Connecting our communities
with a better financial future
Annual Report and Accounts
2025
Contents
Performance and Strategy
2
Performance Highlights 2025
4
Chair’s Statement
6
Chief Executive’s Review
12
Strategic Report
32
Sustainability Report
Governance
48
Risk Management Report
58
Our Directors
64
Directors’ Report
66
Statement of Directors’ Responsibilities
67
Report of the Directors on
Corporate Governance
76
Audit Committee Report
80
Remuneration Committee Report
90
Independent Auditor's Report
Financial Statements
100
Income Statements
101
Statements of Comprehensive Income
102
Balance Sheets
103
Statements of Movements in
Members’ Interests
105
Cash Flow Statements
106
Notes to the Accounts
Other information
180
Annual Business Statement
181
Directors Listing
182
Glossary
185
Branch and Financial Advice
Centre Directory
Our approach
to strategy
delivers a truly
Purpose-led
business
1
Common Equity Tier 1
(2024: 12.2%)
Overall customer
satisfaction
Operating profit
before impairments
(2024: 96%)
(2024: £34.2m)
97%
£23.4m
New
mortgage
customers
Individuals
Supported
through
Helping Hand
5,800
174
£1.2bn
Gross residential lending
(2024: £1.2bn)
Savings balance
(2024: £5.4bn)
£5.9bn
Colleague
engagement score
(2024: +49)
+48
Profit before tax
(2024: £15.7m)
£22.6m
Colleague volunteering hours
(2024: 10,000+)
9,000+
In community grants
distributed through
Community Funds
£98k+
Completion and opening of flagship
branches for the Newcastle Building
Society and Manchester Building
Society brands
11.7%
(2024: 188)
Performance Highlights 2025
(2024: £140k+)
(2024: 5,350)
2
3
"Across the whole
Group we have
demonstrated
continued delivery
of our
Purpose.
"
Regardless of their size or industry, most modern
organisations face a shared truth; that change is not optional.
Whether it’s building digital capability, responding to the
opportunities and threats arising from the AI revolution, or
addressing rapidly evolving consumer trends: the strategic
reality is that adaptability and agility are vital attributes of any
successful business.
Change is underway at our Society. We have ambitious
growth plans and we are on a journey to accelerate the
impact we make with our distinct version of mutuality. I am
pleased that in a year characterised by uncertainty (uncertain
global geopolitics, uncertain UK economic growth and
uncertainty around Government policy), the Society has made
progress on those ambitions. This includes several confident
investments in our future, updates to the way the business
is organised, and further embedding of the culture and
behaviours that will enable the Society to increase the impact
and value we create for Members and communities.
Across the whole Group we have demonstrated continued
delivery of our Purpose.
In the North West we have delivered on our promise to bring
the Manchester Building Society brand back to the high
street. Our intent in Greater Manchester is to build something
unique to the North West, using local talent, local ideas,
and local expertise to connect the communities in those
boroughs with a better financial future. The opening of our
flagship Manchester Building Society branch in Manchester
city centre was a proud moment for the whole Group as such
a huge amount of work has taken place since the merger with
Manchester Building Society was first considered.
Chair's Statement
In the North East, our new flagship Newcastle Building
Society branch at Monument in Newcastle city centre
represents a huge vote of confidence in our model,
and our commitment to providing accessible face-to-
face services. The branch stands apart from any other
facility in the city region, with a bold ambition to bring
our communities together; to build trust and spark
the conversations that will lead to their better
financial futures.
Income growth has been strong across the Group.
There was significant ongoing investment in people,
technology and processes during the year as we
continued to make good progress in replacing
inefficient systems and processes and implementing
the digital capabilities that are key to future
performance and service quality, while maintaining
our commitment to high streets and face-to-face
service. The short-term impact through the delivery
phase of these new capabilities, together with the
increased operating costs of the outgoing systems
and procedures, resulted in a reduction in the Group’s
underlying operating profit versus 2024 and an
overall loss before tax for the year in Newcastle
Strategic Solutions.
How we organise ourselves as a Group to be in
the right shape for our future is also a key factor in
progress towards greater efficiency and presents
multiple opportunities for the Society. To make the
most of those opportunities during the year, several
key changes were made, which included reshaping
the Executive team to fit the future needs of the
organisation. I am delighted with the new leadership
structure and the experience and skill each new
appointment brings to the Group.
Board matters
There are several key changes to the Board make-up,
occurring as a result of our natural succession cycle and
as part of our work to refresh and renew the expertise
and knowledge the Board can contribute to the
changing needs and focus of the Society.
David Samper, Amanda Shepherd and Stuart Miller
moved on to pursue new opportunities in 2025,
stepping down as Executive Directors. Chris Keay, our
Chief Risk Officer, joined the Board as an Executive
Director to provide continuity through this period of
change, ahead of his planned retirement from executive
life at the end of March 2026.
Due to other commitments, Michele Faull stepped
down as a Non-Executive Director in April 2025 and
Moorad Choudhry stepped down as a Non-Executive
Director in November 2025.
Longstanding Board members, Anne Shiels and Bryce
Glover have both reached the end of their tenure as
Non-Executive Directors and will stand down following
the 2026 Annual General Meeting.
I’d like to thank all of them for their contributions to the
Board and wish them all the best for the future.
These changes bring the opportunity to add new
expertise and bring new ideas to the Society. Karen
McDonagh Reynolds joined the Board in April 2025
and stands for election at the 2026 Annual General
Meeting. Karen brings substantial experience gained
over two decades of senior technology and operational
leadership across both regulated industries and the
not-for-profit sector.
In December 2025 we also welcomed Richard
Gabbertas to the Board, who will stand for election
at the 2026 Annual General Meeting. Richard brings
extensive experience in financial services and
regulatory insight and will be a valuable addition to
the team.
Also joining the Board is the Society’s new Chief
Financial Officer, Andrew Conroy, who we welcomed to
the business in February 2026. Andrew’s appointment
follows Paul Astruc’s tenure as interim Chief Financial
Officer, which ended in December 2025, and I would
like to recognise Paul’s significant contribution to the
Society during his short time with us, while we finalised a
permanent appointment to the role.
Regulatory update
Towards the end of 2025, the Bank of England, the
Prudential Regulation Authority (PRA), and the Financial
Conduct Authority (FCA) published their proposals
to support the mutuals sector, highlighting the
emergence of regulatory tailwinds which could have a
material positive impact on building societies’ ability to
compete, innovate and grow.
The PRA’s decision to discontinue the Building
Societies Sourcebook indicates a shift towards a more
proportionate regulatory regime and the creation of a
more level playing field for building societies. The Bank
of England and FCA’s joint proposal to launch a Mutual
Societies Development Unit should encourage growth
across the mutual sector.
These are positive developments but the responsibility
for sector growth sits with the organisations
themselves. The need for continued innovation and
ambition across the mutual sector is clear, as is the
opportunity to evidence the ways in which the mutual
model is increasingly relevant in the modern world, to
all generations.
Looking ahead
Your Board continues to have full confidence in the
strategic approach of the Group, and we can clearly see
the success of the model as we grow and in the value
we are creating for Members and their communities.
More than ever, the Society needs to exhibit agility in
the face of new challenges. Your Board will continue to
support the investment required to deliver the changes
required as we organise the Group and create the right
structure to make the most of future opportunities.
I’m grateful to all our Members and partners for their
continued support and feedback which helps drive
the Society forward. As ever I would like to thank the
colleagues across the Group who continued to work so
hard throughout the year serving our customers
and communities.
James Ramsbotham
Chair
5 March 2026
4
5
"We recognise
the importance of
listening
to Members
and taking the
time to
understand
their priorities
and concerns."
2025 was a year of further growth and substantial investment
in all areas of our Group, ensuring that we have the people
capabilities, the technology and the physical presence to
continue in the delivery of our Purpose for current and future
generations of Members.
Progress was manifested very visibly in the re-launch of
the Manchester Building Society brand, taking our distinct
approach to delivering Member value to the North West and
in the opening of our new flagship branch at Monument in the
very centre of Newcastle. We also saw continued growth of
our savings management outsourcing subsidiary, Newcastle
Strategic Solutions, which is now managing record balances
in excess of £52bn on behalf of its bank and building
society clients.
We have continued to invest in people, growing the
number of colleagues, particularly, within the Solutions
business to support the increased client activity. Behind
the scenes we have advanced our multi-year, multi-million-
pound programme to replace ageing technology with
modern and flexible systems across the Group. We are
investing significantly in an upgrade of our customer facing
technologies, to bring an enhanced experience for those
engaging with us through digital channels, together with new
product capabilities and to bring more efficient systems to
support our branch colleagues. Progress has been strong,
with a number of the new capabilities now fully operational and
already having a positive impact.
Chief Executive's Statement
Strategy
We continue to execute the strategy that drives our
Purpose-led, place-based building society Group
for the long-term benefit of our Members and their
communities. In 2025 we’ve consistently created
value for Members whilst delivering a commercially
successful and sustainable business model; generating
the necessary profit to enable reinvestment into the
business to provide long-term stability and power our
growth ambitions.
Across the Group, we are united by shared values
and driven by a common Purpose – to connect our
communities with a better financial future:
■
We help people to own their own home, to save and
to plan their finances.
■
We build lasting authentic relationships with
customers, clients and partners.
■
We foster inclusion, diversity and positive change
at work and in our communities.
■
We aim to deliver a great place to work where
people are empowered to realise their potential.
■
We care about sustainability for future generations.
Our focus on providing accessible, face-to-face
service through our branch network continues to
build long-term, stable Member relationships, which
are the foundation on which we grow our business.
Strategy is built upwards from our high streets, towns
and regions; attracting new customers and providing
outstanding levels of service, satisfaction and value to
our Members through our branches, supported with
digital capabilities delivered by our Newcastle Strategic
Solutions subsidiary. The growing levels of savings
balances we attract and retain through our branch
network help to fuel our lending activity. The success of
this accessible, familiar and local presence completely
contradicts the mantra of the big banks which continue
to close their high street branches and also provides an
excellent outlet to grow our financial advice business,
providing this much needed service for the benefit of
ordinary people within our communities.
For more detail on our strategy and how this comes to
life across the Group, please see the Strategic Report.
Delivering sustainable value for Members
We continue to use the Mutual Value Measurement
Framework to guide our approach to reporting the
Member value we deliver. For 2025, we have again
simplified the framework to three broad areas:
Product value, service and accessibility
We remain absolutely committed to offering our
Members consistent, good value savings interest. I am
pleased to report that over the 12 months to December
2025 our savings rates were 0.60% (2024: 0.56%)
higher than the market average of 3.03%, (source:
CACI), equating to an additional £32.8m of interest
for our savings Members over the same period (2024:
£28.1m). The impact of focusing on providing high
street savers with good value is evidenced by the fact
that over the 12 month period to December 2025,
our branch savings balances have grown at more
than double the rate of the market average across all
channels, including online.
We also continue to offer good value mortgage pricing;
our residential standard variable rate (SVR) remains
one of the most competitive on the market, and at the
end of 2025 was 6.50% (2024: 6.94%) compared to a
market average SVR of 7.20% (source: Moneyfacts).
Our average SVR throughout the year was 6.67%
(2024: 6.94%), compared to a market average of
7.44% (source: Moneyfacts) which means that our SVR
borrowers saved more than £1.6m in additional interest
(2024: £2.8m).
Our focus on helping people own their own home
means supporting those underserved by the wider
market. Last year we introduced our innovative First
Step mortgage, offering first time buyers the option
to borrow up to 98% of their home’s value with a
minimum deposit of just £5,000. First Step is
targeted specifically at borrowers who’ve successfully
saved a small deposit, helping them get into their first
home faster.
We remain steadfast in our commitment to the
provision of accessible face-to-face financial services
on our regions’ high streets and in our communities.
In July 2025 we opened our new flagship Newcastle
Building Society branch. The multi-million-pound
investment into Monument branch brought all five
floors of the building back into public use. As well as
a fantastic branch space in the heart of the city, the
facilities available at Monument inspire and enable
collaboration, bringing our partners and communities
together, helping us drive positive change in the city
and beyond. North East Mayor, Kim McGuinness joined
us on opening day at Monument, highlighting that
our investments in the North East align well with the
Combined Authority’s own focus on communities and
our regions high streets.
6
7
In Manchester, our first new branch under the
Manchester Building Society brand opened in
September. The three-storey branch, in King Street, is
a powerful signal of our intent in Greater Manchester,
in the beating heart of the city. The attendance of
Greater Manchester Mayor Andy Burnham at the launch
event was a ringing endorsement of our approach.
The ground floor branch space provides space for
customer conversations where we can provide financial
advice for all, while the upper floor provides hybrid
offices facilities for the growing Manchester Building
Society team. King Street branch is a space where
people who care about their place can come together,
with one whole floor free for local community groups
and charities to use.
Both Monument and King Street branches have been
designed to warmly welcome people into the branch,
and to encourage visitors to the high street by
providing space and facilities for their regions’ civic
and charity groups. This approach builds on our long-
standing innovation around branches. Half our branch
network provides free-to-use community rooms to
local groups, and our community partnership branches,
which share space with other local services, continue
to thrive.
This commitment to being present in our places, and
the excellent work of colleagues across the business
is evidenced in our outstanding customer satisfaction
score, which at the end of 2025 was 97% (2024:
96%). Our record-high net promoter score (NPS) of
+87 (2024: +86), demonstrates a high willingness by
Members to recommend the Society to others.
Our Newcastle Financial Advisers subsidiary ensures
that regulated financial advice is available on our
regions’ high streets, for all our Members and
communities. Delivered through our branch network, in
our local communities, and in our regions’ workplaces,
we aim to make advice as inclusive as possible, with
no minimum investment levels and face-to-face
appointments supporting the strong ongoing demand
for accessible and trusted advice.
Newcastle Financial Advisers continues to see an
increasing need and demand for financial advice,
supporting customers with all aspects of their financial
planning, particularly around pensions and retirement
planning, as well as investment, inheritance tax and
protection advice. We believe that financial advice
should be available to everyone, not just the wealthy,
therefore we do not apply any minimum thresholds for
the provision of advice.
The value of the advice provided to Newcastle Financial
Advisers’ customers is reflected in the continued high
level of customer feedback and advocacy received.
Newcastle Financial Advisers achieved VouchedFor’s
‘Top Rated Firm’ status for the fourth consecutive year
along with winning VouchedFor’s ‘Client Impact Award’.
Both awarded based purely on customer feedback
received and the difference our financial advice service
is making to customers’ financial futures. For more
detail on our approach to the provision of face-to-face
financial services in our communities, please see the
Strategic Report.
Membership and community
As a Member-owned organisation we recognise the
importance of listening to Members and taking the time
to understand their priorities and concerns. In 2025 I
very much enjoyed attending the six Member listening
events held in communities around our region attended
by more than 130 Members. More than 70 colleagues,
including Board members and Executive leaders, met
with Members in a relaxed setting to understand their
priorities and concerns.
Concerns about bank branch closures feature
prominently during these events, as do conversations
about the value that customers continue to place on
their savings passbook. I was delighted to be able to
assure customers that branches and face-to-face
service remains at the heart of our strategy and that we
will not only look to grow our number of physical outlets,
we will also continue to innovate in this area. We’ve
made a commitment to continue to offer passbooks to
customers as long as a significant number of Members
consider them to be worthwhile. As part of a wide range
of services we offer, it's clear that people continue
to see passbooks as an accessible, trusted, and
convenient way to manage their money.
During 2025 we continued to engage with our
Members through our ‘Connected Communities’
online engagement platform. This provides a space
for Members and those based in the communities
to provide feedback and help to shape the future of
the Society. We have more than 900 panellists for
Newcastle Building Society and more than 200 for
Manchester Building Society.
Our ‘Voice of the Customer’ programme provides daily,
real-time feedback from our customers, helping us to
continue to develop and improve the service we deliver.
In 2025, we received over 24,500 responses from
our customers across all our channels including the
branch network, digital savings, mortgage operations,
mortgage advice, mortgage intermediaries and
our financial advice subsidiary, Newcastle Financial
Advisers. We use this feedback to inform our product
development and improve the services we provide.
We’ve continued to support Members and their
communities through several strategic partnership
initiatives. While 2024 included exceptional levels of
community and charitable activity, including the one
off £1m donation to the North East Community Fund,
our commitment to supporting Members and their
communities has remained strong throughout 2025.
Our Helping Hand service, which is delivered by Citizens
Advice Gateshead provides fast and free guidance,
advice and practical assistance on a wide range of
issues. During 2025 the service supported more than
170 individuals, helping to unlock more than £350,000
in additional income through advice which included
eligibility for benefits and welfare support.
Beyond the value we create at a personal level for
Members, every Member, colleague, branch, and
partnership plays a role in delivering our Purpose.
One of the ways we seek to make a lasting positive
difference in our regions is through the provision of
sustainable, consistent and meaningful grant funding
to local charities. In the North East our long-term
partnership with the Community Foundation North East
has helped grow the Group’s Community Fund to more
than £3.7m, with almost £70,000 in grants issued to 15
charities working to tackle our areas of strategic focus,
work and opportunity, and financial confidence.
In the North West, during 2024, we created a new
partnership with Forever Manchester to bring local
expertise and knowledge to our community support.
Working with Forever Manchester, we made an initial
donation distribution of £100,000 in 2024 to fund small
grants to local charities and community groups across
the Greater Manchester boroughs. In 2025, 10 grants
were awarded totalling £30,000, focusing on projects
that provide work and opportunity support services,
especially those that also foster diversity and inclusion.
Across our regions, we have maintained our focus on
sustainable and targeted community impact through
ongoing partnerships, grant making and colleague
involvement. Although activity levels naturally
normalised following last year’s exceptional total
charitable contribution of £1.5m, our support this year
has continued to address local priorities, strengthen
financial confidence and create opportunities for
people to thrive.
Partnerships and employment
In addition to the impact we make through grant-giving,
we aim to build financial confidence and support
work and opportunity outcomes through dedicated
regional partnerships.
We continue to work with Newcastle United
Foundation across various initiatives and in particular
their flagship programme, NU Futures. Working
alongside the Foundation’s team, Society colleagues
continue to deliver financial confidence workshops
in schools and other settings. Dedicated work and
opportunity sessions allow colleagues to share their
professional skills and life experiences, supporting
with mock interviews, career conversations, and
interview preparation.
In the North West we established a new partnership with
EMPOWER, who provide thousands of young people
somewhere safe to go, the opportunity to take part in
positive activities, and access to someone trusted to
talk to. As part of a four-year patron donor commitment
to EMPOWER, in 2024 we donated £100,000 to help
fund their activities and colleagues are working with
their Youth Zone in Salford to help young people build
their financial know-how and develop useful new skills.
As a prominent employer in the North East, and with our
ambition to build our presence in the North West, we
remain focused on building a diverse workforce which
represents all our communities, and a culture where
every colleague feels they belong. To meet our growth
ambitions, the Board have recognised the importance
of evolving that culture, so work has continued
throughout 2025 to embed our ‘Be the Change’ culture
programme alongside work to optimise and refine
our operating model. These organisational changes
will have a lasting positive impact and will ensure the
organisation remains ready to deliver on our long-term
ambitions. Given the impact that change has within any
organisation, it's understandable that our colleague net
promoter score has seen a small decrease to +48 at the
end of 2025 (YE 2024: +49).
For further detail on how we support our people, please
see the Strategic Report.
Financial performance
In 2025 the Group continued to grow its Balance Sheet,
invest purposefully to deepen relationships with, and
enhance services for, Members and clients and to
deliver long-term sustainability.
Total assets grew to over £7bn (2024: £6.6bn),
supported by strong mortgage lending of £1.2bn
(2024: £1.2bn) and further growth in retail savings, which
increased to nearly £6bn (2024: £5.4bn). These results
reflect continued trust from Members and our ability
to offer competitive, good-value products even in a
challenging environment.
This balance sheet growth supported an increase in
net interest income and increased fee income in our
subsidiary business (see subsidiary performance
section below for further details).
Our investment programme, focused on our two
flagship branches, digital capability, operational
resilience, and service enhancements, continued at
pace, ensuring we build a stronger, more efficient
organisation that can support Members’ needs
long into the future. As a result of this investment,
operational costs increased during the year, across
staff costs and other administrative costs.
