
(152)
(2,137)
(152)
(2,137)
Effect of exchange rate changes on cash and cash equivalents
(110)
(10)
(110)
-
Net decrease in cash and cash equivalents
(1,464)
(4,869)
(1,468)
(4,856)
Cash and cash equivalents at start of year
25,955
30,824
25,949
30,805
Cash and cash equivalents at end of year
36
24,491
25,955
24,481
25,949
Total interest received was £12,963m (2023: £7,376m) and total interest paid was £7,828m (2023: £3,260m).
The notes on pages 241 to 315 form part of these financial statements.
240
Strategic report Risk report Financial statementsGovernance Other informationAnnual Report and Accounts 2024
Notes to the financial statements
Annual Report and Accounts 2024
Notes to the financial statements
1. Statement of accounting policies
Basis of preparation
The Group and Society financial statements are prepared in accordance with
international accounting standards in conformity with the requirements of the Building
Societies Act 1986 and with those parts of the Building Societies (Accounts and Related
Provisions) Regulations 1998 (as amended) that are applicable. International accounting
standards which have been adopted for use within the UK have also been applied in
these financial statements.
The Group financial statements are also prepared in accordance with International
Financial Reporting Standards (IFRS) adopted by the European Union.
The audited sections in the Risk report form an integral part of these financial
statements. These disclosures, where marked as ‘audited’, are covered by the
Independent auditor’s report for this Annual Report and Accounts.
The financial statements have been prepared under the historical cost convention as
modified by the revaluation of investment properties, branches and non-specialised
buildings, financial assets measured at fair value through other comprehensive income
(FVOCI), and derivatives and certain other financial assets and liabilities measured at fair
value through profit and loss (FVTPL).
The consolidated financial statements are presented in sterling, which is the functional
currency of the Society.
A summary of the Group’s material accounting policies, which have been consistently
applied, is set out below. There have been no changes arising from adoption of new and
revised IFRSs, as explained below.
Further information about judgements in applying accounting policies and critical
accounting estimates is provided in note 2.
Going concern
The Group’s business activities and financial position, the factors likely to affect its
future development and performance, its objectives and policies in managing the
financial risks to which it is exposed, and its capital, funding and liquidity positions are
set out in the Financial review and the Risk report.
The directors have assessed the Group’s ability to continue as a going concern, with
reference to current and anticipated market conditions including the impact of climate-
related matters and the proposed acquisition of Virgin Money UK plc. The directors
confirm they are satisfied that the Group has adequate resources to continue in
business for a period of not less than 12 months from the date of approval of these
consolidated financial statements and that it is therefore appropriate to adopt the going
concern basis.
Adoption of new and revised IFRSs
A number of amendments and improvements to accounting standards have been issued
by the International Accounting Standards Board (IASB) with an effective date for
annual reporting periods beginning on or after 1 January 2023. The adoption of these
amendments had no significant impact on the Group.
Future accounting developments
The IASB has also issued a number of amendments to IFRSs that become effective for
annual reporting periods beginning on or after 1 January 2024, some of which have not
yet been endorsed for use in the European Union or the UK. These amendments are not
expected to have a significant impact for the Group.
241
Strategic report Risk report Financial statementsGovernance Other informationAnnual Report and Accounts 2024
Notes to the financial statements (continued)
Annual Report and Accounts 2024
Notes to the financial statements
(continued)
1. Statement of accounting policies (continued)
Basis of consolidation
The assets, liabilities and results of the Society and its undertakings, which include
subsidiaries and structured entities, are included in the financial statements on the
basis of accounts made up to the reporting date.
Investments in subsidiary undertakings are stated in the Society accounts at cost less
provisions for any impairment in value. The directors consider it appropriate for
administrative and commercial reasons that subsidiary undertakings have financial
years ending on 31 March. Adjustment is made for individually significant transactions
arising between 31 March and the Society’s year end.
Securitisation and covered bond transactions
The Group has securitised certain mortgage loans by the transfer of the loans to
structured entities controlled by the Group. The securitisation enables a subsequent
issuance of debt, either by the Society or the structured entities, to investors who gain
the security of the underlying assets as collateral. Those structured entities are fully
consolidated into the Group accounts.
The transfers of the mortgage loans to the structured entities are not treated as sales
by the Society. The Society continues to recognise the mortgage loans on its own
balance sheet after the transfer because it retains their risks and rewards through the
receipt of substantially all of the profits or losses of the structured entities. In the
accounts of the Society, the proceeds received from the transfer are accounted for as a
deemed loan repayable to the structured entities.
For covered bonds, the Society itself and not the structured entity issues the covered
bonds and then lends the proceeds to the structured entity on back-to-back terms. The
structured entity then uses these proceeds as consideration for the loans transferred
from the Society. In the accounts of the Society, neither the loan to the structured entity
nor the consideration for the transfer of mortgage loans is recognised separately as an
additional asset and liability.
The Group has also entered into self-issuances of debt to be used as collateral for
repurchase (‘repo’) and similar transactions. Investments in self-issued debt and the
related obligation, together with the related income, expenditure and cash flows, are not
recognised in the Society’s or Group’s financial statements. This avoids the ‘grossing-up’
of the financial statements that would otherwise arise.
To manage interest rate risk, the Society enters into derivative transactions with the
structured entities, receiving a rate of interest based on the securitised mortgages and
paying a rate inherent in the debt issuances. These internal derivatives are treated as
part of the deemed loan and not separately fair valued because the relevant mortgage
loans are not derecognised. All other derivatives relating to securitisations are treated
as explained in the derivatives and hedge accounting policy below.
Interest receivable and interest expense
For instruments measured at amortised cost the effective interest rate (EIR) method is
used to measure the carrying value of a financial asset or liability and to allocate
associated interest income or expense over the relevant period.
In calculating the effective interest rate, the Group estimates cash flows considering all
contractual terms of the financial instrument (for example, early redemption penalty
charges) and anticipated customer behaviour but does not consider future credit losses.
The calculation includes all fees received and paid and costs incurred that are an
integral part of the effective interest rate, transaction costs, and all other premiums or
discounts above or below market rates.
Interest income is calculated by applying the EIR to the gross carrying amount of non-
credit impaired financial assets. For credit impaired financial assets the interest income
is calculated by applying the EIR to the amortised cost of the credit impaired financial
assets (i.e. net of the allowance for expected credit losses (ECLs)). Where loans are credit
impaired on origination, or when purchased from third parties, the carrying amount at
initial recognition is net of the lifetime ECL at that date. For these assets the EIR reflects
the ECLs in determining the future cash flows expected to be received from the financial
asset.
Interest receivable and similar income/(expense) calculated using the effective interest
rate method also includes interest on financial assets classified as fair value through
other comprehensive income, and on derivatives in qualifying hedge relationships.
Interest income not calculated using the effective interest rate method, including
interest on financial assets classified as fair value through profit or loss and derivatives
not in qualifying hedge relationships, is presented as other interest receivable and
similar income/(expense).
Member reward payments
Member reward payments represent discretionary payments to members of the Society
which may be determined by the Board from time to time, depending on the financial
strength of the Society. The Group recognises the expected cost of member reward
payments on the date at which they are announced.
242
Strategic report Risk report Financial statementsGovernance Other informationAnnual Report and Accounts 2024
Notes to the financial statements (continued)
Annual Report and Accounts 2024
Notes to the financial statements
(continued)
1. Statement of accounting policies (continued)
Fees and commissions
Fee and commission income and expense comprises fees that are not an integral part of
the EIR. Fees and commissions relating to current accounts, savings accounts,
mortgages and credit cards are either:
• transaction-based and therefore recognised when the performance obligation
related to the transaction is fulfilled, or
• related to the provision of services over a period of time and therefore recognised
on a systematic basis over the life of the agreement as services are provided.
The transaction prices and provision of services are defined within the product terms
and conditions.
Trail commission relating to investments under administration, general insurance and
protection products sold on behalf of third parties may include variable consideration.
Where this is the case the trail commission is recognised either on the accruals basis
over the period to which the commission relates or, if the uncertainties are more
significant, once the uncertainties are resolved.
Fee and commission income is generally earned from short-term contracts with
payment terms that do not include a significant financing component.
Segmental reporting
The Executive Committee (ExCo) is responsible for allocating resources and assessing
the performance of the business and is therefore identified as the chief operating
decision maker.
The Group has determined that it has one reportable segment as the ExCo reviews
performance and makes decisions based on the Group as whole. No segmental analysis
is required on geographical lines as substantially all of the Group’s activities are in the
United Kingdom. As a result, no segmental disclosure is provided.
Leases
At inception, the Group assesses whether a contract is, or contains, a lease. This
assessment involves exercising judgement as to whether the contract conveys the right
to control the use of an identified asset, and the right to obtain substantially all of the
economic benefits from this asset, for a period of time.
Leases held by the Group as a lessee consist primarily of property contracts for
branches and office buildings. The Group recognises a right-of-use (RoU) asset and a
lease liability at the commencement of the lease, except for short-term leases (defined
as leases with a lease term of less than 12 months) and leases of low value assets.
Payments for short-term leases and leases of low value assets are generally recognised
in the income statement on a straight-line basis.
Intangible assets
Intangible assets held by the Group consist primarily of externally acquired and
internally developed computer software which is held at cost less accumulated
amortisation and impairment. Computer software intangible assets are amortised using
the straight-line method over their estimated useful lives which generally range
between 3 and 10 years.
Intangible assets, including computer software, are reviewed for indicators of
impairment at each reporting date and whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. Where the carrying amount is
not recoverable the asset is written down immediately to the estimated recoverable
amount.
Property, plant and equipment
Freehold and long leasehold properties comprise mainly branches and office buildings.
Branches and non-specialised buildings are stated at revalued amounts, being the fair
value, determined by market-based evidence at the date of the valuation, less any
subsequent accumulated depreciation and subsequent impairment. Valuations are
completed annually as at 4 April, or more frequently if required, by external,
independent and qualified surveyors who have recent experience in the location and
type of properties. Valuations are performed in accordance with the Royal Institution of
Chartered Surveyors Appraisal and Valuation Standards and are generally performed on
a vacant possession basis, using a comparative method of valuation with reference to
sales prices and observable market rents for similar properties in similar locations.
The Group holds a small number of investment properties comprising properties held
for rental which are held at fair value, with changes in fair value included in the income
statement.
243
Strategic report Risk report Financial statementsGovernance Other informationAnnual Report and Accounts 2024
Notes to the financial statements (continued)
Annual Report and Accounts 2024
Notes to the financial statements
(continued)
1. Statement of accounting policies (continued)
Other property, plant and equipment, including specialised administration buildings, are
included at historical cost less accumulated depreciation and impairment. Land is not
depreciated. Other assets are depreciated over the following estimated useful lives:
Branches and non-specialised buildings 60 years Specialised administration buildings up to 60 years Plant and machinery 5 to 15 years Equipment, fixtures, fittings and vehicles 3 to 10 years
Assets are reviewed for indicators of impairment at each reporting date and whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable. Where the carrying amount is not recoverable the asset is written down
immediately to the estimated recoverable amount.
Inventories
Inventories relating to property development activities are held at the lower of cost and
net realisable value and are included within other assets on the balance sheet.
Employee benefits
The Group operates a number of defined benefit and defined contribution pension
arrangements.
The net defined benefit asset or liability represents the difference between the present
value of defined benefit obligations and the fair value of plan assets, after applying the
asset ceiling test, where a net defined benefit surplus is limited to the present value of
available refunds and reductions in future contributions to the plan.
The defined benefit obligation is calculated by independent actuaries using the
projected unit credit method. The present value of the defined benefit obligation is
determined by discounting the estimated future cash flows derived from yields of high-
quality corporate bonds that have terms to maturity approximating to the terms of the
related pension liability.
Actuarial remeasurements arise from experience adjustments (the effects of differences
between previous actuarial assumptions and what has actually occurred) and changes in
forward-looking actuarial assumptions. Actuarial remeasurements are recognised in full,
in the year they occur, in other comprehensive income.
A defined contribution arrangement is one into which the Group and the employee pay
fixed contributions, without any further obligation to pay additional contributions.
Payments to defined contribution schemes are charged to the income statement as they
fall due.
The Group also offers variable compensation to employees including bonus schemes.
For performance-based awards, no amounts are recognised in the income statement
until it is considered probable that payments will be made. Where a performance-based
bonus payment is considered probable, the amount recognised in the income statement
will reflect the portion of the vesting period that has passed. The vesting period for
performance-based awards runs from the start of the performance period associated
with the plan to the settlement date.
Provisions
A provision is recognised where there is a present obligation as a result of a past event,
it is probable that the obligation will be settled, and it can be reliably estimated.
Contingent liabilities
Contingent liabilities are possible obligations whose existence will be confirmed only by
the outcome of uncertain future events which are not wholly within the control of the
entity, and present obligations where the outflow of resources is uncertain or cannot be
measured reliably. Contingent liabilities are not recognised on the balance sheet but are
disclosed unless the likelihood of an outflow of economic resources is remote.
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Annual Report and Accounts 2024
Notes to the financial statements
(continued)
1. Statement of accounting policies (continued)
Taxation
Current tax payable on profits is recognised as an expense in the period in which profits
arise. Current tax assets and liabilities are measured at the amount expected to be
recovered from, or paid to, taxation authorities. Management evaluates where uncertain
taxation positions exist and recognises provisions where appropriate to reflect the best
estimate of the probable outcome.
Deferred tax is provided in full on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the financial statements, using tax
rates and laws that have been enacted or substantively enacted by the balance sheet
date and which are expected to apply when the related deferred tax asset is realised, or
the deferred tax liability is settled.
Deferred tax assets and liabilities are offset where there is a legally enforceable right to
offset current tax assets against current tax liabilities and where the deferred tax assets
and liabilities relate to income taxes levied by the same taxation authority on either the
same taxable entity or different taxable entities where there is an intention to settle on a
net basis.
Current and deferred tax are charged or credited in the income statement except to the
extent that the tax arises from a transaction or event which is recognised outside the
income statement. In this case, the tax appears in the same statement as the transaction
that gave rise to it. An exception to this principle relates to the tax consequences of the
Group's distributions on other equity instruments. Although such distributions are
recognised directly in equity, the tax consequences are credited to the income
statement, where the profit being distributed originally arose.
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise cash
and non-restricted balances with less than three months maturity from the date of
acquisition, included within cash and loans and advances to banks and similar
institutions on the balance sheet.
Financial assets
Financial assets primarily consist of cash, loans and advances to banks and similar
institutions, investment securities, derivative financial instruments and loans and
advances to customers.
Recognition and derecognition
All financial assets are recognised initially at fair value. Purchases and sales of financial
assets are accounted for at trade date. Financial assets are derecognised when the
rights to receive cash flows have expired or where the assets have been transferred and
substantially all the risks and rewards of ownership have been transferred.
Modification of contractual terms
An instrument that is renegotiated is derecognised if the existing agreement is
cancelled and a new agreement is made on substantially different terms (such as
renegotiations of commercial loans). Residential mortgages reaching the end of a fixed
interest deal period are deemed repricing events, rather than a modification of
contractual terms, as the change in interest rate at the end of the fixed rate period was
envisaged in the original mortgage contract.
Where an instrument is renegotiated and not derecognised, the change is considered a
modification of contractual terms. Where this arises, the gross carrying amount of the
loan is recalculated as the present value of the renegotiated or modified contractual
cash flows, discounted at the loan’s original effective interest rate. Any gain or loss on
recalculation is recognised immediately in the income statement.
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Annual Report and Accounts 2024
Notes to the financial statements
(continued)
1. Statement of accounting policies (continued)
Classification and measurement
The classification and subsequent measurement of financial assets is based on an
assessment of the Group’s business models for managing the assets and their
contractual cash flow characteristics. Financial assets are classified into the following
three categories:
(a)
Amortised cost
Financial assets held to collect contractual cash flows and where contractual terms
comprise solely payments of principal and interest (SPPI) are classified as amortised
cost. This category of financial assets includes cash, loans and advances to banks and
similar institutions, the majority of the Group’s residential and commercial mortgage
loans, all unsecured lending, and certain investment securities within a ‘hold to collect’
business model.
Financial assets within this category are recognised on either the receipt of cash or
deposit of funds into one of the Group’s bank accounts (for cash and loans and advances
to banks and similar institutions), when the funds are advanced to borrowers (for
residential, commercial and unsecured lending) or on the trade date for purchases of
investment securities. After initial recognition, the assets are measured at amortised
cost using the effective interest rate method, less provisions for expected credit losses.
(b)
Fair value through other comprehensive income
Debt instruments held in a business model whose objective is achieved by both
collecting contractual cash flows and selling financial assets, and where contractual
terms comprise solely payments of principal and interest (SPPI), are classified as, and
measured at, FVOCI. This category of financial assets includes most of the Group’s
investment securities which are held to manage liquidity requirements.
Financial assets within this category are recognised on trade date. The assets are
measured at fair value using, in the majority of cases, market prices or, where there is no
active market, prices obtained from market participants. In sourcing valuations, the
Group makes use of a consensus pricing service, in line with standard industry practice.
In cases where market prices or prices from market participants are not available,
discounted cash flow models are used.
Interest on FVOCI debt instruments is recognised in interest receivable and similar
income in the income statement, using the effective interest rate method. Unrealised
gains and losses arising from changes in value are recognised in other comprehensive
income. Provisions for expected credit losses and foreign exchange gains or losses are
recognised in the income statement. Cumulative gains or losses arising on sale of FVOCI
debt instruments are recognised in the income statement within other operating
income/(expense), net of any credit or foreign exchange gains or losses already
recognised.
Upon initial recognition, the Group may elect to classify irrevocably some of its equity
investments as FVOCI when they meet the definition of equity under IAS 32 ‘Financial
Instruments: Presentation’ and are not held for trading. Such classification is
determined on an instrument-by instrument basis. Gains and losses on these equity
instruments are never recycled to the income statement. Dividends are recognised in
the income statement as other operating income unless deemed to represent a recovery
of part of the cost of the investment. Equity instruments at FVOCI are not subject to an
impairment assessment.
(c)
Fair value through profit or loss
All other financial assets are measured at FVTPL. Financial assets within this category
primarily include derivative instruments and a small number of residential and
commercial loans and investment securities with contractual cash flow characteristics
which do not meet the SPPI criteria. The contractual terms for these cash flows include
contingent or leverage features, or returns based on movements in underlying collateral
values such as house prices.
Fair values are based on observable market data, valuations obtained from third parties
or, where these are not available, internal models. Gains or losses arising from changes
in the fair value of these instruments and on disposal are recognised in the income
statement within other operating income.
Hedge accounting is not applied to assets classified as FVTPL; however, hedging may be
applied for economic purposes. Gains or losses arising from changes in the fair value of
derivatives economically hedging FVTPL financial assets are also included within other
operating income.
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Annual Report and Accounts 2024
Notes to the financial statements
(continued)
1. Statement of accounting policies (continued)
Impairment of financial assets
Financial assets within the scope of IFRS 9 expected credit loss (ECL) requirements
comprise all financial debt instruments measured at either amortised cost or FVOCI.
These include cash, loans and advances to banks and similar institutions, and the
majority of investment securities and loans and advances to customers. Also within
scope are irrevocable undrawn commitments to lend and intra-group lending (the latter
being eliminated on consolidation in the Group accounts).
The ECL represents the present value of expected cash shortfalls following the default
of a financial instrument, including any undrawn commitment. A cash shortfall is the
difference between the cash flows that are due in accordance with the contractual terms
of the instrument and the cash flows that the Group expects to receive.
The allowance for ECLs is based on an assessment of the probability of default,
exposure at default and loss given default, discounted at the effective interest rate to
give a net present value of cash flows. The estimation of ECLs is unbiased and
probability weighted, taking into account all reasonable and supportable information,
including forward-looking economic assumptions and a range of possible outcomes.
ECLs are typically calculated from initial recognition of the financial asset for the
maximum contractual period that the Group is exposed to the credit risk. However, for
revolving credit loans such as credit cards and overdrafts, the Group’s credit risk is not
limited to their contractual period and therefore the expected life of the loan and
associated undrawn commitment is calculated based on the behavioural life of the loan.
For financial assets recognised in the balance sheet at amortised cost, the allowance for
ECLs is offset against the gross carrying value so that the amount presented in the
balance sheet is net of impairment provisions. For financial assets classified as FVOCI,
any credit losses recognised are offset against cumulative fair value movements within
the other comprehensive income reserve. For separately identifiable irrevocable loan
commitments, where the related financial asset has not yet been advanced, the
provision is presented in provisions for liabilities and charges in the balance sheet.
Forward-looking economic inputs
ECLs are calculated by reference to information on past events, current conditions and
forecasts of future economic conditions. Multiple economic scenarios are incorporated
into ECL calculation models. These scenarios are based on external sources where
available and appropriate, and internally generated assumptions in all other cases. To
capture any non-linear relationship between economic assumptions and credit losses, a
minimum of four scenarios is used. This includes a base case scenario which reflects the
Group’s view of the most likely future economic conditions, together with upside,
downside and severe downside scenarios representing alternative plausible views of
economic conditions, weighted based on management’s view of their probability
.
Credit risk categorisation
For the purpose of calculating ECLs, assets are categorised into three stages as follows:
Stage 1: no significant increase in credit risk since initial recognition
On initial recognition, and for financial assets where there has not been a significant
increase in credit risk since initial recognition, provision is made for losses from credit
default events expected to occur within the next 12 months. Expected credit losses for
these stage 1 assets continue to be recognised on this basis unless there is a significant
increase in the credit risk of the asset.
Stage 2: significant increase in credit risk
Financial assets are categorised as being within stage 2 where an instrument has
experienced a significant increase in credit risk since initial recognition. For these assets,
provision is made for losses from credit default events expected to occur over the
lifetime of the instrument.
Whether a significant increase in credit risk has occurred is ascertained by considering
both quantitative and qualitative factors. Quantitative considerations take into account
changes in the residual lifetime probability of default (PD) of the asset. As a backstop, all
assets with an arrears status of more than 30 days past due on contractual payments
are considered to be in stage 2.
Qualitative factors that may indicate a significant change in credit risk include
concession events where full repayment of principal and interest is envisaged, on a
discounted basis.
Further information about the identification of significant increases in credit risk is
provided in note 10.
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Notes to the financial statements (continued)
Annual Report and Accounts 2024
Notes to the financial statements
(continued)
1. Statement of accounting policies (continued)
Stage 3: credit impaired (or defaulted) loans
Financial assets are transferred into stage 3 when there is objective evidence that an
instrument is credit impaired. Provisions for stage 3 assets are made on the basis of
credit default events expected to occur over the lifetime of the instrument. Assets are
considered credit impaired when:
• Contractual payments of either principal or interest are past due by more than 90
days;
• There are other indications that the borrower is unlikely to pay, such as signs of
financial difficulty, probable bankruptcy, breaches of contract and concession events
which have a detrimental impact on the present value of future cash flows; or
• The loan is otherwise considered to be in default.
Interest income on stage 3 credit impaired loans is recognised in the income statement
on the loan balance net of the ECL provision. The gross balance sheet value of stage 3
loans reflects the contractual terms of the assets and continues to increase over time
with the contractually accrued interest.
Transfers between stages
Transfers from stage 1 to 2 occur when there has been a significant increase in credit
risk and from stage 2 to 3 when credit impairment is indicated as described above.
Loans in stage 2 or 3 can transfer back to stage 1 or 2 once the criteria for a significant
increase in credit risk or impairment are no longer met. For loans subject to concession
events deemed to be forbearance, accounts are transferred back to stage 1 or 2 only
after being up to date for a period of 12 months.
Write-off
Loans remain on the balance sheet, net of associated provisions, until they are deemed
to have no reasonable expectation of recovery. Loans are generally written off after
realisation of any proceeds from collateral and upon conclusion of the collections
process, including consideration of whether an account has reached a point where
continuing attempts to recover are no longer likely to be successful. Where a loan is not
recoverable, it is written off against the related provision for loan impairment once all
the necessary procedures have been completed and the amount of the loss has been
determined. Subsequent recoveries of amounts previously written off decrease the
value of impairment charges recorded in the income statement.
Financial liabilities
Borrowings, including shares, deposits, debt securities in issue, subordinated liabilities
and permanent interest-bearing shares (subscribed capital) are recognised initially at
fair value, being the issue proceeds net of premiums, discounts and transaction costs
incurred.
All borrowings are subsequently measured at amortised cost using the effective interest
rate method. Amortised cost is adjusted for the amortisation of any premiums,
discounts and transaction costs. The amortisation is recognised in interest expense and
similar charges using the effective interest rate method.
