Newcastle Building Society Half Year Results 2017

27^th July 2017

Newcastle Building Society reports positive results for the first six months of 2017 with increases in operating profit and profit before tax and significant growth in savings and mortgage lending. The Society's considerable investment in people and infrastructure has continued, whilst its programme of grant donations to help communities in the North East make positive changes, has expanded.

Key highlights:

Operating profit increased by £0.1m to £6.2m with higher income being offset by increased costs reflecting significant investment into the business as capability is built for the future
Profit before tax increased from £3.5m to £7.2m reflecting a lower provisions charge and a one-off credit of £2.1m arising on the purchase of our Cobalt office
Savings balances increased by £120m as 10,000 new savers joined the Society
Gross lending to home buyers increased to £303m from £255m
3 month mortgage arrears reduced to 0.39% from 0.47% compared with the same point last year
Achievement of 'Gold' Investors in People status
More than 70,000 (est ) people in the North East positively impacted by community grant funding in its first year

As a mutual, the Society needs to make sufficient profits to grow and invest for the future, while maintaining strong capital ratios. Over the previous six months it has increased profitability at a time of making significant investments into the branch network and property infrastructure, strengthening senior management, developing colleagues, and adding over 40 new roles to the organisation, whilst enhancing the resilience of its systems and focusing on high levels of customer service.

Against a backdrop of falling individual savings levels, and despite the prevailing challenge of a persistent low interest rate environment, Newcastle Building Society welcomed 10,000 new savers in the last six months.

The Society continued to build healthy volumes of mortgage lending. Gross lending increased to £303m from £255m and net lending improved from £116m to £155m in the first half of 2017 compared to the same period in 2016. The continued reduction in levels of mortgage arrears of three months or more, which were already well below industry average, down from 0.47% at the same point last year to 0.39%, were pleasing to see, and reflect strong credit risk and affordability assessments on the lending being carried out.

Last week Newcastle Building Society's high service levels were recognised by mortgage brokers and the general public when it was voted Best Regional Building Society in the What Mortgage Awards 2017.

The Society's operating profit before provisions for liabilities and charges and one-off items increased from £6.1m to £6.2m in the first half of the year. It posted a pre tax profit of £7.2m, significantly up from £3.5m (2016), reflecting a one off credit on the purchase of its Cobalt office in North Tyneside of £2.1m and lower provisions charges.

The purchase of its flagship building, 21 Cobalt Park, in February marked a long term commitment to the mutual's award winning and fast-growing third-party savings management business, Newcastle Strategic Solutions, which provides multi-channel savings management services for banks, building societies and other global financial institutions from its North Tyneside location.

In May the Society became one of just a handful of companies in the region to achieve the prized 'Gold' Investors in People (IIP) standard, reflecting continued investment and improvement in its leadership, support and development of colleagues. It continues to offer high quality career opportunities and currently employs 1,044 people across the region.

In just 12 months the Newcastle Building Society Community Fund at the Community Foundation has made grant donations to the value of £78,000 to local projects, which has had a positive impact on the lives of more than 70,000 (est) people across the North East region. The Society's donations into the fund, linked to its Community Saver accounts, are further supported by generous fund raising by colleagues. A talking newspaper for the visually impaired in Alnwick; a Durham lunch club that tackles social isolation; and a North Shields community garden are just some of the recent projects which will be making use of grant funding.

Grants are nominated by customers of the Society to support charity and community causes in the region, and £120,000 has been committed for 2017.

Newcastle Building Society chief executive, Andrew Haigh said:

"We've made some very positive progress already this year and we're proud of the milestones we've already achieved, both financially, and in delivering on the contract we have with the region. This extends beyond a commitment to the fundamentals of providing a robust regional building society and branch network, but also sees us driving growth to generate career opportunities for people across the North East, investing in our communities, and building an organisation the region can be proud of."

If you have any queries you'd like to discuss with us, please don't hesitate to get in touch with your local Business Development Manager. Alternatively our Intermediary Support Team will be happy to assist on 0345 602 2338 or via webchat (Monday to Friday, 8am to 6pm).

This information is for use by authorised mortgage intermediaries only and should not be relied on by customers.