These increases in costs offset the strong income seen
during the year, resulting in our underlying operating
profit before impairment and provisions
reducing
to £29.7m (2024: £31.9m). The Group delivered a
profit before tax of £22.6m, up from £15.7m in 2024,
largely due to the non-recurrence of the one-off
Philips Trust provision in 2024, partly offset by the cost
impacts noted above and fair value movements on the
instruments we hold at fair value.
Capital and liquidity remained strong throughout
the year, supporting our long-term sustainability
and regulatory obligations. The Common Equity
Tier 1 ratio closed at 11.7% (2024: 12.2%), in line with
planned balance sheet growth and comfortably above
regulatory requirements. Liquidity remained robust with
a Liquidity Coverage Ratio of 180% (2024: 229%).
Overall, 2025 was a year of purposeful growth
and strategic investment, ensuring we remain well
positioned to serve more Members, support more
savers and borrowers, and continue delivering positive
impact across our regions.
8
9
Subsidiary performance
Newcastle Strategic Solutions (Solutions) increased
the number of savings accounts it manages to 1.8
million from 1.6 million in 2024 and grew its balances
under management by £1bn to £52bn in deposits.
As a market-leading provider of outsourced savings
management and customer service, Solutions plays
a pivotal role in the Group’s strategy, underpinning
our operating model through the efficiencies of
scale it generates and the service excellence it
delivers on behalf of clients. Its continued
investment in technology, data and talent reinforces
both its importance as a regional employer and its
position as a critical enabler of the Group’s long-term
growth ambitions.
The Solutions business saw strong growth in income as
a result but reported a loss before tax of £6.2m for 2025
(2024: £0.3m profit before tax); reflecting increased
operating costs in the year driven by higher staff
costs to support the growth and ongoing substantial
investment which is transforming Solutions systems
and processes to bring enhanced service, new levels of
efficiency and product capabilities in future years.
Newcastle Financial Advisers delivered another year
of strong performance, supporting nearly 12,000
customer appointments and growing assets under
management to more than £1.2bn (2024: £1.1bn),
reflecting both sustained demand for local, accessible
financial advice and the strength of its inclusive,
no-minimum-threshold model. Operating through our
branch network, in local workplaces and communities,
Newcastle Financial Advisers continues to play an
important role in the Group, ensuring professional,
face-to-face financial advice remains available to
Members across our region.
Looking ahead
I’m both pleased and proud that we continue to make
good progress in the delivery of our Purpose, visibly
investing in the places we serve, our customer service,
and our colleague experience. As the Group grows
and evolves, we can clearly see the success of our
strategy in the value we’re creating for Members and
our communities, and the positive impact we’re having
across our regions. It is of paramount importance that
we have the right skills and leadership across the Group
to build on the progress of recent years. I have been
delighted therefore to welcome new members to the
Executive team across finance, risk, technology and
the commercial operations of the Group. This new team
collectively brings experience, strengthened capability
and the ambition required to realise the true potential of
our unique strategy, embedded in Purpose and Place.
Looking ahead, in what seems to be an ever more
uncertain and unpredictable world, there will be a
number of economic and business headwinds for
the Group to navigate in 2026. Controlling costs,
while continuing the transformation of our systems
and processes and investing in the growth of the
organisation are all key areas of focus. With our
progress to date and the strength of the new team
that is now in place, I believe we are very well placed
to address whatever challenges may lie ahead and
to ensure that the Society and the wider Group will
continue to thrive for the benefit of current and future
Members and their communities.
Finally, I’d like to recognise all our colleagues who
continue to work so hard each day, delivering for all
our customers and clients. I’d also like to thank all our
Members and partners for their ongoing support and
I look forward to continuing our work as we strive to
‘connect our communities with a better financial future’.
Andrew Haigh
Chief Executive
5 March 2026
We remain
focused on
building a
diverse
workforce which
represents all
our communities
11
10
Strategic
Report
Creating a
workplace
where people
can
thrive
and
realise their
full potential
12
13
Our Group
Across the Newcastle Building Society Group, we
are driven by a common Purpose – ‘to connect our
communities with a better financial future’. Our
structure enables us to deliver a unique, place-based
mutuality, with straightforward savings and mortgage
lending at the heart of our model.
Newcastle Building Society
is the beating heart of our
business, operating 32 branches across the North East,
North Yorkshire and Cumbria including our new five-
storey flagship Monument branch in Newcastle city
centre, which opened in July 2025.
Manchester Building Society
is the newest addition
to our Group, a trading name of Newcastle Building
Society signalling an intent to build a regional network
of collaborative mutual brands. With a new flagship
branch on King Street, in Manchester city centre, our
ambition is to grow in Greater Manchester and serve
communities across the North West region.
Both Newcastle Building Society and Manchester
Building Society retail brands seek to address the
unique financial needs of their communities, working
with local leaders and partner organisations to build
impact and make a lasting positive difference in
both regions.
What sets us apart is the provision of accessible and
inclusive regulated financial advice, and market
leading savings technology and service, delivered
through our subsidiaries.
Newcastle Financial Advisers
is an appointed
representative of Openwork LLP and provides
regulated financial advice on our high streets for all
our Members and communities, playing a critical part
in delivering our Purpose-led strategy with a financial
adviser available in every branch. Unlike many UK
banks and building societies, there is no minimum
investment requirement, and customers are
welcome to seek advice even if they choose to not take
up our recommendations.
Newcastle Financial Advisers continues to grow its
place on the high street with more than £1.2bn of
assets under management and increasing demand
for tailored advice on key life decisions including
pensions and retirement planning, investment,
inheritance and protection.
Newcastle Strategic Solutions
(Solutions) provides
an award-winning, full savings solution for some of
the UK’s leading digital savings providers. Solutions
manages 1.8 million savings accounts and £52bn in
savings deposits on behalf of its clients, growing
from 1.6 million savings accounts and £51bn in savings
deposits in 2024.
Solutions plays an important part in helping to deliver
our Purpose-led strategy through efficiencies of scale
as the Society directly benefits from its investment in
technology, resilience and infrastructure. In addition,
Solutions is a large regional employer and an important
source of talented colleagues for the wider Group.
Strategic Report
Our Purpose and Strategy
Our Purpose
Being truly Purpose-led in our approach to
strategy and developing the business in a
manner which delivers a business model
that is ‘Powered by Purpose’.
Building our brands through our
communities, recognising that our success
relies on the reputation we build with our
Members, the difference we make for their
communities and the degree to which our
Members connect with the value we create
for them across multiple dimensions.
Growing the scale and efficiency of the
business, with appropriate infrastructure,
technology, skills and culture to increase
our impact and the long term sustainability
of our operations.
Fostering mutual advocacy, whereby our
Members genuinely value the services we
provide and the contribution we make to
their community and region; they actively
participate in the Society and become our
biggest advocates, encouraging others to
become part of our Society.
Understanding that making a positive
contribution to the region’s sustainability
and environment is not a matter of choice
but a necessity.
Listening to
Members is
incredibly
valuable
Purpose and strategic pillars
As a sustainable mutual business, our success lies in the intersection between serving the interests of our
stakeholder Members and communities and delivering an efficient, profitable and resilient business model: a
strategy that is directed by the Purpose of the organisation and valued by its customers.
Our strategy:
Bringing together our understanding of Purpose and Member Value, in a savings, mortgage and advice business, our
strategy is built around five themes:
Connecting our communities
with a better financial future.
14
15
Blueprint
In 2025 we introduced a new blueprint for colleagues,
to help bring clarity within the organisation, connecting
individuals very clearly with our Purpose and helping
functions align priority objectives over the next three to
five years. The blueprint encourages decision making
that balances purpose, risk and profit while protecting
the interests of both current and future Members of our
Society, and looks at three key areas:
Strengthening our foundations
Through our talented and engaged colleagues, our
investment in technology and data, our capital
strength and drive for cost efficiency, and our
commitment to being a responsible business, playing
our part in creating a sustainable Society in the places
we are present.
Powering our purpose
Driving sustainable value: growing our savings balances,
making it easy to do business with us and building
a market-leading, resilient and scalable Solutions
business to drive sustainable value for Members.
Building our Society
Creating value for our Members through our distinct,
Purpose powered, place-based mutuality. Through
deeply local, people-focused, regional retail brands;
through accessible and inclusive financial advice, and
market leading savings technology and service.
We believe that our approach to strategy delivers a
truly Purpose-led business, which is driven to act in the
interests of, and create value for, our Members, who
are our key stakeholders, but also powers a successful
commercial outcome in parallel.
Commercial success is vitally important as the
profits we generate are re-invested into the business
to support areas such as growth, innovation and
infrastructure, for the long-term benefit of Members,
and to provide the capital to underpin our operations,
providing a resilient, secure Society for our Members.
Our ‘strategy wheel’ summarises our approach and
demonstrates how each aspect of our business
contributes and complements the others to work in
synergy and deliver stable, cost-effective funding and
lending, achieving a sustainable business model for the
long term, which is uniquely placed within the regions
and the communities we serve.
Member value
and community
impact build...
...drive the
savings and
mortgages
business
models...
...long-term
authentic
customer
and client
relationships...
... and commercial
success and
scale enables...
Playing our
part in creating
a
sustainable
Society
We're
committed
to being an
inclusive
organisation
17
16
What we do
We operate nationally through digital and mortgage
intermediary channels, but the heart of our business
is in face-to-face delivery and the lasting, inter-
generational relationships we build in our regions
and communities.
We operate in 33 locations on high streets in our
regions, with 32 Newcastle Building Society branches
stretching across the North East, Cumbria and North
Yorkshire, and since September 2025, in Greater
Manchester following the opening of the Manchester
Building Society King Street branch.
We start with place, deeply committed to making a
positive difference for the people and places we serve.
We are owned by our Members, which allows us to focus
on what’s really important – delivering consistent value
through the products we offer, providing our customers
with outstanding service and building a sustainable,
successful business that benefits our Members,
communities and regions, both now and in the future.
We care about building lasting, authentic relationships
with our customers. Digital and intermediary channels
play a key role in our distribution and service delivery,
and along with face-to-face contact and a thriving
branch network drive the business forward. To address
the unique financial needs of local communities, we
embrace innovation and inclusivity to support and
champion our regions’ high streets.
We are clear how being truly led by our Purpose of
‘connecting our communities with a better financial
future’ means that through our five strategic pillars we
can deliver a unique and sustainable business to benefit
both our regions and our customers for the long term.
We help people to own their own home, to save
and to plan their finances:
Helping our customers to save and plan their finances
by offering consistently fair rates on a range of savings
accounts through our branch network and online.
We also help people to own their own home, taking care
to personally assess affordability for each customer
based on their circumstances.
Our mortgage lending supports people with very
different circumstances and requirements, such as
first-time buyers, people borrowing in retirement and
the self-employed.
And we offer long-term financial planning through
our Newcastle Financial Advisers subsidiary, with a
qualified, professional financial adviser available in all
our branches.
We build lasting, authentic relationships with our
customers, clients and partners:
We're always listening to our customers and finding new
ways to deliver the services they need.
We're committed to maintaining financial services
on our high streets and believe in the power of warm,
friendly face-to-face customer conversations.
Our convenient branch services are supported by our
popular savings app, and online account opening and
servicing options.
We aim to deliver a great place to work where
people are empowered to realise their potential:
We provide opportunities for our colleagues to build
meaningful careers and are committed to developing
talent from a range of different backgrounds.
We provide opportunity for all our colleagues to make
a real and positive difference to the people and places
that mean the most to them.
We foster inclusion, diversity and positive
change at work and in our communities:
We're committed to being an inclusive organisation,
both as a place to work and in our approach to
our communities.
We help our communities to create positive change
through a variety of partnerships, including long-term
relationships with Newcastle United Foundation,
Community Foundation North East, Forever
Manchester, and EMPOWER.
We care about sustainability for
future generations:
We fully recognise our responsibility to care for our
environment and support a sustainable future for
our communities
We will make positive changes to improve our
own sustainability but also work with our Members
and partners to help them to reduce their
environmental impact.
Our business model
Purpose of ‘connecting our communities with a better
financial future’. As a Member-owned regional building
society, we help people own their own home, save and
plan their finances. We attract savings balances by
offering our customers fair and consistent rates over
the long term and we offer fairly priced mortgages
on residential property to customers whom we
financial planning in all our branches, which helps our
customers to plan their finances for the long term, while
strengthening the trust and bond between us.
Our delivery of Purpose ensures that we are valued
for more than consistent pricing and excellent service
as we seek to benefit our regions through our role as
employer, enabler of talent and facilitator of positive
change within our communities.
The net effect of ‘mutual value’ we deliver is to foster
long-term, authentic customer relationships which in
turn form the foundation of a stable, sustainable savings
and mortgage business, in the form of a building
society. We bring scale and a diversified income stream
to the Group by taking one of our core skills, savings
management, and offering that as a service to other
banks and building societies.
How we fund our Society
As a Member business, our funding predominantly
comes from our Members and the savings they
deposit with us. We diversify this funding with
wholesale funding and Bank of England funding
schemes. We also hold reserves which are
generated from profits from prior years.
How we generate income
We earn income from the mortgages our
customers hold with us and this then enables us to
pay interest to our Members who have savings
with us. We also earn income on the liquidity
we hold and through our savings management
outsourcing business, Newcastle Strategic
Solutions and our financial advice business,
Newcastle Financial
Advisers.
How we use this funding in
our Society
We use our funding to enable people to own their
own home, save and plan their finances. We do this
by offering residential and buy-to-let mortgages. We
also hold some of our funding in liquid assets so we can
ensure we meet regulatory limits as well as being able to
pay out all liabilities as they fall due.
How we invest in a
sustainable business
Community sits at the heart of our Society and as
a mutual business we are committed to providing
a service to our communities and to building
authentic, lasting relationships. We reward our
colleagues fairly to ensure we are a great place
to work where people can realise their potential.
We also ensure that we are investing in the
infrastructure and capability to provide a safe,
secure and sustainable business and adapt to
change and new opportunities and challenges as
they arise.
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18
Mutual value
In 2023, we adopted a new framework to bring
even greater focus to our delivery of Purpose and
to help us drive more meaningful impact and value
from our actions. The Mutual Value Measurement
(MVM®) framework was developed in Australia, by the
Business Council for Cooperatives and Mutuals and
Monash University in Melbourne, working with Warwick
University in the UK.
We were the first UK organisation to receive Mutual
Value Measurement Accreditation, recognising our
ongoing commitment to create value and better serve
our Members and their communities.
To bring additional clarity and focus to the value
we deliver, we aligned our findings from the Mutual
Value Measurement framework with our Purpose and
strategic intent, simplifying them into three broad areas
and providing the framework for reporting the Member
value we continue to deliver each year:
■
Product value, service and accessibility
■
Membership and community
■
Partnerships and employment
For further information on how we have delivered
against these areas, please refer to the Chief
Executive’s Review.
Our people
Creating a workplace where people can thrive and
realise their full potential is central to delivering on our
Purpose. Our people strategy provides an immediate,
ongoing, and long-term framework for engaging,
developing, and supporting colleagues, ensuring we
build an inspiring environment where everyone can
contribute to the Group’s ambitions.
We place strong emphasis on colleague engagement
as a driver of both business performance and colleague
experience. Through Colleague Voice, our colleague
engagement survey, we capture insights from across
the organisation, enabling us to measure engagement
at a strategic level and empower managers to act
on feedback. This approach ensures that colleague
perspectives inform decision-making and shape
everyday conversations.
Our strategic people metric, employee net promoter
score (eNPS), benchmarks us against the financial
services sector and leading employers globally. In
a period of significant organisational change, our
eNPS score for 2025 was +48 (2024: +49). While this
represents a slight decline, it places us firmly within
the upper-middle range of the sector according to
Workday Peakon’s global database.
Following the culture programme launch in 2024, we
continue to embed the new behavioural framework: Be
Collaborative, Be Curious, Be Courageous, Be Efficient
and Be Accountable, with all colleagues having specific
behavioural performance objectives. This year we
refreshed our Colleague Insight Forum, launching the
Colleague Experience Collective; a diverse group of
advocates from across the organisation. Using data-
driven analytics, design thinking, and sprint-based
methodologies, this group focuses on practical actions
to enhance the colleague experience and support our
cultural transformation journey.
An annual pay review for all colleagues takes place on
1 April each year and in addition the Group operates
the ‘Sharing in our Success’ Bonus Scheme for all
colleagues below Executive level. Payments from this
scheme are determined by the delivery of financial
and non-financial metrics linked to the Group’s
strategic objectives and the personal performance of
each colleague.
We consult with Unite when considering our approach
to annual pay awards for colleagues, except for
Executives. The 2025 pay rise for colleagues ranged
from 0% to 10%, with an average increase of 4.1%
received by colleagues (2024: 6.0%).
As a ‘Maintaining Excellence’ awarded employer
through the Better Health at Work Award, health and
wellbeing remained a central focus throughout 2025,
with a continued emphasis on mental health awareness
and general wellbeing initiatives. Over the year, we
strengthened partnerships with organisations such
as Newcastle United Foundation through its Be a
Game Changer campaign, Working Families, Metlife
and men’s mental health charities such as Andy’s Man
Club, while also collaborating closely with our internal
diversity, equity and inclusion colleague-led networks.
We continued our review of people policies and
introduced enhanced neonatal leave and pay,
along with improved support provisions for key
people-dependent policies including retirement,
redeployment, and carers’ leave. The latter was
supported further by the introduction of a new
carers passport to better assist colleagues with
caring responsibilities.
We continue to have an active, dedicated network of
volunteers in the roles of accredited mental health first
aiders and health and wellbeing advocates to support
and drive activity across the business and are proud
to consistently maintain a health and wellbeing eNPS
score which is consistently higher than industry average
and in the top 25% of financial services.
A key contributor in the delivery of our people strategy
is the way we manage our talent, from the moment they
begin their colleague journey with us, through to their
continued professional development in-role whilst
supporting their career aspirations.
Showing our ongoing commitment to our work and
opportunity agenda, we welcomed our 2025 early
talent cohort in September, including increased focus
on partnership working with our training providers to
enhance the learner experience. We also partnered
closely with Newcastle United Foundation during 2025
to introduce a community partnerships day as part of
our corporate induction for new starters.
In 2025, we continued to embed our ‘Place to Be You’
strategy; our commitment to building a workforce
and future talent pipeline that reflects the diverse
communities we serve and fostering a culture where
every colleague feels they belong and can be their
authentic self.
We made strong progress against our diversity,
equity and inclusion goals this year. Our colleague-
led networks remain at the heart of this work, sharing
lived experiences and diverse perspectives to raise
awareness, deepen understanding, and shape more
inclusive practices across the organisation.
Through partnerships with Goss and the Business
Disability Forum, we advanced accessibility and
inclusion for colleagues, Members, and communities.
This included introducing an Equality Impact
Assessment Framework to embed inclusive-by-design
principles into our ways of working and achieving
disability confident level 2 employer status.
The Framework describes the six dimensions of Mutual Value:
1
Commerciality
Commerciality refers to the generation of sustainable
economic value for current and future Members
through business operations.
4
Community relationships
Community relationships refers to building and
maintaining strong and sustainable relationships
with the broader community beyond the Members
of the Mutual.
2
Shaping markets
Shaping markets refers to the value of a Mutual’s
existence in creating, maintaining or shaping
sustainable and competitive markets for goods
and services.
5
Ecosystem and reciprocity
Ecosystem and reciprocity refer to the Mutual
thriving alongside other stakeholders as part of a
mutually beneficial and sustainable ecosystem.
3
Member relationships
Member relationships refers to building and
maintaining meaningful and sustainable
relationships with Members of the Mutual.
6
Mutual mindset
Mutual mindset refers to acting ethically,
sustainably, and consistent with mutual and
co-operative values.
21
20
Education and awareness continued to be a priority,
with events and resources focused on gender, race,
menopause, neurodiversity, disability, wellbeing, and
LGBTQ+ inclusion. Highlights included:
■
Race equality week: Our united for change:
Advancing race equity together event brought over
40 colleagues, regional employers, and community
partners together to explore actions for a more
equitable North East.
■
Global accessibility awareness day: We hosted
Access for All: Physical Places & Digital Spaces,
convening regional stakeholders to drive inclusive
and accessible workplaces.