Derivative financial liabilities are measured at FVTPL. Borrowings that are designated as
hedged items are subject to measurement under the hedge accounting requirements
described in the derivatives and hedge accounting policy below.
Financial liabilities are derecognised when the obligation is discharged, cancelled or has
expired. The financial liabilities of dormant shares and deposit accounts are
extinguished when balances have been transferred to the Government-backed
unclaimed asset scheme under the terms of the Dormant Accounts and Building Society
Accounts Act 2008, with no impact on the income statement.
Fair value of assets and liabilities
IFRS 13 ‘Fair Value Measurement’ requires an entity to classify assets and liabilities held
at fair value, and those not measured at fair value but for which the fair value is
disclosed, according to a hierarchy that reflects the significance of observable market
inputs in calculating those fair values. The three levels of the fair value hierarchy are
defined below:
Level 1 – Valuation using quoted market prices
Assets and liabilities are classified as Level 1 if their value is observable in an active
market. Such instruments are valued by reference to unadjusted quoted prices for
identical assets or liabilities in active markets where the quoted price is readily available,
and the price reflects actual and regularly occurring market transactions on an arm’s
length basis. An active market is one in which transactions occur with sufficient volume
and frequency to provide pricing information on an ongoing basis.
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Annual Report and Accounts 2024
Notes to the financial statements
(continued)
1. Statement of accounting policies (continued)
Level 2 – Valuation technique using observable inputs
Assets and liabilities classified as Level 2 have been valued using models whose inputs
are observable in an active market. Valuations based on observable inputs include
derivative financial instruments such as swaps and forward rate agreements which are
valued using market standard pricing techniques, and options that are commonly traded
in markets where all the inputs to the market standard pricing models are observable.
They also include investment securities valued using consensus pricing or other
observable market prices.
Level 3 – Valuation technique using significant unobservable inputs
Assets and liabilities are classified as Level 3 if their valuation incorporates significant
inputs that are not based on observable market data. A valuation input is considered
observable if it can be directly observed from transactions in an active market, or if
there is compelling external evidence demonstrating an executable exit price. An input
is deemed significant if it is shown to contribute more than 10% to the valuation of a
financial instrument.
Derivatives and hedge accounting
Derivatives are entered into to reduce exposures to fluctuations in interest rates,
exchange rates, market indices and credit risk, and are not used for speculative
purposes.
(a) Derivative financial instruments
Derivatives are carried at fair value with movements in fair values recorded in the
income statement. Derivative financial instruments are principally valued by discounted
cash flow models using yield curves that are based on observable market data or on
valuations obtained from third parties. Discounting uses the appropriate risk-free rate
for the currency of the cash flow; for example, GBP cash flows are discounted using a
Sonia yield curve.
In the first instance fair values are calculated using mid prices. An adjustment is then
made to derivative assets and liabilities to value them on a bid and offer basis
respectively. The bid-offer adjustment is calculated on a portfolio basis and reflects the
costs that would be incurred if substantially all residual net portfolio market risks were
closed out using available hedging instruments or by disposing of or unwinding actual
positions. The methodology for determining the bid-offer adjustments involves netting
between long and short positions and the grouping of risk by type, in accordance with
the hedging strategy. Bid-offer spreads are derived from market sources such as broker
data and are reviewed periodically.
In measuring fair value, separate credit valuation and debit valuation adjustments are
made for counterparty or own credit risk to the extent not already included in the
valuation. Funding valuation adjustments are also made to reflect an estimate of the
adjustment a market participant would make to incorporate funding costs and benefits
that arise in relation to derivative exposures.
All derivatives are classified as assets where their fair value is positive and liabilities
where their fair value is negative. Where there is the legal right and intention to settle
net, then the derivative is classified as a net asset or liability, as appropriate.
Where cash collateral is received, to mitigate the risk inherent in amounts due to the
Group, a liability is recognised within deposits from banks and similar institutions.
Similarly, where cash collateral is given, to mitigate the risk inherent in amounts due
from the Group, an asset is recognised within loans and advances to banks and similar
institutions. Where securities collateral is received the securities are not recognised in
the accounts as the Group does not obtain the risks and rewards of the securities.
Where securities collateral is given, the securities are not derecognised as the Group
retains substantially all the risks and rewards of ownership.
(b) Hedge accounting
The Group has adopted the general hedge accounting requirements of IFRS 9 but
continues to apply the scope exception which allows ongoing application of IAS 39 for
fair value hedge accounting for a portfolio (macro) hedge of interest rate risk. When
transactions meet the criteria specified in IFRS 9, the Group can apply two types of
hedge accounting: either hedges of the changes in fair value of the financial asset or
liability (fair value hedge accounting) or hedges of the variability in cash flows of the
financial asset or liability (cash flow hedge accounting). The Group does not have hedges
of net investments.
At inception each hedge relationship is formally documented, including a description of
the hedged item (a financial asset or liability which is being economically hedged) and
the hedging instrument (a derivative), as well as the methods which will be used to
assess the effectiveness of the hedge. Hedges accounted for under IFRS 9 are required
to be effective on a prospective basis, in line with risk management strategy. Macro
hedges which continue to be accounted for under IAS 39 are required to be highly
effective on both a retrospective and a prospective basis.
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Annual Report and Accounts 2024
Notes to the financial statements
(continued)
1. Statement of accounting policies (continued)
Fair value and cash flow hedges may have residual hedge ineffectiveness. This is the
degree to which the change in fair value of the hedging instrument does not offset the
change in fair value of the hedged item. This ineffectiveness is recognised in the income
statement and typically arises from:
• Differences in the magnitude or timing of future expected cash flows in the hedged
item and hedging instrument;
• Differences in the market curves used to value the hedged item and hedging
instrument;
• Unexpected adjustments to either the hedged item or hedging instrument, due to
early repayments or disposals; or
• The ongoing amortisation of any existing balance sheet mismatch between the fair
value of the hedged item and hedging instrument.
The Group discontinues hedge accounting when:
• It is evident from testing that a hedging instrument ceases to meet the hedge
effectiveness requirements;
• The hedging instrument expires, or is sold, terminated or exercised; or
• The hedged item matures, is sold or repaid or, in the case of a forecasted item, is no
longer deemed to be highly probable to occur.
For macro hedges which continue to be accounted for under IAS 39, the Group may also
decide to prospectively cease hedge accounting even though the hedge relationship
continues to be highly effective, by ceasing to designate the financial instrument as a
hedge. For hedges accounted for under IFRS 9, the Group is unable to voluntarily de-
designate hedging relationships, unless there has been a change to risk management
objectives.
Fair value hedge accounting
Fair value hedge accounting results in the carrying value of the hedged item being
adjusted to reflect changes in fair value attributable to the risk being hedged. This
creates an offset to the fair value movements of the hedging instrument. Changes in the
fair value of the hedged items and hedging instruments are recorded in the income
statement, except for changes in the fair value of hedging instruments accounted for
under IFRS 9 which are attributable to foreign currency basis spreads. Where foreign
currency basis spreads are excluded from hedge designation, this element of fair
valuation of the hedging instrument is instead recognised directly within equity within
the ‘other hedging reserve’.
For larger and distinctively identifiable assets and liabilities, such as investment
securities and debt securities in issue, a single or small number of hedging instruments
may be used. This is referred to as a micro fair value hedge. If the hedge is effective, the
Group adjusts the carrying value of that specific asset or liability to reflect changes in its
fair value due to movements in the designated benchmark rate, such as Sonia. This
creates an offset to the fair value movement of the hedging instruments.
For hedged items which are classified as FVOCI, such as investment securities, there is
no further need to adjust their carrying value as they are already held at fair value.
Instead, hedge accounting results in an amount being removed from the FVOCI reserve
and instead reported in the income statement, to create an offset to the change in fair
value of the hedging instrument.
For balances within portfolios of homogeneous instruments, such as mortgages, savings
and commercial loans, derivatives may be used to hedge risks on a portfolio basis. The
Group creates separate portfolio (macro) hedges for assets and liabilities. The Group
determines the hedged item by identifying portfolios of similar assets or liabilities and
scheduling the expected future cash flows from these items into repricing time buckets,
based on expected rather than actual repricing dates. A portion of the total cash flow
from each time bucket is then included in the hedged item. The size of this portion is set
so that it is expected to create a highly effective fair value offset to the equivalent future
cash flows from the hedging instruments. If the hedge is highly effective the Group
records an adjustment in the fair value adjustment for portfolio hedged risk category on
the balance sheet. Macro hedges are frequently rebalanced to include new business.
In fair value hedge accounting relationships, if the hedging instrument no longer meets
the criteria for hedge accounting, the cumulative fair value hedge adjustment is
amortised over the period to maturity of the previously designated hedge relationship.
If the hedged item is sold or repaid, the unamortised fair value adjustment is
immediately recognised in the income statement.
Cash flow hedge accounting
In a cash flow hedge accounting relationship, the portion of the hedging instrument’s
fair value movement that is deemed to be an effective hedge is deferred to the cash flow
hedge reserve, instead of being immediately recognised in the income statement. The
ineffective portion of the derivative fair value movement is recognised immediately in
the income statement.
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Annual Report and Accounts 2024
Notes to the financial statements
(continued)
1. Statement of accounting policies (continued)
Amounts deferred to the cash flow hedge reserve are subsequently recycled to the
income statement. This recycling occurs when the underlying asset or liability being
hedged impacts the income statement, for example when interest payments are
recognised. In cash flow hedge accounting relationships, if the derivative no longer
meets the criteria for hedge accounting, the cumulative gain or loss from the effective
portion of the movement in the fair value of the derivative remains in other
comprehensive income until the cash flows from the underlying hedged item are
recognised in the income statement or are no longer expected to occur. If the hedged
item is sold or repaid, the cumulative gain or loss in other comprehensive income is
immediately recognised in the income statement.
Sale and repurchase agreements
Investment and other securities may be lent or sold subject to a commitment to
repurchase them at a pre-determined price (a repo). Such securities are retained on the
balance sheet when substantially all the risks and rewards of ownership (typically, the
interest rate risk and credit risk on the asset) remain within the Group, and the
counterparty liability is included separately on the balance sheet within deposits from
banks and similar institutions as appropriate.
Similarly, where the Group borrows or purchases securities subject to a commitment to
resell them (a reverse repo) but does not acquire the risks and rewards of ownership, the
transactions are treated as collateralised loans within loans and advances to banks and
similar institutions, and the securities are not included on the balance sheet.
The difference between sale and repurchase price is accrued over the life of the
agreements using the effective interest rate method.
Equity instruments
Issued financial instruments are classified as equity instruments where the contractual
arrangement with the holder does not result in the Group having a present obligation to
deliver cash, another financial asset or a variable number of equity instruments. Where
the Group does have a present obligation, the instrument is classified as a financial
liability.
Own equity instruments that are reacquired, referred to as treasury shares, are
recognised at cost and deducted from equity. No gain or loss is recognised in profit or
loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments.
Any difference between the carrying amount and the consideration, if reissued, is
recognised in the share premium.
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Annual Report and Accounts 2024
Notes to the financial statements
(continued)
2. Judgements in applying accounting policies and critical accounting estimates
The preparation of the Group’s financial statements in accordance with IFRS involves management making judgements and estimates when applying those accounting policies that affect
the reported amounts of assets, liabilities, income and expense. Actual results may differ from those on which management’s estimates are based. Estimates and assumptions are
continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable. For the year ended 4 April
2024, this evaluation has considered the impact of climate-related risks on the Group’s financial position and performance. While the effects of climate change represent a source of
uncertainty, the Group does not consider there to be a material impact on its judgements and estimates from physical and transition risks of climate change in the short to medium term.
The key areas involving a higher degree of judgement or areas involving significant sources of estimation uncertainty made by management in applying the Group’s accounting policies
are disclosed in the following notes.
Estimates Judgements Impairment charge and provisions on loans and advances to customers Note 10 Note 10 Retirement benefit obligations Note 30
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Notes to the financial statements (continued)
Annual Report and Accounts 2024
Notes to the financial statements
(continued)
3. Interest receivable and similar income
Group Society 2024 2023 2024 2023 £m £m £m £m On financial assets measured at amortised cost: Residential mortgages 6,424 4,904 4,733 3,550 Connected undertakings - - 1,000 768 Other loans 718 602 702 592 Other liquid assets, including reserves at central banks 1,962 1,002 1,962 1,002 Investment securities 1 2 1 2 On investment securities measured at FVOCI 522 310 522 310 Net income on financial instruments hedging assets in a 4,335 1,956 4,335 1,956 qualifying hedge accounting relationship Total interest receivable and similar income calculated using 13,962 8,776 13,255 8,180 the effective interest rate method Interest on net defined benefit pension surplus (note 30) 44 26 44 26 Other interest and similar income (note i) 19 23 18 23 Total 14,025 8,825 13,317 8,229
Note:
i. Includes interest on financial instruments hedging assets that are not in a qualifying hedge accounting relationship.
4. Interest expense and similar charges
Group Society 2024 2023 2024 2023 £m £m £m £m On shares held by individuals 5,217 1,915 5,217 1,915 On subscribed capital 11 11 11 11 On deposits and other borrowings: Subordinated liabilities 277 272 277 272 Connected undertakings - - 112 81 Deposits from banks and similar institutions and other 1,723 1,070 1,723 1,069 deposits Debt securities in issue 1,244 769 1,148 695 Net expense on financial instruments hedging liabilities 1,103 290 771 195 Total 9,575 4,327 9,259 4,238
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Notes to the financial statements (continued)
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Notes to the financial statements
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5. Fee and commission income and expense
2024 2023 Income Expense Net Income Expense Net Group £m £m £m £m £m £m Current account and savings 300 (234) 66 288 (251) 37 General insurance 34 - 34 27 - 27 Protection and investments 33 - 33 44 - 44 Mortgage 12 (20) (8) 21 (27) (6) Credit card 41 (33) 8 44 (25) 19 Other fees and commissions 6 (5) 1 8 (8) - Total 426 (292) 134 432 (311) 121
The Society’s net fee and commission income and expense is as shown above for the Group except that it excludes £1 million (2023: £2 million) of mortgage net expense.
6. Other operating income
Group Society 2024 2023 2024 2023 £m £m £m £m Losses on financial assets measured at FVTPL (6) (10) (6) (12) Gains on disposal of FVOCI investment securities 47 74 47 74 Recharges for services to connected undertakings - - 75 88 Other income/(expense) 39 (10) 43 (17) Total 80 54 159 133
Other income/(expense) includes a £42 million net gain relating to the disposal of the Society’s investment advice business.
There were no gains or losses on disposal of financial assets measured at amortised cost in the year ended 4 April 2024 (2023: £nil).
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Notes to the financial statements
(continued)
7. Gains/losses from derivatives and hedge accounting
As a part of its risk management strategy, the Group uses derivatives to economically hedge financial assets and liabilities. More information on how the Group manages market risk can
be found in the Risk report. Hedge accounting is employed by the Group to minimise the accounting volatility associated with the change in fair value of derivative financial instruments.
The Group only uses derivatives for the hedging of risks; however, income statement volatility can still arise due to hedge accounting ineffectiveness or because hedge accounting is
either not applied or is not currently achievable. The overall impact of derivatives will remain volatile from period to period as new derivative transactions replace those which mature to
ensure that interest rate and other market risks are continually managed.
Note 1 describes how fair value and cash flow hedge accounting affect the financial statements and the main sources of the residual hedge ineffectiveness remaining in the income
statement. Further information on the current derivative portfolio and the allocation to hedge accounting types is included in note 15.
Gains/(losses) from derivatives and hedge accounting Group Society 2024 2023 2024 2023 £m £m £m £m Gains/(losses) from fair value hedge accounting (note i) 111 (62) 103 (60) Gains from cash flow hedge accounting - 1 - - Fair value gains from other derivatives (note ii) 10 56 34 48 Foreign exchange retranslation (note iii) (4) 1 (4) - Total 117 (4) 133 (12)
Notes:
i. Includes gains/(losses) from portfolio hedges of interest rate risk arising from amortisation of existing balance sheet amounts and hedge ineffectiveness.
ii. Gains or losses arise from derivatives used for economic hedging purposes which are not currently in a hedge accounting relationship, including derivatives economically hedging fixed rate mortgages not
yet on the balance sheet, and valuation adjustments applied at a portfolio level which are not allocated to individual hedge accounting relationships.
iii. Gains or losses arise from the retranslation of foreign currency monetary items not subject to effective hedge accounting.
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Notes to the financial statements
(continued)
7. Gains/losses from derivatives and hedge accounting (continued)
Fair value hedge accounting
Interest rate and currency derivatives are used to economically hedge the fair value of fixed rate assets and liabilities. The market risk from fixed rate assets and liabilities may be netted
down before deciding to use derivatives. The derivatives used are predominantly interest rate swaps, which convert fixed rate cash flows to a benchmark floating rate such as Sonia, and
cross currency swaps which convert foreign currency cash flows to GBP cash flows. In addition, bond forwards are used to reduce swap spread risk within the investment securities
portfolio and inflation swaps are used to economically hedge contractual inflation risk within investment securities. The table below provides further information on the Group’s fair value
hedges:
Fair value hedge accounting 2024 Change in fair value used Hedge Carrying Of which: for determining hedge ineffectiveness amount accumulated ineffectiveness recognised in of the fair value the income hedged item adjustment Group statement Hedged item balance sheet Hedging instrument Risk category Hedged Instrument classification item (note i) £m £m £m £m £m Assets: Loans and advances to customers (note ii) Interest rate swaps Interest rate 1,601 (1,492) 109 109,318 (2,980) Investment securities Interest rate swaps, bond forwards Interest rate 254 (254) - 3,176 (220) Interest rate swaps, cross currency Interest rate and foreign Investment securities 354 (350) 4 13,088 (663) interest rate swaps exchange Interest rate swaps, inflation Interest rate, inflation and Investment securities swaps, cross currency interest rate foreign exchange (75) 77 2 2,631 (316) swaps Investment securities Inflation swaps Interest rate and inflation (64) 65 1 4,864 (149) Total assets 2,070 (1,954) 116 133,077 (4,328) Liabilities: Shares (note iii) Interest rate swaps Interest rate (48) 47 (1) 32,458 50 Debt securities in issue Interest rate swaps Interest rate 5 (3) 2 1,761 (3) Interest rate swaps, cross currency Interest rate and foreign Debt securities in issue (412) 409 (3) 19,788 (1,022) interest rate swaps exchange Interest rate swaps, cross currency Interest rate and foreign Subordinated liabilities 6 (7) (1) 7,154 (287) interest rate swaps exchange Subscribed capital Interest rate swaps Interest rate 1 (3) (2) 168 - Total liabilities (448) 443 (5) 61,329 (1,262) Total fair value hedges 1,622 (1,511) 111
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Annual Report and Accounts 2024
Notes to the financial statements
(continued)
7. Gains/losses from derivatives and hedge accounting (continued)
(204)
(4)
6,755 (281)
Notes:
iv. The Group does not include cross currency basis spreads within its hedge accounting relationships. The change in fair value is instead deferred to an ‘other hedging reserve’ and so is not included in the
change in value of the hedging instrument.
v. Some of the Group’s loans and advances to customers have been included as hedged items in macro fair value hedges of interest rate risk. The accumulated fair value hedge adjustment includes
£(3,330) million (2023: £(5,011) million) which is recognised in the separate balance sheet asset ‘fair value adjustment for portfolio hedged risk’. The remaining amount relates to the fair value adjustment to
commercial loans in a micro fair value hedge accounting relationship and is included in the carrying value of these loans as shown in note 14.
vi. In the year ended 4 April 2024, a portion of the Group's shares were included as hedged items in macro fair value hedges of interest rate risk, with the accumulated fair value hedge adjustments
recognised in the separate balance sheet liability 'fair value adjustment for portfolio hedged risk'. As at 4 April 2023, shares were not designated in fair value hedge accounting relationships, and as a result
the carrying amount of the hedged item represented only the value of the historic hedge adjustments remaining from previous hedge relationships, which were amortising over the life of the shares.
Annual Report and Accounts 2024
Notes to the financial statements
(continued)
7. Gains/losses from derivatives and hedge accounting (continued)
(204)
(4)
6,755 (281)
Notes:
iv. The Group does not include cross currency basis spreads within its hedge accounting relationships. The change in fair value is instead deferred to an ‘other hedging reserve’ and so is not included in the
change in value of the hedging instrument.
v.
Some of the Group’s loans and advances to customers have been included as hedged items in macro fair value hedges of interest rate risk. The accumulated fair value hedge adjustment includes
£(3,330) million (2023: £(5,011) million) which is recognised in the separate balance sheet asset ‘fair value adjustment for portfolio hedged risk’. The remaining amount relates to the fair value adjustment to
commercial loans in a micro fair value hedge accounting relationship and is included in the carrying value of these loans as shown in note 14.
vi.
In the year ended 4 April 2024, a portion of the Group's shares were included as hedged items in macro fair value hedges of interest rate risk, with the accumulated fair value hedge adjustments
recognised in the separate balance sheet liability 'fair value adjustment for portfolio hedged risk'. As at 4 April 2023, shares were not designated in fair value hedge accounting relationships, and as a result
the carrying amount of the hedged item represented only the value of the historic hedge adjustments remaining from previous hedge relationships, which were amortising over the life of the shares.
as new derivative transactions replace those which mature to
accounting affect the financial statements and the main sources of the residual hedge ineffectiveness remaining in the income
Notes:
i. Includes gains/(losses) from portfolio hedges of interest rate risk arising from amortisation of existing balance sheet amounts and hedge ineffectiveness.
ii. Gains or losses arise from derivatives used for economic hedging purposes which are not currently in a hedge accounting relationship, including derivatives economically hedging fixed rate mortgages not
yet on the balance sheet, and valuation adjustments applied at a portfolio level which are not allocated to individual hedge accounting relationships.
iii. Gains or losses arise from the retranslation of foreign currency monetary items not subject to effective hedge accounting.
ccounting ineffectiveness or because hedge accounting is
period to period as new derivative transactions replace those which mature to
Notes:
i. Includes gains/(losses) from portfolio hedges of interest rate risk arising from amortisation of existing balance sheet amounts and hedge ineffectiveness.
ii. Gains or losses arise from derivatives used for economic hedging purposes which are not currently in a hedge accounting relationship, including derivatives economically hedging fixed rate mortgages not
yet on the balance sheet, and valuation adjustments applied at a portfolio level which are not allocated to individual hedge accounting relationships.
iii. Gains or losses arise from the retranslation of foreign currency monetary items not subject to effective hedge accounting.
e financial statements
th the change in fair value of derivative financial instruments.
e due to hedge accounting ineffectiveness or because hedge accounting is
continually managed.
ve portfolio and the allocation to hedge accounting types is included in note 15.