■
Powered by Pride: A community event held at
St James Park in collaboration with our strategic
partner Newcastle United Foundation.
We received external recognition for our commitment
to LGBTQ+ inclusion, winning the Pride Action North
Business Award and the FT Adviser Award and proudly
joined the Northern Pride and Manchester Pride
marches with colleagues and community connections.
For the second year, we were headline sponsor of
Newcastle Mela, the North East’s largest multicultural
festival, celebrating South Asian culture and
strengthening community cohesion.
Our commitment to gender equality continues through
the Women in Finance Charter, which we signed in 2020
and we remain on track to achieve a gender-balanced
Senior Management population by 2026, being
close to achieving this since 2024 with 49% of Senior
Management being Female.
Social mobility is another key focus. In 2025, we
established a partnership with Smart Works Newcastle,
supporting unemployed women and those on zero-
hours contracts with interview preparation and
workwear and were proud to be ranked 65th in the UK
top 100 employers in the Social Mobility Foundation’s
Social Mobility Index.
In recognition of our work promoting the living pension
internally and externally, we were awarded the Living
Pension Champion Award in the 2025 Living Wage
Champion Awards.
Key performance indicators
The Board regards key performance indicators (KPIs) as an important way of monitoring achievement of short-term
objectives and progress against the strategic plan. The KPIs that are reported to the Board monthly are detailed below.
There have been no changes to the KPIs reported to the Board, or calculations in determining these KPIs, during the year.
Key performance indicators
How it is measured
Performance
Link to our strategy
and Purpose
Financial – Sustainable business
Profit before tax*
Profit before tax as reported in
the Income Statement.
2025: £22.6m
2024: £15.7m
To ensure we generate
the necessary capital to
grow the business.
Underlying operating profit**
Underlying operating profit
excludes items defined as
income or expenses that arise
from events or transactions
that are distinct from the core
activities of the Group and
therefore do not represent the
Group’s true performance.
2025: £29.7m
2024: £31.9m
To ensure we generate
the necessary capital to
sustainably grow
the business, furthering
our Purpose.
Operating profit before
impairment and provisions
Operating profit
before impairment and
provisions as reported in
the Income Statement.
2025: £23.4m
2024: £34.2m
To ensure we generate
the necessary capital to
grow the business.
Common Equity Tier 1 ratio
Common Equity Tier 1 capital
(defined by the PRA as general
reserves or qualifying capital
instruments which for the Society
is the accumulation of retained
profits as a percentage of risk
weighted assets).
2025: 11.7%
2024: 12.2%
To ensure we remain
financially strong and be
able to protect against
risks inherent in running a
building society.
UK leverage ratio
A Basel III ratio which measures
Tier 1 capital against total on and
off balance sheet assets.
2025: 4.9%
2024: 5.2%
To ensure we remain
financially strong and be
able to protect against
risks inherent in running a
building society.
Liquidity coverage ratio
The liquidity coverage ratio
measures unencumbered
high quality liquid assets as a
percentage of net cash outflows
over a 30 day stress period.
2025: 180%
2024: 229%
Ensures the Group
has sufficient liquidity
to operate.
Efficiency
Cost to income ratio
Administrative expenses,
depreciation and amortisation
(as reported in the Income
Statement) as a percentage of
total income.
2025: 85%
2024: 78%
Cost to income ratio is
a measure of financial
progress against internal
targets and the return
achieved on investment
in the business.
Lending and saving
Net interest margin
Net interest margin is a relative
measure of the Group’s net
interest income (as disclosed in
the Income Statements) – the
difference between interest
received on assets and interest
paid on liabilities – divided by
the Group’s average total assets
during the year.
2025: 1.49%
2024: 1.44%
To assess the income
from our mortgage
and savings accounts,
indicating the society’s
long-term sustainability
and ability to deliver
our Purpose.
In the North West
we established a
new partnership
with
EMPOWER
22
23
Female
Male
2025
2024
2025
2024
Senior Management*
49%
49%
51%
51%
Managers
47%
47%
53%
53%
Colleagues
67%
66%
33%
34%
Overall
61%
60%
39%
40%
*Senior Management is defined as Board, Executive Committee and
Executive direct reports
Key performance indicators
How it is measured
Performance
Link to our strategy
and Purpose
Lending
Gross mortgage lending
The value of residential lending
advanced during the year.
2025: £1,219m
2024: £1,196m
Helping people own
their own homes.
Net core residential lending*
Gross residential lending, less
repayments of principal and
redemptions during the year
across core residential and retail
buy-to-let mortgages.
2025: £444m
2024: £496m
Helping people own
their own homes.
Savings
Savings balances
The value of savings balances
held by our Members.
2025: £5,883m
2024: £5,433m
Helping people save
and plan their finances.
Non financial measures - Service quality and customer experience
Customer satisfaction
Customer satisfaction is a
measure of how our products
and services meet customer
expectations.
2025: 97%
2024: 96%
Building lasting
authentic relationships.
Customer engagement score
(NPS)*
Customer engagement
measures the loyalty of our
customer relationships.
2025: +87
2024: +86
Building lasting
authentic relationships.
People, leadership and culture
Colleague engagement score
(eNPS)*
Colleague engagement is
measured throughout the year
across all colleagues. Society
goals are delivered by highly
engaged colleagues.
2025: +48
2024: +49
Being a great place to
work where people can
realise their potential.
* Included as a key measure in the Executive Directors’ Remuneration Policy calculations. For further details see the Directors’ Remuneration Report.
** Underlying basis excludes items that arise from events or transactions that are distinct from the core activities of the Group and therefore do not
represent the Group’s true performance. The reconciliation of profit before tax to underlying operating profit can be found on page 26.
Senior Management consider a wide range of financial and non-financial metrics to assess the performance and future
direction of both the Group and Society. Financial metrics include both measures defined or specified by the Group’s
applicable financial reporting frameworks (primarily International Financial Reporting Standards and the Building
Societies (Accounts and Related Provisions) Regulations), such as Group operating profit before impairment and
provisions, and non-specified measures, such as net interest margin and cost to income ratio.
Those financial measures not specified by the Group’s financial reporting frameworks are alternative performance
measures (APMs) with further detail provided below.
Our financial performance
The Chief Executive’s Review details the Group’s
performance throughout 2025 and should be read
in conjunction with this report. The Strategic Report
outlines the financial performance of the Group
during 2025.
Newcastle Building Society is the largest building
society based in the North East of England and the
seventh largest building society in the UK, with assets
of £7.0bn (2024: £6.6bn). Profit before tax for 2025
was £22.6m, up from £15.7m in 2024, with the prior
year including £20m of costs provided for in relation
to voluntary financial support to Members who were
affected by the actions and subsequent collapse of
Philips Trust.
Our operating profit before impairment and provisions
has decreased from £34.2m in 2024 to £23.4m in
2025, with strong income growth more than offset by
increases in the cost base and continued investment in
the Group, as well as movement in market interest rates
creating losses in the instruments the Group holds at
fair value.
Financial profitability
Profitability is one of the key performance measures
the Board monitors closely. The Group seeks to make
sufficient profit to invest in and grow the business for
the benefit of its current and future Members.
Alternative performance measures
The Board reviewed and was satisfied that the
alternative performance measure of underlying
operating profit, which is reported alongside the
statutory profit measure, gives a clearer view of the
underlying performance of the business for
our Members.
Non underlying items are defined as income or
expenses that arise from events or transactions
that are distinct from the core activities of the
Group and therefore do not represent the Group’s
true performance, primarily relating to fair value
adjustments. There have been no changes to the way
underlying profit is calculated or reported in the year.
On an underlying basis, operating profit before
impairment and provisions was £29.7m in 2025, a
reduction of £2.2m from £31.9m in 2024, with cost
growth outpacing strong income growth. The following
table reflects operating profit before impairment and
charges on an underlying basis, with further detail on
the reconciliation from underlying operating profit
before impairment and charges to reported profit
before tax on page 26.
1.
Other income and charges per the Income Statement, excluding
fair value gains less losses on financial instruments and hedge
accounting per the Income Statement and £0.8m investment
distribution (2024: £nil).
2.
Administrative expenses per the Income Statement, excluding
£0.6m IT transformation costs (2024: £2.6m).
Net interest income and margin
Net interest income increased by £9.5m to £101.4m
in 2025 (2024: £91.9m) and net interest margin was
1.49% (2024: 1.44%). Net interest margin increased
in 2025 in part due to the maturity of the outstanding
£366.7m Bank of England’s Term Funding Scheme with
additional incentives for SMEs (TFSME). This was repaid
using excess cash in the liquidity portfolio, removing
the higher cost funding of TFSME and the lower yielding
cash from the Balance Sheet, creating a net benefit
to net interest margin. This was partially offset by the
Society’s first external securitisation issuance in the
second half of the year, where we actively invested
interest cost to diversify funding streams and manage
future maturity risks. Balance Sheet growth and the
strength and stability of retail funding also contributed
to the increase in net interest income, with mortgage
balances, including provisions and accounting
adjustments, increasing by £424.9m and savings
balances increasing by £450.0m (2024: increase of
£429.6m and £418.4m, respectively).
Underlying Group
Income Statement
2025
2024
£m
£m
Net interest income
101.4
91.9
Other income and charges ¹
60.4
56.1
Total operating income
161.8
148.0
Administrative expenses ²
(123.7)
(108.5)
Depreciation
(8.4)
(7.6)
Underlying operating profit before
impairments and provisions
29.7
31.9
1.49%
1.44%
2025
2024
2023
2022
2021
1.50%
1.48%
1.21%
Net interest margin
24
25
Other income and charges
Other income and charges includes income from
Newcastle Strategic Solutions (Solutions) and
Newcastle Financial Advisers. Income from Solutions
includes income generated from balances under
management of Solutions’ clients. Income from
Newcastle Financial Advisers relates to fee income
generated through financial advice services. Other
income and charges increased by £4.2m to £60.1m in
2025 from £55.9m in 2024, driven primarily by £1.6bn of
growth in Solutions’ balances under management in the
year and strong levels of new investments and on-going
service in the financial advice business.
Administrative expenses, depreciation
and amortisation
Overall management expenses (administrative
expenses, which includes operational investment,
depreciation and amortisation) increased to £132.7m
from £118.7m. This reflects increased headcount
levels as we sought to maintain strong service levels
for Members and clients. Costs also rose due to our
continued commitment to colleagues during a period
of sustained inflationary pressure, including paying the
Real Living Wage, alongside higher national insurance
contributions. Other administration expenses also
increased driven by a continued move towards new
cloud-based systems, investment in core processes,
as well as higher depreciation and amortisation based
on prior capital investment commitments.
Cost control and delivering a more efficient, scalable
and sustainable operating model are a key focus for the
Group leading into 2026 supported by the deployment
of our new target operating model.
The underlying cost to income ratio reflects underlying
costs deemed to be under the control of management
(administrative expenses plus depreciation and
amortisation as disclosed in the Income Statements)
divided by total underlying operating income, as
similarly presented. Management assesses the ratio
as a measure of operating efficiency and continues to
look for ways to improve this performance indicator.
The underlying cost to income ratio increased to 82% in
2025 (2024: 78%). The higher cost appreciation across
both staff and non-staff expenditure as outlined above
has more than offset the income growth.
The following table presents the reconciliation from
underlying operating profit before impairment and
provisions to reported profit before tax.
Fair value movements on equity
release mortgages
The Society’s equity release mortgages are held at
fair value and so any changes in the value of these
mortgages are recognised in the Income Statement.
The value of the equity release mortgages is impacted
by a number of factors used to estimate the future
cashflows expected on these mortgages; the most
significant of which is market interest rates, movement
in which is predominantly the driver of the £1.9m loss
recognised on these mortgages during the year
(2024: £4.9m gain).
Hedge accounting and movement in
financial instruments
The impact of market interest rate changes on the
Society is mitigated by hedging our exposure to
interest rate risks using interest rate swaps. This
significantly reduces the impact of changes in market
interest rates on net interest income.
Interest rate swaps are held at fair value and therefore
the value of the swap changes when market interest
rates move. As a result of changing interest rates, net
values of the interest rate swaps have decreased by
£54.2m during the year (2024: increase of £35.4m). This
was largely offset by increases in the Society’s hedge
adjustments on mortgages and savings, resulting in a
net loss of £4.5m during the year (2024: £0.3m gain).
Impairment provisions for loans and advances
to customers
During the year, economic conditions showed signs
of improvement, with inflation easing and gradual
bank base rate reductions (cumulatively of 100 bps)
supporting increased affordability. This all against a
backdrop of fiscal policy changes and geopolitical
uncertainty which impacted house price inflation in the
latter part of the year.
82%
78%
2025
2024
2023
2022
2021
76%
77%
76%
Underlying cost to income ratio
Some of this uncertainty is expected to unwind during
2026, impacting security values positively. Delinquency
rates, while low, have also experienced a small
reduction during the year. All in all, this improvement
in the macroeconomic outlook has led to a modest
reduction in the level of expected provisions with a net
impairment gain for loans and advances to customers
of £0.7m in 2025 (2024: gain of £2.5m).
The following table provides an overview of the
movement in provisions. More details are included in
notes 39 and 40 to the Annual Accounts.
Prime residential and buy-to-let provisions reduced by
£0.2m in the year, reflecting the improving economic
conditions, offset by the net growth in the mortgage
book. The mortgage loss provision coverage ratios
moved from 0.11% to 0.09%.
The Society successfully continued winding down
its legacy portfolios, seeing the redemption of, or
capital repayments against, legacy loans,
reducing the balances by £5.0m, with a £0.2m
reduction in provisions.
Provisions for liabilities and charges
Provisions for liabilities and charges have fallen from
£21.0m in 2024 to £1.3m in 2025, primarily reflecting
costs recognised in 2024 following our commitment
to provide voluntary financial support to help
Members whose trusts are affected by the actions and
subsequent collapse of Philips Trust.
At 31 December 2025, the majority of payments have
been made to affected customers, with a nominal
provision balance (£1.0m) retained to settle these cases
in 2026. In addition, £1.0m (2024: £1.2m) was received
from the administrators of Philips Trust in 2025 from the
recoveries made from Philips Trust investments, which
is netted off charges for provisions for liabilities and
charges in the Income Statement.
The remaining movement in provisions for liabilities for
the year relates predominantly to £2.1m of colleague-
related costs associated with an ongoing review and
deployment of the new Group target operating model
(2024: £0.9m).
Taxation
The Group shows an effective corporation tax rate of a
20.4% charge in 2025 (2024: 5.1% credit) and is lower
than the standard rate of corporation tax of 25% due
to adjustments for allowable distributions to
Additional Tier 1 capital holders, as well as differences in
timing of when charges are recognised for accounting
and tax purposes.
Balance Sheet
A consolidated Balance Sheet is set out below with key
Balance Sheet items discussed in detail in this report.
2025
2024
£m
£m
Underlying operating profit before
impairment and provisions
29.7
31.9
(Loss) / gain in fair value of equity
release mortgages
(1.9)
4.9
Hedge ineffectiveness and fair value
movements on other financial instruments
(4.5)
0.3
Revaluation loss on equity investments
(0.1)
(0.4)
Foreign exchange movements
-
0.1
Investment distribution
0.8
-
IT transformation costs
(0.6)
(2.6)
Reported operating profit
23.4
34.2
Impairment reversals on loans and advances
to customers
0.7
2.5
Loss on disposal of tangible and
intangible assets
(0.2)
-
Provision for liabilities and charges
(1.3)
(21.0)
Reported profit before tax
22.6
15.7
26
27
Movements
in loans and
advances to
customers
and related
provisions
Opening
balance
New
originations
in 2025
Redemptions
Movements
relating
to loans
originated
before
2025
Closing
balances
Prime and
buy-to-let
Loan balance (£m)
4,906.3
1,170.9
(726.9)
-
5,350.3
Provision (£m)
5.2
1.1
(0.6)
(0.7)
5.0
Legacy (excl)
housing
associations
Loan balance (£m)
29.9
-
(5.0)
-
24.9
Provision (£m)
1.4
-
(0.1)
(0.1)
1.2
2025
2024
£m
£m
Assets
Liquid assets
1,182.7
1,155.6
Derivative financial instruments
16.9
56.6
Loans and advances to customers
5,714.2
5,289.3
Fair value adjustments for hedged risk
16.6
(21.9)
Intangible assets
11.7
13.8
Property, plant and equipment
36.6
34.0
Other assets
33.2
28.8
Total Assets
7,011.9
6,556.2
Liabilities
Shares
5,882.7
5,432.7
Fair value adjustments for hedged risk
1.6
-
Deposits and debt securities
646.1
658.6
Derivative financial instruments
44.5
29.4
Other liabilities and provisions for liabilities
49.2
55.6
Subscribed capital
34.7
34.8
Reserves and equity
353.1
345.1
Total Liabilities
7,011.9
6,556.2
Liquid assets
The Society has continued to maintain a level of high
quality liquid assets throughout 2025. The Society’s
liquid assets comprise of assets held in cash or that can
be easily convertible to cash through treasury markets
(repo) or via various Bank of England liquidity schemes.
All the liquid assets are placed with institutions with
investment grade credit ratings, and 100% of the
Society’s liquid assets are with institutions rated AA-
or higher by Fitch (31 December 2024: 100%).
The Society’s strong liquidity position is also
demonstrated by the Liquidity Coverage Ratio, which
was 180% at 31 December 2025 (2024: 229%), well
in excess of the regulatory requirement of 100%. As
the Bank of England’s base rate has fallen in 2025
the benefit of holding excess liquidity has reduced.
The Society complied with all regulatory and internal
liquidity requirements throughout the year.
In addition, the Society has access to the Bank of
England liquidity schemes and has pre-positioned
mortgage collateral and other treasury assets that can
provide additional liquid assets as part of business as
usual and contingency funding plans.
Loans and advances to customers
During 2025, the Society’s strategy to grow core
lending, which includes prime residential and buy-to-
let mortgages, whilst winding down legacy
portfolios continued. Details of the movement in the
Society’s mortgage books is provided in note 12 to the
Annual Accounts.
Gross mortgage lending for 2025 remained flat at
£1.2bn, matching the record level of £1.2bn set in 2024,
whilst the balance of loans and advances to customers
after provisions increased by £424.9m overall in 2025
(2024: £429.6m). The lower net growth in mortgages
in 2025 compared to the prior year was due to lower
retention on certain tranches of maturing discount
mortgages, as well as a delay in completions towards
the end of 2025 due to high demand across the market.
Average loan to value for the core mortgage book
increased during the year to 67.5% (2024: 67.1%) and
average indexed loan to value saw an increase to 63.3%
(2024: 62.8%).
The majority of the Society’s lending is secured with a
first charge registered against the collateral property.
Core and legacy residential loans are shown at indexed
loan to value using the quarterly regional Halifax House
Price Indices, all other loans are shown without indexing.
Mortgage credit quality
Arrears
The Society measures mortgage arrears of 3 months
or more (excluding possessions) for both number and
value of loans. Although primarily a measure of the
quality of the existing mortgage books, the Society
also uses its mortgage support functions to inform
future lending with ’lessons learned’ fed back into
Lending Policy.
The percentage of mortgages in arrears by 3 months or
more remains at low levels. Overall by number of loans
in arrears we have seen a decrease of 0.1% to 0.8%, and
by balance we have seen an increase of 0.1% to 0.9%.
Forbearance
The Society works closely with any homeowner
experiencing difficulties, offering help and advice.
Customers utilising the benefits offered by the
Mortgage Charter (an agreement between the UK
Government, mortgage lenders, and the Financial
Conduct Authority that outlines the standards and
commitments for lenders when providing residential
mortgages) are not considered by the Society to be in
forbearance. Forbearance cases and options granted
are monitored by the Credit Risk Committee with the
levels of concessions granted not considered to be
material for the size of the overall book. Please refer to
note 40 to the Annual Accounts for further details.
Law of Property Act receiverships
and possessions
The Society continued to experience a low level of
possessions on residential loans and Law of Property
Act receiver appointments. At the end of 2025 the
Society had 21 properties in possession (2024: 11)
in relation to residential loans, one of which being
managed by a Law of Property Act (LPA) receiver (2024:
one) and there were three legacy loan properties (2024:
two) being managed by a Law of Property Act receiver.
Whilst possessions have seen a small increase in the
year, arrears levels remain low across all loan portfolios
as outlined above.
Funding
The Society manages its funding levels, mix and
duration carefully to ensure it has the required
resources in place to meet its liquidity requirements
and lending targets. The Society is predominantly
funded through retail savings with wholesale funding
used to provide a diversified funding source.
Retail savings balances increased by £450.0m during
2025 to £5.9bn (2024: £418.4m increase to £5.4bn),
further progressing our Purpose through providing
safe products for saving members. Wholesale
funding remained broadly flat compared to 2025.
Full repayment of the £366.7m of drawings previously
made under the Bank of England’s TFSME was made
during the year, offsetting with £350m raised from
the issuance of loan notes during the year under the
Society’s first external securitisation issuance
Hadrian Funding 2025-1 Plc, the Society's inaugural
external securitisation issuance, completed on 1
July 2025 with strong investor demand (2.5 times
over-subscribed) and highly competitive pricing in a
challenging market environment, issuing £350m of
external A notes and the Society retaining £300m of A
notes for use as contingent funding. This will provide an
important source of alternative funding in the future.
The ratio of shares and deposits to wholesale balances
moved from 89% / 11% in 2024 to 90% / 10% in 2025.
We’re
committed
to our high
streets
And our
local
presence
helps
us offer a
much-needed
service for
everyone
Asset class
2025
2024
%
%
Cash in hand and balances with the
Bank of England
15.0
39.1
Loans and advances to credit institutions
12.4
8.5
Covered bonds
21.2
17.7
Residential mortgage backed securities
17.7
8.2
Gilts
26.5
17.6
Treasury Bills
1.0
4.6
Supranationals
6.2
4.3
Total
100.0
100.0
28
29
Loan portfolios
2025
2024
£m
£m
Core lending
Prime residential
4,990
4,522
Retail buy-to-let <£1m
360
385
5,350
4,907
Legacy Lending
Equity release
163
172
Specialist buy-to-let
4
6
Housing associations
171
179
Commercial
3
4
Other
18
19
359
380
5,709
5,287
Provisions
(6)
(7)
Other accounting adjustments
11
9
Loans and advances to customers
5,714
5,289
%
%
Average LTV%
68.1
67.7
Average ILTV%
63.4
62.9
Arrears performance
3 months or more arrears
By number of loans
By balance
2025
2024
2025
2024
%
%
%
%
Core lending
0.7
0.7
0.8
0.8
Legacy lending
4.6
5.5
1.0
1.4
Total
0.8
0.9
0.9
0.8
Reserves and equity
The Group’s equity is predominantly made up of
£312.6m retained profits in the general reserve
(2024: £299.8m) and £40m of Additional Tier 1 (AT
1) instruments which were issued in 2024 and are
recognised in the other equity instruments reserve.
Capital
The following table shows the composition of the
Group’s capital ratios at the end of 2025. The increase
in Common Equity Tier 1 capital relates to the profit in
the year, after any applicable prudential adjustments.
The increase in additional Tier 1 and Tier 2 capital relates
to previously ineligible capital becoming eligible for
regulatory capital purposes. Remaining ineligible
capital will become eligible as the Group’s Balance
Sheet grows further.
The Group complied with its regulatory overall capital
requirements (which include regulatory capital buffers),
as notified by the Prudential Regulation Authority,
throughout 2025. The total capital ratio was 15.2%
(2024: 15.7%); Tier 1 capital ratio was 13.2% (2024:
13.7%), and Common Equity Tier 1 ratio was 11.7% (2024:
12.2%). As expected, capital ratios have reduced in
the year, as the Society advanced its Purpose through
higher lending levels which resulted in growth in risk
weighted assets only partially offset by retained
earnings generated in the year, utilising capital raised
externally in 2024.
The leverage ratio is a simplified capital strength ratio
measuring qualifying tier 1 capital against on and off
balance sheet assets. The Board monitors the leverage
ratio on a monthly basis, and, at 31 December 2025, the
figure was 4.9% (2024: 5.2%). This is, and has remained
throughout 2025, well in excess of the regulatory
expectation of 3.25%. The reduction is due to Balance
Sheet growth in excess of capital generation in the year.
The Group’s total capital requirement is communicated
annually by the Prudential Regulation Authority and
consists of minimum regulatory capital requirements
(Pillar 1) plus additional Society-specific capital
requirements for credit, market, operational,
counterparty, credit concentration, interest rate and
pension obligation risk (Pillar 2A). The Group’s total
capital requirement at 31 December 2025 (excluding
capital buffers) was £205.8m (2024: £188.9m). Further
detail on the Group’s capital is given in the Pillar III
disclosures available on the Society’s website.
A new regime for determining regulatory capital
requirements commonly referred to as Basel 3.1 is
coming into force on 1 January 2027. The Society
qualifies for the alternative Small Domestic Deposit
Taker regime and intends to adopt this regime. The
Society does not expect material negative impact on
overall capital requirements from the regime change.
Principal risks and uncertainties
The principal risks and uncertainties faced by the Group
are detailed in the Risk Management Report.
Anti-corruption and anti-bribery
It is our policy to conduct all of our business in an
honest and ethical manner. In doing so we will take
reasonable steps to prevent the facilitation of bribery,
corruption and tax evasion and where we identify that
our organisation is being used to facilitate bribery,
corruption or tax evasion we will take a zero-
tolerance approach.
Our Anti-Bribery and Corruption Policy sets out our
responsibilities, and those of anyone working for us,
in observing and upholding our position on bribery,
corruption and preventing the criminal facilitation of tax
evasion, and it also provides information and guidance
to colleagues on how to recognise and deal with a
suspicion of bribery, corruption or tax evasion issues.
It is a criminal offence to offer, promise, give, request,
or accept a bribe or fail to prevent our colleagues,
workers, agents or service providers facilitating tax
evasion. Individuals found guilty can be punished by
up to ten years' imprisonment and/or a fine. As an
employer if we fail to prevent bribery or tax evasion
we can face criminal sanctions, an unlimited fine and
damage to our reputation. We therefore take our legal
responsibilities very seriously.
Anti-slavery and human trafficking
The Group has a zero-tolerance approach to modern
slavery and we are committed to acting ethically
and with integrity in all our business dealings and
relationships and to implementing and enforcing
effective systems and controls to ensure modern
slavery is not taking place anywhere within our own
business or any of our supply chains. We are also
committed to ensuring there is transparency in our
own business and in our approach to tackling modern
slavery throughout our supply chains, consistent with
our disclosure obligations under the Modern Slavery Act
2015. We expect the same high standards from all our
contractors, suppliers and other business partners.
Our Anti-Slavery and Human Trafficking Policy applies
to all persons working on our behalf in any capacity,
including colleagues at all levels, Directors, officers,
agency workers, seconded workers, volunteers,
agents, contractors, external consultants, third-party
representatives and business partners, sponsors, or any
other person associated with us, wherever located.
Outlook
Whilst the key UK economic metrics have shown
some signs of improvement in 2025, the outlook
remains uncertain.
There are a number of potential headwinds emerging
for the Group in 2026, some of which remain largely
outside of our control. As we move into 2026 the key
focus areas will be around ensuring that we continue in
the deployment of our new target operating model, to
drive cost efficiency and sustainable scalability, with
a particular focus on improving the profitability of the
Solutions Business, investing in technology, systems
and process that make us more efficient as a business
and provide better services and experiences for our
Members and clients.
Whilst we remain cautious, we believe that our clear
strategy and strength in our core business allows us
to continue to support our Members and our UK wide
customer and client base connect with a better
financial future.
On behalf of the Board
Andrew Haigh
Chief Executive Officer
5 March 2026
31
30
Capital
2025
2024
£m
£m
Common equity tier 1 capital
Retained earnings
312.3
299.8
Other reserves and
prudential adjustments
(13.0)
(13.7)
299.3
286.1
Additional tier 1 capital
Perpetual capital securities
40.0
40.0
Ineligible additional tier 1
capital deducted
(1.4)
(4.6)
38.6
35.4
Total tier 1 capital
337.9
321.5
Tier 2 capital
Permanent Interest Bearing Shares
34.8
34.8
Subordinated loan notes
19.6
19.5
Ineligible tier 2 capital deducted
(2.9)
(7.1)
51.5
47.2
Total capital
389.4
368.7
Risk weighted assets
Liquid assets
56.6
34.2
Loans and advances to customers
2,155.0
1,990.4
Other assets
69.3
69.0
Counterparty credit risk
61.3
54.5
Operational risk
224.1
206.3
2,566.3
2,354.4
Capital Ratios
%
%
Common Equity Tier 1 ratio
11.7
12.2
Tier 1 ratio
13.2
13.7
Total capital ratio
15.2
15.7
UK Leverage ratio (excluding claims on
central banks)
4.9
5.2
Sustainability
Report
I am proud to introduce our Sustainability
Report for 2025. This report documents
our commitment to operating as a
responsible business and the year-on-
year progress we are making on our
journey to net zero.
We have been connecting our communities
with a better financial future for over 160
years and our commitment to caring for our
environment and ensuring sustainability is more
important than ever if we are to ensure that we
can help provide a strong financial future for
generations to come.
We remain committed to supporting the UK’s
transition to be a low carbon economy by
minimising our climate-related impact. We
have taken action to improve our operational
emissions reporting; and I am pleased to
report we have seen a decrease in our overall
operational carbon footprint.
We are working on further reducing our
environmental impact and a particular highlight
in 2025 was becoming a signatory of the United
Nations Environment Programme Financial
Initiative and committing to their Principles
of Responsible Banking Framework. This will
allow us to contribute to the wider global
climate impact by supporting our Members
and working with communities across our
regions. With the help of our diverse workforce,
robust governance and ambitious strategy, I
am confident we will continue to make positive
progress across all our environmental and
sustainability ambitions as we move through
2026 and beyond. We are committed to
transitioning the Society to ensure that it
continues to operate sustainability in the future.
Andrew Haigh
Chief Executive
32
33
Supporting the transition to a greener economy
The Society recognises the vital role the financial
services sector plays in supporting the transition to
be a low carbon economy. This report demonstrates
the Society’s commitment to effectively govern,
manage, and monitor the risks and opportunities arising
from climate change in line with its obligations under
the Prudential Regulation Authority’s Supervisory
Statement 3/19 (SS3/19).
This report outlines activity from across the Group,
including the Society and its subsidiaries, Newcastle
Strategic Solutions Limited (NSSL) and Newcastle
Financial Advisors Limited (NFAL).
Additionally, this report provides information in line with
the Society’s obligations under:
■
Companies (Strategic Report) (Climate-related
Financial Disclosure) Regulations under sections
414CA and 414CB of the Companies Act 2006; and
■
UK Government Streamlined Energy and Carbon
Reporting Requirements 2019 (SECR).
Our Climate Strategy
How risks are linked to our business model
and strategy
Climate change is relevant to the Society’s success
as the physical effect of climate change and the
transition to a low carbon economy continue to create
unforeseen risk and potential economic impact. We
also recognise that we have a corporate responsibility
to address any negative impact we have on the wider
environment because of our business operations.
These risks and consequences could affect the
viability of the Society, as well as the stability of
the wider financial system. Considering this, and
responding to the climate change challenges faced,
the Society has a clear understanding on the action
required to address the large-scale change that is
needed across the business.
The climate strategy is supported by the Group
strategy, which includes environment as one of its
five strategic pillars. The environmental strategic pillar
outlines the Society’s commitment, documenting that
the Society
will care for our environment and ensure a
sustainable future for generations.
We have been working hard over the last few years to
establish a clearer understanding of the impact our
business currently has on the climate and in return the
risks and opportunities the climate presents to our
business, which has enabled us to identify and agree
on the most orderly way to transition our business to
operate on a net zero basis.
Climate risk is separated into two key areas: physical
risk and transitional risk.
■
physical risk arises from an increased frequency
and severity of climate and weather-related
events; and
■
transition risk is an exposure that may arise from
changes to regulation and policy (e.g. targets for
more energy-efficient homes), legal, technology
and market changes associated with the process
of adjusting towards a low-carbon economy.
We have identified that the largest risk exposure the
business has is physical risk related to the impact of
climate change on our mortgage portfolios.
The table on the following page summarises the key
climate-related risks we have identified and their
potential impact on the Society.
These risks are documented by their risk type, either
physical or transitional, and the time horizon associated
with each risk.
Risk Type
Horizon
Risk description
Risk impact
Controls
Credit Risk
Physical
Long
Increased severity and
frequency of extreme
weather events can
impact property collateral
value and cause financial
pressure to households
due to higher costs,
increasing the probability
of default.
Impact on customer
affordability that impacts
borrowers’ ability to repay
the loan which creates an
impairment on the loan and
a loss to the Society.
Annual climate risk scenario
analysis of physical and
transitional risks in the
mortgage portfolio, where
results are considered as
part of the Internal Capital
Adequacy Assessment
Process and impairment
assessments.
Credit risk appetite limits
in relation to lending book
physical and transitional
risk. Limits are reviewed
regularly to ensure they
remain effective.
Transitional
Medium
Macroeconomic downturn
from a disorderly national
transition may place
pressure on borrowers’
affordability increasing the
probability of default.
Impact on borrowers’
affordability due to higher
running costs, retrofit
costs or inability to sell their
property which may impact
the borrowers’ ability to
repay the loan. Resulting
in defaults which impact
the Society’s financial
performance and Balance
Sheet due to impairment of
the loan.
Bi-annual monitoring
of EPC on the
mortgage portfolio.
Bi-annual reporting
of exposures relating
to physical risk on the
mortgage portfolio.
Horizon scanning to
understand regulatory or
industry changes.
Operational Risk
Physical
Medium
Supply chain disruption
due to extreme and
frequent weather events.
Weather events may
cause damage to our
supply chain operations
leading to delays and
disruption which impacts
our business. The impact
of the type of event may
lead to the business being
unable to deliver regulatory
requirements or customer
requests due to a loss of
service, this could result
in financial loss and / or
increased operational
costs for the business
as well as regulatory
penalties.
Operationally resilient
business so that business
services to our Members
and customers continue
to be provided. Controls
include:
■
Remote working
capabilities for
our colleagues.
■
Buildings insurance
for all Group
owned premises.
■
Business
continuity plans.
■
Business impact
assessment.
■
Operational risk
scenario analysis.
Note:
Short-term: < 5 years this aligns with the Group’s financial planning cycle and our commitment to the United Nations.
Medium-term: 5 - 15 years, the primary time horizon associated with transitional risk materialising.
Long-term: 15+ years, this covers the main time horizon associated with physical risk and our climate risk stress testing horizon.
Sustainability Report
We fully
recognise our
responsibility
to care for our
environment
35
34
Climate Risk management
How we identify and assess
climate-related risks
Climate risk management is embedded within the
Society’s risk management processes and is adopted
using the Society’s three lines of defence framework to
both identify and manage business risks.
Climate risk is considered as part of first line
business processes; it is incorporated into risk
appetites and is monitored and reported to relevant
governance committees.
With regards to climate risk associated with our
mortgage portfolio, current processes include a
valuer's assessment of known flood risk as well as
subsequent checks on property insurance,
providing assurance that the property is insurable
before completion.
Following the Government’s publication of minimum
energy efficient standard guidance in 2020, our
processes require details of energy efficiency ratings
on buy-to-let properties, receiving confirmation from
the surveyor that the property’s energy performance
certificate (EPC) rating is not in bands F or G.
The Society is committed to continually reviewing
and improving our controls around identification,
assessment, management and monitoring of climate
risk in line with lending exposures.
Biannual reporting is undertaken to assess mortgage
portfolio exposures to risks arising from weather related
events such as flooding, subsidence and coastal
erosion and risks associated with energy efficiency.
This is reported to relevant committees, under the
governance framework, with the Enterprise Risk teams
responsible for providing oversight and challenge to
the first line teams.
Climate-related environmental events, international
policy and strategy to address climate change,
economic, social and market trends are considered
as part of the Society’s risk management planning and
reporting, notably via the Chief Risk Officer’s report to
the Group Risk Committee and the Board.
Regular review of the risk horizon carried out as
part of this reporting takes account of key internal
and external influences to our strategic goals and
informs our response to emerging risks or threats.
This approach includes an internal assessment of the
Society’s exposure to key risks highlighted within the
Government’s National Risk Register.
How we manage climate-related risks
The Society has developed specific climate-related
risk appetite statements and reporting as a component
within the Society’s risk management framework.
Quantitative credit risk appetite limits have been
set to manage the financial risk from climate change
and have been set in relation to both physical and
transition risks. We report on and monitor climate-
related risk exposures for flooding, subsidence and
coastal impacts, as well as monitoring EPC status of our
mortgage book to gain better insight and review our
position against risk appetite limits.
The Society revisits annually the operational scenarios
it runs based on the key risks it faces, the greatest
potential impact of those risks and the likelihood of
those risks. The operational risk scenario library includes
at least one scenario which considers the impact of
an environmental event such as severe weather and
flooding. These scenarios are developed internally,
in discussion with key stakeholders from across the
business and consider the operational and financial
impact of the event.
Scenario analysis
Climate change is a complex and
inherently systemic
issue, and it is particularly difficult to model given the
long-term nature of the exposure and the potential
implications cutting across several key areas of risk
such as credit, operational, liquidity, market and
operational resilience.
There is an expectation from the Prudential Regulatory
Authority that scenario analysis is conducted for
material climate-related risks, and to consider the
impact of the exposure over short, medium and
long-term time horizons. In 2022, the Bank of England
published the results of the Climate Biennial Exploratory
Scenario (CBES). The exercise was designed to present
a fully coherent set of scenarios that could be used to
assess climate risks facing key UK firms.
To support the CBES, the Bank of England issued
climate-related scenarios (Early Action, Late Action
and No Action). Likewise, the Intergovernmental
Panel on Climate Change (IPCC) has also set
Representative Concentration Pathways (RCPs),
which represent different levels in global greenhouse
gas concentrations (the higher the RCP the greater
the volume of greenhouse gas emissions). Both the
RCP and Bank of England scenarios include global
temperature increase forecasts and therefore it
is possible to match them (subject to a degree of
judgement), as outlined in the table below:
Expected credit losses
We undertake climate change scenario analysis
using the metrics from the RCP and Bank of England
scenarios to estimate expected credit losses that may
come from physical risks associated to flooding (from
fluvial, pluvial and tidal sources), as well as subsidence
and coastal erosion. A post model adjustment in
respect of expected losses from climate change is
in place as part of our overall expected credit loss
provision, as outlined in note 38 to the Annual Accounts.
Internal Capital Adequacy Assessment
Process (ICAAP)
The ICAAP considers the impact of a range of scenarios
on the Society’s capital position. As part of the
Society’s ICAAP we conducted three credit risk related
scenarios linked to climate-related risk, with the focus
being on the medium-term horizon, which covered our
maximum mortgage term of 40 years.
We also considered the operational impact on the
organisation; carrying out an extreme but plausible
pluvial flood related scenario which impacted the
operational effectiveness of the Society’s Head Office.
The scenario considered likelihoods of 1 in 10 years
(typical event) and 1 in 25 years (extreme event).
The output of this scenario concluded that the risks
identified are being managed effectively with a robust
control framework in place which mitigates exposure
to within appetite and that there is sufficient capital
available to respond accordingly and quickly in the
event of the risk materialising.
Internal Liquidity Adequacy Assessment
Process (ILAAP)
The ILAAP considers the impact of a range of scenarios
on the Society’s liquidity position. Whilst climate-
related risks were considered as part of scoping the
stress tests within the most recent ILAAP, the Society
concluded that currently we do not consider climate-
related liquidity risks to present a material exposure
to our liquidity position. The Society will continue to
consider climate-related risk assessments within the
scope of future ILAAPs, acknowledging the evolving
risks presented by climate change.
Operational Resilience
The Society’s operational resilience framework
addresses how the Society would be impacted
by future responses to climate-related risks and
opportunities. The Society’s activities are largely in the
UK, and its direct emissions are limited, meaning we
can monitor the risks we are exposed to from climate
change closely and adapt in accordance with any
movement in the risk.
The Society’s mortgage book is a dynamic asset and
as such medium-term risks such as flooding risks
associated with increases in global temperatures can
be mitigated through our lending criteria reducing
the immediate effect on the credit worthiness of
those assets.