023
g
g
Fair value hedge accounting Fair value hedge accounting 2023 2023 Change in fair value used for Change in fair value used for Hedge Hedge Carrying Carrying Of which: Of which: determining hedge determining hedge ineffectiveness ineffectiveness amount amount accumulated accumulated ineffectiveness ineffectiveness recognised in recognised in of the of the fair value fair value Annual Report and Accounts 2024 the income the income hedged item hedged item adjustment adjustment Annual Report and Accounts 2024 Group Group NotesAnnuastatement statement to the financial statements l Report and Accounts 2024 (continued) Hedged item balance sheet Hedged item balance sheet Notes to the financial sHedging instrument Hedging instrument inued) tatements (contRisk category Risk category Hedged item Hedged item Instrument Instrument Notes to thclassification classification (continued) (note i) (note i) 7. Gains/losses from derivatives and hedge accounting£m £m £m £m £m £m £m £m £m £m 7. Gains/losses from derivatives and hedge accountingAssets: Assets: 7. Gains/losses from derivatives and hedge accountingAs a part of its risk management strategy, the Group uses derivatives to economically hedge financial assets and liabilities. More information on how the Group manages market risk canLoans and advances to customers (note ii) Loans and advances to customers (note ii) Interest rate swaps Interest rate swaps Interest rate Interest rate (2,687) (2,687) 2,630 2,630 (57) (57) 86,465 86,465 (4,581) (4,581) be found in the Risk report. Hedge accounting is employed by the Group to minimise the accounting volatility associated with the change in fair value of derivative financial instruments. As a part of its risk management strategy, the Group uses derivatives to economically hedge financial assets and liabilities. More information on how the Group manages market risk canInvestment securities Interest rate swaps, bond forwards Investment securities Interest rate swaps, bond forwards Interest rate Interest rate (107) (107) 107107 - -2,936 2,936 (474) (474) As a part of its risk management strategy, the Group uses derivatives to economically hedge financial assets and liabilities. More information on how the Group manages market risk can The Group only uses derivatives for the hedging of risks; however, income statement volatility can still arise due to hedge accounting ineffectiveness or because hedge accounting is be found in the Risk report. Hedge accounting is employed by the Group to minimise the accounting volatility associated with the change in fair value of derivative financial instruments. Interest rate swaps, cross currency Interest rate swaps, cross currency Interest rate and foreign Interest rate and foreign Investment securities Investment securities e found in the Risk reither not applied or ihe Group only uses d(336)(336)ted wiport. Hedge accounting is employed by the Group to minimise the accounting volatility associainterest rate swaps interest rate swaps exchange exchange not currently achievable. The overall impact of derivatives will remain volatile from period to period erivatives for the hedging of risks; however, income statement volatility can still arise due to hedge as334334(2)(2)13,188 (1,017) 13,188 (1,017) beTThe Group only uses derivatives for the hedging of risks; however, income statement volatility can still arisInterest rate swaps, inflation Interest rate swaps, inflation Interest rate, inflation and Interest rate, inflation and ensure that interest rate and other market risks are continually managed. either not applied or is not currently achievable. The overall impact of derivatives will remain volatile from ensure that interest rate and other market risks are continually managed. either not applied or is not currently achievable. The overall impact of deriInvestment securities Investment securities swaps, cross currency interesswaps, cross currency interesvatives will remain volatile from period to period as new derivative transactions replace those which mature to t rate t rate foreign exchange (221)foreign exchange (221) 222222112,935 (241) 2,935 (241) ensure that interest rate and other market risks are swaps swaps Note 1 describes how fair value and cash flow hedge statement. Further information on the current derivative portfolio and the allocation to hedge accounting types is included in note 15. Note 1 describes how fair value and cash flow hedge accounting affect the financial statements and the main sources of the residual heInvestment securities Inflation swaps Investment securities Inflation swaps Interest rate and inflation Interest rate and inflation (154)(154)dge ineffectiveness remaining in the income 154 154 --5,297 5,297 (85) (85) statement. Further information on the current derivative portfolio and the allocation to hedge accounting types is included in note 15. Note 1 describes how fair value and cash flow hedge accounting affect the financial statements and the main sources of the residual heTotal assets Total assets (3,505) (3,505) 3,43,dge ineffectiveness remaining in the income 47 447 (58) (58) 110,821 110,821 (6(6,,398) 398) statement. Further information on the current derivatiLiabilities: Liabilities: Gains/(losses) from derivatives and hedge accounting Shares (note iii) Shares (note iii) Gains/(losses) from derivatives and hedge accounting Interest rate swaps Interest rate swaps Group Interest rate Interest rate Society 9 9 - - 9 9 2 2 2 2 Gains/(losses) from derivatives and hedge accounting Debt securities in issue Debt securities in issue Interest Interest rate swaps rate swaps Group Interest rate Interest rate Society 56 56 (54) (54) 2 2 1,927 1,927 2 2 2024 2023 2024 2023 Group Society cy cy Interest rate and foreign Interest rate and foreign Interest rate swaps, cross currenInterest rate swaps, cross currenDebt securities in issue Debt securities in issue 2024 2023 2024 2023 1,0601,060 (1,069)(1,069)(9)(9)18,528 (1,434) 18,528 (1,434) interest rate swaps interest rate swaps £m exchange exchange 024 2£m £m £m 2024 2023 cy cy £m111 Interest rate and foreign Interest rate and foreign (62) £m 103 £m (60)£m Gains/(losses) from fair value hedge accounting (note i) Interest rate swaps, cross currenInterest rate swaps, cross currenSubordinated liabilities Subordinated liabilities 200200£m(60 )-£m £m £m 111 - exchange exchange (62) 1 103 - Gains from cash flow hedge accounting Gains/(losses) from fair value hedge accounting (note i) interest rate swaps interest rate swaps Subscribed capital Subscribed capital Fair value gains froGains from cash floGains/(losses) fromm other derivatives (note ii) w hedge accounting fair value hedge accountin (note i) InterestInterest rate swaps rate swaps 11110-Interest rate Interest rate (6256) 1 103 34 - (60)48 14 14 - (16) (16) (2) (2) 168 168 1 1 Total liabilities Total liabilities Foreign exchanFair value gainGains from cash flow hedge accounting ge retranslation (note iii) from other derivatives (note ii) s(4) 10 - 56 1 1 (4) 34 - 1,339 1,339 48 - - (1,343) (1,343) (4) (4) 27,380 27,380 (1,710) (1,710) Fair value gains from other derivatives (note ii) 10 56 34 48 Total fair value hedges Total fair value hedges Total Foreign exchange retranslation (note iii) 117 (4) (4) 1 133 (4) (2,166) (2,166) (12) - 2,104 2,104 (62) (62) Total Forein exchange retranslation (note iii) 117 (4) (4) 1 133 (4) (12) -
Total
117
(4)
133
(12)
Notes:
i. Includes gains/(losses) from portfolio hedges of interest rate risk arising from amortisation of existing balance sheet amounts and hedge ineffectiveness.
ii. Gains or losses arise from derivatives used for economic hedging purposes which are not currently in a hedge accounting relationship, including derivatives economically hedging fixed rate mortgages not
yet on the balance sheet, and valuation adjustments applied at a portfolio level which are not allocated to individual hedge accounting relationships.
iii. Gains or losses arise from the retranslation of foreign currency monetary items not subject to effective hedge accounting.
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Annual Report and Accounts 2024
Notes to the financial statements
(continued)
7. Gains/losses from derivatives and hedge accounting (continued)
Cash flow hedge accounting
The Group’s risk management approach may involve creating future cash flow certainty. The Group uses cross currency interest rate swaps to hedge non-sterling investment securities,
debt securities in issue and subordinated liabilities. A portion of the interest rate flows within these derivatives has been included as a hedging instrument in cash flow hedges. In addition,
inflation swaps are used to hedge RPI-linked debt securities in issue. The table below provides further information on the Group’s cash flow hedges:
Cash flow hedge accounting 2024 Change in fair value used for Changes in instrument fair value Amounts accumulated determining hedge reported as in the cash flow hedge reserve Amounts ineffectiveness Hedge Net amounts (excluding deferred taxation) reclassified ineffectiveness deferred to from reserves Group recognised in other to income Hedged item balance Hedging instrument Risk category Hedged item Hedging the income comprehensive Continuing Discontinued statement sheet instrumentstatement income hedges hedges(note ii) classification (note i) £m £m £m £m £m £m £m Assets: Cross currency interest Interest rate and Investment securities 2 (1)- (1) (1) -(1) rate swaps foreign exchange Total assets 2 (1) - (1) (1) - (1) Liabilities: Interest rate and Debt securities in issue Inflation swaps 10 (10)- (10) - -(10) inflation Cross currency interest Interest rate and Debt securities in issue 6 (7)- (7) (2) 160- rate swaps foreign exchange Cross currency interest Interest rate and Subordinated liabilities 14 (14)- (14) 7 10- rate swaps foreign exchange Total liabilities 30 (31) - (31) 5 170 (10) Total cash flow hedges 32 (32) - (32) 4 170 (11)
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Notes to the financial statements (continued)
Annual Report and Accounts 2024
Notes to the financial statements
(continued)
7. Gains/losses from derivatives and hedge accounting (continued)
5
Cash flow hedge accounting 2023 Change in fair value used for Changes in instrument fair value Amounts accumulated determining hedge reported as in the cash flow hedge reserve Amounts ineffectiveness Hedge Net amounts (excluding deferred taxation) reclassified ineffectiveness deferred to from reserves Group recognised in other to income Hedged item balance sheet Hedging instrument Risk category Hedged item Hedging the income comprehensive Continuing Discontinued statement classification instrumentstatement income hedges hedges (note ii) (note i) £m £m £m £m £m £m £m Assets: Cross currency interest Interest rate and Investment securities 1 (2)(1) (1) - - 1 rate swaps foreign exchange Total assets 1 (2) (1) (1) - - 1 Liabilities: Interest rate and Debt securities in issue Inflation swaps 5 (5)- (5) 10 - (15) inflation Cross currency interest Interest rate and Debt securities in issue (15) 162 14 5 191 rate swaps foreign exchange Cross currency interest Interest rate and Subordinated liabilities (15) 15- 15 21 16 (8) rate swaps foreign exchange Total liabilities (25) 26 2 24 36 207 (18) Total cash flow hedges (24) 24 1 23 36 207 (17)
Notes:
i. Net amounts deferred to other comprehensive income, being losses before tax of £32 million (2023: gains of £23 million), is shown within the cash flow hedge reserve section of the statements of
comprehensive income. The cash flow hedge reserve also includes amounts previously deferred on instruments which have since been migrated to fair value hedges. Amortisation of these amounts of
£37 million (2023: £33 million) is presented within the fair value hedge accounting table within the change in fair value of the hedging instrument.
ii. The amounts reclassified from reserves to income statement of £(11) million (£2023: £(17) million) exclude amortisation of migrated hedges of £37 million (2023: £33 million) which are shown within the
cash flow hedge reserve section of the statements of comprehensive income. Of these amounts reclassified, £(10) million (2023: £(17) million) and £(1) million (2023: £nil) were reclassified from the cash
flow hedge reserve to net interest income and other operating income, respectively, in the income statement.
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Annual Report and Accounts 2024
Notes to the financial statements
(continued)
8. Administrative expenses
Notes:
i. Certain categories of costs have been updated in the current year to more appropriately present costs relating to IT change activities. Prior year comparatives have been restated to be presented on a
consistent basis, increasing Other staff related costs by £98 million, decreasing IT, change and communications costs by £68 million and decreasing Legal professional and consultancy costs by £30 million.
ii. Other operating costs include fraud-related losses.
Group Society 2024 2023 2024 2023 Notes £m £m £m £m Employee costs: Wages and salaries 660 597 660 597 Bonuses 83 78 83 78 Social security costs 86 90 86 90 Pension costs 30 168 153 168 153 997 918 997 918 Other administrative expenses: Other staff related costs (note i) 90 145 90 145 Property costs 105 97 105 97 Printing, postage and stationery 50 36 50 36 IT, change and communications (note i) 383 299 383 299 Marketing and advertising 62 46 62 46 Product operating costs 66 55 66 54 Legal, professional and consultancy (note i) 56 85 56 84 Other operating costs (note ii) 103 99 100 98 915 862 912 859 Bank levy 13 20 13 20 Bank of England levy 36 - 36 - Depreciation, amortisation and impairment 461 523 461 522 Total 2,422 2,323 2,419 2,319
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Annual Report and Accounts 2024
Notes to the financial statements
(continued)
8. Administrative expenses (continued)
Executive directors and certain senior executives are entitled to long-term bonus payments under the Annual Performance Pay (APP) and the Long-Term Performance Pay (LTPP) plans.
Long-term awards made under the APP plan are based on current year results but are generally paid over a period of up to two years for executive directors, and up to seven years for
certain senior executives, with part of the awards linked to the value of Nationwide’s core capital deferred shares (CCDS). Awards made under LTPP plans are based on performance over
a three-year period but are paid up to five years after the end of the performance period, with part of the awards linked to the value of Nationwide’s CCDS.
No bonus is recognised in the income statement for either the APP or LTPP plan until it is considered probable that payments will be made. Where a bonus payment is considered
probable, the amount recognised in the income statement will reflect the portion of the vesting period that has passed. The vesting period for both plans runs from the start of the
performance period associated with the plan to the settlement date. The payment of deferred elements remains subject to further discretion by the Remuneration Committee. The table
below shows actual and expected charges to the income statement in respect of all APP and LTPP long-term bonuses for each relevant scheme year:
Income statement charge for long-term bonuses Group and Society Actual Actual Expected Expected 2023 2024 2025 2026 and (notes i (note iii) beyond and ii) (note iii) £m £m £m £m Annual Performance Pay: 2022 and previous years 4.9 2.0 0.6 0.7 2023 11.7 4.5 1.2 1.3 2024 - 7.7 4.3 2.3 Long Term Performance Pay (note iv): 2024-2026 - - - - Income statement charge for long-term bonuses 16.6 14.2 6.1 4.3
Notes:
i. Bonus charges for the year ended 4 April 2024 include £6 million (2023: £7 million) of deferred bonuses which will be paid more than one year from the balance sheet date.
ii. In the year ended 4 April 2024, £7 million (2023: £6 million) was recognised in the income statement in relation to awards linked to share based payments, being amounts dependent on the performance of
the Group’s CCDS. This payment is deferred and therefore included in accruals and deferred income on the balance sheet.
iii. The amounts expected are based on past performance and are subject to change as a result of future leavers and CCDS performance.
iv. Amounts are only recognised, or reported as expected in future periods, once payments are deemed probable.
The remuneration of the external auditors, Ernst & Young LLP (EY), is set out below:
External auditor’s remuneration Group Society 2024 2023 2024 2023 £m £m £m £m Audit fees for the Group and Society statutory audit 5.4 5.1 5.4 5.1 Fees payable for other services: Audit of Group subsidiaries 0.3 0.3 - - Audit-related assurance services (note i) 0.4 0.4 0.4 0.4 Total audit and audit-related assurance services 6.1 5.8 5.8 5.5 Other non-audit services (note i) 0.8 1.3 0.8 1.3 Total 6.9 7.1 6.6 6.8
Note:
i. Comparatives have been restated to present fees of £0.5 million for treasury assurance services within Other non-audit services. Previously, these were presented within Audit-related assurance services.
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Annual Report and Accounts 2024
Notes to the financial statements
(continued)
9. Employees
Average number of persons employed during the year Group Society 2024 2023 2024 2023 Full time 14,230 13,966 14,225 13,961 Part time 4,080 4,133 4,080 4,133 Total 18,310 18,099 18,305 18,094
10. Impairment charge and provisions on loans and advances to customers
The following tables set out the impairment charges during the year and the closing provision balances which are deducted from the relevant asset values in the balance sheet:
Impairment charge Group Society 2024 2023 2024 2023 £m £m £m £m Owner-occupied mortgages 7 11 6 12 Buy to let and legacy residential mortgages 37 83 3 - Consumer banking 51 31 51 31 Commercial lending 17 1 17 1 Total 112 126 77 44 Impairment provisions Group Society 2024 2023 2024 2023 £m £m £m £m Owner-occupied mortgages 90 84 88 83 Buy to let and legacy residential mortgages 231 196 5 3 Consumer banking 436 469 436 469 Commercial lending 24 16 24 16 Total 781 765 553 571
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Notes to the financial statements (continued)
Annual Report and Accounts 2024
Notes to the financial statements
(continued)
10. Impairment charge and provisions on loans and advances to customers (continued)
Critical accounting estimates and judgements
Impairment is measured as the impact of credit risk on the present value of management’s estimate of future cash flows. In determining the required level of impairment provisions,
outputs from statistical models are used, and judgements incorporated to determine the probability of default (PD), the exposure at default (EAD), and the loss given default (LGD) for
each loan. Provisions represent a probability weighted average of these calculations under multiple economic scenarios. Adjustments are made in modelling provisions, applying further
judgements to take into account model limitations, or to deal with instances where insufficient data exists to fully reflect credit risks in the models.
The most significant areas of judgement are:
• The approach to identifying significant increases in credit risk; and
• The approach to identifying credit impaired loans.
The most significant areas of estimation uncertainty are:
• The use of forward-looking economic information using multiple economic scenarios; and
• The additional judgements made in modelling expected credit losses (ECL) – these currently include PD uplifts relating to the current economic uncertainty and LGD uplifts for
property valuation risk.
The Group has progressed the quantitative assessment of the credit risks resulting from climate change during the year, completing a climate change stress test and associated
sensitivity analysis. This exercise modelled the expected credit loss impact of macroeconomic impacts, physical risks and transition risks in two climate scenarios, uplifting the PD and/or
LGD where appropriate. The stress test exercise outputs support the Group’s view that the impact of climate change on impairment provisions is not currently material. The potential
economic impact of climate change is captured by our existing range of economic scenarios. The expected credit losses associated with physical risks are low and arise over the long term,
and therefore currently have an immaterial impact on the Group’s existing lending due to the effect of loan amortisation and redemptions over time. There are no current transition
policies that require additional provisions against current portfolios. Potential future Government transition policies and the Group’s response to these remain highly uncertain.
Identifying significant increases in credit risk (stage 2)
Loans are allocated to stage 1 or stage 2 according to whether there has been a significant increase in credit risk. Judgement has been used to select both quantitative and qualitative
criteria which are used to determine whether a significant increase in credit risk has taken place. These criteria are detailed within the Credit risk section of the Risk report. The primary
quantitative indicators are the outputs of internal credit risk assessments. While different approaches are used within each portfolio, the intention is to combine current and historical
data relating to the exposure with forward-looking economic information to determine the probability of default (PD) at each reporting date. For residential mortgage and consumer
banking lending, the main indicators of a significant increase in credit risk are either of the following:
• The residual lifetime PD exceeds a benchmark determined by reference to the maximum credit risk that would have been accepted at origination; or
• The residual lifetime PD is at least 75 basis points more than, and at least double, the residual lifetime PD calculated at origination.
These complementary criteria have been reviewed through regular model monitoring, using management performance indicators and actual default experience, and found to be effective
in capturing events which would constitute a significant increase in credit risk.
Identifying credit impaired loans (stage 3)
The identification of credit-impaired loans is an important judgement within the staging approach. A loan is credit-impaired if it has an arrears status of more than 90 days past due,
is considered to be in default, or it is considered unlikely that the borrower will repay the outstanding balance in full, without recourse to actions such as realising security.
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Notes to the financial statements (continued)
Annual Report and Accounts 2024
Notes to the financial statements
(continued)
10. Impairment charge and provisions on loans and advances to customers (continued)
Critical accounting estimates and judgements (continued)
Use of forward-looking economic information
Management exercises judgement in estimating future economic conditions which are incorporated into provisions through modelling of multiple scenarios. The economic scenarios are
reviewed and updated on a quarterly basis. The provision recognised is the probability-weighted sum of the provisions calculated under a range of economic scenarios. The scenarios and
associated probability weights are derived using external data and statistical methodologies, together with management judgement. The Group continues to model four economic
scenarios, which together encompass an appropriate range of potential economic outcomes. The base case scenario is aligned to the Society’s financial planning process. The upside and
downside scenarios are reasonably likely favourable and adverse alternatives to the base case, and the severe downside scenario is aligned with the Society’s internal stress testing. The
impact of applying multiple economic scenarios (MES) is to increase provisions by £126 million (2023: £125 million), compared with provisions calculated on the base case economic
scenario.
Probability weightings for each scenario are reviewed quarterly to reflect economic conditions as they evolve. The probability weightings applied to the scenarios were unchanged over
the year and are shown in the table below. Whilst domestic economic uncertainty has eased in the second half of the year, this has been offset by increased geopolitical risks including the
ongoing conflicts in Ukraine and Gaza.
Scenario probability weighting (%) Upside Base case Downside Severe scenario scenario scenariodownside scenario 4 April 2024 10 45 30 15 4 April 2023 10 45 30 15
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10. Impairment charge and provisions on loans and advances to customers (continued)
Critical accounting estimates and judgements (continued)
In the base case scenario at 4 April 2024, limited economic growth is forecast, with an increase in GDP of 0.7% expected in 2024. In this scenario unemployment peaks at 5.0%. By contrast,
the peak unemployment in the downside scenario of 6.7% reflects a significant UK recession, whilst the severe downside scenario peak of 9.5% reflects a severe and longer-lasting economic
downturn.
House prices are expected to remain broadly stable in the short term, with a fall in the base case scenario of 0.5% during 2024 and an increase of 0.6% during 2025. The downside scenario
assumes more significant falls until 2026, driven by a deterioration in economic conditions, including an increase in unemployment, whilst the severe downside scenario includes a fall in
house prices of 28% from December 2023 to the low point in early 2026. The house price forecasts used within the provision calculations cover a wide range of outcomes; the weighted
average of the four scenarios represents a fall in house prices of 8% from December 2023 to early 2026.
The Bank rate is assumed to have reached a peak of 5.25% in the base case scenario, with a gradual reduction to 4.25% expected during 2024. Further reductions are expected in this scenario
in both 2025 and 2026, with rates stabilising at 3%. Inflation in this scenario is expected to reduce during 2024 to 2.6% and then remain at circa 2% from 2025. In the downside scenario the
Bank rate falls to 1% from 2026 onwards, reflecting that there is a significant UK recession, with a reduction in the Bank rate required to stimulate economic demand. The severe downside
scenario includes a sustained high level of inflation, which leads to an increase in Bank rate to 7.5%.
The graphs below show the historical and forecasted GDP level, unemployment rate and average house price for the Group’s current economic scenarios, as well as the previous base
case economic scenario.
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10. Impairment charge and provisions on loans and advances to customers (continued)
Critical accounting estimates and judgements (continued)
The tables below provide a summary of the values of the key UK economic variables used within the economic scenarios over the first five years of the scenario:
Economic variables Rate/annual growth rate at December 2023-2028 5-year Dec-23 to Dec-23 to Actual Forecast average peak trough (note i) (note ii) (note ii) 2023 2024 2025 2026 2027 2028 4 April 2024 % % % % % % % % % GDP growth Upside scenario (0.2) 1.6 1.6 1.6 1.6 1.7 1.6 8.4 0.4 Base case scenario (0.2) 0.7 1.0 1.2 1.6 1.8 1.3 6.4 0.1 Downside scenario (0.2) (0.6) (1.9) 1.8 3.3 2.1 0.9 4.8 (2.6) Severe downside scenario (0.2) (1.8) (3.5) 3.1 3.0 2.3 0.6 3.1 (5.2) HPI growth Upside scenario (2.3) 5.5 3.8 3.8 3.8 3.8 4.1 22.6 0.7 Base case scenario (2.3) (0.5) 0.6 2.2 2.7 3.3 1.7 9.0 (1.1) Downside scenario (2.3) (6.1) (9.2) (1.8) 5.1 7.5 (1.1) (1.3) (16.3) Severe downside scenario (2.3) (13.3) (16.0) 0.2 8.2 8.0 (3.1) (2.6) (28.3) Unemployment Upside scenario 3.8 4.1 4.0 4.0 4.0 4.0 4.0 4.1 4.0 Base case scenario 3.8 4.6 5.0 4.7 4.6 4.3 4.6 5.0 4.2 Downside scenario 3.8 5.3 6.7 6.2 5.6 5.3 5.7 6.7 4.3 Severe downside scenario 3.8 5.9 8.6 8.4 6.6 5.8 7.0 9.5 4.6 Bank rate Upside scenario 5.3 4.8 4.0 4.0 4.0 4.0 4.2 5.3 4.0 Base case scenario 5.3 4.3 3.5 3.0 3.0 3.0 3.5 5.3 3.0 Downside scenario 5.3 5.8 3.0 1.0 1.0 1.0 2.7 6.0 1.0 Severe downside scenario 5.3 7.5 6.0 4.5 4.0 3.5 5.3 7.5 3.5 Consumer price inflation Upside scenario 3.9 1.7 2.0 2.0 2.0 2.0 1.9 2.3 1.4 Base case scenario 3.9 2.6 1.7 1.9 2.0 2.0 2.1 3.7 1.6 Downside scenario 3.9 2.0 0.3 1.2 1.7 2.0 1.5 4.0 0.3 Severe downside scenario 3.9 8.0 3.0 2.0 2.0 2.0 3.8 8.0 2.0
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10. Impairment charge and provisions on loans and advances to customers (continued)
Critical accounting estimates and judgements (continued)
Notes:
i. The average rate for GDP and HPI is based on the cumulative annual growth rate over the forecast period. Average unemployment and CPI is calculated using a simple average using quarterly points.
ii. GDP growth and HPI are shown as the largest cumulative growth/fall over the forecast period. The unemployment rate and CPI is shown as the highest/lowest rate over the forecast period.