How we identify and assess
climate-related opportunities
We utilise existing processes to identify and assess
climate-related opportunities, such as the product
development process, as well as colleagues attending
working groups and committees such as the United
Nations Environment Programme, UK Finance and The
Green Finance Institute.
The internal Environment Taskforce played a key role
in identifying opportunities and implementing tactical
solutions across the Society and wider communities
such as organising regular litter picks and beach cleans
as well as the creation of the School of Sustainability,
an internal one stop hub for colleagues to support
environmentally sustainable living, knowledge and
volunteering opportunities.
How we manage climate-related opportunities
Climate-related opportunities are managed through
various functions and governance structures across
the Society according to risk exposure and business
impact. The Executive Committee is central to
managing these opportunities and giving a directive
steer on how to manage opportunities according to the
Society’s purpose priorities and climate strategy.
Climate risk governance
As we continue to enhance our environmental, social
and governance (ESG) approach, we are committed
to implementing the right measures to assess our
performance and maximise our impact.
Climate risk is managed through the Society’s risk
governance structure which is outlined in the Risk
Management Report and is governed as set out below.
Board
The Board is responsible for effective oversight of
the governance aspects of the climate strategy and
associated climate-related risks, which are embedded
into existing governance structures to ensure that
accountability, transparency and ethical conduct is
present across the business.
Group Risk Committee and sub-committees
The Group Risk Committee is responsible for ensuring
climate-related risk and opportunities are being
managed effectively, with the Chief Risk Officer
being responsible for the day-to-day management of
climate-related risks;
■
Known or emerging risks are raised to the
appropriate Board sub-risk committee as follows:
Enterprise Risk Committee for climate-related
risks to business operations (including
operational resilience);
Credit Risk Committee for climate-related risks to
the Society’s secured mortgages; and
Assets and Liabilities Committee for climate-
related risks to capital or liquidity.
In 2025, Committee meetings covered
following topics:
■
annual climate financial risk reporting at Group
Risk Committee;
■
monthly review of the climate-related risk appetite
at Enterprise Risk Committee;
■
biannual climate-related risk monitoring at Credit
Risk Committee; and
■
lending decisions in relation to flooding risk at
Credit Risk Committee.
Climate Change Scenarios
Scenario
Early action
Late action
No Policy action
RCPs
2.6
6.0
8.5
Internal link to
Bank of England
Climate Scenarios
Low emissions
Significant reduction in
greenhouse emissions
(Early Action)
Medium emissions
All signatories of Paris
accord deliver on
commitments
(Late Action)
High emissions
Business as usual
(No Policy Action)
Temperature increase
0.9°C - 2.3°C by 2100
2.0°C – 3.7°C by 2100
3.2°C – 5.4°C by 2100
36
37
Executive Committee
The Society’s Executive Committee chaired by the
Chief Executive is responsible for overseeing the
identification and management of climate-related risks
and opportunities. They work proactively to review any
new, emerging or changing risks focusing on short-term
priorities to ensure the business adapts accordingly.
Discussions are focused on the Society's short-term
exposure to physical and transitional climate-related
risks and opportunities.
In 2025, we officially became signatories of the
United Nations Principle of Responsible Banking
following approval from the Executive Committee
and Board. The Executive Committee discussed the
benefits of being a signatory and agreed the most
appropriate sustainable development goals to adopt in
line with our commitment. Since becoming signatories,
we have focused on aligning the business to the
principles framework.
Senior Management accountability
The accountability for climate strategy and climate-
related risk within Senior Management is shared
between our Chief Financial Officer (CFO) and our
Chief Risk Officer (CRO) as defined under their
additional responsibilities.
Chief Financial Officer
The CFO is accountable for managing the climate-
related physical and transitional financial risks the
business is exposed to. This includes accountability for
leading the development and implementation of:
■
identification, measurement, monitoring and
reporting of the financial risks of climate change,
in line with our risk appetite including our risk
exposure limits and thresholds;
■
scenario analysis (including a catastrophe
modelling approach) to determine long-term
financial risks and assess the impacts on our
Balance Sheet; and
■
disclosing the financial risks of climate change to
the Prudential Regulatory Authority.
Chief Risk Officer
The CRO has accountability for ensuring the
development and implementation of a governance
framework to ensure that the Board understand and
assess the financial risks from climate change which
affect the Society, and address and oversee these risks
within our overall business strategy and risk appetite.
Internal Audit Services
In addition, Internal Audit Services provide independent
assurance on the effectiveness of how we manage
climate risk.
United Nations Principles of Responsible
Banking
In 2025, we became an official signatory of the United
Nations Principles of Responsible Banking (UN PRB).
This marked a milestone in our net zero journey allowing
us to align our strategy, decision making and le
nding to a globally recognised framework which will
support us in contributing to global climate efforts at a
regional level.
The UN PRB is an internationally recognised framework
made up of 6 principles:
Being a member of UN PRB commits the Society to a
set of structured actions, over time, which are matched
to our existing sustainability efforts. By aligning to the
science-based framework from the UN PRB it provides
the business with comfort that our transition to net zero
follows a robust and orderly pathway supported by
international policy makers, scientists and academics.
Following this approach ensures we move closer to
achieve net zero.
The principles are designed to be integrated into
our business strategies and across our portfolio of
activities, bringing purpose, vision and ambition on
sustainable finance to the core of our organisation,
whilst effectively managing the risks and opportunities
the business is exposed to as we evolve and climate
change develops.
Throughout 2025 we focused on building our
understanding of the principles that will guide the
transition of our business to operate on a net zero basis.
We have considered five of the six principles, using their
guidance to conduct an overall review of our operations
to determine where our priorities over the coming
months and years should be placed, with the following
questions being at the core of this work:
■
How does the business currently impact
the climate?
■
Where in the business are the biggest
negative emitters, and what can we do to reduce
those emissions?
■
What are the climate-related opportunities
available as we transition the business to increase
our positive impact on the environment?
These questions have allowed us to gather data and
information to create a clearer picture of the work
required over the coming months and years to ensure
we fully align our efforts to the Paris Climate Agreement
and the Greenhouse Gas Protocol when reducing our
greenhouse gas emissions.
It has also provided some insight in recognising that
we are a business that operates on a sole asset class
(mortgages) basis and that the emissions from these
assets contribute to the majority of the Group’s carbon
footprint. We recognise that there are limited controls
we can deploy to reduce these emissions and that to
deliver meaningful reductions we are reliant on external
factors such as changes to a national renewable utility
infrastructure, increased consumer demand for greener
products and UK Government policy to support the
green changes needed for lenders across the UK.
External network
We are working closely with UK Finance and the
Prudential Regulation Authority, sharing thought and
opinion, ensuring we are involved with work needed
to support the UK Government to make the changes
required to drive progress towards a greener UK and
greener mainstream finance.
In the meantime, we are focusing our efforts on the
controllable emissions in scope 1 (direct) and scope
2 (indirect) and working on the reduction of those
emissions across our business estate.
Alignment
We will align our business strategy
to be consistent with and contribute
to individuals’ needs and society’s
goals, as expressed in the Sustainable
Development Goals, the Paris Climate
Agreement and relevant national and
regional frameworks.
Impact & Target Setting
We will continuously increase our
positive impact and manage the risks to
people and environments. At the same
time, we reduce the negative impact
resulting from our activities, products
and services. To this end, we will set
and publish targets that have the most
significant impact.
Clients & Customers
We will work responsibly with our
clients and our customers to encourage
sustainable practices and enable
economic activities that create
shared prosperity for current and
future generations.
Transparency & Accountability
We will periodically review our individual
and collective implementation of these
principles and be transparent about
and accountable for our positive and
negative impact and our contribution to
societal goals
Stakeholders
We will proactively and responsibly
consult, engage and partner with
relevant stakeholders to achieve
societal goals.
Governance & Culture
We will implement our commitment
to these principles through effective
governance and a culture of
responsible banking.
38
39
United Nations Sustainable Development Goals
In addition to our carbon reduction activities, we
have also adopted six United Nations sustainable
development goals.
In 2025, a gap analysis was conducted which looked at
each of the 17 United Nations sustainable development
goals and how they individually align to our strategic
pillars, business model and Purpose. The objective was
to identify the goals with the strongest alignment to
our business. To support this gap analysis various peer
reviews were also conducted to gain insight into how
our peers approach adoption of their goals, appetite
and progress of adoption.
The output of this work has led to us officially
adopt the following United Nations sustainable
development goals:
■
We’re proud to have achieved the
‘Maintaining Excellence’ award in
Better Health at Work scheme -
recognising our commitment to our
approach to health and wellbeing.
Our wellbeing approach considers
mental, physical, financial and
emotional wellbeing.
■
Our benefits include Medicash, providing access
to everyday healthcare support, our reward and
benefits hub, which offers wellbeing initiatives such
as GymFlex to help colleagues stay active
and healthy.
■
We also deliver financial wellbeing sessions to
colleagues, customers and community groups
to equip people with the tools to manage their
wellbeing holistically. Additionally, we partner
with Citizen’s advice to provide financial support
through their ‘Helping Hands Scheme’.
■
Our partnerships with schools,
colleges and community
organisations help us promote
financial and digital literacy,
helping people in our communities
build confidence.
■
We’re committed to developing our colleagues
through learning and career development
opportunities, ensuring everyone has the tools to
progress. We have invested in LinkedIn Learning
which all colleagues can access to complete a
range of courses and adopt new skills.
■
We have formed a partnership with Newcastle
United Foundation to help create inclusive
pathways for all to learn, grow and gain experience.
We also delivered a week long summer academy in
partnership with the Newcastle United Foundation.
■
We held an International
Women’s Day Event including a
sexual harassment webinar for
line managers.
■
We have in place equalised family
leave, baby loss and neonatal
provisions and support.
■
We have Parent & Carers, Menopause and Women
in Leadership networks all delivering a calendar of
activity internally across the business.
■
We have a partnership with Smart works
supporting women across the North East Region
back into work.
■
We are a Living Wage and Living
Pension accredited employer – we
won the Living Pension Employer
Award in 2025.
■
We offer free pension talks
delivered to regional employers and
community organisations.
■
We have formed a partnership with Newcastle
United Foundation to help create inclusive
pathways for all to learn, grow and gain experience.
■
We offer 2 paid volunteer days for each colleague
annually to support wider economic growth within
our communities.
■
Our First Step mortgage (up to 98%
loan-to-value) is designed to help
first time buyers get on the property
ladder sooner with a smaller up-
front cost.
■
We offer mortgages in later life
products that are tailored for
those looking to borrow in and
approaching retirement and
provides borrowing up to 95% LTV.
■
Our Sustainable Living Hub provides accessible
information for making sustainable home choices.
The hub is located on the communities’ page of
our website.
■
The total number of hours our
colleagues have spent volunteering
on environmental causes was 1,792
during 2025.
■
The electric vehicle (EV) scheme has increased
vehicle uptake from 10 in 2024 to 36 in 2025. Our
EV benefit includes both new and nearly new cars
which ensures that costs are kept to a minimum and
makes the benefit accessible to more colleagues.
An increase of 26 EV in 2025 equates to a saving of
9.24 tonnes of carbon emissions.
■
Head office LED lighting replacement project
approved in 2025; project will facilitate the
replacement of the current fluorescent
lighting with LED lighting reducing negative
carbon emissions.
In the latter part of 2025, we have used our research
and analysis to create a set of strategic considerations
and an action plan for senior leadership, which will be
implemented over the next three to five years in line
with the timeline set out as part of the United Nations
commitment ensuring we fully embed the six principles.
Whilst at the beginning of this journey we are clear on
the steps needed to fully integrate the principles and
evolve our business towards being a more sustainable
and environmentally friendly operation.
We commit to adapting the business and will lead by
example and remain focused to ensure we achieve our
strategic goals to transition to a low carbon economy
and sustainable Society by 2050, whilst financing
the transition for our Members through sustainable
products and providing support to our communities on
their transition to a sustainable, greener world.
Metrics and targets
The Society has committed to a science-based
pathway in line with its commitment to the UN PRB
which will transition the business to operate as a
net zero sustainable Society by 2050. In addition
to monitoring key metrics associated with climate
change, the Society is working hard to reduce absolute
emissions, as measured by our emissions inventory with
a specific focus on the reduction of controllable scope
1 direct and 2 indirect purchased electricity emissions
across the entire property estate, noting that during
2025 we have increased our property portfolio through
organic growth of the business with the opening of the
flagship branch in the centre of Newcastle alongside
the first branch opening of Manchester Building Society
located in the centre of Manchester.
Metrics and targets used to monitor physical
and transition risk metrics
The metrics we apply to assess and monitor the climate
risk exposure to the Society are:
■
properties classed as being in the highest flood
risk category;
■
properties classed as being in the highest
subsidence risk category;
■
properties at risk of being impacted by coastal
erosion; and
■
mortgage portfolio distribution by EPC category.
The Society has quantitative portfolio credit risk
appetite metrics to manage and limit its exposure to
physical and transition risks associated with climate.
The monitoring specifically focuses on the lending in
the very high risk categories given these are likely to
be impacted the most from a valuation perspective
and higher insurance costs due to the severity and
frequency of physical events.
The Society has developed specific climate-related
risk appetite statements and reporting as a component
within the Society’s risk management framework.
Quantitative credit risk appetite limits have been set
to manage the financial risk from climate change and
have been set in relation to both physical and transition
risks. We report on and monitor climate-related risk
exposures for flooding, subsidence and coastal risks,
as well as monitoring EPC status of our mortgage book
to gain better insight and review our position against
risk appetite limits. Reporting is discussed bi-annually
at Credit Risk Committee.
Physical risk metrics
Since 2024, we have engaged with a third-party
data provider in relation to the physical risks covering
flooding, subsidence, and coastal risk. All climate risk
exposures are monitored bi-annually to ensure we
operate within our risk appetite. The current overall
exposure remains low and below UK averages as shown
in the following table.
1.
UK benchmark refers to both mortgaged and unmortgaged
properties. Flood, subsidence and coastal data covers residential
and buy-to-let
2.
Twinn current flood risk rating (81-100)
3.
Terrafirma current subsidence risk score (10-15)
4.
Terrafirma current coastal risk score (100)
The Society tests the resilience of its mortgage
portfolio via scenario analysis. It does so by forecasting
what the exposure of the current portfolio would
be using the most severe view for greenhouse gas
emissions over the lifetime of the book. The scenario
is represented by a ‘no further policy action’ scenario
where global temperatures will continue to rise
progressively by the end of the century, reaching
up to 5.4°C, from pre-industrial levels. In those
circumstances, the greatest movement in the book is
observed for flood risk, which represents circa 2.3%
of the current book. Overall, the risk remains low and
below the UK average. The increases seen from other
physical risks are less pronounced as seen in the
table below:
Current portfolio exposure to physical risks
2025
Physical risk
Number of
properties
Exposure
£m
Book
%
UK %
1
Properties
classed in the
highest flood
risk category
²
498
74.1
1.5
1.8
Properties
classed in
the highest
subsidence
risk category
³
1,412
396.8
4.3
6.9
Properties
classed in
the highest
coastal risk
category
⁴
-
-
-
-
Portfolio exposure under a
‘No policy action/RCP 8.5’ scenario 2050
Physical risk
Number of
Properties
Exposure
£m
Book %
Properties
classed in the
highest flood
risk category
775
113.2
2.3
Properties
classed in
the highest
subsidence
risk category
1,485
410
4.5
Properties
classed in
the highest
coastal risk
category
2
0.3
0.01
40
41
Energy performance certificates (EPCs)
Domestic EPCs are banded from ‘A’ to ‘G’ where ‘A’
is the most energy efficient in terms of fuel costs and
CO2 emissions, and ‘G’ is the least energy efficient.
Properties are categorised into these seven bands
based on their standard assessment procedure (SAP)
rating, as shown in the table below.
Such ratings consider the performance potential of
the building itself (the fabric) and its services (such
as heating, insulation, ventilation and fuels used). The
method used to calculate the SAP score is regularly
reviewed by the Government, where it is expected that
the new SAP 11 method is to be rolled out as part of the
future homes standard on new builds in the near future.
In 2024 we started to perform analysis of EPC ratings on
our residential mortgage portfolio, to understand our
exposures regarding energy efficiency.
The most common EPC rating based on book volume
on the Society’s residential mortgage portfolio is a
‘D’ rating which is consistent with the rest of UK. The
Society is in line in terms of EPC, with 47% of
properties having an EPC rating of C and above, against
the UK at 48%.
This table is inclusive of both valid and expired EPCs.
The unknown category, covers properties which do
not have an EPC or have not been matched in the open
register. This is due to a lag in EPC data being registered
and therefore the data captured in October 25 for
England and September 25 for Scotland is the latest
data available. This data is sourced from a third-party
external supplier.
Risk exposure to actual EPCs
EPC
Category
Volume
Exposure
£m
Book
%
A
281
56.7
0.8%
B
4,472
818.1
13.4%
C
7,838
1,254.1
23.5%
D
9,791
1,602.4
29.4%
E
2,939
508.8
8.8%
F
554
104.5
1.7%
G
133
25.3
0.4%
Unknown
7,327
1,068.3
22.0%
Streamlined Energy and
Carbon Reporting (SECR)
SECR Summary
SECR disclosures became mandatory for listed and
large unlisted UK companies for reporting cycles
beginning on or after 1st April 2019.
The following sections summarise Newcastle Building
Society’s energy usage, associated emissions, energy
efficiency actions and energy performance under the
government policy SECR.
This is implemented by the Companies (Directors’
Report) and Limited Liability Partnerships (Energy and
Carbon Report) Regulations 2018.
Under the legislation, a business must disclose its
energy consumption, emissions, intensity metrics and
all energy efficiency improvements implemented for all
UK operations.
Newcastle Building Society is a UK-incorporated
business. An operational boundary has been applied for
the purposes of the reporting.
Through 2025 we were able to record 91% of accurate
consumption data to calculate scope 1 & 2 emissions
in 2025. The remaining 9% of the consumption data
has been estimated based on the observed data.
As we continue to mature our capability to measure
and report our emissions, we aim to include scope 3
controllable emissions in future periods; currently there
is not sufficient available data to accurately measure
applicable scope 3 emissions.
Year-on-year changes
Following changes within the branch footprint in 2025,
including the removal of gas boilers and small changes
in space usage within one of our locations, our natural
gas emissions decreased by 14.13% in 2025 compared
to 2024 and electricity emissions decreased by 16.93%
in 2025 compared to 2024.
Additionally, there was a reduction in the UK grid
emissions factor by 14.5% for 2025, contributing to the
electricity emissions decrease year-on-year.
In 2025, there was a shift away from diesel company
vehicles towards electric company vehicles, resulting
in reduced diesel mileage and fuel use alongside
increased electric vehicle mileage. Transport
emissions increased by 1.61% in 2025 compared to
2024, largely due to higher business electric vehicle
company car mileage.
Energy efficiency
The business is committed to year-on-year
improvements in its operational energy efficiency.
A register of energy efficiency measures has been
compiled, with a view to implementing these measures
in the next five years.
Energy saving measures to be addressed in 2026 as
part of the Society’s decarbonisation agenda are:
■
removal of gas from additional branches is under
review; and
■
LED lighting upgrade: the lighting at head office is
planned to be upgraded to LED lighting.
EPC Rating
SAP Score
A
92+
B
81 - 91
C
69 - 80
D
55 - 68
E
39 - 54
F
21 - 38
G
1 - 20
Current EPC:
Newcastle Building Society vs UK
% Properties
EPC Rating
40%
30%
20%
10%
0%
A
B
C
D
E
F
G
NBS
UK
1%
16%
30%
38%
12%
2%
1%
2%
1%
0%
13%
35%
37%
12%
Caring for our
environment
and ensuring
sustainability
is
more important
than ever
43
42
Reporting methodology
The SECR report (including the scope 1, 2 and 3 kWh
consumption and CO2e emissions data) has been
developed and calculated using the Greenhouse Gas
Protocol – A Corporate Accounting and Reporting
Standard (World Resources Institute and World
Business Council for Sustainable Development, 2004);
Greenhouse Gas Protocol – Scope 2 Guidance (World
Resources Institute, 2015); ISO 14064-1 and ISO 14064-
2 (ISO, 2018; ISO, 2019); Environmental Reporting
Guidelines: Including Streamlined Energy and Carbon
Reporting Guidance (HM Government, 2019).
Government Emissions Factor Database 2025 version
1.0 has been used, utilising the published kWh gross
Calorific Value (CV) and kgCO2e emissions factors
relevant for the reporting period of the year to 31
December 2025.
Estimations were undertaken to cover missing billing
periods for properties directly invoiced to Newcastle
Building Society. These were calculated on a kWh /
day pro-rata basis at the meter level and applied to the
properties with no available data.
For properties where Newcastle Building Society is
indirectly responsible for utilities (i.e. via a landlord
or service charge), the median consumption for
properties with similar operations was calculated at
the meter level and applied to the properties with no
available data. This was applied to one gas meter.
All estimates equated to 9.42% of reported
consumption.
Market-based emissions have been calculated using
the supplier-specific fuel mix from Newcastle Building
Society’s electricity suppliers.
Newcastle Building Society uses 100% renewable
electricity sourced from its suppliers backed by
Renewable Energy Guarantees of Origin certificates.
The breakdown of supplier-specific emissions
intensities is as follows:
SSE: 0.00 tCO2 /kWh
Drax Energy Solutions: 0.00 tCO2 /kWh
The Society’s 2024 transportation consumption,
emissions figures and associated intensity metrics
have been restated following updates to the actual
transportation mileage activity for company
electric vehicles.
Intensity metrics have been calculated using total
tCO2e figures and the selected performance indicator
agreed with the Society for the relevant report period:
Floorspace (m2)
2025
(2024)
16,747
(14,812)
Compliance responsibility
The SECR report has been prepared by the ESG division
of Inspired Limited for Newcastle Building Society
by means of interpreting the Companies (Directors’
Report) and Limited Liability Partnerships (Energy and
Carbon Report) Regulations 2018 as they apply to
information supplied by Newcastle Building Society
and its energy suppliers.
Outlook for 2026
Our focus for 2026 takes into consideration our
PRB commitment, our internal blueprint principles
and our external regulatory obligations. We aim to
concentrate on 4 work streams which transitions our
business forward to operate in a more transparent and
sustainable manner, they are as follows:
1.
PRB principle 2 - Establish and agree interim
targets for scope 1 and 2 controllable emissions
2.
PRB principle 2 - Focus on measuring relevant
scope controllable 3 emissions
3.
Increase climate risk and environment knowledge
across the business from Board level down
4.
SECR - Continue with decarbonisation of our
business estate
As part of our commitment to UN PRB we will publish our
first progress report in the second quarter of 2026.
2025 Emissions
2024 Emissions
Utility and scope
Location-based
(tCO2e)
Market-based
(tCO2e)
Location-based
(tCO2e)
Market-based
(tCO2e)
Scope 1 total
206.60
206.60
169.48
169.48
Natural gas (Scope1)
140.62
140.62
163.77
163.77
Refrigerants (Scope1)
61.80
61.80
N/A
N/A
Transportation (Scope1) *
4.18
4.18
5.71
5.71
Scope 2 Total
404.97
2.45
486.27
12.36
Grid-supplied electricity (Scope 2) **
402.52
-
484.57
10.66
Transportation (Scope 2)
2.45
2.45
1.70
1.70
Total
611.57
209.05
655.75
181.84
2025 Emissions
2024 Emissions
Utility and scope
Location-based
(tCO2e)
Market-based
(tCO2e)
Location-based
(tCO2e)
Market-based
(tCO2e)
Scope 1 total
144.80
144.80
169.48
169.48
Natural gas (Scope1)
140.62
140.62
163.77
163.77
Refrigerants (Scope1)
4.18
4.18
5.71
5.71
Scope 2 Total
404.97
2.45
486.27
12.36
Grid-supplied electricity (Scope 2) **
402.52
-
484.57
10.66
Transportation (Scope 2)
2.45
2.45
1.70
1.70
Total
549.77
147.25
655.75
181.84
Total UK Scope 1 and 2 location and market-based emissions, including refrigerants
Total UK Scope 1 and 2 location and market-based emissions, excluding refrigerants
Carbon and energy overview
The following tables show scope 1 and 2 emissions
for financial years ending 31 December 2025 and 31
December 2024 across all operations.
Scope 1 and 2 emissions include direct combustion
of natural gas and fuels utilised for transportation
operations e.g. company fleet vehicles.
Refrigerant emissions have been included in financial
year 2025 reporting due to improved data quality and
availability. In previous years, including financial year
2024, complete and reliable data was not available,
so emissions relating to refrigerant gases were not
incorporated into scope 1 reporting.
For financial year 2025, enhanced data-gathering
processes and more robust record keeping have
enabled the full capture of refrigerant usage associated
with emissions. As a result, the year-on-year increase
in scope 1 emissions when comparing financial year
2025 (including refrigerants) to financial year 2024
(excluding refrigerants) reflects an improvement in
data completeness rather than a material operational
change. The inclusion of refrigerant emissions from
financial year 2025 onwards ensures greater accuracy
and supports consistent reporting for future years.
Scope 2 consumption and emissions capture indirect
emissions related to the consumption of purchased
electricity and electric vehicle transport e.g. company
fleet vehicles.
In 2025, the business expanded scope 2 reporting
to dual-report on location-based and market-
based emissions factors. Market-based emissions
demonstrate the carbon reduction achieved by
renewable electricity procurement. Market-based
emissions are reported in tCO2 only and reflect the
specific emissions associated with a supplier-specific
fuel mix.
N.B. The reported scope 1and 2 emissions have been rounded to two decimal places. Any calculations have been conducted using complete unrounded
figures.
*FY2024 transportation emissions have been restated following updates to the actual transportation activity recorded for FY2024.More information can
be found in the methodology section.
**Emissions from grid-supplied electricity (scope 2) are captured and reported in tCO2only, due to the market-based methodology.
44
45
Governance
Committed to
making a
positive
difference
for the
people and places
we serve
46
47
Overview
The risk management framework is designed to
proactively identify and manage risk, while supporting
Senior Management in the delivery of the strategy.
This is achieved through the effective utilisation of
risk appetite and ensuring resilience to operational
and financial risks. The Group’s ability to identify,
measure, monitor, report and control risk is key to
the continued delivery of sustainable and resilient
business performance, including fair outcomes for
our customers. The Chief Risk Officer has ultimate
accountability for the maintenance and enhancement
of the organisation’s risk management framework.
The risk management framework includes the use of
Board approved risk appetite statements covering
a variety of principal risks that the Group faces.
Additionally, regular management information and
performance data in respect of the overall framework
is provided to the Group Risk Committee. There is a
demonstrated level of balance within the framework
with evidence of performance, stress testing, scenario
analysis and recovery planning.
Overall, there is a high degree of awareness and
understanding of risk across the Group. Senior
Management understands and champions the basis for
risk measures with detailed understanding of strengths
and limitations. The culture across the organisation
supports the development of risk skills which is
articulated from the top down and gives due focus to
risk management.
Risk governance
The Board is ultimately responsible for ensuring that
adequate systems of risk management are in place, and
that the strategy, risk appetite and risk management are
aligned. To assist the Board, a Group Risk Committee
oversees the management of risk across the Group. In
addition, the Board is responsible for the establishment
of risk appetites that ensure business activities and
decisions are taken within our capacity for accepting
risk. Performance to risk appetites are monitored by
the Board and the Group Risk Committee with
appropriate frequency.
The Risk function, as the second line of defence,
oversees the suitability and effectiveness of risk
management across the organisation and supports
the Group Risk Committee. This includes the provision
of oversight reporting to the Group Risk Committee
and its sub-committees. The Chair of the Group Risk
Committee reports formally to the Board on the Group
Risk Committee’s business at its monthly meetings.
This includes confirming the effectiveness of risk
management and the internal control systems which
have been in place throughout the year. In addition,
Internal Audit Services, as the third line of defence,
provide independent assurance to the Board and
Senior Management on the adequacy of the design and
operational effectiveness of internal control systems
and measures across the business.
The Chief Risk Officer also provides formal updates on
risk management to the Board, in relation to the Group,
at each Board meeting.
The risk governance structure is shown in the
Sustainability Report and discussed further below.
Group Risk Committee
Members of the Group Risk Committee at 31 December
2025 were:
Bryce Glover (Committee Chair), Adam Bennett,
Richard Gabbertas and Mick Thompson.
The Group Risk Committee oversees the risk
management and governance framework, and the
overall risk profile. The Group Risk Committee meets at
least four times per year and more frequently
when required.
The duties of the Group Risk Committee include:
■
oversight of overall risk appetite, tolerance and
risk management strategy and the principal and
emerging risks the Group is willing to take in order
to achieve its long-term strategic objectives;
■
oversight of the management of risks to which
the business may be exposed, including (but
not limited to) prudential risks, conduct risks,
operational risks, climate change related risks,
operational resilience and IT related risks including
cyber risk;
■
oversight of compliance with risk policies;
Risk Management Report
■
assessment of new initiatives, projects and
products that have a significantly different risk
profile to current Group activities;
■
oversight, review and recommendation to the
Board in respect of approval of the Internal Capital
Adequacy Assessment Process (ICAAP), Internal
Liquidity Adequacy Assessment Process (ILAAP),
the Recovery Plan (including Solvent Exit Analysis)
and Resolution Pack;
■
oversight of the risk sub-committees
(see below); and
■
review and assessment of the risk appetite and
associated stress testing.
During 2025, Group Risk Committee considered the
following matters (amongst others):
■
periodic review of the amount of risk we are
prepared to accept in the conduct of our business,
measuring delivery against regulatory compliance
and good customer outcomes;
■
approved a number of lending proposition changes
that appropriately balanced risk and reward, with
particular consideration of helping more people to
buy a home;
■
reviewed and recommended to the Board the
approval of the 2025 Operational Resilience Self-
Assessment document;
■
regular oversight of the delivery of good outcomes
for customers and the support for customers in
vulnerable circumstances.
■
reviewed and recommended to the Board the
ICAAP and the ILAAP documents;
■
reviewed and recommended to the Board an
updated Recovery Plan that included a Solvent Exit
Analysis; and
■
reviewed and approved entity level policies
including (but not limited to) lending, treasury,
interest rate risk, operational risk and conduct risk.
The Group Risk Committee met on four occasions
in 2025.
Credit Risk Committee
The Credit Risk Committee, chaired by the Chief Risk
Officer, is responsible for the oversight of the retail
and commercial credit risk framework. This Credit
Risk Committee acts under the authority of the Group
Risk Committee and has delegated authority to make
decisions and recommendations in accordance
with the agreed terms of reference. The Credit Risk
Committee ensures the use of regular stress testing
and scenario modelling that are reflective of the nature
of the associated risk.
Matters will be escalated as required to the Group Risk
Committee and this also applies to the Enterprise Risk
Committee, the Model Risk Committee and the Assets
and Liabilities Committee (see below).
The Credit Risk Committee met on nine occasions
in 2025.
Enterprise Risk Committee
The Enterprise Risk Committee, chaired by the
Chief Risk Officer, is responsible for overseeing the
risk framework for operational risk, conduct risk,
IT risk, people risk and operational resilience. The
Enterprise Risk Committee has the responsibility for
review and approval of entity level policies in advance
of final approval by the Group Risk Committee. All
relevant operational risk management information,
to include (but not limited to) performance against
risk appetite statements, is reported to the Enterprise
Risk Committee.
The Enterprise Risk Committee met on twelve
occasions in 2025.
Model Risk Committee
The Model Risk Committee, chaired by the Chief Risk
Officer, ensures the Group’s compliance with the
Prudential Regulation Authority Supervisory Statement
SS3/18 ‘Model Risk Management Principles for Stress
Testing’. The Model Risk Committee acts under the
authority of the Group Risk Committee in an advisory
capacity and makes non-binding recommendations
concerning adherence to the Model Risk Policy.
Recommendations are made by the Model Risk
Committee to the Group Risk Committee on suitable
macroeconomic scenarios, model risk appetite, model
performance (monitoring) and model limitations.
Approval of the macroeconomic scenarios remains the
responsibility of the Board.
The Model Risk Committee met on nine occasions
in 2025.
Assets and Liabilities Committee
The Assets and Liabilities Committee, chaired by the
Chief Financial Officer, oversees asset and liability
mix, the effectiveness of risk and controls of strategic
capital planning, liquidity, funding and interest rate risk
in the banking book (IRRBB) and compliance
with limits and metrics set out in the Treasury Policy
and Standards.
The Assets and Liability Committee met on eleven
occasions in 2025.
First
line of
defence
Comprises of core business
units, which ultimately hold the
responsibility for identifying,
quantifying and managing risk while
adhering to corporate risk appetite,
policies and standards. The first
line also holds the responsibility
for implementing and maintaining
regulatory compliance.
Second
line of
defence
The Risk function provides
independent oversight of the
implementation of effective risk
management, while developing and
maintaining risk management
policies and methodologies. The
second line reports (through the
Chief Risk Officer) to the Chief
Executive and ultimately to the Group
Risk Committee.
Third
line of
defence
Internal Audit Services provide
independent assurance to the
Board and senior management on
the adequacy of the design and
operational effectiveness of internal
control systems and measures
across the business.
48
49
Principal risks
The Society’s Purpose is 'connecting our communities with a better financial future'. To enable the Group to achieve its
strategic objectives as a Purpose-led organisation, the Board ensures that systems and controls are in place so that
risks are suitably identified, quantified, managed and reported.
The Board categorises the key risks in operating as a going concern as ‘principal risks’. In addition to the principal risks,
climate risk is included as an emerging risk, reflective of the increased frequency and severity of climate related events.
The current principal risks the Group faces, which remain unchanged in the year, are:
Principal Risk
Risk Management
Commentary
Capital Risk
(Principal Risk)
Capital risk refers to the risk that the Group
holds insufficient capital to cover the risks it is
exposed to and therefore is unable to absorb
losses arising in a stress or finds itself in breach
of regulatory capital requirements. Such a stress
could be the result of an economic downturn
affecting all UK financial institutions, an event
only impacting the Group or a combination
of both.
To manage this risk, the Group plans its capital
usage and generation closely and monitors
adherence to its business plans regularly.
Day-to-day capital management is delegated to
the Chief Financial Officer with oversight by the
Assets and Liabilities Committee, the Group Risk
Committee and the Board.
The Group assesses its capital position and risks
through an annual Internal Capital Adequacy
Assessment Process (ICAAP) in line with
regulatory requirements. The ICAAP considers
the key capital risks and the amount of capital
that should be retained. These requirements
are assessed against the current position and
throughout any forward planning. The
Prudential Regulation Authority sets and
monitors capital requirements for the Group.
Capital adequacy is measured by comparing
both current and forecast capital resources to
capital requirements.
Capital stress testing is performed as part of the
ICAAP and makes sure that the Group is resilient
to a range of stresses, assessing whether capital
requirements would be met under severe but
plausible stress scenarios and considers the
mitigating actions available to management.
The Group’s policy is to maintain a strong capital
base to maintain Member, creditor and market
confidence and to sustain future growth. The
Group has complied with all externally imposed
capital requirements and internally set limits
throughout the year.
Risk remained static in 2025.
The Group raised £60m of external
capital in 2024, demonstrating the
confidence of external investors
in the Group and its ability to
raise capital. Alongside capital
generated in the year, the Group has
continued to utilise the additional
capital headroom created by the
capital raised, for growth and
investment over several years into
its operations, IT infrastructure
and strategy.
The total capital ratio reduced from
15.7% to 15.2%, remaining well
ahead of the regulatory minimum
of 8%.Correspondingly, Common
Equity Tier 1 (CET1) capital has
reduced from 12.2% to 11.7%.
The reduction was in line with the
Society’s business plan and CET1
capital remains comfortably above
the regulatory minimum of 4.5%.
Risks and opportunities with
potential capital impact such as
business growth are continually
reviewed to drive appropriate
action where necessary.
Principal Risk
Risk Management
Commentary
Credit risk
(Principal risk)
Loans are underwritten individually based
on affordability, credit score and history,
appropriate collateral levels and the overall
Society’s lending criteria.
The Society does not undertake new residential
sub-prime or self-certification lending and has
minimal exposures to commercial and other
legacy lending.
The Lending Policy is actively managed and
has been reviewed in 2025 to ensure we
respond appropriately to market challenges
and opportunities.
The loan book is subject to monthly reporting to
the Credit Risk Committee in relation to its credit
risk characteristics (which includes loan to value,
loan to income, arrears, credit score profile, early
delinquencies and arrears arising from cohorts
of lending).
The risk appetite is expressed in terms of asset
quality and losses arising in a stressed scenario
and remains well within the credit risk appetite
set by the Board.
Risk remained static in 2025.
During 2025 the Bank of England
base rate has reduced by 100
basis points (1%), average earnings
growth has eased yet remained
above consumer price inflation.
In line with base rate reductions,
mortgage market rates have also
trended down. These factors
have both supported mortgage
affordability and a rather
subdued but positive trend in
yearly house price inflation of
around 0.3% (Halifax).
Residential mortgage arrears
remain broadly stable and well
within risk appetite. Actual losses
on residential mortgages lending
remain extremely low.
Loan impairment provisions during
the year have experienced a small
reduction, reflecting improvements
in affordability and the wider credit
risk environment. The level of loan
impairment is aligned to historical
experience and reflects expected
macroeconomic trends.
There remains significant
uncertainty in the macroeconomic
outlook, with persistent geopolitical
tensions, new barriers to trade and
changes to UK fiscal policy. The
Group continues to monitor these
uncertainties and the impact on
borrowers’ ability to pay.
50
51
Principal Risk
Risk Management
Commentary
Conduct risk
(Principal risk)
The Group maintains a Conduct Risk Policy
which is subject to review and approval by the
Enterprise Risk Committee and Group Risk
Committee, together with risk metrics relating to
customer outcomes.
Performance is measured against these within
the Consumer Duty reporting to the Enterprise
Risk Committee with oversight from the Group
Risk Committee.
The embedding of Consumer Duty, outcomes-
based testing and supporting customers in
vulnerable circumstances continued to be a key
area of focus for the Financial Conduct Authority
in 2025.
All new products are approved by the Mortgage
and Savings Committee, which includes
consideration of an assessment of risks to
customer outcomes. A customer outcomes
dashboard is maintained, which looks at
evidence supporting good customer outcomes
(or suggesting poor customer outcomes) and
this is reviewed monthly and reported to the
Enterprise Risk Committee.
The Group maintains independent oversight
of the management of conduct risks, through
approved monitoring plans, which are risk based
and reviewed quarterly, with reporting to the
Enterprise Risk Committee with oversight from
the Group Risk Committee.
Risk stable at an elevated level
in 2025.
Conduct risk remains at the
elevated level highlighted in
2024 given the higher standard
of consumer care required by the
Consumer Duty for new and existing
products, which requires more
proactive action to deliver good
outcomes and fair value.
Relevant control frameworks
have been both maintained and
improved during the year. This
risk area remains a key focus,
particularly in relation to further
enhancing monitoring, testing of
outcomes and taking appropriate
action based on the insights.
The Group provides a simple
product range of savings and
mortgages to its customers.
Newcastle Financial Advisers
provides financial advice as an
appointed representative of the
Openwork Partnership.
Principal Risk
Risk Management
Commentary
Interest rate risk
(Principal risk)
The Group does not operate a trading book
(there are no instruments that meet the
specifications for trading book instruments as
per Basel regulation) and therefore only has
interest rate risk in the banking book (IRRBB).
The Group uses structural hedging for retained
profit, allocating these reserves to time buckets
and offsetting exposures where possible.
Remaining exposures from fixed mortgages
and deposits are hedged with derivatives
where necessary. A suite of prescribed and
idiosyncratic stress scenarios are performed
on a regular basis to assess vulnerability to net
interest income and economic value of equity.
Outcomes are reported to the Assets and
Liabilities Committee along with any mitigating
management actions.
IRRBB components are included in funds transfer
pricing (FTP) when considering product pricing.
Product proposals also consider risks such as
basis risk and maturity concentrations. Customer
optionality is regularly reviewed and stressed to
capture changes in customer behaviour.
Interest rate risk and basis risk are monitored and
reported monthly to the Assets and Liabilities
Committee, including compliance with the Board
approved risk appetite, captured across several
metrics and limits.