Economic variables Rate/annual growth rate at December 2022-2027 5-yearDec-22 to Dec-22 to average peak trough Actual Forecast (note i) (note ii) (note ii) 2022 2023 2024 2025 2026 2027 4 April 2023 % % % % % % % % % GDP growth Upside scenario 0.4 1.3 2.0 1.8 1.6 1.6 1.7 8.6 0.2 Base case scenario 0.4 (1.1) 1.2 1.8 2.9 2.0 1.4 7.0 (1.1) Downside scenario 0.4 (2.9) 0.8 2.4 2.3 2.0 0.9 4.7 (3.2) Severe downside scenario 0.4 (5.2) 2.2 3.0 2.1 1.7 0.7 3.7 (5.7) HPI growth Upside scenario 6.0 0.4 3.7 3.8 3.8 3.8 3.1 16.2 (1.0) Base case scenario 6.0 (4.5) 0.7 3.0 3.2 3.2 1.1 5.6 (4.5) Downside scenario 6.0 (8.6) (11.4) 2.0 6.8 4.3 (1.7) (1.7) (19.5) Severe downside scenario 6.0 (21.0) (15.8) 2.2 7.7 5.1 (5.1) (1.7) (33.8) Unemployment Upside scenario 3.7 3.9 4.0 4.0 4.0 4.0 3.9 4.0 3.7 Base case scenario 3.7 4.6 5.0 4.5 4.3 4.2 4.5 5.0 3.9 Downside scenario 3.7 5.8 6.5 5.7 5.3 5.1 5.6 7.0 3.9 Severe downside scenario 3.7 6.6 9.4 8.0 7.0 6.4 7.5 10.0 4.2 Bank rate Upside scenario 3.5 4.0 3.0 3.0 3.0 3.0 3.3 4.3 3.0 Base case scenario 3.5 4.3 3.8 2.8 2.3 2.0 3.1 4.3 2.0 Downside scenario 3.5 5.0 0.5 0.1 0.1 0.5 1.5 5.0 0.1 Severe downside scenario 3.5 7.0 3.0 2.5 2.5 2.5 3.5 7.0 2.5 Consumer price inflation Upside scenario 10.5 1.2 1.8 2.0 2.0 2.0 2.3 8.5 1.2 Base case scenario 10.5 4.0 2.0 2.0 2.0 2.0 2.9 9.0 2.0 Downside scenario 10.5 5.0 1.5 0.5 1.5 1.9 3.0 13.0 0.3 Severe downside scenario 10.5 14.0 3.5 2.0 2.0 2.0 5.3 16.0 2.0
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Notes to the financial statements
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10. Impairment charge and provisions on loans and advances to customers (continued)
Critical accounting estimates and judgements (continued)
To give an indication of the sensitivity of ECLs to different economic scenarios, the table below shows the ECL if 100% weighting is applied to each scenario:
Expected credit losses Proportion of balances in stage 2 under 100% weighted scenarios under 100% weighted scenarios Upside Base case Downside Severe Reported Upside Base case Downside Severe Reported Reported scenario scenario scenario downside provision scenario scenario scenario downside stage 2 stage 3 scenario scenario (note i) 4 April 2024 £m £m £m £m £m % % % % % % Residential mortgages 210 216 275 814 321 15.0 13.7 13.0 27.7 17.4 0.6 Consumer banking – credit 186 183 187 247 195 23.8 23.0 22.4 24.6 24.3 5.4 cards Consumer banking – personal 229 232 245 269 241 35.3 37.1 41.1 45.6 39.6 6.3 loans and overdrafts Commercial lending 24 24 24 24 24 5.2 5.2 5.2 5.2 5.2 1.3 Total 649 655 731 1,354 781 4 April 2023 £m £m £m £m £m % % % % % % Residential mortgages 160 179 236 789 280 14.6 13.9 13.5 35.7 17.6 0.5 Consumer banking – credit 225 cards 213 212 228 264 37.8 37.8 39.0 40.2 38.8 5.8 Consumer banking – personal 227 233 247 281 244 34.6 37.5 41.4 46.5 40.0 6.7 loans and overdrafts Commercial lending 16 16 16 17 16 3.3 3.3 3.3 3.3 3.3 0.7 Total 616 640 727 1,351 765
Note:
i. The staging of stage 3 assets is not sensitive to economic scenarios. The reported stage 3 proportion is the same as it would be in any of the 100% weighted scenarios.
Reported ECL represents 119% (2023: 120%) of the base case scenario ECL, primarily due to the impact of increased losses in the severe downside scenario. The increased ECLs in both
the downside and severe downside scenarios are the result of increased unemployment rates combined with material house price falls. The low Bank rate forecast in the downside
scenario is the main driver of residential mortgage and credit cards stage 2 proportion being lower in the downside scenario than in the base case scenario. Provisions in the commercial
portfolios relate primarily to a small number of higher risk loans, which are sensitive to loan-specific factors rather than economic scenarios.
The ECL for each scenario multiplied by the scenario probability will not reconcile to the reported provision. Whilst the stage allocation of loans varies in each individual scenario, each
loan is allocated to a single stage in the reported provision calculation; this is based on a weighted average PD which takes into account the economic scenarios. A probability-weighted 12-
month or lifetime ECL (which takes into account the economic scenarios) is then calculated based on the stage allocation.
The table below shows the sensitivity at 4 April 2024 to some of the key assumptions used within the ECL calculation:
Sensitivity to key forward-looking information assumptions Increase in provision 2024 £m Single-factor sensitivity to key economic variables 10% decrease in house prices (HPI) at 4 April 2024 and throughout the forecast period (note i) 27 Sensitivity to changes in scenario probability weightings 10% increase in the probability of the downside scenario (reducing the upside by a corresponding 10%) 8 5% increase in the probability of the severe downside scenario (reducing the downside by a corresponding 5%) 31
Note:
i. As this is a single-factor sensitivity, it should not be extrapolated due to the likely non-linear effects. The provision impact is calculated using the base case scenario and only includes the impact of a 10%
decrease of house prices on LGD.
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Annual Report and Accounts 2024
Notes to the financial statements
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10. Impairment charge and provisions on loans and advances to customers (continued)
Critical accounting estimates and judgements (continued)
The table below shows key adjustments made in modelling provisions in relation to the significant areas of estimation uncertainty for the retail portfolios (residential mortgages and
consumer banking), with further details on each provided below. There are no significant adjustments for the commercial portfolio.
Significant adjustments made in modelling provisions 4 April 2024 4 April 2023 Residential Consumer Banking Total Residential Consumer Banking Total Mortgages Credit cards Personal Mortgages Credit cards Personal loans and loans and overdrafts overdrafts £m £m £m £m £m £m £m £m PD uplift for economic uncertainty 72 44 29 145 77 64 36 177 LGD uplift for property valuation risks 19 - - 19 22 - - 22 Total 91 44 29 164 99 64 36 199 Of which: Stage 1 7 6 3 16 5 4 4 13 Stage 2 76 38 26 140 89 60 30 179 Stage 3 8 - - 8 5 - 2 7
PD uplift for economic uncertainty
Household disposable income has reduced over recent years due to a combination of high inflation and increasing mortgage interest rates, which has increased the risk that borrowers
will not be able to meet their contractual repayments. In addition, model inputs relating to borrower credit quality are still benefitting from improvements to credit indicators which are
expected to reverse, such as reduced levels of arrears. An adjustment is made to reflect the cumulative effect of these combined risks by increasing the PD.
At 4 April 2024, the overall PD uplift adjustment for economic uncertainty increased provisions by £145 million (2023: £177 million). During the year, a combination of wage growth and a
lower rate of inflation have resulted in a reduction in the PD uplift applied for both residential mortgage and consumer banking portfolios. In the mortgage portfolio this reduction has
been partially offset by the impact of uplifting the PD for an increased volume of mortgages which have switched or are expected to switch to higher interest rates. The most significant
element of the PD uplift relates to the assumed increase in mortgage rates faced by borrowers over the next two years. If mortgage rates were to increase by 1% above current
assumptions this would increase residential mortgage provisions by £18 million.
The uplift in PD has resulted in loans breaching existing quantitative criteria for transfer to stage 2. This has resulted in approximately £12.8 billion (2023: £16.6 billion) of residential
mortgages and £473 million (2023: £585 million) of consumer banking balances moving from stage 1 to stage 2.
LGD uplift for property valuation risks
An adjustment is made to reflect the property valuation risk associated with flats, originally driven by risks for properties subject to fire safety issues such as unsuitable cladding. We
continue to hold an adjustment to provisions for this segment of the market whilst there is insufficient evidence of a recovery in the value of affected properties. This adjustment
increased provisions by £19 million (2023: £22 million).
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Annual Report and Accounts 2024
Notes to the financial statements
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11. Taxation
Tax charge in the income statement Group Society 2024 2023 2024 2023 £m £m £m £m Current tax: UK corporation tax 483 565 409 495 Adjustments in respect of prior years (28) 17 (29) 18 Total current tax 455 582 380 513 Deferred tax: Current year (credit)/charge (3) (4) 11 (3) Adjustments in respect of prior years 24 (13) 24 (14) Total deferred taxation 21 (17) 35 (17) Tax charge 476 565 415 496
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Notes to the financial statements
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11. Taxation (continued)
The actual tax charge differs from the theoretical amount that would arise using the standard rate of corporation tax in the UK as follows:
Reconciliation of tax charge Group Society 2024 2023 2024 2023 £m £m £m £m Profit before tax: 1,776 2,229 1,521 2,533 Tax calculated at a tax rate of 25% (2023: 19%) 444 424 380 481 Adjustments in respect of prior years (4) 4 (5) 4 Tax credit on distribution to the holders of Additional Tier 1 capital (20) (15) (20) (15) Banking surcharge 41 145 41 145 Temporary differences where no deferred tax is recognised - 1 - 1 Expenses not deductible for tax purposes/(income not taxable): Depreciation on non-qualifying assets 2 2 2 2 Bank levy 3 4 3 4 Effect of results of LLP structured entity (note i) - - 2 (3) Customer redress 4 (2) 4 (2) Dividend income - - - (124) Other 6 - 8 3 Effect of deferred tax provided at different tax rates - 2 - - Tax charge 476 565 415 496
Note:
i. The Society is liable for tax on the results of Nationwide Covered Bonds LLP, the profit or loss of which is reported within that entity.
Following the enactment of Finance Act 2021 on 10 June 2021, the main rate of UK corporation tax increased from 19% to 25% on 1 April 2023. Further, following the enactment of Finance
Act 2022 on 24 February 2022, the annual banking surcharge allowance was increased from £25 million to £100 million, and the banking surcharge rate reduced from 8% to 3% with
effect from 1 April 2023. The impact of these changes has been reflected in the current tax and deferred tax balances recognised in these financial statements.
On 17 November 2022 the UK Government confirmed its intention to implement the G20-OECD Inclusive Framework Pillar 2 rules in the UK, including a Qualified Domestic Minimum
Top-Up Tax rule. This legislation, enacted on 11 July 2023, seeks to ensure that UK-headquartered multinational enterprises pay a minimum tax rate of 15% on UK and overseas profits
arising after 31 December 2023. The Group is within the scope of the legislation; however as the UK rate of corporation tax is 25%, and the Group’s business is UK based, the impact of
these rules on the Group is not expected to be material. The IAS 12 exemption to recognise and disclose information about deferred tax assets and liabilities related to Pillar 2 income
taxes has been applied.
The tax on items through other comprehensive income is as follows:
Tax charge/(credit) on items through other comprehensive income Group Society 2024 2023 2024 2023 £m £m £m £m Relating to: FVOCI investment securities (10) (40) (11) (39) Cash flow hedges (20) (2) (10) 6 Other hedging (1) (3) (1) (3) Revaluation gains 2 1 2 1 Retirement benefit obligations (190) (29) (190) (29) Total (219) (73) (210) (64)
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Annual Report and Accounts 2024
Notes to the financial statements
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11. Taxation (continued)
Deferred tax
The Authorised Surplus Payments Charge (Variation of Rate) Order 2024 (SI 2024/335) reduces the taxation rate on the payout of pension scheme surpluses from 35% to 25%. This order
was published on 11 March 2024 and came into force on 6 April 2024. The impact of the change on deferred tax balances has been recognised in these financial statements.
The movements on the deferred tax account are as follows:
Movements in deferred taxation Group Society 2024 2023 2024 2023 £m £m £m £m At 5 April (287) (371) (225) (307) Deferred tax credit/(charge) in the income statement: Fixed assets timing differences (24) 25 (24) 25 Other items 3 (8) (11) (8) Tax on items through the income statement (21) 17 (35) 17 Deferred tax credit/(charge) in other comprehensive income: FVOCI investment securities 9 27 10 27 Cash flow hedges 10 (4) 10 (4) Other hedging 1 2 1 2 Unrealised revaluation losses - 1 - - Retirement benefit obligations 95 17 95 16 Effect of deferred tax provided at different tax 95 25 95 25 rates Other 1 (1) 2 (1) Tax on items through other comprehensive income 211 67 213 65 At 4 April (97) (287) (47) (225)
The majority of deferred tax assets are anticipated to be recoverable after more than
one year. Deferred tax assets have not been recognised in respect of gross temporary
differences for the Group and Society of £63 million (2023: £59 million and £52 million
respectively). These differences relate primarily to revalued properties, for which capital
losses realised on disposal can be carried forward indefinitely. Deferred tax assets have
not been recognised in respect of these items because it is not considered probable
that future taxable gains will be available against which they can be utilised.
Deferred tax assets and liabilities are attributable to the following items:
Deferred tax assets and liabilities Group Society 2024 2023 2024 2023 £m £m £m £m Deferred tax assets Fixed assets timing differences 43 67 43 67 IFRS 9 transition 22 28 14 17 Unrealised revaluation losses - (1) - (1) Cash flow hedges (2) (14) (2) (14) Other hedging 18 18 18 18 FVOCI investment securities 13 8 19 8 Other items 15 13 14 13 109 119 106 108 Deferred tax liabilities Unrealised revaluation gains - (4) - - Cash flow hedges (41) (49) - - Retirement benefit obligations (note i) (153) (333) (153) (333) Other items (12) (20) - - (206) (406) (153) (333) Net deferred tax liability (97) (287) (47) (225)
Note:
i. Deferred tax on the Society’s retirement benefit asset is provided at 25% (2023: 35%).
For deferred tax assets recognised on the balance sheet, the Group considers that there
will be sufficient future trading profits in excess of profits arising from the reversal of
existing taxable temporary differences to utilise the deferred tax assets.
As a result of exemptions on dividends from subsidiaries and on capital gains on disposal
there are no significant taxable temporary differences associated with investments in
subsidiaries.
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Notes to the financial statements
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12. Classification and measurement
As the majority of the Group’s assets and liabilities are held within the Society, the disclosures in this note and notes 21 to 24 are on a consolidated basis. The following table summarises
the classification of carrying amounts of the Group’s financial assets and liabilities:
Notes:
ii. As at 4 April 2024 and 4 April 2023 the Group had no assets or liabilities for which it had taken the option to designate at FVTPL.
iii. Total financial assets and financial liabilities exclude certain financial instruments presented within 'Other' relating to accruals, trade receivables, trade payables and settlement balances which are
classified at amortised cost.
Further information on the fair value of financial assets and liabilities is included in notes 21 to 23.
Annual Report and Accounts 2024
Notes to the financial statements
(continued)
12. Classification and measurement
As the majority of the Group’s assets and liabilities are held within the Society, the disclosures in this note and notes 21 to 24 are on a consolidated basis. The following table summarises
the classification of carrying amounts of the Group’s financial assets and liabilities:
Notes:
ii. As at 4 April 2024 and 4 April 2023 the Group had no assets or liabilities for which it had taken the option to designate at FVTPL.
iii.
Total financial assets and financial liabilities exclude certain financial instruments presented within 'Other' relating to accruals, trade receivables, trade payables and settlement balances which are
classified at amortised cost.
Further information on the fair value of financial assets and liabilities is included in notes 21 to 23.
Annual Report and Accounts 2024
Notes to the financial statements
(continued)
12. Classification and measurement
As the majority of the Group’s assets and liabilities are held within the Society, the disclosures in this note and notes 21 to 24 are on a consolidated basis. The following table summarises
the classification of carrying amounts of the Group’s financial assets and liabilities:
Notes:
ii. As at 4 April 2024 and 4 April 2023 the Group had no assets or liabilities for which it had taken the option to designate at FVTPL.
iii. Total financial assets and financial liabilities exclude certain financial instruments presented within 'Other' relating to accruals, trade receivables, trade payables and settlement balances which are
classified at amortised cost.
Further information on the fair value of financial assets and liabilities is included in notes 21 to 23.
Annual Report and Accounts 2024
Notes to the financial statements
(continued)
12. Classification and measurement
As the majority of the Group’s assets and liabilities are held within the Society, the disclosures in this note and notes 21 to 24 are on a consolidated basis. The following table summarises
the classification of carrying amounts of the Group’s financial assets and liabilities:
Classification of financial assets and liabilities Classification of financial assets and liabilities Classification of financial assets and liabilities Classification of financial assets and liabilities 2024 2024202420242023 202320232023Amortised Amortised Amortised Amortised Fair value Fair valueFair valueFair valueFair value Fair value Fair value Fair value Total Total Total Total Amortised Amortised Amortised Amortised Fair value Fair value Fair value Fair value Fair value Fair value Fair value Fair value Total Total Total Total cost costcostcostthrough other through otherthrough otherthrough otherthrough profit through profit through profit through profit cost cost cost cost through other through other through other through other through profit through profitthrough profitthrough profitcomprehensive comprehensivecomprehensivecomprehensiveor loss or lossor lossor losscomprehensive comprehensivecomprehensivecomprehensiveor loss or lossor lossor lossincome incomeincomeincome(note i) (note i)(note i)(note i)income incomeincomeincome(note i) (note i)(note i)(note i)Group Group Group Group £m £m£m£m£m £m£m£m£m £m £m £m £m £m £m £m £m £m £m £m £m £m £m £m £m £m £m £m £m £m £m £m Financial assets Financial assets Financial assets Financial assets Cash Cash Cash Cash 23,817 23,817 23,817 23,817 - - - - - - - - 23,817 23,817 23,817 23,817 25,635 25,635 25,635 25,635 - - - - - - - - 25,635 25,635 25,635 25,635 Loans and advances to banks and similar institutions Loans and advances to banks and similar institutions Loans and advances to banks and similar institutions Loans and advances to banks and similar institutions 2,478 2,478 2,478 2,478 - - - - - - - - 2,478 2,478 2,478 2,478 2,860 2,860 2,860 2,860 - - - - - - - - 2,860 2,860 2,860 2,860 Investment securities Investment securities Investment securities Investment securities 4 4 4 4 26,522 26,522 26,522 26,522 6 6 6 6 26,532 26,532 26,532 26,532 40 40 40 40 27,562 27,562 27,562 27,562 13 13 13 13 27,615 27,615 27,615 27,615 Derivative financial instruments Derivative financial instruments Derivative financial instruments Derivative financial instruments - - - - - - - - 6,290 6,290 6,290 6,290 6,290 6,290 6,290 6,290 - - - - - - - - 6,923 6,923 6,923 6,923 6,923 6,923 6,923 6,923 Fair value adjustment for portfolio hedged risk Fair value adjustment for portfolio hedged risk Fair value adjustment for portfolio hedged risk Fair value adjustment for portfolio hedged risk (3,330) (3,330) (3,330) (3,330) - - - - - - - - (3,330) (3,330) (3,330) (3,330) (5,011) (5,011) (5,011) (5,011) - - - - - - - - (5,011) (5,011) (5,011) (5,011) Loans and advances to customers Loans and advances to customers Loans and advances to customers Loans and advances to customers 213,398 213,398 213,398 213,398 - - - - 42 42 42 42 213,440 213,440 213,440 213,440 210,682 210,682 210,682 210,682 - - - - 100 100 100 100 210,782 210,782 210,782 210,782 Total financial assets (note ii) Total financial assets (note ii) Total financial assets (note ii) Total financial assets (note ii) 236,367 236,367 236,367 236,367 26,522 26,522 26,522 26,522 6,338 6,338 6,338 6,338 269,227 269,227 269,227 269,227 234,206 234,206 234,206 234,206 27,562 27,562 27,562 27,562 7,036 7,036 7,036 7,036 268,804 268,804 268,804 268,804 Other (note ii) Other (note ii)Other (note ii)Other (note ii)2,690 2,690 2,690 2,690 3,089 3,089 3,089 3,089 Total assets Total assets Total assets Total assets 271,917 271,917 271,917 271,917 271,893 271,893 271,893 271,893 Financial liabilities Financial liabilities Financial liabilities Financial liabilities Shares Shares Shares Shares 193,366 193,366 193,366 193,366 - - - - - - - - 193,366 193,366 193,366 193,366 187,143 187,143 187,143 187,143 - - - - - - - - 187,143 187,143 187,143 187,143 Deposits from banks and similar institutions Deposits from banks and similar institutions Deposits from banks and similar institutions Deposits from banks and similar institutions 16,388 16,388 16,388 16,388 - - - - - - - - 16,388 16,388 16,388 16,388 25,056 25,056 25,056 25,056 - - - - - - - - 25,056 25,056 25,056 25,056 Other deposits Other deposits Other deposits Other deposits 4,530 4,530 4,530 4,530 - - - - - - - - 4,530 4,530 4,530 4,530 5,191 5,191 5,191 5,191 - - - - - - - - 5,191 5,191 5,191 5,191 Fair value adjustment for portfolio hedged risk Fair value adjustment for portfolio hedged risk Fair value adjustment for portfolio hedged risk Fair value adjustment for portfolio hedged risk 50 50 50 50 - - - - - - - - 50 50 50 50 2 2 2 2 - - - - - - - - 2 2 2 2 Debt securities in issue Debt securities in issue Debt securities in issue Debt securities in issue 29,599 29,599 29,599 29,599 - - - - - - - - 29,599 29,599 29,599 29,599 27,626 27,626 27,626 27,626 - - - - - - - - 27,626 27,626 27,626 27,626 Derivative financial instruments Derivative financial instruments Derivative financial instruments Derivative financial instruments - - - - - - - - 1,451 1,451 1,451 1,451 1,451 1,451 1,451 1,451 ----- - - - 1,524 1,524 1,524 1,524 1,524 1,524 1,524 1,524 Subordinated liabilities Subordinated liabilities Subordinated liabilities Subordinated liabilities 7,225 7,225 7,225 7,225 - - - - - - - - 7,225 7,225 7,225 7,225 6,755 6,755 6,755 6,755 - - - - - - - - 6,755 6,755 6,755 6,755 Subscribed capital Subscribed capital Subscribed capital Subscribed capital 173 173 173 173 - - - - - - - - 173 173 173 173 173 173 173 173 - - - - - - - - 173 173 173 173 Lease liabilities Lease liabilities Lease liabilities Lease liabilities 172 172 172 172 - - - - - - - - 172 172 172 172 225 225 225 225 - ---- ---225 225 225 225 Total financial liabilities (note ii) Total financial liabilities (note ii) Total financial liabilities (note ii) Total financial liabilities (note ii) 251,503 251,503 251,503 251,503 - - - - 1,451 1,451 1,451 1,451 252,954 252,954 252,954 252,954 252,171 252,171 252,171 252,171 - - - - 1,524 1,524 1,524 1,524 253,695 253,695253,695253,695Other (note ii) Other (note ii) Other (note ii) Other (note ii) 1,277 1,277 1,277 1,277 1,292 1,292 1,292 1,292 Total liabilities Total liabilities Total liabilities Total liabilities 254,231 254,231 254,231 254,231 254,987 254,987 254,987 254,987
Notes:
ii. As at 4 April 2024 and 4 April 2023 the Group had no assets or liabilities for which it had taken the option to designate at FVTPL.
iii. Total financial assets and financial liabilities exclude certain financial instruments presented within 'Other' relating to accruals, trade receivables, trade payables and settlement balances which are
classified at amortised cost.
Further information on the fair value of financial assets and liabilities is included in notes 21 to 23.
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13. Investment securitiesGroup Society 2024 2023 2024 2023 £m £m £m £m Government, government guaranteed and 22,173 22,968 22,17322,968supranational investment securities Other debt investment securities 4,299 4,592 4,296 4,590 Investments in equity shares 60 55 7 12 Total 26,532 27,615 26,476 27,570
The Group may use its investment securities as collateral to secure deposits received under sale and repurchase agreements or to support derivative financial instruments. The Group
retains substantially all of the risks and rewards associated with those investment securities and as a result they are retained on the balance sheet. The counterparty receiving that
collateral normally has the contractual right to sell or repledge it.
Investment securities with a fair value of £2,569 million (2023: £3,100 million) have been used for sale and repurchase agreements and £1,304 million (2023: £1,408 million) for derivative
financial instruments. The Group also holds £631 million (2023: £1,002 million) of investment securities as collateral under reverse repurchase agreements which are not recognised in the
table above.
Further information on investment securities is included in the Credit risk - Treasury assets section of the Risk report.