A suite of metrics is used to manage interest
rate risks within risk appetite. These metrics are
designed to address all sub-components of
interest rate risk including basis risk, earnings
risks, economic value risks, credit spread risks,
duration and optionality risks.
The Group completes regular stress testing
analysis to ensure that IRRBB remains within
appetite should such scenarios arise.
Risk remained static in 2025.
Market volatility remained high in
2025, but the IRRBB framework
ensured that the overall risk
profile of the Group did not
materially increase.
The Group continues to maintain a
robust interest rate risk framework
and an effective hedging strategy.
IRRBB continues to be managed
within the Group’s conservative
risk appetite.
52
53
Principal Risk
Risk Management
Commentary
Liquidity risk
(Principal risk)
The Group ensures it holds sufficient quality and
quantity of liquidity to remain a going concern
after a severe but plausible stress. Cash flow
forecasts are used to forecast liquidity, ensuring
future compliance with limits set by the Board.
Wherever appropriate, the Group ensures
it takes any necessary steps to ensure it has
access to any available Bank of England facilities
designed to support financial institutions, such
as Indexed Long-Term Repos.
Liquidity risk is monitored against limits and
metrics defined within the approved Treasury
Policy and Standards, including the Liquidity
Coverage Ratio, Net Stable Funding Ratio
and other internal firm-specific liquidity
requirements, whilst the Internal Liquidity
Adequacy Assessment Process is subject to
both the Assets and Liabilities Committee and
Board approval. Stress tests are used to ensure
liquidity risk is managed within risk appetite.
Liquidity is monitored daily with a fortnightly
Liquidity Management Group in place and
monthly reporting to the Assets and Liabilities
Committee. The Group maintains a robust
liquidity alert framework to trigger enhanced
monitoring in times of higher risk.
Investments are subject to a Group Risk
Committee approved Treasury Policy, including
limits on exposures to instruments, countries
and counterparties. Investments are monitored
and reported monthly to the Assets and
Liabilities Committee.
The mark-to-market value of investments in gilts,
residential mortgage-backed securities, and
covered bonds are monitored daily and reported
to the Assets and Liabilities Committee monthly.
Risk remained static in 2025.
Liquidity risk overall remains within
our risk appetite and the Group
maintains sufficient sources of
both liquidity and contingent
liquidity to access cash even under
stressed circumstances.
The Group successfully repaid
£366.7m of Term Funding
Scheme and Term Funding for SME
during 2025.
A securitisation issuance was
successfully completed in 2025,
with £350m issued externally and
£300m retained for contingent
liquidity purposes.
The Group maintains a robust
Treasury Policy governing such
activity and focuses on investment
in high-quality liquid assets.
Principal Risk
Risk Management
Commentary
Operational risk,
operational
resilience &
supplier, third
party risks
(Principal risks)
Operational risk is subject to a Group Risk
Committee approved policy, which covers the
framework for the management of operational
risk. This framework includes identification,
assessment against risk appetite and
management of risks through controls and
control testing. The framework also defines
procedures for reporting and responding to risk
events, and operational losses.
Losses due to operational risk, fraud and financial
crime are monitored and reported.
Material and emerging risks, taking into
consideration internal and external influences,
together with coverage across regulatory risk
categories are used to inform scenario exercises
to test business resilience, control effectiveness
and operational recovery. Operational resilience
is a significant area of focus. The operational
resilience framework is subject to review and
approval by the Group Risk Committee and
the Board. This continues to mature in line with
regulatory requirements, with important business
services and associated impact tolerances
defined, critical dependencies identified and
a programme of severe but plausible exercises
maintained to test the Group’s ability to recover
from severe disruption within defined tolerances.
Identified vulnerabilities are assessed for any
necessary remediation and eradication.
It is accepted that the use of suppliers and
critical third parties exposes the Group to the
risk of disruption to important business services
due to interruption to service provided by third
parties. These risks are controlled and
managed by maintaining a suitable supplier
management framework.
The Group has a defined and approved
incident management process that sets out a
clear structure for responding to and
managing incidents.
Risk remained static in 2025.
The Group’s operational risk
framework continues to mature and
enables the effective identification,
assessment and management of
operational risk within approved
risk appetites. There is increased
current focus on change risk
management, which is particularly
appropriate given the investment
in IT infrastructure across the
Group’s operations.
Key risks and controls are identified
and documented by all areas of
the business, to understand the
risk profile and to inform actions
to maintain residual risks within
defined appetite.
As the Group’s business model
includes diversification via the
Newcastle Strategic Solutions
subsidiary, this increases exposure
to operational risk, particularly in
relation to IT systems capability
and human error. There is ongoing
focus on financial crime prevention
to ensure that appropriate systems
and controls for detection and
prevention are maintained and are
proportionate to the nature and
scale of our business operations.
Corporate insurance policies have
been negotiated with regard to the
key risks within the Group requiring
greater mitigation
.
54
55
Principal Risk
Risk Management
Commentary
Cyber risk
(Principal risk
within
operational risk)
The Group’s information security framework
comprises a suite of information and cyber
security policies which are aligned to the
Annex A controls structure of ISO27001:2022.
These policies are subject to annual review and
approval by the Enterprise Risk Committee,
with the overarching Information Security Policy
subject to review and approval by the Group
Risk Committee. The Group maintains a mature
information security capability comprised of
15 management control activities as defined
within the ISO27001 standard. Risk and control
self-assessment (as per the operational risk
framework, and governance and management
information reporting) is also undertaken.
Cyber reporting is provided to the Enterprise
Risk Committee with summary updates/
escalation to the Executive Committee, Group
Risk Committee and the Board. The Group
continues to invest in its cyber resilience
capability, through initiatives such as updating
our security operations centre capability, utilising
AI and machine learning for threat detection,
developing brand protection, updating
colleague training and awareness, continued
penetration testing and updated incident
playbooks through exercising.
Risk remained stable at an elevated
level in 2025.
The cyber risk threat remains
elevated in 2025 in line with the
increasing trend in 2024.
The external cyber threat to the
UK remains due to the current
tense geopolitical environment.
There is a continued development
and evolution of ransomware,
phishing and digital fraud and
the growing use of AI by threat
actors to generate attacks. The
direct risk to the Group’s business
operations is deemed to be
stable. The risk remains elevated
but is considered stable given
the continued investment in
and enhancements to our cyber
capability. Threat monitoring and
reporting is ongoing. Corporate
cyber insurance cover has been
maintained at the same level of
cover throughout 2025. We are
carefully following how the Cyber
Resilience Bill has been moving
through the parliamentary
approvals and will observe how this
influences regulatory changes in the
coming months.
Principal Risk
Risk Management
Commentary
Climate
change risk
(Emerging risk)
The Group is exposed to both physical risks
arising from climate change (damage to homes
from flooding for example) and transitional
risks associated with adjusting towards a lower
carbon economy.
The Group has robust operational resilience
processes and responses to manage the impact
of any transient localised climate change events.
The Group has also developed climate change
scenarios and uses them in capital modelling and
stress testing.
The Group actively engages with industry
groups in order to consider the range of
potential long-term impacts that could arise
from climate change.
Climate risk remains an emerging risk given the
uncertainty in relation to the exact nature and
timing of climate-related events on the Group’s
strategy and operations.
Risk was static in 2025.
Climate change risk continues to be
evident with an increased frequency
and severity of climate-related
events. The Society continues to
use scenario analysis and modelling
to guide its assessment of the risk.
Our current estimate of potential
loss attributed to it remains low.
Exposure and potential impact will
continue to evolve as Government
policy develops and technology
advances. During 2025, the Group
has strengthened its strategic focus
on environmental sustainability as
a signatory to the United Nations
Environment Programme Financial
Initiative and committing to the
related Principles of Responsible
Banking Framework.
Additional notes
Macroeconomic risk: Impacts from macroeconomic risks are closely monitored, reported and assessed and they are
referenced within the commentary in this report rather than in a separate principal or emerging risk category as the
movements are beyond the Group’s control.
Investment credit risk: Investment credit risk would be referenced where relevant within liquidity risk rather than a
separate principal risk category, for example if the lower credit quality of liquid assets had a material impact on
available liquidity.
On behalf of the Board
Bryce Glover
Chair of the Group Risk Committee
5 March 2026
Our intent
in
Greater
Manchester
is to
build something
unique to the
North West
56
57
James Ramsbotham
A
ppointed August 2021
Chair
Experience
Prior to joining the Board, he was
Chief Executive of the North East
Chamber of Commerce for 15 years,
and Chair of Darlington Building
Society until December 2017.
Previously James was Vice Chair of
North East construction firm, the
Esh Group, and before this spent
14 years in Corporate Banking at
Barclays Bank plc.
He was a soldier for 12 years with the
Royal Green Jackets and benefited
from executive education at Harvard
(USA), INSEAD (France), and Oxford
University, after graduating from
Durham University.
Other roles
James is the Chair of Newcastle
Strategic Solutions Limited as
well as being Chair of the
Society’s Nominations and
Governance Committee.
He is also a Pro-Chancellor of
Sunderland University (2016);
Honorary Colonel for The Rifles
(2007), Lay Canon for Durham
Cathedral (2025), Honorary Fellow
of the Association of International
Accountants (FAIA Hon.) (2017); and
made a CBE for services to business
and the North East economy in the
2019 New Year’s Honours. and the
North East economy in the 2019 New
Year’s Honours.
Adam Bennett
Appointed April 2019
Non-Executive Director
Experience
During his professional legal career,
Adam advised building societies
across a range of issues. He brings
formidable legal insight and
experience of different business
models and structures, important
given the Group structure, which
includes two key subsidiaries,
Newcastle Strategic Solutions
Limited and Newcastle Financial
Advisers Limited.
Adam has advised on rules of building
societies, on corporate governance,
including compliance with the UK
Corporate Governance Code, and on
the powers and statutory and
fiduciary duties of Directors, all of
which contribute to ensuring
the Society
deals with its Members,
colleagues and stakeholders in a
responsible, trustworthy and
ethical manner.
Other roles
Adam is the Senior Independent
Director and a member of the
Society’s Group Risk Committee and
the Nominations and Governance
Committee, upholding the Society’s
commitments to financial control,
integrity and regulation.
Andrew Haigh
Appointed January 2014
Chief Executive
Experience
With over 30 years’ experience in
the mutual sector, Andrew has a
background in marketing and an
extensive track record in transforming
and developing businesses. He has
held financial services leadership
roles as both an Executive and a
Non-Executive Director, reinforcing
the Board’s depth of consumer
understanding. His previous
experience is drawn from a variety
of sectors including the financial
services, technology, automotive and
airline industries.
Andrew became the Society’s Chief
Executive in May 2015. A proven Chief
Executive, Andrew has particular
strength in building effective
leadership teams and
organisations with a strong sense
of social purpose, supporting
sustainable business models and
healthy, customer focused cultures.
He proudly drives our Society’s
ongoing commitment to equality,
diversity and inclusion.
Other roles
Andrew is a Director and Chair of
Newcastle Financial Advisers Limited
and is a Board member of the North
East Chamber of Commerce.
Rory Campbell
Appointed June 2023
Non-Executive Director
Experience
Rory brings extensive experience as
a senior executive, Board member
and advisor to organisations across
a range of industries. Rory spent
six years at John Lewis & Partners,
including three years on the
Management Board, and twelve years
as a senior Executive within Lloyds
Banking Group.
Reflecting the Society’s values, Rory
is passionate about purpose, society
and leadership; he is Partner of The
Alexander Partnership, supporting
senior executives and Boards of
international firms to deliver business
outcomes through leadership and
team effectiveness.
Other roles
Rory is a Visiting Fellow of Nottingham
Business School; an Independent
Chair of Trustees of Ignite Consulting
Trustee Ltd and a Fellow of The Royal
Society for the Encouragement of
Arts, Manufactures and Commerce.
For the Group, Rory chairs the
Remuneration Committee, is a
member of the Nominations and
Governance Committee, is the
Board Sponsor for Diversity, Equity
& Inclusion and Board Champion for
Consumer Duty.
Our Directors
Member of Audit Committee
Member of Group Risk Committee
Member of Remuneration Committee
Director of NSSL
Member of Nominations Committee
Director of NFAL
Our Board members skills and experience contributes to delivery of a long-term and sustainable Society, details of
which are found in their biographies.
Committee Key:
“Having been part of the
mutual sector in various guises
I am deeply committed to the
unique way in which we can be
catalysts for positive change in
our communities.”
“Having specialised in advising
building societies at a law firm for
37 years, I have a deep knowledge
of the mutual sector and my
understanding of its associated
corporate governance and
regulatory requirements
contributes to the Board’s diverse
spectrum of expertise.”
“I’m hugely passionate about
the role of mutuals, focused on
delivering a balance of meaningful
Member value and profitability,
enabling long-term positive impact
in our communities.”
“I’m passionate about harnessing
our Society’s connection to
Purpose, while ensuring we have
the strength to deliver long-term
impact. I will continue to bring
my experience working with
businesses and leaders to unlock
our best performance.”
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Mick Thompson
Appointed January 2019
Deputy Chair and Non-Executive Director
Experience
Mick brings significant accountancy
experience with a deep knowledge
of audit to support the Society’s
governance and audit function.
His diverse skillset and broad range
of perspectives derives from vast
sector experience that has seen
him work in industries including
housebuilding, social housing,
education, engineering, charities and
financial services.
Mick spent 21 years as a Partner and
nine years as Office Senior Partner at
KPMG Newcastle.
Other roles
He is a Non-Executive Director of The
Clinkard Group Limited, Atlas Cloud
Limited and NorthStandard
Ltd.
Recognising the importance
of charitable action and giving back
to causes throughout the region,
Mick is also a Trustee of Greggs
Foundation Charity; Trustee of NUFC
Foundation Charity; Trustee of Tyne
and Wear Building Preservation Trust,
and Regional Treasurer of The Lord’s
Taverners Charity.
He chairs the Group’s Audit
Committee, as well as being a
member of the Group Remuneration
Committee and in 2025 joined the
Group Risk Committee. Mick also
chairs the Newcastle Building
Society Pension & Assurance
Scheme Board.
Karen McDonagh Reynolds
Appointed April 2025
Non-Executive Director
Experience
Karen brings over two decades of
senior technology and operational
leadership across regulated
industries and the not-for-profit
sector. Her career spans housing
associations, charities and major
financial institutions, including Aviva
and WTW, where she led complex
transformation programmes and
large-scale technology delivery.
Recognised as one of the UK’s top
100 technology leaders, with
repeated inclusion in the CIO 100
(2021, 2023 and 2024), Karen is
known for driving high impact digital
transformation while maintaining a
strong focus on people, performance
and purpose. She is passionate about
harnessing technology to enhance
outcomes for customers, colleagues
and the wider organisation.
As a certified coach and
advocate for inclusive leadership,
Karen focuses supporting mid-career
professionals and is a frequent public
speaker on technology, diversity and
inclusion. She is particularly
committed to championing women
in tech and has long supported
apprenticeships and widening access
to technology careers.
Karen brings a people-first approach
to governance, cultivating trust-
based high-performance cultures
that empower individuals to thrive,
aligning seamlessly with Newcastle
Building Society’s ethos.
Other roles
Karen is a member of the
Group’s Audit Committee and a
Director of Newcastle Strategic
Solutions Limited.
Richard Gabbertas
Appointed December 2025
Non-Executive Director
Experience
Richard was with KPMG for almost
40 years, and as a Partner he led its
building society practice for 23 years,
advising and auditing a wide range
of societies, from the largest to the
smallest. In his advisory roles, Richard
specialised in regulation,
governance, risk management and
mergers and acquisitions.
He has also worked with a wide range
of retail financial institutions, from
FTSE 100 banks to small, local mutuals
across UK regions.
Other role
Richard is a Director of Arbuthnot
Banking Group
where he chairs
the Board Risk Committee, and
previously, the Audit Committee. He
was a Director of Recognise Bank until
July 2025, where he chaired the Audit
Committee for six years.
Richard is a member of the
Group’s Audit Committee and
Group Risk Committee.
Andrew Conroy
Appointed February 2026
Chief Financial Officer
Experience
Andrew has over 20 years’ experience
in financial services, including a number
of senior roles in both building societies
and banking institutions. Having worked
within finance, treasury and corporate
strategy, Andrew has developed strong
technical skills in financial accounting
and treasury risk management.
Other roles
Andrew is Chair of the Group’s Assets
and Liabilities Committee and, as Chief
Financial Officer, has responsibility for
the Group’s Finance, Treasury, Property
and Third Party Management functions,
along with oversight of its recovery plan
and associated activities.
"Much of my career has been in the
building society sector due to my
belief that mutuals help Members
achieve financial goals and
positively impact their communities.
I have joined the Society to use my
experience to balance safeguarding
the Group’s financial position with
investing in positive change and
increasing Member value."
“I bring proven experience in
transformation with a people-first
approach, ensuring Newcastle
Building Society grows stronger
while staying true to its Purpose for
all Members and our communities.”
“My wide-ranging Board portfolio,
particularly in the charity sector,
is well aligned to the Society’s
community focus and contributes to
a better understanding of the issues
affecting this sector.”
“My professional life was rooted in
supporting the mutual sector and its
values, and I am immensely proud
to be returning to the sector and
a building society that espouses
those values so passionately in
everything it does.”
Member of Audit Committee
Member of Group Risk Committee
Member of Remuneration Committee
Director of NSSL
Member of Nominations Committee
Director of NFAL
Committee Key:
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61
Outgoing Directors
Moorad Choudhry
Moorad’s tenure on the Board, supported by his distinguished career in
treasury and wholesale banking, has provided the Society with helpful
technical insight and high-level decision-making support. His contributions
to the Group Risk Committee and his insight in the principles of banking
have reinforced our commitment to maintaining robust financial standards
and governance.
Stuart Miller
During his eight-year tenure, Stuart made a significant contribution to the
progress of the Group, bringing his customer oriented focus to leadership
roles in both the Society and in Newcastle Strategic Solutions.
Bryce Glover
Bryce has provided invaluable commercial and retail banking expertise
since 2017, leveraging his understanding of the mutual sector to help
shape the Group’s long-term strategy. As Chair of the Group Risk
Committee, his industry knowledge and business acumen have
strengthened our risk framework and supported the continuing growth
of Newcastle Strategic Solutions.
Anne Shiels
Since 2017, Anne has brought leadership and organisational
transformation expertise to the Board, ensuring a strong focus on
people, culture and governance. As Chair of the Remuneration Committee,
her role as a trusted adviser has helped guide our leadership development
and the maintenance of rigorous board-level controls.
We extend our sincere thanks to these outgoing Directors for the invaluable expertise and contributions that have
significantly shaped the future of our Society for the benefit of all our stakeholders.
Michele Faull
Michele has made a significant contribution to the Society since joining
the Board in 2021. As a valued member of the Audit Committee, she
applied her extensive technical knowledge and practical experience to
strengthen oversight across financial reporting, risk and governance.
Amanda Shepherd
As Chief Operating Officer, Amanda applied her extensive experience
in operations and technology to align our customer service and change
strategies with the Society’s overarching Strategic Plan.
Chris Keay
Drawing on his nearly four decades of financial services experience,
Chris provided leadership in regulation, risk and operations during
his tenure on the Board in 2025. His extensive background in retail
banking and risk management across diverse sectors help ensure that
our strategic decisions remained firmly rooted in both operational
excellence and a deep commitment to our customers’ interests.
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63
The Directors present their Annual Report and Accounts
and Annual Business Statement for the year ended
31 December 2025, which they consider to be fair,
balanced and understandable, providing Members with
the information necessary to assess the Group’s and
Society’s position and performance, business model
and strategy.
Objectives and activities
It is the intention of the Directors that the Society, as
parent company of the Group, will continue to remain
an independent regional building society. The
Society’s Purpose and strategy are set out in the
Strategic Report.
Business review and future developments
The Chief Executive’s Review and Strategic Report set
out the business activities and business performance
in the year against our strategic objectives, as well as
likely future developments. The Strategic Report also
outlines the Group’s and Society’s key performance
indicators (KPIs), which include customer, colleague
and financial KPIs, details of the Group’s and Society’s
customer focus, colleague agenda, financial analysis,
mortgage credit quality, funding and capital position.
The Annual Business Statement and the Credit Risk
Notes, 38 to 40, contain respectively the ratios and
arrears disclosures required by the Building Societies
Act 1986.