14. Loans and advances to customers
2024 2023 Loans held at amortised cost Loans held Total Loans held at amortised cost Loans held Total Gross Provisions Other Total at FVTPL Gross Provisions Other Total at FVTPL (note i) (note i) Group £m £m £m £m £m £m £m £m £m £m £m £m Owner-occupied mortgages 160,941 (90) - 160,851 40 160,891 157,511 (84) - 157,427 47 157,474 Buy to let and legacy residential 43,486 (231) - 43,255 - 43,255 44,104 (196) - 43,908 - 43,908 mortgages Consumer banking 4,263 (436) - 3,827 - 3,827 4,408 (469) - 3,939 - 3,939 Commercial lending 5,139 (24) 350 5,465 2 5,467 4,994 (16) 430 5,408 53 5,461 Total 213,829 (781) 350 213,398 42 213,440 211,017 (765) 430 210,682 100 210,782 2024 2023 Loans held at amortised cost Loans held Total Loans held at amortised cost Loans held Total Gross Provisions Other Total at FVTPL Gross Provisions Other Total at FVTPL (note i) (note i) Society £m £m £m £m £m £m £m £m £m £m £m £m Owner-occupied mortgages 160,796 (88) - 160,708 40 160,748 157,339 (83) - 157,256 47 157,303 Buy to let and legacy residential 268 (5) - 263 - 263 326 (3) - 323 - 323 mortgages Consumer banking 4,263 (436) - 3,827 - 3,827 4,408 (469) - 3,939 - 3,939 Commercial lending 4,830 (24) 350 5,156 2 5,158 4,679 (16) 430 5,093 38 5,131 Total 170,157 (553) 350 169,954 42 169,996 166,752 (571) 430 166,611 85 166,696
Note:
i. ‘Other’ represents a fair value adjustment for micro hedged risk for commercial loans that were previously hedged on an individual basis. The hedge relationships have been discontinued and the
balances are being amortised over the remaining life of the loans.
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14. Loans and advances to customers (continued)
The tables below summarise the movements in, and stage allocations of, gross loans and advances to customers held at amortised cost, including the impact of ECL impairment
provisions and excluding the fair value adjustment for micro hedged risk. Residential mortgages represent the majority of the Group’s loans and advances to customers. Additional tables
summarising the movements for the Group’s residential mortgages and consumer banking are presented in the Credit risk section of the Risk report.
The basis of preparation for this note has been updated. Previously, the tables were presented on a gross basis, with the reported values representing an aggregation of monthly
movements over the period. To present more directly the change in credit quality compared to the previous reporting period, the tables are now prepared on a net basis. The movements
within the tables compare the position at 4 April to that at the start of the reporting period. The comparative tables have been restated to also be presented on a net basis. Further detail
on the methodology is included within the footnotes to the tables.
The reasons for key movements for the year ended 4 April 2024 were as follows:
• Gross balances increased, due to £27,219 million of new lending offset by £24,280 million of repayments and redemptions. The majority of these movements relate to residential
mortgages.
• Write-offs decreased to £106 million, comprising £89 million relating to consumer banking, £8 million to residential mortgages and £9 million to commercial lending.
• Impairment provisions increased by £16 million in the period to £781 million. Further detail on impairment provisions by portfolio is shown in note 10.
Reconciliation of net movements in balances and impairment provisions Non-credit impaired Credit impaired (note i) Subject to 12-month ECL Subject to lifetime ECL Subject to lifetime ECL Total Stage 1 Stage 2 Stage 3 and POCI Gross Provisions Gross Provisions Gross Provisions Gross Provisions balances balances balances balances Group £m £m £m £m £m £m £m £m At 5 April 2023 172,058 50 37,457 410 1,502 305 211,017 765 Stage transfers: Transfers from stage 1 to stage 2 (16,072) (3) 16,072 3 - - - - Transfers to stage 3 (162) (1) (612) (40) 774 41 - - Transfers from stage 2 to stage 1 13,432 100 (13,432) (100) - - - - Transfers from stage 3 76 1 176 10 (252) (11) - - Net remeasurement of ECL arising from transfer of stage (82) 102 82 102 Net movement arising from transfer of stage (note ii) (2,726) 15 2,204 (25) 522 112 - 102 New assets originated or purchased (note iii) 25,526 12 1,681 39 12 7 27,219 58 Net impact of further lending and repayments (note iv) (7,785) (15) (769) (26) (5) 2 (8,559) (39) Changes in risk parameters in relation to credit quality (note v) - (3) - 3 - 37 - 37 Other items impacting income statement (including recoveries) - - - - - (10) - (10) Redemptions (note vi) (12,213) (5) (3,270) (20) (238) (11) (15,721) (36) Income statement charge for the year 112 Decrease due to write-offs - - - - (127) (106) (127) (106) Other provision movements - - - - - 10 - 10 At 4 April 2024 174,860 54 37,303 381 1,666 346 213,829 781 Net carrying amount 174,806 36,922 1,320 213,048
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Reconciliation of net movements in balances and impairment provisions Non-credit impaired Credit impaired (note i) Subject to 12-month ECL Subject to lifetime ECL Subject to lifetime ECL Total Stage 1 Stage 2 Stage 3 and POCI Gross Provisions Gross Provisions Gross Provisions Gross Provisions balances balances balances balances Group £m £m £m £m £m £m £m £m At 5 April 2022 188,130 48 18,326 380 1,691 318 208,147 746 Stage transfers: Transfers from stage 1 to stage 2 (24,049) (7) 24,049 7 - - - - Transfers to stage 3 (229) (1) (392) (39) 621 40 - - Transfers from stage 2 to stage 1 4,956 68 (4,956) (68) - - - - Transfers from stage 3 134 1 277 9 (411) (10) - - Net remeasurement of ECL arising from transfer of stage (57) 114 63 120 Net movement arising from transfer of stage (note ii) (19,188) 4 18,978 23 210 93 - 120 New assets originated or purchased (note iii) 31,085 15 2,842 50 14 6 33,941 71 Net impact of further lending and repayments (note iv) (8,018) (13) (834) (27) (26) (4) (8,878) (44) Changes in risk parameters in relation to credit quality (note v) - 2 - 7 - 22 - 31 Other items impacting income statement (including recoveries) - - - - - (10) - (10) Redemptions (note vi) (19,951) (6) (1,855) (23) (255) (13) (22,061) (42) Income statement charge for the year 126 Decrease due to write-offs - - - - (132) (117) (132) (117) Other provision movements - - - - - 10 - 10 At 4 April 2023 172,058 50 37,457 410 1,502 305 211,017 765 Net carrying amount 172,008 37,047 1,197 210,252
Notes:
i. Gross balances of credit impaired loans include £113 million (2023: £123 million) of purchased or originated credit impaired (POCI) loans, which are presented net of lifetime ECL on transition to IFRS 9 of
£5 million (2023: £5 million).
ii. The remeasurement of provisions arising from a change in stage is reported within the stage to which the assets are transferred.
iii. If a new asset is originated in the year, the values included are the closing gross balance and provision for the year. The stage in which the addition is shown reflects the stage of the account at the end of
the year.
iv. This comprises further lending and capital repayments where the asset is not derecognised. The gross balances value is calculated as the closing gross balance for the year less the opening gross balance
for the year. The provisions value is calculated as the change in exposure at default (EAD) multiplied by opening provision coverage for the year.
v. This comprises changes in risk parameters, and changes to modelling inputs and methodology. The provision movement for the change in risk parameters is calculated for assets that do not move stage in
the year.
vi. For any asset that is derecognised in the year, the value disclosed is the provision at the start of the year.
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Reconciliation of net movements in balances and impairment provisions Non-credit impaired Credit impaired Subject to 12-month ECL Subject to lifetime ECL Subject to lifetime ECL Total Stage 1 Stage 2 Stage 3 Gross Provisions Gross Provisions Gross Provisions Gross Provisions balances balances balances balances Society £m £m £m £m £m £m £m £m At 5 April 2023 145,642 37 20,156 269 954 265 166,752 571 Stage transfers: Transfers from stage 1 to stage 2 (6,549) (5) 6,549 5 - - - - Transfers to stage 3 (105) (1) (390) (33) 495 34 - - Transfers from stage 2 to stage 1 10,454 84 (10,454) (84) - - - - Transfers from stage 3 69 2 139 7 (208) (9) - - Net remeasurement of ECL arising from transfer of stage (67) 62 63 58 Net movement arising from transfer of stage (note i) 3,869 13 (4,156) (43) 287 88 - 58 New assets originated or purchased (note ii) 23,389 10 787 33 11 7 24,187 50 Net impact of further lending and repayments (note iii) (7,489) (14) (545) (24) (6) 1 (8,040) (37) Changes in risk parameters related to credit quality (note iv) - (4) - 9 - 25 - 30 Other items impacting income statement (including recoveries) - - - - - (5) - (5) Redemptions (note v) (10,696) (4) (1,814) (10) (120) (5) (12,630) (19) Income statement charge for the year 77 Decrease due to write-offs - - - - (112) (100) (112) (100) Other provision movements - - - - - 5 - 5 At 4 April 2024 154,715 38 14,428 234 1,014 281 170,157 553 Net carrying amount 154,677 14,194 733 169,604
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14. Loans and advances to customers (continued)
Reconciliation of net movements in balances and impairment provisions Non-credit impaired Credit impaired Subject to 12-month ECL Subject to lifetime ECL Subject to lifetime ECL Total Stage 1 Stage 2 Stage 3 Gross Provisions Gross Provisions Gross Provisions Gross Provisions balances balances balances balances Society £m £m £m £m £m £m £m £m At 5 April 2022 154,485 34 8,716 317 1,124 283 164,325 634 Stage transfers: Transfers from stage 1 to stage 2 (14,725) (2) 14,725 2 - - - - Transfers to stage 3 (182) (1) (250) (35) 432 36 - - Transfers from stage 2 to stage 1 2,741 64 (2,741) (64) - - - - Transfers from stage 3 114 1 227 5 (341) (6) - - Net remeasurement of ECL arising from transfer of stage (52) 77 55 80 Net movement arising from transfer of stage (note i) (12,052) 10 11,961 (15) 91 85 - 80 New assets originated or purchased (note ii) 27,249 10 1,213 34 13 6 28,475 50 Net impact of further lending and repayments (note iii) (7,690) (13) (694) (25) (18) (4) (8,402) (42) Changes in risk parameters related to credit quality (note iv) - 1 - (25) - 13 - (11) Other items impacting income statement (including recoveries) - - - - - (6) - (6) Redemptions (note v) (16,350) (5) (1,040) (17) (134) (5) (17,524) (27) Income statement charge for the year 44 Decrease due to write-offs - - - - (122) (113) (122) (113) Other provision movements - - - - - 6 - 6 At 4 April 2023 145,642 37 20,156 269 954 265 166,752 571 Net carrying amount 145,605 19,887 689 166,181
Notes:
i. The remeasurement of provisions arising from a change in stage is reported within the stage to which the assets are transferred.
ii. If a new asset is originated in the year, the values included are the closing gross balance and provision for the year. The stage in which the addition is shown reflects the stage of the account at the end of
the year.
iii. This comprises further lending and capital repayments where the asset is not derecognised. The gross balances value is calculated as the closing gross balance for the year less the opening gross balance
for the year. The provisions value is calculated as the change in exposure at default (EAD) multiplied by opening provision coverage for the year.
iv. This comprises changes in risk parameters, and changes to modelling inputs and methodology. The provision movement for the change in risk parameters is calculated for assets that do not move stage in
the year.
v. For any asset that is derecognised in the year, the value disclosed is the provision at the start of that year.
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14. Loans and advances to customers (continued)
Maturity analysis
The following table shows the residual maturity of loans and advances to customers, based on their contractual maturity:
Residual maturity of loans and advances to customers Group Society 2024 2023 2024 2023 £m £m £m £m Repayable: On demand 1,911 1,835 1,911 1,835 In not more than three months 2,232 2,337 2,020 2,106 In more than three months but not more than one year 5,826 6,277 5,663 6,101 In more than one year but not more than five years 30,175 31,496 27,986 29,395 In more than five years 173,727 169,172 132,619 127,400 213,871 211,117 170,199 166,837 Impairment provision on loans and advances (781) (765) (553) (571) Fair value adjustment for micro hedged risk 350 430 350 430 Total 213,440 210,782 169,996 166,696
The maturity analysis is produced on the basis that where a loan is repayable by instalments, each such instalment is treated as a separate repayment. The analysis is based on contractual
maturity rather than actual redemption levels experienced, which are likely to be materially different.
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14. Loans and advances to customers (continued)
Asset backed funding
Certain owner-occupied mortgages have been pledged to the Group’s asset backed funding programmes or utilised as whole mortgage loan pools for TFSME and other short-term
liquidity facilities. The programmes have enabled the Group to obtain secured funding. Mortgages pledged and the carrying values of the notes in issue are as follows:
Mortgages pledged to asset backed funding programmes 2024 2023 Notes in issue Notes in issue Mortgages Held by Held by the Group Mortgages Held by Held by the Group pledgedthird parties Drawn Undrawn Total notes pledgedthird parties Drawn Undrawn Total notes (note i) (note ii) (note iii) (note iv) in issue (note i) (note ii) (note iii) (note iv) in issueGroup £m £m £m £m £m £m £m £m £m £m Covered bond programme 23,581 14,955 - - 14,955 20,253 13,496 - - 13,496 Securitisation programme 7,321 1,984 - 3,651 5,635 8,705 2,535 - 2,632 5,167 Whole mortgage loan pools 12,000 - 9,254 - 9,254 23,045 - 17,166 - 17,166 Total 42,902 16,939 9,254 3,651 29,844 52,003 16,031 17,166 2,632 35,829
Notes:
i. Mortgages pledged include £6.3 billion (2023: £6.6 billion) in the covered bond and securitisation programmes that are in excess of the amount contractually required to support notes in issue.
ii. Notes in issue which are held by third parties are included within debt securities in issue. Further information on debt securities is included in note 18.
iii. Notes in issue, held by the Group and drawn, are whole mortgage loan pools securing amounts drawn with the BoE under the TFSME.
iv. Notes in issue, held by the Group and undrawn, are debt securities issued by the programmes to the Society.
Mortgages pledged under the Nationwide Covered Bond programme provide security for issues of covered bonds made by the Society.
The securitisation programme notes are issued by Silverstone Master Issuer plc and are not included in the accounts of the Society. Silverstone Master Issuer plc is fully consolidated into
the accounts of the Group. The issuance proceeds are used to purchase, for the benefit of note holders, a share of the beneficial interest in the mortgages pledged by the Society. The
remaining beneficial interest in the pledged mortgages of £1.4 billion (2023: £3.4 billion) stays with the Society and includes its required minimum seller share in accordance with the rules
of the programme. The Group is under no obligation to support losses incurred by the programme or holders of the notes and does not intend to provide such further support. The
entitlement of note holders is restricted to payment of principal and interest to the extent that the resources of the programme are sufficient to support such payment and the holders of
the notes have agreed not to seek recourse in any other form.
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14. Loans and advances to customers (continued)
The whole mortgage loan pools are pledged at the BoE Single Collateral Pool. Notes are not issued when pledging the mortgage loan pools at the BoE. Instead, the whole loan pool is
pledged to the BoE and drawings are made directly against the eligible collateral, subject to a haircut. At 4 April 2024, £12.0 billion (2023: £23.0 billion) of pledged collateral supported
£9.3 billion (2023: £17.2 billion) of TFSME drawdowns.
In accordance with accounting standards, notes in issue and held by the Group are not recognised in the Group’s or Society’s balance sheets. Mortgages pledged are not derecognised
from the Group or Society balance sheets as the Group has retained substantially all the risks and rewards of ownership. The Group and Society continue to be exposed to the liquidity
risk, interest rate risk and credit risk of the mortgages. No gain or loss has been recognised on pledging the mortgages to the programmes.
The following table sets out the carrying value and fair value of the transferred assets and liabilities for the Silverstone Master Trust:
Carrying value Fair value Transferred Associated Total Transferred Associated Total assets liabilities assets liabilities £m £m £m £m £m £m At 4 April 2024 7,321 (5,635) 1,686 7,110 (5,634) 1,476 At 4 April 2023 8,705 (5,167) 3,538 8,323 (5,178) 3,145
The Society holds cash deposited by the Nationwide Covered Bond programme of £0.6 billion (2023: £0.5 billion) and by the Silverstone programme of £0.4 billion (2023: £0.6 billion).
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15. Derivative financial instruments
All of the Group’s derivative financial instruments are used to manage economic risk, although not all of the derivatives are subject to hedge accounting. Note 7 sets out the link between
economic risk management and the hedge accounting applied by the Group. The table below provides an analysis of the notional amount and fair value of derivatives by both hedge
accounting type and instrument type. The amount of ineffectiveness recognised for each hedge type is shown in note 7. Contract/notional amount is the amount on which payment flows
are derived and does not represent amounts at risk.
Assets Liabilities
Derivatives by instrument and hedge type 2024 2023 Group Society Group Society Contract/ Fair value Contract/ Fair value Contract/ Fair value Contract/ Fair value notional notional notional notional amount Assets Liabilities Assets Liabilities Assets Liabilities amount amount amount(note i) (note i) £m £m £m £m £m £m £m £m £m £m £m £m Micro fair value hedges: Interest rate swaps 48,764 22 364 55,876 527 361 48,684 25 511 53,271 691 406 Cross currency interest rate swaps 43,111 1,722 771 50,144 1,849 1,007 41,125 1,762 626 45,442 1,785 982 Bond forwards 143 - - 143 - - 1,645 70 17 1,645 70 17 Inflation swaps 7,687 205 46 7,687 204 46 8,272 176 30 8,272 176 30 99,705 1,949 1,181 113,850 2,580 1,414 99,726 2,033 1,184 108,630 2,722 1,435 Macro fair value hedges: Interest rate swaps 233,132 1,985 60 233,132 1,985 60 221,801 2,333 107 221,801 2,333 107 233,132 1,985 60 233,132 1,985 60 221,801 2,333 107 221,801 2,333 107 Cash flow hedges: Cross currency interest rate swaps 32,443 20 26 31,087 20 26 31,027 34 23 29,111 34 19 Inflation swaps - - - - - - 120 51 - 120 51 - 32,443 20 26 31,087 20 26 31,147 85 23 29,231 85 19 Not subject to hedge accounting: (note ii) Interest rate swaps 111,771 2,096 119 112,520 2,079 111 111,128 2,259 156 111,878 2,259 162 Cross currency interest rate swaps 2,010 19 42 2,163 20 6 2,318 5 14 2,471 (53) (45) Foreign exchange swaps 2,469 31 2 2,469 31 2 1,593 13 6 1,593 13 6 Inflation swaps 7,425 190 19 7,425 190 19 5,633 195 30 5,633 195 30 Other derivatives 111 - 2 111 - 2 247 - 4 247 - 4 123,786 2,336 184 124,688 2,320 140 120,919 2,472 210 121,822 2,414 157 Total 489,066 6,290 1,451 502,757 6,905 1,640 473,593 6,923 1,524 481,484 7,554 1,718
Notes:
i. Where the same derivative contract has been used in more than one hedge type, for example where one risk component has been included in a fair value hedge and another risk component has been
included in a cash flow hedge, the full notional amount has been included in both categories.
ii. Valuation adjustments are applied at a portfolio level and not allocated to individual hedge accounting relationships and have therefore been included in the ‘Not subject to hedge accounting section’,
which can result in negative amounts presented.
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15. Derivative financial instruments (continued)
The contractual maturity of derivatives used as hedging instruments in micro fair value and cash flow hedges is provided in the table below. Macro fair value hedges are frequently
rebalanced to include new business. As a result, these hedges have not been included in the analysis below.
Contractual maturity of hedging instruments (contract/notional amount) 2024 Group Society Less than Between More than Total Less than Between one More than Total one year one and five five years one year and five five years years years £m £m £m £m £m £m £m £m Micro fair value hedges Interest rate swaps 3,405 29,092 16,267 48,764 2,942 33,209 19,725 55,876 Cross currency interest rate swaps 3,688 25,494 13,929 43,111 3,319 29,601 17,224 50,144 Bond forwards 143 - - 143 143 - - 143 Inflation swaps - 4,498 3,189 7,687 - 4,498 3,189 7,687 7,236 59,084 33,385 99,705 6,404 67,308 40,138 113,850 Cash flow hedges Cross currency interest rate swaps 3,359 20,389 8,695 32,443 2,883 19,950 8,254 31,087 3,359 20,389 8,695 32,443 2,883 19,950 8,254 31,087 Contractual maturity of hedging instruments (contract/notional amount) 2023 Group Society Less than Between one More than Total Less than Between one More than Total one year and five five years one year and five five years years years £m £m £m £m £m £m £m £m Micro fair value hedges Interest rate swaps 3,401 23,538 21,745 48,684 2,825 25,614 24,832 53,271 Cross currency interest rate swaps 3,009 20,543 17,573 41,125 2,449 22,708 20,285 45,442 Bond forwards 1,645 - - 1,645 1,645 - - 1,645 Inflation swaps - 2,423 5,849 8,272 - 2,423 5,849 8,272 8,055 46,504 45,167 99,726 6,919 50,745 50,966 108,630 Cash flow hedges Cross currency interest rate swaps 2,841 16,792 11,394 31,027 2,281 16,315 10,515 29,111 Inflation swaps 120 - - 120 120 - - 120 2,961 16,792 11,394 31,147 2,401 16,315 10,515 29,231
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15. Derivative financial instruments (continued)
The weighted average rates of hedging instruments which achieve fixed rates are summarised in the table below. Fair value and cash flow hedging instruments which do not achieve a
fixed rate have not been included in this analysis.
Average rates achieved 2024 Group Society Less than Between one More than Total Less than Between one More than Total one year and five five years one year and five five years years years Cross currency interest rate swaps Average EUR/GBP rate 1.18 1.16 1.19 1.17 1.19 1.16 1.20 1.18 Average USD/GBP rate 1.36 1.30 1.27 1.29 1.36 1.30 1.27 1.29 Average JPY/GBP rate 145.59 148.25 132.22 147.68 145.59 148.25 132.22 147.68 Average NOK/GBP rate 10.06 11.21 12.66 11.53 10.06 11.21 12.90 11.81 Average HKD/GBP rate 1.74 1.67 1.69 1.74 1.67 1.69 Average CHF/GBP rate 11.85 9.13 11.56 11.85 9.13 11.56 Average CAD/GBP rate 1.15 1.18 1.16 1.16 1.19 1.17 Average rates achieved 2023 Group Society Less than Between one More than Total Less than Between one More than Total one year and five five years one year and five five years years years Cross currency interest rate swaps Average EUR/GBP rate 1.17 1.16 1.18 1.17 1.17 1.17 1.19 1.18 Average USD/GBP rate 1.35 1.33 1.28 1.31 1.35 1.33 1.28 1.31 Average JPY/GBP rate 136.87 145.27 146.31 145.13 136.87 145.27 146.31 145.13 Average NOK/GBP rate - 11.07 11.24 11.13 - 11.07 11.24 11.13 Average HKD/GBP rate - 11.85 9.13 11.56 - 11.85 9.13 11.56 Average CHF/GBP rate - 1.16 1.17 1.17 - 1.16 1.18 1.17 Average CAD/GBP rate - 1.80 1.70 1.78 - 1.80 1.70 1.78 Inflation swaps Average fixed interest rate (GBP %) 3.79 - - 3.79 3.79 - - 3.79 Average inflation rate (RPI index) 256.30 - - 256.30 256.30 - - 256.30
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16. Deposits from banks and similar institutions
Deposits from banks and similar institutions are repayable from the balance sheet date in the ordinary course of business as follows:
Group Society 2024 2023 2024 2023 £m £m £m £m Accrued interest 28 7 28 7 Repayable: On demand 5,183 5,806 5,183 5,804 In not more than three months 1,925 2,082 1,925 2,082 In more than three months but not more than one year 3,982 1 3,982 1 In more than one year but not more than five years 5,270 17,160 5,270 17,160 Total 16,388 25,056 16,388 25,054
For the Group and Society, deposits from banks and similar institutions include £9.3 billion (2023: £17.2 billion) drawn down against the Bank of England’s TFSME.
17. Other deposits
Other deposits are repayable from the balance sheet date in the ordinary course of business as follows:
Group Society 2024 2023 2024 2023 £m £m £m £m Accrued interest 17 10 17 10 Repayable: On demand 1,076 1,135 1,298 1,561 In not more than three months 1,785 2,221 1,785 2,221 In more than three months but not more than one year 1,573 1,700 1,573 1,700 In more than one year but not more than five years (note i) 79 125 79 125 Total 4,530 5,191 4,752 5,617
Note:
i. Includes £15 million (2023: £14 million) of other financial liabilities relating to contractual indemnity obligations.
Other deposits primarily comprise wholesale and commercial deposits. The Society’s other deposits as at 4 April 2024 include £222 million (2023: £425 million) of deposits from
subsidiary undertakings.
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18. Debt securities in issue
Group Society 2024 2023 2024 2023 £m £m £m £m Certificates of deposit and commercial paper 1,506 1,011 1,506 1,011 Medium term notes 11,557 11,141 11,557 11,141 Covered bonds 15,577 14,373 15,577 14,373 Asset backed securities 1,984 2,534 - - 30,624 29,059 28,640 26,525 Fair value adjustment for micro hedged risk (1,025) (1,433) (385) (532) Total 29,599 27,626 28,255 25,993 Debt securities in issue are repayable from the balance sheet date in the ordinary course of business as follows: Accrued interest 310 227 287 205 Residual maturity repayable: In not more than one year 3,632 6,538 3,406 5,390 In more than one year 26,682 22,294 24,947 20,930 30,624 29,059 28,640 26,525 Fair value adjustment for micro hedged risk (1,025) (1,433) (385) (532) Total 29,599 27,626 28,255 25,993
The total for debt securities in issue in the Group includes £16,939 million (2023: £16,031 million), and in the Society includes £15,577 million (2023: £14,373 million), secured on certain
loans and advances to customers. Further information is given in note 14.
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19. Subordinated liabilities
Group and Society 2024 2023 Issuance date Next call date Maturity date £m £m Senior non-preferred 1.5% fixed-to-floating rate notes (Euro 1 billion) 8 March 2018 8 March 2025 8 March 2026 859 877 4.302% fixed-to-floating rate notes (US Dollar 0.75 billion) 8 March 2018 8 March 2028 8 March 2029 594 602 4.363% fixed-to-floating rate notes (US Dollar 1 billion) (note i) 1 August 2018 - 805 3.4675% fixed rate notes (Norwegian Kroner 1 billion) 5 October 2018 5 October 2026 75 79 0.805% fixed-to-floating rate notes (Japanese Yen 1 billion) (note i) 24 October 2018 - 6 0.9925% fixed rate reset notes (Japanese Yen 4 billion) 30 October 2018 30 October 2025 30 October 2026 21 24 3.875% fixed rate notes (Norwegian Kroner 0.3 billion) 13 November 2018 13 November 2028 23 24 3.9% fixed rate notes (Norwegian Kroner 1 billion) 13 November 2018 13 November 2028 75 79 1.2775% fixed rate reset notes (Japanese Yen 3 billion) 14 November 2018 14 November 2028 14 November 2029 16 18 3.96% fixed-to-floating rate notes (US Dollar 1 billion) 18 July 2019 18 July 2029 18 July 2030 796 806 0.85% fixed-to-floating rate notes (Japanese Yen 5 billion) 16 August 2019 16 August 2029 16 August 2030 26 30 2.972% fixed-to-floating rate notes (US Dollar 0.75 billion) 16 February 2022 16 February 2027 16 February 2028 594 602 Sofr + 1.29% floating rate notes (US Dollar 0.3 billion) 16 February 2022 16 February 2027 16 February 2028 239 242 6.178% fixed rate reset notes (GBP 0.65 billion) 7 December 2022 7 December 2026 7 December 2027 663 663 1.4% floating rate notes (GBP 0,025 billion) 4 July 2023 4 July 2025 4 July 2026 25 - 1.65 % fixed rate notes (JPY 3 billion) 12 July 2023 12 July 2028 16 - 1.060% fixed rate notes (JPY 2 billion) 12 July 2023 12 July 2028 10 - 1.064% fixed rate notes (JPY 2 billion) 14 July 2023 14 July 2028 10 - 1.2% fixed rate reset notes (JPY 2 billion) 19 July 2023 19 July 2028 19 July 2029 10 - 6.948% fixed rate reset notes (GBP 0.05 billion) 1 August 2023 1 August 2025 1 August 2026 52 - 6.240% fixed rate notes (GBP 0.05 billion) 10 August 2023 10 August 2033 50 - 0.9% fixed rate notes (JPY 2 billion) 16 August 2023 16 August 2026 10 - 0.988% fixed rate reset notes (JPY 2 billion) 18 August 2023 18 August 2025 18 August 2026 10 - 2.98% fixed rate notes (CHF 0.175 billion) 8 September 2023 8 September 2026 8 September 2027 155 - 6.122% fixed rate reset notes (GBP 0.02 billion) 29 September 2023 29 September 2035 29 September 2036 21 - 6.557% fixed-to-floating rate notes (USD 1.25 billion) 18 October 2023 18 October 2026 18 October 2027 1,016 - Tier 2 eligible 4% subordinated notes (US Dollar 1.25 billion) 14 September 2016 14 September 2026 881 893 2% subordinated notes (Euro 1 billion) 25 July 2017 25 July 2024 25 July 2029 870 888 4.125% subordinated notes (US Dollar 1.25 billion) 18 October 2017 18 October 2027 18 October 2032 408 414 7,525 7,052 Fair value hedge accounting adjustments (287) (281) Unamortised premiums and issue costs (13) (16) Total 7,225 6,755
Note:
i. The Society exercised its option to call these notes during the year ended 4 April 2024.
Senior non-preferred notes are a class of subordinated liability which rank equally with each other and behind the claims against the Society of all depositors, creditors and investing
members other than holders of Tier 2 eligible subordinated notes, permanent interest-bearing shares (PIBS), Additional Tier 1 (AT1) instruments and core capital deferred shares (CCDS).
Senior non-preferred notes contribute to meeting the Society’s minimum requirement for own funds and eligible liabilities (MREL) and loss absorbing requirements.
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19. Subordinated liabilities (continued)
The Tier 2 eligible subordinated notes rank equally with each other and ahead of claims against the Society of holders of PIBS, AT1 instruments and CCDS.
The interest rate and foreign exchange risks arising from the issuance of fixed rate and foreign currency subordinated liabilities have been mitigated through the use of derivatives.
20. Subscribed capital
Group and Society 2024 2023 Note Next call date £m £m 6.25% permanent interest-bearing shares i 22 October 2024 45 45 5.769% permanent interest-bearing shares i 6 February 2026 85 84 7.859% permanent interest-bearing shares i 13 March 2030 39 39 Floating rate (Sonia + 4.2%) permanent interest-bearing shares 30 September 2030 5 5 174 173 Fair value hedge accounting adjustments - 1 Unamortised premiums and issue costs (1) (1) Total 173 173
Note:
i. Repayable, at the option of the Society, in full on the initial call date or every fifth anniversary thereafter. If not repaid on a call date, then the interest rate is reset at a margin to the yield on the then
prevailing five-year benchmark gilt rate.
All PIBS are denominated in sterling and only repayable with the prior consent of the PRA. PIBS do not form part of capital resources.
PIBS rank equally with each other. They are deferred shares of the Society and rank behind the claims against the Society of all noteholders, depositors, creditors and investing members
of the Society, other than the holders of AT1 and CCDS instruments.
The interest rate risk arising from the issuance of fixed rate PIBS has been mitigated through the use of interest rate swaps.
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21. Fair value hierarchy of financial assets and liabilities held at fair value
As the majority of the Group’s assets and liabilities are held within the Society, the disclosures in notes 21 to 24 are on a consolidated basis. The following tables show the Group’s financial
assets and liabilities that are held at fair value by fair value hierarchy, balance sheet classification and product type:
2024 2023 Fair values based on Fair values based on Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total £m £m £m £m £m £m £m £m Financial assets Government, government guaranteed and 22,173 - - 22,173 22,968 - - 22,968 supranational investment securities Other debt investment securities 2,980 1,312 3 4,295 2,843 1,707 2 4,552 Investments in equity shares - - 60 60 - 3 52 55 Total investment securities (note i) 25,153 1,312 63 26,528 25,811 1,71054 27,575 Interest rate swaps - 4,103 - 4,103 - 4,617 - 4,617 Cross currency interest rate swaps - 1,761 - 1,761 - 1,801 - 1,801 Foreign exchange swaps - 31 - 31 - 13 - 13 Inflation swaps - 200 195 395 - 265 157 422 Bond forwards and futures - - - - - 70 - 70 Total derivative financial instruments - 6,095 195 6,290 - 6,766 157 6,923 Loans and advances to customers - - 42 42 - - 100 100 Total financial assets 25,153 7,407 300 32,860 25,811 8,476 311 34,598 Financial liabilities Interest rate swaps - (543) - (543) - (774) - (774) Cross currency interest rate swaps - (839) - (839) - (663) - (663) Foreign exchange swaps - (2) - (2) - (6) - (6) Inflation swaps - (62) (3) (65) - (52) (8) (60) Bond forwards and futures - - - - - (18) - (18) Swaptions - - (2) (2) - - (3) (3) Total derivative financial instruments - (1,446) (5) (1,451) - (1,513) (11) (1,524) Total financial liabilities - (1,446) (5) (1,451) - (1,513) (11) (1,524)
Note:
i. Investment securities exclude £4 million (2023: £40 million) of investment securities held at amortised cost.
The Group’s Level 1 portfolio comprises government and other highly rated securities for which traded prices are readily available. Asset valuations for Level 2 investment securities are
sourced from consensus pricing or other observable market prices. None of the Level 2 investment securities are valued using models. Level 2 derivative assets and liabilities are valued
using observable market data for all significant valuation inputs. More detail on the Level 3 portfolio is provided in note 22.
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21. Fair value hierarchy of financial assets and liabilities held at fair value (continued)
Transfers between fair value hierarchies
Instruments move between fair value hierarchies primarily due to increases or decreases in market activity or changes to the significance of unobservable inputs to valuation, and are
recognised at the date of the event or change in circumstances which caused the transfer. There were no transfers between the Level 1 and Level 2 portfolios during the current or prior
year.
22. Fair value of financial assets and liabilities held at fair value – Level 3 portfolio
The main constituents of the Level 3 portfolio are as follows:
Loans and advances to customers
Certain loans and advances to customers are classified as FVTPL. Level 3 assets in this category include a closed portfolio of residential mortgages.
Investment securities
The Level 3 items in this category primarily include investments made in Fintech companies, of which £57 million (2023: £44 million) are equity investments which have been designated
at FVOCI as the investments are being held for long term strategic purposes.
Derivative financial instruments (inflation swaps and swaptions)
Inflation swaps are used to hedge the Group’s investments in index-linked government debt. Adjustments to the inflation curve to reflect seasonality in inflation index publications are
required to determine a valuation; however, unlike most derivative valuation inputs, this market data is not available and therefore the input is internally derived rather than observable.
Where the impact of seasonality is significant to the valuation of the swaps, these are classified as Level 3 in the hierarchy.
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22. Fair value of financial assets and liabilities held at fair value – Level 3 portfolio (continued)
The tables below set out movements in the Level 3 portfolio, including transfers in and out of Level 3:
Notes:
i. Includes foreign exchange revaluation gains/(losses).
ii. The proportional impact of seasonality on the value of GBP-denominated inflation swaps reduced during the year ended 4 April 2023, resulting in these instruments no longer being categorised within
Level 3 of the fair value hierarchy.
Movements in Level 3 portfolio 2024 2023 Investment Derivative Derivative Loans and Investment Derivative Derivative Loans and securities financial financial advances to securities financial financial advances to assets liabilities customers assets liabilities customers £m £m £m £m £m £m £m £m At 5 April 54 157 (11) 100 63 260 (176) 116 Gains/(losses) recognised in the income statement, within: Net interest income - 97 2 4 - (113) (16) 4 Gains from derivatives and hedge accounting (note i) - 58 7 - - 509 75 - Other operating income (4) 24 - (2) (3) - (9) (11) Gains/(losses) recognised in other comprehensive income, within: Fair value through other comprehensive income reserve 5 - - - (3) - - - Additions 8 - - - 1 - - - Disposals - (24) - - (4) - 9 - Settlements/repayments - (117) (3) (60) - (16) 4 (9) Transfers out of Level 3 portfolio (note ii) - - - - - (483) 102 - At 4 April 63 195 (5) 42 54 157 (11) 100 Unrealised (losses)/gains recognised in the income statement attributable to assets and liabilities held at the end of the (4) 81 7 (2) (4) 212 7 (11) period
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22. Fair value of financial assets and liabilities held at fair value – Level 3 portfolio (continued)
Level 3 portfolio sensitivity analysis of valuations using unobservable inputs
The fair value of financial instruments is, in certain circumstances, measured using valuation techniques based on market prices that are not observable in an active market or significant
unobservable market inputs. Reasonable alternative assumptions can be applied for sensitivity analysis, taking account of the nature of valuation techniques used, as well as the
availability and reliability of observable proxy and historic data. The following table shows the sensitivity of the Level 3 fair values to reasonable alternative assumptions (as set out in the
table of significant unobservable inputs below) and the resultant impact of such changes in fair value on the income statement or members’ interests and equity.
Sensitivity of Level 3 fair values 2024 2023 Income statement Other comprehensive income Income statement Other comprehensive Fair value income Favourable Unfavourable Favourable Unfavourable Favourable Unfavourable Favourable Unfavourable Fair value changes changes changes changes changes changes changes changes £m £m £m £m £m £m £m £m £m £m Investment securities 63 2 (2) 14 (14) 54 4 (3) 12 (11) Net derivative financial instruments 190 29 (29) - - 146 32 (32) - - Loans and advances to customers 42 2 (2) - - 100 3 (2) - - Total 295 33 (33) 14 (14) 300 39 (37) 12 (11)
Alternative assumptions are considered for each product and varied according to the quality of the data and variability of the underlying market. The following table discloses the
significant unobservable inputs underlying the above alternative assumptions for assets and liabilities recognised at fair value and classified as Level 3, along with the range of values for
those significant unobservable inputs. Where sensitivities are described, the inverse relationship will also generally apply.
Significant unobservable inputs 2024 2023 Total Total Valuation Significant Range Units Total Total Valuation Significant Range Units assets liabilities technique unobservable (note i) assets liabilities technique unobservable (note i) inputs inputs £m £m £m £m Internal Various Internal Various Investment securities 63 - - - £ 54 - - - £ assessment (note ii) assessment (note ii) Derivative financial Discounted Discounted 195 (5) Seasonality 0.02 0.99 % 157 (11) Seasonality 0.02 0.82 % instruments cash flows cash flows Loans and advances to Discounted Discounted 42 - Discount rate 5.23 7.23 % 100 - Discount rate 3.31 9.75 % customers cash flows cash flows
Notes:
i. The range represents the values of the highest and lowest levels used in the calculation of favourable and unfavourable changes as presented in the table of sensitivities above.
ii. Given the wide range of investments and variety of inputs to modelled values, which may include inputs such as observed market prices, discount rates or probability weightings of expected outcomes, the
Group does not disclose ranges as they are not meaningful without reference to individual underlying investments, which would be impracticable. Some of the significant unobservable inputs used in the
fair value measurement of investment securities may be interdependent.
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22. Fair value of financial assets and liabilities held at fair value – Level 3 portfolio (continued)
Discount rate
The discount rate is used to determine the present value of future cash flows. The level of the discount rate takes into account the time value of money, but also the risk associated with
the investment at the time the investment was made. Typically, the greater the risk, the higher the discount rate. A higher discount rate leads to a lower valuation and vice versa.
Seasonality
An inflation swap curve is built using inflation swap quotes to project future levels of the inflation indices in each of the markets in which the Group is active. These curves are used to
calculate future cash flows. While inflation swap instruments give a good indication of annual growth in inflation, monthly index fixings throughout the year tend to behave differently and
so the inflation swap curve is adjusted for this seasonality accordingly. The higher the seasonality, the greater the adjustment to the inflation swap curve.
23. Fair value of financial assets and liabilities measured at amortised cost
The following table summarises the carrying value and fair value of financial assets and liabilities measured at amortised cost on the Group’s balance sheet:
Fair value of financial assets and liabilities (note i) 2024 2023 Carrying Fair values based on Total fair Carrying Fair values based on Total fair value Level 1 Level 2 Level 3 value value Level 1 Level 2 Level 3 value £m £m £m £m £m £m £m £m £m £m Financial assets Loans and advances to banks and similar 2,478 - 2,478 - 2,478 2,860 - 2,860 - 2,860 institutions Investment securities 4 - 4 - 4 40 - 40 - 40 Loans and advances to customers: Residential mortgages 204,106 - - 198,123 198,123 201,335 - - 192,504 192,504 Consumer banking 3,827 - - 3,737 3,737 3,939 - - 3,821 3,821 Commercial lending 5,465 - - 4,981 4,981 5,408 - - 4,863 4,863 Total 215,880 - 2,482 206,841 209,323 213,582 - 2,900 201,188 204,088 Financial liabilities Shares 193,366 - 193,333 - 193,333 187,143 - 186,917 - 186,917 Deposits from banks and similar institutions 16,388 - 16,388 - 16,388 25,056 - 25,056 - 25,056 Other deposits 4,530 - 4,516 15 4,531 5,191 - 5,176 14 5,190 Debt securities in issue 29,599 12,889 17,048 - 29,937 27,626 11,491 16,374 - 27,865 Subordinated liabilities 7,225 - 7,365 - 7,365 6,755 - 6,731 - 6,731 Subscribed capital 173 - 173 - 173 173 - 171 - 171 Total 251,281 12,889 238,823 15 251,727 251,944 11,491 240,425 14 251,930
Note:
i. The table above excludes cash and other financial assets and liabilities such as accruals, trade receivables, trade payables and settlement balances which are short-term in nature and for which fair value
approximates carrying value.
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23. Fair value of financial assets and liabilities measured at amortised cost (continued)
The fair values of loans and advances to customers are further analysed, between those credit impaired and those non-credit impaired, as follows:
Fair value of loans and advances to customers 2024 2023 Non-credit impaired Credit impaired Total Non-credit impaired Credit impaired Total (stages 1 and 2) (stage 3 and POCI) (stages 1 and 2) (stage 3 and POCI) (note i) (note i) Carrying Fair Carrying Fair Carrying Fair Carrying Fair Carrying Fair Carrying Fair value value value value value value value value value value value value £m £m £m £m £m £m £m £m £m £m £m £m Residential mortgages 202,862 196,916 1,244 1,207 204,106 198,123 200,212 191,430 1,123 1,074 201,335 192,504 Consumer banking 3,797 3,707 30 30 3,827 3,737 3,892 3,774 47 47 3,939 3,821 Commercial lending 5,419 4,936 46 45 5,465 4,981 5,381 4,836 27 27 5,408 4,863 Total 212,078 205,559 1,320 1,282 213,398 206,841 209,485 200,040 1,197 1,148 210,682 201,188
Note:
i. POCI loans are those which were credit impaired when purchased or originated.
Loans and advances to banks and similar institutions
The fair value of loans and advances to banks and similar institutions is estimated by discounting expected cash flows at a market discount rate.
Investment securities
The fair value of investment securities is sourced from consensus pricing or other observable market prices.
Loans and advances to customers
The fair value of loans and advances to customers is estimated by discounting expected cash flows at rates that reflect current rates for similar lending. Consistent modelling techniques
are used across the different loan books. The estimates take into account expected future cash flows and future lifetime expected losses, based on historic trends and discount rates
appropriate to the loans, to reflect a hypothetical exit price value on an asset by asset basis. Variable rate loans are modelled on estimated future cash flows, discounted at current market
interest rates. Variable rate retail mortgages are discounted at the currently available market standard variable interest rate (SVR) which, for example, in the case of the Group’s
residential base mortgage rate (BMR) mortgage book, generates a fair value lower than the amortised cost value as those mortgages are priced below the SVR.
For fixed rate loans, discount rates have been based on the expected funding and capital cost applicable to the book. When calculating fair values on fixed rate loans, no
adjustment has
been made to reflect interest rate risk management through internal natural hedges or external hedging via derivatives.
Shares, deposits and amounts due to customers
The estimated fair value of shares, deposits and amounts due to customers with no stated maturity, including non-interest-bearing deposits, is the amount repayable on demand. For
items without quoted market prices the fair value represents the discounted amount of estimated future cash flows based on expectations of future interest rates, customer withdrawals
and interest capitalisation. For variable interest rate items, estimated future cash flows are discounted using current market interest rates for new debt with similar remaining maturity.
For fixed rate items, the estimated future cash flows are discounted based on market offer rates currently available for equivalent deposits.
Debt securities in issue
The estimated fair values of longer dated liabilities are calculated based on quoted market prices where available or using similar instruments as a proxy for those liabilities that are not of
sufficient size or liquidity to have an active market quote. For those notes for which quoted market prices are not available, a discounted cash flow model is used based on a current yield
curve appropriate for the remaining term to maturity.
Subordinated liabilities and subscribed capital
The fair value of subordinated liabilities and subscribed capital is determined by reference to quoted market prices of similar instruments.
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24. Offsetting financial assets and financial liabilities
The Group has financial assets and liabilities for which there is a legally enforceable right to set off the recognised amounts, and there is an intention to settle on a net basis or realise the
asset and liability simultaneously. In accordance with IAS 32 ‘Financial Instruments: Presentation,’ where the right to set off is not unconditional in all circumstances this does not result in
an offset of balance sheet assets and liabilities.
The following table shows:
•
Amounts which have been offset, where there is an enforceable master netting arrangement or similar agreement in place, an unconditional right to offset exists and there is an
intention to settle net (‘amounts offset’); and
• Amounts which have not been offset, where there is an enforceable master netting arrangement or similar agreement in place, but the offset criteria are otherwise not satisfied
(‘master netting arrangements’) and/or where financial collateral has been paid or received (‘financial collateral’).
Offsetting financial assets and financial liabilities 2024 2023 Gross Amounts Net amounts Master Financial Net Gross Amounts Net Master Financial Net amounts offset reported on netting collateral amounts amounts offset amounts netting collateral amounts recognised (note i) the balance arrangements (note ii) recognised (note i) reported on arrangements (note ii) sheet the balance sheet £m £m £m £m £m £m £m £m £m £m £m £m Financial assets Derivative financial assets 17,580 (11,290) 6,290 (1,265) (5,009) 16 19,978 (13,055) 6,923 (1,286) (5,634) 3 Reverse repurchase 628 (617) 11 - (11) - 1,027 (1,027) - - - - agreements Total financial assets 18,208 (11,907) 6,301 (1,265) (5,020) 16 21,005 (14,082) 6,923 (1,286) (5,634) 3 Financial liabilities Derivative financial liabilities 12,326 (10,875) 1,451 (1,265) (38) 148 13,442 (11,918) 1,524 (1,286) (63) 175 Repurchase agreements 2,560 (617) 1,943 - (1,942) 1 3,102 (1,027) 2,075 - (2,074) 1 Total financial liabilities 14,886 (11,492) 3,394 (1,265) (1,980) 149 16,544 (12,945) 3,599 (1,286) (2,137) 176
Notes:
i. Amounts offset for derivative financial assets of £11,290 million (2023: £13,055 million) include cash collateral netted of £1,055 million (2023: £1,753 million). Amounts offset for derivative financial liabilities
of £10,875 million (2023: £11,918 million) include cash collateral netted of £640 million (2023: £616 million).
ii. The balances presented for financial collateral on repurchase agreements and reverse repurchase agreements are less than the financial collateral balances reported in note 13, as the amounts disclosed
above are limited to the net amounts reported on the balance sheet after amounts offset as shown in the table.
Master netting arrangements consist of agreements such as an International Swaps and Derivatives Association (ISDA) Master Agreement, global master repurchase agreements and
global master securities lending agreements, whereby outstanding transactions with the same counterparty can be offset and settled net, either unconditionally or following a default or
other predetermined event.
Financial collateral on derivative financial instruments consists of cash paid or received, typically daily or weekly, to mitigate the credit risk on the fair value of derivative contracts.
Financial collateral on repurchase agreements typically comprises highly liquid securities which are legally transferred and can be liquidated in the event of counterparty default.
The net amounts after offsetting presented above show the exposure to counterparty credit risk for derivative contracts after netting benefits and collateral, and are not intended to
represent the Group’s actual exposure to credit risk. This is due to a variety of credit mitigation strategies which are employed in addition to netting and collateral arrangements.
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25. Intangible assets
Group 2024 Computer software Total computer Goodwill Total Externally acquired Internally developed software £m £m £m £m £m Cost At 5 April 2023 356 2,426 2,782 12 2,794 Additions 15 281 296 - 296 Disposals (29) (115) (144) - (144) At 4 April 2024 342 2,592 2,934 12 2,946 Accumulated amortisation and impairment At 5 April 2023 278 1,654 1,932 - 1,932 Amortisation charge 38 263 301 - 301 Impairment in the year 3 6 9 - 9 Disposals (29) (115) (144) - (144) At 4 April 2024 290 1,808 2,098 - 2,098 Net book value At 4 April 2024 52 784 836 12 848 Group 2023 Computer software Total computer Goodwill Total Externally acquired Internally developed software £m £m £m £m £m Cost At 5 April 2022 369 2,311 2,680 12 2,692 Additions 18 267 285 - 285 Disposals (31) (152) (183) - (183) At 4 April 2023 356 2,426 2,782 12 2,794 Accumulated amortisation and impairment At 5 April 2022 265 1,514 1,779 - 1,779 Amortisation charge 44 264 308 - 308 Impairment in the year - 28 28 - 28 Disposals (31) (152) (183) - (183) At 4 April 2023 278 1,654 1,932 - 1,932 Net book value At 4 April 2023 78 772 850 12 862
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25. Intangible assets (continued)
Computer software capitalised during the year primarily relates to the Group’s investment in digital services, data capabilities and modernisation of the Group’s technology estate. The
total cost at 4 April 2024 includes £80 million (2023: £185 million) of assets in the course of construction which, to the extent that they are not yet ready for use by the business, have no
amortisation charged against them. For all other computer software capitalised the estimated useful life of individual assets is predominantly five years.
An impairment loss of £9 million (2023: loss of £28 million) was recognised in the year, primarily as a result of software becoming obsolete earlier than envisaged due to ongoing
investment to ensure the Group's technology estate is fit for the future.
The Society’s intangible assets are as shown above for the Group, except that they exclude £12 million (2023: £12 million) of goodwill relating to the acquisition of The Mortgage Works
(UK) plc which is only recognised at Group level. Capital expenditure contracted for but not accrued at 4 April 2024 was £17 million (2023: £10 million).
26. Property, plant and equipment
Group 2024 Branches and non-Specialised Investment Plant and Equipment, Right-of-use Total specialised administration properties machinery fixtures, fittings branches and non-buildings buildings and vehicles specialised buildings £m £m £m £m £m £m £m Cost or valuation At 5 April 2023 142 166 2 326 891 288 1,815 Additions - - - 9 77 10 96 Revaluation (2) - - - - - (2) Disposals (3) - - (1) (125) (43) (172) At 4 April 2024 137 166 2 334 843 255 1,737 Accumulated depreciation and impairment At 5 April 2023 - 89 - 267 580 135 1,071 Depreciation charge - 3 - 18 106 23 150 Impairment charge/(reversal) - - - - 4 (3) 1 Disposals - - - (1) (124) (16) (141) At 4 April 2024 - 92 - 284 566 139 1,081 Net book value At 4 April 2024 137 74 2 50 277 116 656
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26. Property, plant and equipment (continued)
Group 2023 Branches and non-Specialised Investment Plant and machinery Equipment, fixtures, Right-of-use Total specialised administration properties fittings and vehicles branches and non-buildings buildings specialised buildings £m £m £m £m £m £m £m Cost or valuation At 5 April 2022 156 166 18 308 963 266 1,877 Additions - - - 19 43 11 73 Transfers (note i) - - (13) - - 13 - Revaluation 1 - (3) - - - (2) Disposals (15) - - (1) (115) (2) (133) At 4 April 2023 142 166 2 326 891 288 1,815 Accumulated depreciation and impairment At 5 April 2022 - 85 - 244 572 96 997 Depreciation charge - 3 - 20 110 25 158 Impairment charge - 1 - 4 9 15 29 Disposals - - - (1) (111) (1) (113) At 4 April 2023 - 89 - 267 580 135 1,071 Net book value At 4 April 2023 142 77 2 59 311 153 744
Note:
i. During 2023, there was a transfer of investment property to right-of-use branches and non-specialised administration buildings, following the decision to reoccupy the property.
Property, plant and equipment includes £8 million (2023: £14 million) of assets in the course of construction. Capital expenditure contracted for but not accrued at 4 April 2024 was
£10 million (2023: £4 million). As at 4 April 2024, branches and non-specialised buildings includes £3 million (2023: £3 million) of properties which are classified as held for sale.
Branches and non-specialised buildings are valued annually at the balance sheet date by independent surveyors. The current use of all branches and non-specialised buildings represents
the highest and best use, and there have been no changes to the valuation technique during the year.
IFRS 13 requires that all assets held at fair value are classified according to a hierarchy that reflects the significance of observable market inputs in calculating those fair values. Branches
and non-specialised buildings valuations are classified within Level 2 of the fair value hierarchy.
Branches and non-specialised buildings revalued annually would have a carrying value under the historic cost model of £55 million (2023: £58 million).
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27. Provisions for liabilities and charges
Group Customer Legal and Other Total redress regulatory provisions £m £m £m £m At 5 April 2023 40 1 41 82 Charge for the year 28 99 32 159 Release for the year - - (7) (7) Net income statement charge (note i) 28 99 25 152 Provisions utilised (44) (3) (38) (85) At 4 April 2024 24 97 28 149
Note:
i. The net income statement charges relating to customer redress and legal and regulatory provisions are included in provisions for liabilities and charges. The net income statement charge relating to other provisions is
included in administrative expenses.
The Society’s provisions for liabilities and charges are materially the same as shown above for the Group.
Customer redress
During the course of its business, the Group receives complaints from customers in relation to past sales or ongoing administration and is subject to enquiries from regulators or other
public bodies, including the Financial Ombudsman Service, on a range of customer-related matters. In addition, the Group may identify through its own investigations matters which
require customer redress.
Consideration of these matters may result in a provision, a contingent liability or both, depending upon relevant facts and circumstances. No provision is made where it is concluded that it
is not probable that a quantifiable payment will be made; this will include circumstances where the facts are unclear or further time is required to reasonably quantify the expected
payment.
At 4 April 2024, the Group holds provisions of £24 million (2023: £40 million) in respect of the potential costs of remediation and redress in relation to issues with historical quality
control procedures, past sales and administration of customer accounts, and other matters requiring customer redress.
Whilst there is uncertainty as to the timing of the utilisation of customer redress provisions, the Group expects the majority to have been utilised within the next year.
Legal and regulatory provisions
The Group is also subject to enquiries from, and discussions with, its regulators and other government bodies, including tax authorities, on a range of matters, and may be engaged in
legal proceedings in the course of its business.
Provisions of £99 million have been recognised for such matters during the year. The matter to which this provision relates is the subject of ongoing litigation commenced by the Group
against Allen & Overy and Bank of New York Mellon, and the Group expects to recover significant amounts from the defendants. No such amounts have been recognised as at the balance
sheet date on the basis that these are not yet considered to be virtually certain of receipt.
The Group does not disclose further information in the case of matters subject to active legal proceedings where such disclosure could be seriously prejudicial to the conduct of the
claims.
Whilst there is uncertainty as to the timing of the utilisation of provisions, the Group expects the majority to have been utilised within the next two years.
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27. Provisions for liabilities and charges (continued)
Other provisions
Other provisions include amounts for property-related provisions, severance costs and expected credit losses on irrevocable personal loan and mortgage lending commitments. A charge
of £25 million was recognised for these items in the year ended 4 April 2024.
Whilst there is uncertainty as to the timing of the utilisation of provisions, the Group expects the majority to have been utilised within the next two years.
28. Leasing
The Group leases various offices, branches and other premises under leasing arrangements. The following tables show the amounts recognised in the income statement and on the
balance sheet arising from these leases:
Leasing amounts recognised in the income statement Group and Society 2024 2023 Income statement classification £m £m Interest expense Interest expense and similar charges (3) (6) Depreciation and impairment of right-of-use assets Administrative expenses (20) (40) Lease expense in respect of short term and low value leases Administrative expenses (9) (9) Amounts receivable under leases where the Group is a lessor Other operating income 2 2 Leasing amounts recognised at the balance sheet date Group and Society 2024 2023 Balance sheet classification £m £m Right-of-use branches and non-specialised admin buildings Property, plant and equipment 116 153 Lease liabilities Other liabilities (172) (225)
Total leasing cash outflows in the year were £42 million (2023: £43 million). No lease commitments (2023: £nil) were entered into that had not yet commenced at the balance sheet date.
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28. Leasing (continued)
Future undiscounted minimum payments under lease liabilities were as follows:
Leasing commitments Group and Group and Society Society 2024 2023 £m £m Amounts falling due: Within one year 33 33 Between one and two years 31 31 Between two and three years 28 29 Between three and four years 26 27 Between four and five years 23 24 After five years 99 119 Total 240 263
At the balance sheet date £13 million (2023: £7 million) of future minimum lease payments were receivable under leases where the Group is a lessor, of which £3 million (2023: £2 million)
was receivable under non-cancellable subleases.
29. Contingent liabilities
During the ordinary course of business, the Group may be subject to complaints, disputes and threatened or actual legal proceedings brought by or on behalf of current or
former employees, customers, investors or other third parties. The Group may also be subject to legal and regulatory reviews, challenges, investigations and enforcement
actions which may result in, among other things, actions being taken by governmental, tax and regulatory authorities, increased costs being incurred in relation to remediation of
systems and controls, or fines. Any such material cases are periodically reassessed, with the assistance of external professional advisers where appropriate, to determine the
likelihood of incurring a liability and any ability to recover any losses in future periods.
In those instances where it is concluded that it is not yet probable that a quantifiable payment will be made, for example because the facts are unclear or further time is required
to fully assess the merits of the case or to reasonably quantify the expected payment, no provision is made.
Provision has also not been made for certain contingent liabilities
relating to existing provisions for legal matters disclosed in note 27, where the existence of a possible obligation will only be confirmed by the occurrence or non-occurrence of
certain future events which are outside of the control of the Group.
The Group does not disclose amounts in relation to contingent liabilities associated with such claims where the likelihood of any payment is remote or where, in the case of
matters subject to active legal proceedings, such disclosure could be seriously prejudicial to the conduct of the claims.
The FCA is undertaking an investigation of the Society’s compliance with UK money laundering regulations and the FCA’s rules and Principles for Businesses in an enquiry
focused on aspects of the Society’s anti-money laundering control framework. The Society is co-operating with the investigation, which remains ongoing. The Group has not
disclosed an estimate of any potential financial impact arising from this matter as it is not currently practicable to do so.
Apart from the matters disclosed, the Group does not expect the ultimate resolution of any current complaints, disputes, threatened or actual legal proceedings, regulatory or
other matters to have a material adverse impact on its financial position. However, in light of the uncertainties involved in such matters there can be no assurance that the
outcome of a particular matter or matters may not ultimately be material to the Group’s results.
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30. Retirement benefit obligations
The Group operates two defined contribution pension schemes in the UK – the Nationwide Group Personal Pension Plan (GPP) and the Nationwide Temporary Workers Pension Scheme.
New employees are automatically enrolled into one of these schemes. Outside of the UK, there is a defined contribution pension scheme for a small number of employees in the Isle of
Man.
The Group also has funding obligations to several defined benefit pension schemes, which are administered by boards of trustees. Pension trustees are required by law to act in the
interests of all relevant beneficiaries and are responsible for the investment policy of fund assets, as well as the day-to-day administration. The Group’s largest pension scheme is the
Nationwide Pension Fund (the Fund). This is a defined benefit pension scheme, with both final salary and career average revalued earnings (CARE) sections. The Fund was closed to new
entrants in 2007 and since that date employees have been able to join the GPP. The Fund was closed to future accrual on 31 March 2021.
In line with UK pensions legislation, a formal actuarial valuation (‘Triennial Valuation’) of the assets and liabilities of the Fund is carried out at least every three years by independent
actuaries. The main differences between the assumptions used for assessing defined benefit liabilities for purposes of the actuarial funding valuation and those used for accounting under
IAS 19 ‘Employee Benefits’ are that the financial and demographic assumptions used for the funding valuation are generally more prudent than those used for the IAS 19 valuation. As the
31 March 2022 Triennial Valuation indicated a funding surplus, a recovery plan requiring employer deficit contributions was not needed.
In November 2020, Nationwide and the Trustee of the Fund entered into an arrangement whereby Nationwide agreed to provide a contingent asset in the form of self-issued Silverstone
notes to provide additional security to the Fund. The Fund would have access to these notes in the case of certain events such as insolvency of Nationwide.
Further information on the Group’s obligations to defined benefit pension schemes is set out below.
Defined benefit pension schemes
Retirement benefit obligations on the balance sheet Group 2024 2023 £m £m Fair value of fund assets 4,679 5,281 Present value of funded obligations (4,069) (4,331) Present value of unfunded obligations (3) (4) Surplus at 4 April 607 946
Most members of the Fund can draw their pension when they reach the Fund’s retirement age of 65. The methodologies for calculating the level of pension benefits accrued before 1 April
2011 varied; however, most were based on 1/54th of final salary for each year of service. Pension benefits accrued after 1 April 2011 until 31 March 2021 were usually based on 1/60th of
average earnings, revalued to the age of retirement, for each year of service (also called CARE). From 1 April 2021, members moved from active to deferred status, with future indexation
of deferred pensions before retirement measured by reference to the Consumer Price Index (CPI). On the death of a Fund member, benefits may be payable in the form of a
spouse/dependant’s pension, lump sum (paid within five years of a Fund member beginning to take their pension), or refund of Fund member contributions.
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30. Retirement benefit obligations (continued)
Approximately 56% (2023: 57%) of the Fund’s pension obligations relate to deferred Fund members (current and former employees not yet drawing their pension) and 44% (2023: 43%)
to current pensioners and dependants. The weighted average duration of the Fund’s overall pension obligation is approximately 16 years (2023: 16 years), reflecting an average duration
of 19 years for deferred members and 11 years for current pensioners.
The Group’s retirement benefit obligations include a deficit of less than £1 million (2023: £1 million) recognised in a subsidiary company, Nationwide (Isle of Man) Limited. This obligation
relates to a defined benefit scheme providing benefits based on both final salary and CARE, which was closed to new entrants in 2009. The Group’s retirement benefit obligations also
include £3 million (2023: £4 million) in respect of unfunded legacy defined benefit arrangements.
The amounts recognised in the income statement are as follows:
Retirement benefit obligations recognised in the income statement Group 2024 2023 £m £m Defined contribution cost (164) (149) Defined benefit schemes - administrative expenses (4) (4) Included in employee costs (note 8) (168) (153) Interest on net defined benefit asset (note 3) 44 26 Total (124) (127)
Changes in the present value of the net defined benefit asset (including unfunded obligations) are as follows:
Movements in net defined benefit asset Group 2024 2023 £m £m At 5 April 946 1,008 Interest on net defined benefit asset 44 26 Return on assets less than discount rate (note i) (684) (2,144) Contributions by employer 1 1 Administrative expenses (4) (4) Actuarial gains on defined benefit obligations (note i) 304 2,059 At 4 April 607 946
Note:
i. The net impact before tax on the surplus of return on assets and actuarial gains is a decrease of £380 million (2023: £85 million) in other comprehensive income.
The £684 million (2023: £2,144 million) loss relating to the return on assets being less than the discount rate is driven by decreases in value of the Fund’s liability matching assets due to
increases in interest rates in the period.
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30. Retirement benefit obligations (continued)
As the Fund is closed to future accrual, there have been no current service costs, past service costs or employer contributions made in respect of future benefit accrual during the current
or prior year. Additionally, there have been no employer deficit contributions required into the Fund and there are no such contributions scheduled in the year ending 4 April 2025 or
future years under the current Schedule of Contributions. Employer deficit contributions of £1 million (2023: £1 million) were made in respect of the Group’s defined benefit scheme in its
Nationwide (Isle of Man) Limited subsidiary.
The £304 million (2023: £2,059 million) actuarial gain on defined benefit obligations is due to:
• A £215 million (2023: £2,175 million) gain from changes in financial assumptions, driven by a 0.30% increase in the discount rate (which decreases the value of liabilities), in addition to
a 0.05% decrease in assumed Retail Price Index (RPI) inflation (which also decreases the value of the liabilities).
• A £75 million (2023: £22 million) gain arising from the impacts of updates to demographic assumptions and applying the latest industry views for future longevity improvements.
• An experience gain of £14 million (2023: £138 million loss) primarily reflecting the difference between estimates of long-term inflation compared to actual inflation.
Changes in the present value of defined benefit obligations (including unfunded obligations) are as follows:
Movements in defined benefit obligations Group 2024 2023 £m £m At 5 April (4,335) (6,403) Interest expense on retirement obligation (198) (161) Experience gain/(loss) on plan assumptions 14 (138) Changes in demographic assumptions 75 22 Changes in financial assumptions 215 2,175 Benefits paid 157 170 At 4 April (4,072) (4,335)
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30. Retirement benefit obligations (continued)
Changes in the fair value of plan assets for the pension schemes are as follows:
Movements in plan assets Group 2024 2023 £m £m At 5 April 5,281 7,411 Interest income on assets 242 187 Return on assets less than discount rate (684) (2,144) Administrative expenses (4) (4) Contributions by employer 1 1 Benefits paid (157) (170) At 4 April 4,679 5,281
The major categories of assets held for the pension schemes, stated at fair value, are as follows:
Categories of plan assets Group 2024 2023 £m £m Listed equities (quoted) 12 17 Government bonds (quoted) 3,298 3,413 Corporate bonds and other credit investments (quoted) 7 94 Infrastructure (unquoted) 258 222 Property (unquoted) 573 712 Private equity investments (unquoted) 818 775 Private debt investments (unquoted) 637 603 Cash and derivatives 84 87 Liability relating to repurchase agreement (1,150) (786) Insurance policies 107 113 Other assets and liabilities 35 31 Total 4,679 5,281
The defined benefit pension schemes do not invest in the Group’s own financial instruments or property. Certain investments in private equity, private debt, infrastructure and property
are not quoted in active markets or valued based on observable inputs. Valuations for these assets are based on the most recent valuation provided by the asset manager and adjusted for
any cash movements to the balance sheet date.
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30. Retirement benefit obligations (continued)
The Fund’s liabilities are well hedged by matching assets, primarily government bonds and corporate bonds. In addition, the Fund invests in alternative matching assets such as property
ground rents and property leases (included in property above) that are expected to generate inflation-linked income over the long term. In November 2023, the Government issued a
consultation on potential options for how it could intervene to cap ground rents, as part of its wider leasehold reforms. Developments on this will continue to be monitored to determine the
potential impact on the £67 million of freehold properties held as part of the Fund’s assets.
The Fund also holds return-seeking assets which are expected to generate a return over and above the Fund’s liabilities in the long term but may create risk and volatility in the short to
medium term.
During the year the Trustee has continued to manage interest rate and inflation risk in the Fund through the use of certain investments and derivative instruments to reduce volatility
from changes to long-term interest rates and inflation expectations. The Fund’s investments also continue to be supported by the utilisation of repurchase agreements (loans
collateralised against the Fund’s government bonds), which at 4 April 2024 amounted to £1,150 million (2023: £786 million). In January 2022 the Trustee completed a pensioner buy-in for
the smaller Cheshire & Derbyshire section of the Fund, removing the investment and longevity risk to the Fund in relation to members in this section. At 4 April 2024, the value of the
insurance asset for the Cheshire & Derbyshire section buy-in was £107 million (2023: £113 million).
In May 2023, the Fund entered into a longevity swap transaction to manage the scheme’s longevity risk in relation to £1.7 billion of pension liabilities, covering approximately 7,000
pensioners. This transaction will provide income to the Fund in the event that pensions are paid out for longer than expected, mitigating the financial impact and reducing the scheme’s
longevity risk exposure by approximately one third. The swap is included in the Fund’s assets at a fair value of £nil at 4 April 2024, with future changes to its fair value expected to broadly
offset changes in the scheme’s liabilities relating to updates to life expectancy for those pensioners covered.
The Fund’s investments are monitored by both the Trustee and the Society to ensure they remain appropriate given the Fund’s long-term objectives.
The principal actuarial assumptions used are as follows:
Financial assumptions 2024 2023 % % Discount rate 4.95 4.65 Future pension increases (maximum 5%) 3.00 3.05 Retail Price Index (RPI) inflation 3.10 3.15 Consumer price index (CPI) inflation 2.50 2.50 Life expectancy assumptions 2024 2023 years years Age 60 at 4 April 2024: Males 27.0 27.1 Females 28.5 28.7 Age 60 at 4 April 2044: Males 28.0 28.1 Females 29.8 30.0
The assumptions for mortality rates are based on standard mortality tables which allow for future improvements in life expectancy and are adjusted to represent the Fund’s membership.
The assumptions made are illustrated in the table above, showing how long the Group would expect the average Fund member to live for after the age of 60, based on reaching that age
at 4 April 2024 or in 20 years’ time at 4 April 2044.
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30. Retirement benefit obligations (continued)
Critical accounting estimates and judgements
The key assumptions used to calculate the defined benefit obligation which represent significant sources of estimation uncertainty are the discount rate, inflation assumptions and
mortality assumptions. If different assumptions were used, this could have a material effect on the reported surplus. The sensitivity of the results to these assumptions is shown below:
Change in key assumptions at 4 April 2024 Increase in defined benefit obligation £m 1.0% decrease in discount rate 687 0.1% increase in inflation assumption 33 1 year increase in life expectancy at age 60 in respect of all members 89
The above sensitivities apply to individual assumptions in isolation. In practice, changes to individual assumptions in isolation are unlikely to occur, and changes in some of the
assumptions may be correlated. The inflation assumption sensitivity includes the impact on the rate of increases to pensions, both before and after retirement.
31. Core capital deferred shares
Group and Society Number of CCDS Share Treasury Total shares premium share reserve £m £m £m £m At 4 April 2023 (note i) 9,779,892 11 1,323 (101) 1,233 CCDS repurchased and retained (657,547) - - (76) (76) At 4 April 2024 (note i) 9,122,345 11 1,323 (177) 1,157
Note:
i. The total number of shares outstanding at 4 April 2024 is 10,555,500 (2023: 10,555,500) which includes 1,433,155 (2023: 775,608) shares repurchased and retained by the Society.
Core capital deferred shares (CCDS) are a form of Common Equity Tier 1 (CET1) capital which has been developed to enable the Group to raise capital from the capital markets. CCDS are
perpetual instruments. They rank equally to each other and are junior to claims against the Society of all depositors, creditors and investing members. Each holder of CCDS has one vote,
regardless of the number of CCDS held.
In the event of a winding up or dissolution of the Society and if a surplus was available, the amount that the investor would receive for each CCDS held is limited to the average principal
amount in issue, which is currently £126.39 per share.
In the financial year ended 4 April 2024, the Society repurchased 657,547 (6.2% of the issued shares) of £1 CCDS at £114.42 per share. The repurchased CCDS were not cancelled, instead
being retained by the Society. The gross cost of the repurchase of £76 million has been presented within the treasury share reserve in the table above.
There is a cap on the distributions that can be paid to holders of CCDS in any financial year. The cap is currently set at £20.34 per share and is adjusted annually in line with CPI. A final
distribution of £50 million (£5.125 per share) for the financial year ended 4 April 2023 was paid on 20 June 2023 and an interim distribution of £47 million (£5.125 per share) in respect of
the period to 30 September 2023 was paid on 20 December 2023. These distributions have been recognised in the statement of movements in members’ interests and equity.
Since the balance sheet date, the directors have declared a distribution of £5.125 per share in respect of the period to 4 April 2024, amounting in aggregate to £47 million. This has not
been reflected in these financial statements as it will be recognised in the year ending 4 April 2025, by reference to the date at which it was declared.
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(continued)
32. Other equity instruments
Group and Society 2024 2023 Issuance date Next reset date Reset rate £m £m 5.875% Additional Tier 1 17 September 2019 20 June 2025 Benchmark gilts + 5.39% 600 600 5.75% Additional Tier 1 10 June 2020 20 December 2027 Benchmark gilts + 5.625% 750 750 1,350 1,350 Issuance costs (14) (14) Total 1,336 1,336
Other equity instruments are Additional Tier 1 (AT1) capital instruments. The AT1 instruments rank equally to each other and are junior to claims against the Society of all depositors,
creditors and investing members, other than the holders of CCDS.
The AT1 instruments pay a fully discretionary, non-cumulative fixed rate of interest. Coupons are paid semi-annually in June and December. AT1 instruments have no maturity date but are
repayable at the option of the Society from the first reset date, and on every fifth reset date anniversary thereafter. If they are not repaid the interest rate resets at the rates shown in the
table above.
If the fully loaded CET1 ratio for the Society, on either a consolidated or unconsolidated basis, falls below 7% the AT1 instruments convert to CCDS instruments at the rate of one CCDS
share for every £100 of AT1 holding.
Interest payments totalling £78 million were made in the year ended 4 April 2024 (2023: £78 million), representing the maximum non-cumulative fixed coupon amounts. These payments
have been recognised in the statement of movements in member’s interest and equity. A coupon payment of £39 million is expected to be paid on 20 June 2024 and will be recognised in
the statement of movements in members’ interests and equity in the year ending 4 April 2025.
33. Investments in Group undertakings
Society investments in Group undertakings 2024 2023 Shares Loans Total Shares Loans Total £m £m £m £m £m £m At 5 April 366 40,690 41,056 371 39,955 40,326 Additions 15 1 16 1 783 784 Impairment (charge)/release (5) 3 (2) (6) (7) (13) Disposals, redemptions and repayments - (847) (847) - (41) (41) At 4 April 376 39,847 40,223 366 40,690 41,056
The Society received no dividends from Group undertakings during the year ended 4 April 2024 (2023: £652 million).
Impairments for the year ended 4 April 2024 of £2 million (2023: £13 million) relating to the Society’s investments in loans and equity of subsidiaries have been recognised within other
operating income, reflecting a reduction in the expected recoverable amount of these assets.
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Subsidiary name Notes Subsidiary name Notes Regulated subsidiaries Dormant subsidiaries Derbyshire Home Loans Limited i Confederation Mortgage Services Limited E-Mex Home Funding Limited i Exeter Trust Limited The Mortgage Works (UK) plc i FN1 UCB Home Loans Corporation Limited i Jubilee Mortgages Limited iii Monument (Sutton) Limited iv Other subsidiaries Nationwide Home Loans Limited Dunfermline BS Nominees Limited ii NI1 Limited (formerly Nationwide International Limited) Home Propositions Limited ii NLF1 Limited Nationwide (Isle of Man) Limited NOK1 Limited Nationwide Housing Trust Limited ii Nationwide Trust Limited Nationwide Syndications Limited ii NBS CoSec Limited NBS Ventures Limited ii The Derbyshire (Premises) Limited NBS Ventures Management Limited ii Piper Javelin No 1 Limited Piper Javelin Holding Company Limited ii
Annual Report and Accounts 2024 Strategic report Governance Risk report Financial statements Other information
Notes to the financial statements (continued)
33. Investments in Group undertakings
(continued)
Subsidiary undertakings
The interests of the Society in its subsidiary undertakings as at 4 April 2024 are set out below:
Notes:
i. Audited accounts are prepared for regulated entities.
ii. For these companies, the Group has adopted the audit exemption for the year ended 4 April 2024 under Section 479A of the Companies Act 2006. The Society guarantees all outstanding liabilities of the
exempted subsidiary undertakings.
iii. Company dissolved 9 April 2024.
iv. Company dissolved 16 April 2024.
The Society directly or indirectly holds 100% of the ordinary share capital for each subsidiary undertaking. All of the subsidiary undertakings are limited liability companies, with the
exception of FN1 which is an unlimited company.
The registered office for all subsidiary undertakings, other than those listed in the table below, is Nationwide House, Pipers Way, Swindon, SN38 1NW.
Subsidiary name Registered office Dunfermline BS Nominees Limited Caledonia House, Carnegie Avenue, Dunfermline, KY11 8PJ Nationwide (Isle of Man) Limited Atlantic House, Circular Road, Douglas, Isle of Man, IM1 1AG
There are no significant restrictions on any of the Society’s subsidiaries in paying dividends or repaying loans, subject to their financial and operating performance and availability of
distributable reserves.
The Group has no material shares in associates. The Group’s interests in equity shares are included in investment securities as set out in note 13.
Subsidiaries by virtue of control
Details of consolidated and unconsolidated structured entities are set out in note 34.
309
Notes to the financial statements (continued)
Annual Report and Accounts 2024
Notes to the financial statements
(continued)
34. Structured entities
A structured entity is an entity in which voting or similar rights are not the dominant factor in deciding control. Structured entities are consolidated when the substance of the
relationship indicates control. The Group considers factors such as the purpose and design of the entity, the nature of its relationship with the entity, the size of its holding and its
exposure to variability of returns.
Consolidated structured entities
The following structured entities are consolidated in the Group’s results:
Structured entity name Nature of business Registered office Nationwide Covered Bonds LLP Mortgage acquisition and guarantor of covered bonds Nationwide House, Pipers Way, Swindon, SN38 1NW Silverstone Master Issuer plc Funding vehicle Wilmington Trust SP Services (London) Limited, Third Silverstone Funding (No.1) Limited Funding vehicle Floor, 1 King’s Arms Yard, London, EC2R 7AF
Further details on the activities of the above structured entities are included in note 14.
Unconsolidated structured entities
The Group has interests in structured entities which it does not sponsor or control. These largely consist of holdings of mortgage-backed securities and covered bonds issued by entities
that are sponsored by other unrelated financial institutions. The entities are financed primarily by investments from investors, such as the purchase of issued notes.
The Group’s direct interests in unconsolidated structured entities comprise primarily investments in asset backed securities which are reported within investment securities on the
balance sheet. The total carrying value of these interests at 4 April 2024 is £4,296 million (2023: £4,590 million). Further details on the credit risk that the Group is exposed to in respect
of these assets can be found in the Credit risk - Treasury assets section of the Risk report.
Management has concluded that the Group has no control or significant influence over these entities and that the carrying value of the interests held in these entities represents the
maximum exposure to loss. During the year the Group has not provided any non-contractual financial or other support to these entities and has no current intention of providing any such
support.
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Notes to the financial statements (continued)
Annual Report and Accounts 2024
Notes to the financial statements
(continued)
35. Related party transactions
Subsidiary, parent and ultimate controlling party
The Group is controlled by Nationwide Building Society, the ultimate parent, which is registered in England and Wales. Details of subsidiary undertakings are shown in note 33.
Key management personnel compensation
Members of the Executive Committee (including executive directors), together with the non-executive directors of the Society, are considered to be the key management personnel as
defined by IAS 24 ‘Related Party Disclosures’. Total compensation for key management personnel for the year was as follows:
Key management personnel compensation 2024 2023 £’000 £’000 Short term employee benefits 10,158 8,885 Other long-term benefits 2,079 2,028 Contractual/other settlements - 399 Share based payments 1,872 971 Total 14,109 12,283
Other long-term benefits include amounts relating to long-term bonus schemes, some of which will be paid in future periods. Further information on these can be found in note 8. Share-
based payments include amounts that are dependent on the performance of CCDS. Contractual/other settlements include compensation for loss of office.
Further information is included in the Report of the directors on remuneration.
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Notes to the financial statements (continued)
Annual Report and Accounts 2024
Notes to the financial statements
(continued)
35. Related party transactions (continued)
Transactions with related parties
A number of transactions are entered into with related parties in the normal course of business. These include loans, deposits and the payment and recharge of administrative expenses.
The outstanding balances for these related party transactions at the year end, and the associated income and expenses for the year, are as follows:
Transactions with related parties Society subsidiaries Key management personnel 2024 2023 2024 2023 £m £m £m £m Loans payable to the Society Loans outstanding at 5 April 40,690 39,955 1.8 2.3 Loans issued during the year 1 783 0.3 0.9 Impairment release/(charge) during the year 3 (7) - - Loan repayments during the year (847) (41) (0.4) (1.4) Loans outstanding at 4 April 39,847 40,690 1.7 1.8 Deposits payable by the Society Deposits outstanding at 5 April 425 593 1.7 1.7 Deposits placed during the year 2 - 14.5 8.2 Deposit repayments during the year (205) (168) (12.6) (8.2) Deposits outstanding at 4 April 222 425 3.6 1.7 Net interest income Interest receivable 1,000 768 - - Interest expense 112 81 - - Other income and expenses Dividends paid to the Society - 652 - - Fees and expenses paid to the Society 75 88 - - Other balance sheet items Accrued income and prepaid expenses due to the Society 171 335 - - Other liabilities payable by the Society 1,838 2,158 - - Right-of-use asset leased from subsidiary - 1 - - Liability for right-of-use asset leased from subsidiary - 1 - -
In addition, the Society enters into derivative financial instruments with the consolidated structured entities used in its asset backed funding programmes, which are described in note 14.
As at 4 April 2024, the Society held intercompany derivative assets of £615 million and intercompany derivative liabilities of £313 million (2023: £647 million and £337 million,
respectively) in respect of these instruments.
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Notes to the financial statements (continued)
Annual Report and Accounts 2024
Notes to the financial statements
(continued)
35. Related party transactions (continued)
Transactions with key management personnel
Transactions with key management personnel are on the same terms and conditions applicable to other employees within the Group.
A register is maintained by the Society containing details of loans, transactions and arrangements made between the Society or its subsidiary undertakings and directors of the Society or
persons connected with directors of the Society. The register will be available for inspection by members at the Annual General Meeting on 17 July 2024 and during normal office hours at
the Society’s principal office (Nationwide House, Pipers Way, Swindon, SN38 1NW) during the period of 15 days prior to the meeting.
Transactions with Group companies
Transactions with Group companies arise in the normal course of business. Interest on outstanding loans and deposits accrues at a transfer pricing rate agreed between the Society and
its subsidiary undertakings. The Society does not charge the net defined benefit cost to the subsidiary undertakings that participate in the Nationwide Pension Fund.
36. Notes to the cash flow statements
Non-cash items included in profit before tax Group Society 2024 2023 2024 2023 £m £m £m £m Net increase/(decrease) in impairment provisions 16 19 (18) (63) Net increase/(decrease) in provisions for liabilities and charges 67 (71) 63 (71) Amortisation and (gains)/losses on investment securities 110 77 110 78 Write down of inventory 6 5 - - Depreciation, amortisation and impairment 461 523 461 522 Impairment of investment in Group undertakings - - 2 13 Profit on sale of property, plant and equipment (4) (2) (4) (2) Loss on the revaluation of property, plant and equipment 2 5 2 5 Gain on disposal of investment advice business (42) - (42) - Net credit in respect of retirement benefit obligations (40) (22) (40) (22) Interest on subordinated liabilities 495 294 495 294 Interest on subscribed capital 11 7 11 7 (Gains)/losses from derivatives and hedge accounting (117) 4 (133) 12 Total 965 839 907 773
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Strategic report Risk report Financial statementsGovernance Other informationAnnual Report and Accounts 2024
Notes to the financial statements (continued)
Annual Report and Accounts 2024
Notes to the financial statements
(continued)
36. Notes to the cash flow statements (continued)
Changes in operating assets and liabilities Group Society 2024 2023 2024 2023 £m £m £m £m Loans and advances to banks and similar institutions 731 (99) 731 (99) Net derivative financial instruments (1,510) 1,014 (1,757) 1,509 Loans and advances to customers (2,754) (2,854) (3,362) (2,410) Other operating assets (38) (107) 1,206 (1,399) Shares 6,223 9,176 6,223 9,176 Deposits from banks and similar institutions, customers and others (9,160) (11,982) (9,531) (12,044) Debt securities in issue 2,136 1,804 2,685 2,231 Contributions to defined benefit pension scheme (1) (1) - - Other operating liabilities 117 84 (206) (236) Total (4,256) (2,965) (4,011) (3,272) Cash and cash equivalents Cash 23,817 25,635 23,817 25,635 Loans and advances to banks and similar institutions repayable in 3 months or 674 320 664 314 less Total 24,491 25,955 24,481 25,949
The Group is required to maintain balances with the Bank of England and certain other central banks, which at 4 April 2024 amounted to £1,449 million (2023: £1,944 million). These
balances are included within loans and advances to banks and similar institutions on the balance sheet and are not included in the cash and cash equivalents in the cash flow statement as
they are not liquid in nature. The Group also excludes from cash and cash equivalents cash collateral and other deposit balances relating to derivative activities totalling £355 million
(2023: £595 million).
Movements in liabilities arising from financing activities are set out below:
The Society’s liabilities arising from financing activities are materially the same as shown for Group.
Derivative financial instruments used to hedge financing liabilities include interest rate and cross-currency swaps. Interest (paid)/received and proceeds on redemption of these hedging
instruments are included within financing cash flows and for the year ended 4 April 2024 amounted to £(228) million and £18 million (2023: £20 million and £138 million) respectively. Other
changes in the value of these derivatives in the year ended 4 April 2024 included decreases of £256 million (2023: increases of £152 million) due to foreign exchange, fair value and other
movements.
Movements in liabilities arising from financing activities 2024 2023 Subordinated Subscribed Lease Total Subordinated Subscribed Lease Total liabilities capital liabilities liabilities capital liabilities Group and Society £m £m £m £m £m £m £m £m At 5 April 6,755 173 225 7,153 8,250 187 243 8,680 Issuances/additions 1,385 - 11 1,396 646 - 11 657 Redemptions/repayments (789) - (68) (857) (2,335) - (34) (2,369) Foreign exchange (157) - - (157) 396 - - 396 Fair value and other movements 31 - 4 35 (202) (14) 5 (211) At 4 April 7,225 173 172 7,570 6,755 173 225 7,153
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Strategic report Risk report Financial statementsGovernance Other informationAnnual Report and Accounts 2024
Notes to the financial statements (continued)
Annual Report and Accounts 2024
Notes to the financial statements
(continued)
37. Capital management
The Group is subject to the regulatory capital requirements applied by its regulator, the Prudential Regulation Authority (PRA). Regulatory capital comprises the Group’s general reserve,
fair value through other comprehensive income reserve, revaluation reserve, core capital deferred shares, other equity instruments and subordinated debt, subject to various
adjustments and transitional arrangements required by the capital rules.
During the year the Group complied with the capital requirements applied by the PRA. Further unaudited details about the Group’s capital position can be found in the Capital risk section
of the Risk report.
38. Registered office
Nationwide is a building society, incorporated and domiciled in the United Kingdom. The address of its registered office is:
Nationwide Building Society
Nationwide House
Pipers Way
Swindon
United Kingdom
SN38 1NW
39. Events after the balance sheet date
On 21 March 2024, the Society announced a binding offer to acquire the outstanding shares of Virgin Money UK plc for £2.9 billion. On 22 May 2024, the offer was approved in a vote by
Virgin Money UK plc shareholders.
Completion of the acquisition is contingent upon a number of factors, including receipt of requisite regulatory approvals. As the acquisition has not yet completed, there is no impact to
the Group’s consolidated financial statements for the year ended 4 April 2024.
On 22 May 2024, the Board approved a Nationwide Fairer Share Payment to be made to certain eligible members in June 2024, amounting to approximately £385 million in total. This has
not been reflected in these financial statements as it will be recognised in the year ending 4 April 2025, by reference to the date at which it was announced.
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Strategic report Risk report Financial statementsGovernance Other informationAnnual Report and Accounts 2024
Other information
Annual business statement 317
1. Statutory percentages
2. Other percentages
3. Information relating to directors at 4 April 2024
Country-by-country report 320
Underlying profit 321
Forward-looking statements 321
Glossary 321
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Strategic report Risk report Other informationGovernance Financial statementsAnnual Report and Accounts 2024
Annual business statement
Annual Report and Accounts 2024
Other information
Annual business statement for the year ended 4 April 2024
1. Statutory percentages
Statutory percentages
2024
Statutory limit
%
%
Lending limit
8.61
25.00
Funding limit
22.57
50.00
The above percentages have been calculated in accordance with the provisions of the
Building Societies Act 1986 as amended by the Building Societies Act 1997 and the
Modification of the Lending Limit and Funding Limit Calculations Order 2004.
The lending limit measures the proportion of business assets not in the form of loans
fully secured on residential property and is calculated as (X-Y)/X where:
X = business assets, being the total assets of the Group plus impairment provisions on
loans and advances to customers, less liquid assets, property, plant and equipment,
intangible fixed assets and investment properties included in the Group balance
sheet.
Y = the principal of, and interest accrued on, loans owed to the Group which are fully
secured on residential property.
The funding limit measures the proportion of shares and borrowings not in the form of
shares held by individuals and is calculated as (X-Y)/X where:
X = shares and borrowings, being the aggregate of:
i) the principal value of, and interest accrued on, shares in the Society,
ii) the principal value of, and interest accrued on, sums deposited with the Society or
any subsidiary undertaking of the Society, and
iii) the principal value of, and interest accrued under, bills of exchange, instruments or
agreements creating or acknowledging indebtedness and accepted, made, issued
or entered into by the Society or any such undertaking, less any amounts qualifying
as own funds.
Y = the principal value of, and interest accrued on, shares in the Society held by
individuals otherwise than as bare trustees (or, in Scotland, simple trustees) for
bodies corporate or for persons who include bodies corporate.
The statutory limits are as laid down under Buildings Society Act 1986 as amended by
the Building Societies Act 1997 and ensure that the principal purpose of a building
society is that of making loans which are secured on residential property and are funded
substantially by its members.
2. Other percentages
Other percentages
2024
2023
%
%
As a percentage of shares and borrowings:
Gross capital
10.3
9.7
Free capital
10.0
9.4
Liquid assets
21.6
22.9
Profit for the financial year as a percentage of mean total assets
0.48
0.61
Management expenses as a percentage of mean total assets
0.89
0.85
The above percentages have been prepared from the Society’s consolidated financial
statements and in particular:
• ‘Shares and borrowings’ represent the total of shares, deposits from banks and
similar institutions, other deposits and debt securities in issue.
• ‘Gross capital’ represents the aggregate of general reserve, revaluation reserve, fair
value through other comprehensive income reserve, cash flow hedge reserve, other
hedging reserve, CCDS, Additional Tier 1 capital, subscribed capital and
subordinated liabilities.
• ‘Free capital’ represents the aggregate of gross capital and provisions for collective
impairment losses on loans and advances to customers less property, plant and
equipment and intangible assets.
• ‘Liquid assets’ represent the total of cash in hand and balances with the Bank of
England, loans and advances to credit institutions and investments in debt securities.
• ‘Mean total assets’ represent the amount produced by halving the aggregate of total
assets at the beginning and end of the financial year.
• ‘Management expenses’ represent administrative expenses including depreciation,
amortisation and impairment of property, plant and equipment and intangible assets.
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Annual business statement (continued)
Annual Report and Accounts 2024
Annual business statement (continued)
3. Information relating to directors at 4 April 2024
Name and date of birth Occupation Date of appointment Other directorships
K A H Parry OBE
29 January 1962
Society Chairman
Non-executive director
23 May 2016
Daily Mail and General Trust plc
K A H Parry Limited
Royal London Mutual Insurance Society Limited (Chairman)
D A Crosbie
30 March 1970
Executive director
2 June 2022
SSE plc
UK Finance Limited
T Graham
20 July 1965
Senior Independent Director
Non-executive director
28 September 2022
Close Brothers Group plc
DiscoverIE Group plc
LINK Scheme Ltd and LINK Scheme Holdings Ltd
A Hitchcock
16 January 1965
Non-executive director
2 December 2018
PureProfile Limited
A M Keir
16 October 1958
Non-executive director
1 March 2022
Majid Al Futtaim Holdings
Majid Al Futtaim Capital LLC
Sumitomo Mitsui Banking Corporation Bank International plc (Chair)
D Klein
10 August 1968
Non-executive director
1 March 2021
The Guardian Media Group
Multichoice Group
Showmax Africa Holdings Limited
Gwanda Properties Limited
Gwanda Global Limited
Xyon Health Inc
S Orton
5 March 1970
Non-executive director 1 June 2023
T Rajah MBE
24 August 1982
Non-executive director 1 September 2020 London & Partners Limited
Live Better With Ltd.
C S Rhodes
17 March 1963
Executive director
20 April 2009
Derbyshire Home Loans Limited
E-Mex Home Funding Limited
FN1
Jubilee Mortgages Limited
Nationwide Housing Trust Limited
Nationwide Syndications Limited
NBS Ventures Management Limited
The Mortgage Works (UK) plc (Chair)
UCB Home Loans Corporation Limited
Silverstone Securitisation Holdings Limited
Arkose Funding Limited
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Strategic report Risk report Other informationGovernance Financial statementsAnnual Report and Accounts 2024
Annual business statement (continued)
Annual Report and Accounts 2024
Annual business statement (continued)
3. Information relating to directors at 4 April 2024 (continued)
Name
and date of birth Occupation Date of appointment Other directorships
G Riley
6 December 1967
Non-executive director
1 April 2022
Tangerine Bank
Roynat Capital Incorporation (Chair)
St Michael’s Hospital Foundation
P G Rivett
27 June 1955
Non-executive director
1 September 2019
Standard Chartered plc
Standard Chartered Bank
Directors’ service address
Documents may be served on any of the directors c/o Addleshaw Goddard LLP, One St Peter’s Square, Manchester M2 3DE.
Directors’ service contracts
Executive directors’ terms and conditions of employment are detailed in their individual contracts or service agreements which include a notice period of 12 months from the Society to
the individual and a notice period of 12 months and 6 months from the individual to the Society for D A Crosbie and C S Rhodes respectively. The notice period offered to any new
executive director would be 12 months from the Society to the individual and 12 months from the individual to the Society.
Directors’ share options
A proportion of executive directors’ variable pay is linked to the value of the Society’s core capital deferred shares (CCDS), details of which have been provided in the Report of the
directors on remuneration. For 2023/24, the executive directors participated in the Annual Performance Pay (APP) plan and the Long-Term Performance Pay (LTPP) plan. A maximum of
20% of the combined value of the APP and LTPP awards is payable in June 2024, with an equivalent proportion retained until June 2025. A minimum of 60% of the combined value is
deferred, payable between 3 and 7 years following the date of award. 50% of the upfront portion and 60% of the deferred portion is linked to the value of the Society’s CCDS. These
CCDS-linked elements are payable in cash subject to a 12-month retention period. No directors held securities in Nationwide Building Society during the year.
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Strategic report Risk report Other informationGovernance Financial statementsAnnual Report and Accounts 2024
Country-by-country report
Annual Report and Accounts 2024
Other information
Country-by-country report (audited)
The Group is required to comply with the Capital Requirements (country-by-country reporting) Regulations 2013 which implement article 89 of the Capital Requirements Directive IV.
These regulations require disclosure of certain statutory information on a consolidated basis, by country, where an institution has a subsidiary or branch.
The country-by-country reporting disclosures for the year ended 4 April 2024 are shown below.
All activities of the Group are conducted in the United Kingdom. Details of the Society’s subsidiaries and consolidated structured entities can be found in notes 33 and 34 to the accounts.
Country
Nature of activities
Number of
employees
(average full
time equivalent)
Turnover
(note i)
£m
Profit before
tax
£m
Corporation
tax paid
£m
United Kingdom (note ii)
Provision of financial services
16,982
4,781
1,776
479
Notes:
i. Turnover represents ‘total income’ on the Group’s income statement.
ii. The Group has a subsidiary incorporated in the Isle of Man which had an average of five full time equivalent employees during the year and which provides IT services to the Group. The entity is reported
under the United Kingdom where it is managed, controlled and subject to corporation tax.
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Strategic report Risk report Other informationGovernance Financial statementsAnnual Report and Accounts 2024
Underlying profit, Forward-looking statements
and Glossary
Annual Report and Accounts 2024
Underlying profit, Forward-looking statements and Glossary
Underlying profit
Profit before tax shown on a statutory and underlying basis is set out on page 68. The purpose of the underlying profit measure is to reflect management’s view of the Group’s underlying
performance and to assist with like-for-like comparisons of performance across periods. Underlying profit is not designed to measure sustainable levels of profitability as that potentially
requires exclusion of non-recurring items even though they are closely related to (or even a direct consequence of) the Group’s core business activities.
Forward-looking statements
Certain statements in this document are forward-looking with respect to plans, goals and expectations relating to the future financial position, business performance and results of
Nationwide. Although Nationwide believes that the expectations reflected in these forward-looking statements are reasonable, Nationwide can give no assurance that these expectations
will prove to be an accurate reflection of actual results. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances
that are beyond the control of Nationwide including, amongst other things, UK domestic and global economic and business conditions, market-related risks such as fluctuation in interest
rates and exchange rates, inflation/deflation, the impact of competition, changes in customer preferences, risks concerning borrower
credit quality, delays in implementing proposals, the
timing, impact and other uncertainties of future acquisitions or other combinations involving the Society and/or within relevant industries, risks relating to sustainability and climate
change, the policies and actions of regulatory authorities and the impact of tax or other legislation and other regulations in the jurisdictions in which Nationwide operates. The economic
outlook remains unusually uncertain and, as a result, Nationwide’s actual future financial condition, business performance and results may differ materially from the plans, goals and
expectations expressed or implied in these forward-looking statements. Due to such risks and uncertainties, Nationwide cautions readers not to place undue reliance on such forward-
looking statements.
Nationwide undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
This document does not constitute or form part of an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an
exemption from registration. Any public offering to be made in the United States will be made by means of a prospectus that may be obtained from Nationwide and will contain detailed
information about Nationwide and its management, as well
as its financial statements.
Glossary
The glossary for Annual Report and Accounts 2024 is available at:
https://www.nationwide.co.uk/about-us/governance-reports-and-results/results-and-accounts/
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Strategic report Risk report Other informationGovernance Financial statementsAnnual Report and Accounts 2024
Nationwide Building Society
Head Office: Nationwide House, Pipers Way, Swindon, Wiltshire SN38 1NW.
nationwide.co.uk
AGMAR&A2024 (June 2024)
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