Going concern and long-term
viability assessment
Financial planning, risk and stress testing
The Group’s financial planning includes a detailed
budget for the next financial year and a forecast for a
number of financial years thereafter, which covers a
minimum three-year period and considers a range of
outcomes relative to internal and external conditions.
Achievement of long-term plans and goals is not
guaranteed, given the uncertainty in predicting macro-
economic factors long into the future, which may
materially impact the Group’s performance and could
also lead to changes in the Group’s business strategy.
The Strategic Report includes a description of the
Group’s business activities and any factors likely to
affect its future development, as well as details of the
Group’s financial performance and position, including
liquidity and capital structure. The Group’s principal
risks, including the strategy for managing these, are
detailed in the Risk Management Report. Further details
in respect to interest rate risk, liquidity risk and capital
risk are provided in the notes to the Annual Accounts
(see notes 34, 41 and 42 (respectively)).
The Group performs detailed capital and liquidity stress
testing at least once per year in the Internal Capital
Adequacy Assessment Process (ICAAP) and the Internal
Liquidity Adequacy Assessment Process (ILAAP) in line
with regulatory requirements.
The ICAAP stress test ensures that the Group’s forecast
of capital requirements and capital generation are
resilient to ‘severe but plausible’ stresses to the
Group’s external or internal environment, far beyond
the levels forecast in the most negative scenarios
considered in the Group’s longer-term plan. The stress
test demonstrates that the Group’s capital buffers are
sufficient to absorb the level of potential capital erosion
considered in the stress scenario, continuing to meet
minimum regulatory capital requirements.
The ILAAP stress test ensures that the Group holds
adequate liquid assets to meet both its business
as usual liquidity needs and increased liquidity
requirements that could occur as a result of entering
a period of stress. The Group is forecast to hold a
sufficient quantity and quality of liquid assets over
the following three-year period to be able to meet its
liabilities as they fall due, even in the event of a severe
but plausible stress scenario.
Assessment of the appropriateness of preparing
the Annual Accounts on a going concern basis
The Directors are required to satisfy themselves that
it is appropriate to adopt the going concern basis of
accounting when preparing the financial statements
in accordance with IAS 1 Presentation of Financial
Statements and guidance from the Financial
Reporting Council.
The Directors’ going concern review considered the
Group’s and Society’s forecasts, including different
possible scenarios based on possible internal and
external developments and arising risks. Together
with regular stress testing, the forecasts show that
the Group and Society will be able to maintain adequate
levels of both liquidity and capital for at
least the next 12 months while meeting all relevant
regulatory requirements.
After making enquiries, the Directors are therefore
satisfied that both the Group and the Society has
adequate resources to continue in business for at
least the next 12 months and therefore it is appropriate
to adopt the going concern basis of accounting in
preparing these financial statements. The Directors
have concluded that there are no material uncertainties
that may cast significant doubt upon the Group and
Society’s ability to continue to apply the going concern
basis of accounting.
Assessment of the Group’s and Society's long-
term viability
The Directors have assessed the long-term viability
of the Group and the Society over the three years to
December 2028. The assessment considered the
Group’s and Society’s principal and emerging risks,
including both external factors, such as economic
stresses, and internal factors, such as operational
events, and relevant management actions and controls,
including the Board’s risk appetite and performance
against risk limits. It considered the Group’s and
Society’s financial forecasts, including profitability,
capital and liquidity positions. It also considered
the most recent ICAAP and ILAAP stress tests,
complemented by further stress tests and forecasts
completed considering the December 2025 position,
to ensure the viability of the Group and Society even
in times of severe stress. The most significant stress
scenario which was considered included an increase
in unemployment to 8.5% and house price falls of 28%
over the period 2026 to 2028.
Directors’ Report
Based on this assessment, the Directors have a
reasonable expectation that both the Group and
Society will continue in operation and meet their
liabilities as they fall due over the period to
December 2028.
The Directors consider three years the most
appropriate period for the viability assessment, as it is
within the period covered by the financial forecasts and
the stress testing undertaken by the Group and Society,
but does not extend too far into the future, where
forecasts become increasingly more uncertain.
Risk management, principal risks
and uncertainties
The Risk Management Report sets out the principal risks
and uncertainties faced by the Group together with
the risk management framework and risk governance
structure. The Risk Management Report also details
how the Group mitigates the specific key risks to which
it is exposed, which are capital risk, climate change
risk, conduct risk, credit risk (commercial, investment
and residential), liquidity risk, interest rate risk and
operational risk (including cyber risk). In addition,
the Credit Risk notes, 38 to 40, set out the metrics
associated with the key risks including sensitivity
analysis and exposure level.
Mortgage arrears
As at 31 December 2025, there were 45 cases (2024:
42) where payments were 12 months or more in arrears.
The capital balance of these loans was £8.9m (2024:
£4.3m). The total amount of arrears on these loans was
£0.6m (2024: £0.6m).
Political and charitable gifts
Community funding, including charitable donations and
colleague fundraising, totalled £129,721 in 2025 which
were predominantly made to the Newcastle Building
Society Community Fund at the Community Foundation
North East, (2024: £1,535,731, which included one-off
donations totalling £1.3m to the Newcastle Building
Society Community Fund at the Community Foundation
North East, Salford Youth Zone, Forever Manchester
Community Foundation and Newcastle United
Foundation, enabled through the Reclaim Fund).
In 2025, colleagues continued to deliver on the
Group’s Purpose of making a positive difference
to the people who make up its heartland. A variety
of fundraising activities secured a colleague and
customer fundraising contribution of £10,032 in aid of
the Newcastle Building Society Community Fund and
other charities.
Volunteering was also a key focus for colleagues who
gave their time and skills to good causes throughout
our regions delivering more than 9,000 hours (2024:
10,000+ hours) of support to local communities.
The Group has not made any political donations during
2025 (2024: £nil).
Supplier payment policy
The Group follows an internal policy that payment to
suppliers will be made within 30 days from receipt of
an invoice and endeavours to meet individual supplier
payment terms which may be set at shorter timescales.
At 31 December 2025, the number of creditor days was
27 (2024: 27 days).
Directors
At 31 December 2025, the members of the Board, who
have served at any time during the year and continue to
act as Directors, are as follows:
James Ramsbotham, Adam Bennett, Rory Campbell,
Richard Gabbertas, Bryce Glover, Andrew Haigh, Chris
Keay, Anne Shiels, Karen McDonagh Reynolds, and
Mick Thompson.
The following Directors joined the Board in 2025:
■
Moorad Choudhry – appointed on 2 January 2025
■
Richard Gabbertas – appointed on
1 December 2025
■
Chris Keay – appointed on 5 September 2025
■
Karen McDonagh Reynolds – appointed on
23 April 2025
The following Directors stepped down from the Board
in 2025:
■
Moorad Choudhry – stepped down on
30 November 2025
■
Michele Faull – stepped down on 23 April 2025
■
Stuart Miller – stepped down on 9 September 2025
■
David Samper – stepped down on 31 March 2025
■
Amanda Shepherd – stepped down on
22 August 2025
Andrew Conroy joined the Society as the Chief
Financial Officer and was appointed as a Society
Director on 2 February 2026. He will be standing for
election at the AGM.
At the Annual General Meeting, to be held on 28 April
2026, all of the current Directors will offer themselves
up for either election or re-election, with the exception
of Chris Keay who will be stepping down as Director
before the Annual General Meeting, and Bryce Glover
and Anne Shiels, who will be stepping down as Directors
at the Annual General Meeting.
Directors and Officers insurance has been put in place
by the Group.
All Directors are Members of the Society.
Please see the Remuneration Committee Report for
further information.
Independent auditors
A resolution to re-appoint Deloitte LLP will be proposed
at the Annual General Meeting.
Statement of disclosure to External Auditor
So far as each Director is aware, there is no relevant
audit information of which the Group’s External Auditor
are unaware. Each of the Directors, whose names
and functions are listed in the Our Directors section
have taken all steps that they ought to have taken as
a Director in order to make themselves aware of any
relevant audit information and to establish that the
Group’s External Auditor are aware of that information.
Corporate governance
The Group’s statement on corporate governance
can be found in the Report of the Directors on
Corporate Governance.
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65
Statement of Directors’ Responsibilities
The following statement, which should be read
in conjunction with the Statement of Auditors’
Responsibilities, is made by the Directors to explain
their responsibilities in relation to the preparation of
the Annual Report and Accounts, Annual Business
Statement and Directors’ Report.
The Directors are responsible for preparing the Annual
Report and Accounts in accordance with applicable law
and regulation. The Building Societies Act 1986 (the Act)
requires the Directors to prepare Annual Accounts for
each financial year.
Under that law, the Directors have prepared the Group
and Society Annual Accounts in accordance with
International Financial Reporting Standards (IFRSs).
Under the Act, Directors must not approve the Annual
Accounts unless they are satisfied that they give a
true and fair view of the state of affairs of the Group
and Society and of the profit or loss of the Group
and Society, both as at the end of the financial year.
In preparing the Annual Accounts, the Directors are
required to:
■
select suitable accounting policies and then apply
them consistently;
■
state whether applicable accounting standards
have been followed and the financial statements
have been prepared in accordance with
International Accounting Standards, subject to any
material departures disclosed and explained in the
Annual Accounts;
■
make judgements and accounting estimates that
are reasonable; and
■
prepare the Annual Accounts on the going concern
basis unless it is inappropriate to presume that the
Group and Society will continue in business.
The Directors consider that the Annual Report and
Accounts are fair, balanced and understandable,
when taken as a whole, and that they provide the
information necessary for Members to assess the
Group’s and Society’s performance, business model
and strategy. In addition to the Annual Accounts, the Act
requires the Directors to prepare an Annual Business
Statement and a Directors’ Report for each financial
year. Each contains prescribed information relating to
our business and subsidiary undertakings. We are also
required to provide details of Directors’ remuneration
in accordance with part VIII of the Act and regulations
made under it.
The Directors are also responsible for safeguarding the
assets of the Group and Society and hence for taking
reasonable steps in the prevention and detection of
fraud and other irregularities.
The Directors are responsible for ensuring that the
Group and Society:
■
keep adequate accounting records that are
sufficient to show and explain the Group’s
and Society’s transactions and disclose with
reasonable accuracy, at any time, the financial
position of the Group and Society and enable
them to ensure that the Annual Accounts comply
with the Act, as regards the Group Financial
Statements; and
■
take reasonable care to establish, maintain,
document and review such systems and controls as
are appropriate to its business in accordance with
the rules made by both the Prudential Regulation
Authority and the Financial Conduct Authority
under the Financial Services and Markets Act 2000.
The Disclosure and Transparency Rules of the Financial
Conduct Authority require the Annual Report and
Accounts to include:
■
the audited Accounts for the Group and Society;
■
a Strategic and Risk Report that includes a fair
review of the business and a description of the
principal risks and uncertainties; and
■
responsibility statements (see below).
The Directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the Society’s website. Legislation in
the United Kingdom governing the preparation and
dissemination of accounts may differ from legislation in
other jurisdictions.
Each of the Directors, whose names and functions are
listed in the Our Directors section, confirm that, to the
best of their knowledge:
■
the Group and Society Annual Accounts, which
have been prepared in accordance with IFRSs, give
a true and fair view of the assets, liabilities, financial
position and profit of the Group and profit of the
Society; and
■
the Strategic Report includes a fair review of the
development and performance of the business and
the position of the Group and Society, together
with a description of the principal risks and
uncertainties that they face.
In the case of each Director in office at the date the
Directors’ Report is approved:
■
so far as each Director is aware, there is no relevant
audit information of which the Group’s and
Society’s External Auditor are unaware;
■
they have taken all the steps that they ought to have
taken as a Director in order to make themselves
aware of any relevant audit information and to
establish that the Group’s and Society’s External
Auditor are aware of that information; and
■
the Annual Report and Accounts, taken as a whole,
are fair, balanced and understandable and provide
the information necessary for Members to assess
the Group’s and Society’s position, performance,
business model and strategy.
This responsibility statement was approved by the
Board of Directors on 5 March 2026 and is signed on its
behalf by:
On behalf of the Board
James Ramsbotham
Chair
5 March 2026
Statement of Directors’ Responsibilities
Introduction
Corporate governance is the system of rules, processes
and practices which governs the way the Group is
controlled and makes decisions. In discharging its
responsibilities, and to be accountable to Members
for the operation of the Society, the Board regards
good corporate governance as extremely important
to enhance performance and ensure compliance with
regulatory and legal requirements.
The Financial Reporting Council issued the updated
UK Corporate Governance Code (the Code) in January
2024. The 2024 edition of the Code applies to financial
years beginning on or after 1 January 2025. Whilst the
Code is addressed to listed companies, the Prudential
Regulation Authority expects all building societies to
have regard to the Code, in so far as is relevant to a
building society.
The Code contains a set of principles that
emphasise the value of good corporate governance
to long-term sustainable success. At the heart of the
Code is the culture and purpose of an organisation:
putting the relationship between organisations and
their stakeholders at the core of its principles
designed to promote long-term sustainable growth in
the UK economy.
The Board considers it to be best practice, and in the
best interests of all stakeholders, to consider the Code
when establishing and reviewing corporate governance
arrangements. Procedures and processes are regularly
reviewed to ensure they are appropriately aligned with
the Code, including when updates or revised guidance
are published.
This report, together with the Audit Committee Report,
the Risk Committee Report, and the Remuneration
Committee Report, outlines the Society’s approach to
corporate governance and how the Board considers it
has demonstrated application of the principles of the
Code throughout 2025.
The Board
The Society recognises that it must be headed by an
effective Board which is responsible for the long-term
sustainable success of the Society, whilst acting in the
best interests of current and future Members and
other stakeholders.
James Ramsbotham is the Chair of the Board and
Mick Thompson is the Deputy Chair. Adam Bennett is
the Senior Independent Director, providing a
sounding board for the Chair and, where necessary,
serving as an intermediary for the Directors, Members
and stakeholders.
Further details of the composition of the Board are
detailed in the Our Directors section of the Annual
Report and Accounts.
In carrying out its role, the Board aims to achieve
its strategic goals for the benefit of the Society’s
Members and other stakeholders. The Board has
responsibility for setting the purpose and values of the
Group and believes that the interests of all stakeholders
can be best served by remaining a strong and forward-
looking mutual, Purpose powered building society.
An effective Board should not necessarily be a
comfortable place; constructive challenge, as well
as teamwork, being essential features to ensure that
decisions are made in the best interests of the Society.
Open, honest and transparent debate by the Directors
is something which is encouraged by the Chair. The
Board recognise the importance of self-reflection and
at each Board meeting, the Directors are encouraged
by the Chair to undertake an open discussion in regard
to the effectiveness of the meeting and the behaviours
demonstrated during discussions. A culture of
openness and accountability exists within the Group at
every level and Non-Executive Directors regularly
meet throughout the year with members of the
Executive team to ensure a good understanding of the
business and to promote strong relationships amongst
the Board.
There is a clear division of responsibilities between the
running of the Board and the Executive responsibility for
the running of the Group’s business. The roles of Chair
and Chief Executive are exercised by different people
within the Group, ensuring that no one individual has
unfettered powers of decision.
Board composition and independence is important to
safeguard the Board’s ability to fairly and objectively
direct the affairs of the Group and to make balanced
decisions. The Board includes an appropriate
combination of Executive Directors and independent
Non-Executive Directors so that no individual or small
group of individuals can dominate the Board’s decision
making. The composition of the Board reflects an
appropriate balance of skills and comprises of eight
Non-Executive Directors and two Executive Directors
as at the end of 2025.
Details of the Society’s Board Committees are set out
later in this report.
Matters reserved to the Board
The responsibilities of the Board are set out in the
Board’s Terms of Reference, which can be found on
the corporate governance section of the Society’s
website. The Board’s Terms of Reference are reviewed
on a regular basis.
A schedule is maintained of matters reserved to the
Board which includes the following:
■
Strategy and management:
determining the
overall strategy of the Group including approval
of the Strategic Plan, with the responsibility for its
implementation delegated to the Executive team;
monitoring operational and financial performance
in pursuit of the strategy; overseeing and
approving the Group’s recovery plans, playbook,
and resolution pack on an annual basis; monitoring
the indicators and overseeing any proposed
actions in accordance with the playbook;
approving budgets, forecasts and major capital
expenditure or major disposal; approving any
extension of the Group’s activities into new
business or geographical areas; and approving
any decision to cease all, or a material part, of the
Group’s business.
Report of the Directors on Corporate Governance
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■
Culture:
overseeing and setting the tone for
the culture, values and behaviours of the Group
ensuring that the interests of Members and
customers and good outcomes are central to the
Group’s culture and Purpose and are embedded
within the Group; and overseeing and setting the
tone for diversity, equity and inclusion within
the Group.
■
Structure, capital and liquidity:
approval of the
Group’s Internal Liquidity Adequacy Assessment
Process (ILAAP); approval of the Group’s Internal
Capital Adequacy Assessment Process (ICAAP);
approval of changes to the Group’s corporate
structure; approval of any programme for the
issuance or buy back of long-term debt or capital;
and approval of any utilisation of Bank of England
emergency liquidity support.
■
Financial reporting and internal controls:
approval
of stock exchange announcements, half year and
annual results; approval of the Annual Report and
Accounts including the Strategic Report, Risk
Management Report, Report of the Directors on
Corporate Governance, and the Remuneration
Committee Report; approval of the Pillar 3
disclosures; ratification of the going concern
and business viability review following review
and approval by the Audit Committee; approval
of any significant changes in accounting policies
or practice based on the recommendations of
the Audit Committee; and ensuring an adequate
internal control environment is in existence. The
Board delegates oversight of internal controls to
the Audit Committee.
■
Risk management and regulatory:
ensuring
an adequate risk management framework is
in place and that good customer outcomes
are a central focus to business processes. This
includes approval of risk appetite, oversight of
risk governance, reviewing the top risks, ensuring
the strategy and risk appetite are consistent, and
approving the ICAAP. Oversight of the assessment
of the financial and other risks from climate change
that affect the Group and actions to address these
risks within the Group’s overall business strategy
and risk appetite. The Board delegates oversight
of risk management to the Group Risk Committee,
as well as oversight of compliance with regulations
(including by the Prudential Regulation Authority
and the Financial Conduct Authority). Assessment,
at least on an annual basis, of the Society’s delivery
of good outcomes for Members and customers,
including but not limited to the Consumer Duty
Annual Board Report.
■
Senior Managers and Certification Regime:
ensuring that the Society meets its obligations
under the Senior Managers and Certification
Regime (SMCR), including: reviewing at least
annually the SMCR Policy; and maintaining
a responsibilities map for all prescribed
responsibilities and ensuring all prescribed
responsibilities have been allocated.
■
Operational resilience:
the Board retains oversight
and approval of the operational resilience strategy
and matters prescribed in regulatory requirements.
■
Board membership and Senior Management
issues:
approval of changes to the structure,
size and composition of the Board, following
recommendations from Nominations
Committee; ensuring that adequate succession
planning for the Board and Senior Management
is in place following recommendations from
the Nominations Committee; and approving
and overseeing appointments to the Boards of
subsidiary companies.
■
Appointment and/or re-appointment or removal
of the External Auditor:
to be put to Members for
approval, following a recommendation from the
Audit Committee.
■
Remuneration:
agreeing the Remuneration Policy
for the Directors and other senior Executives,
following recommendations from the Group’s
Remuneration Committee.
■
Delegation of Authority:
approval of the
responsibilities of the Chair, the Chief Executive
and the Senior Independent Director; approval
of the delegation of authorities to the Chief
Executive; ratifying the terms of reference for
Board committees and subsidiary companies; and
receiving minutes and/or reports from the Chairs of
the Board committees and subsidiary companies.
■
Corporate governance matters:
to ensure
that a formal evaluation of the effectiveness
of the Board is undertaken and to facilitate
an assessment by external consultants at an
opportune time; determining the independence of
Directors; reviewing the Group’s overall corporate
governance arrangements; agreeing the
Directors’ Conflicts of Interest Policy and other
relevant policies; approval of the Notice of any
General Meeting of the Society including all
resolutions to be put forward to Members; and
insurance: approval of overall levels of insurance
for the Group, including Directors and Officers
liability insurance.
■
Whistleblowing:
receive reports from Audit
Committee regarding the adequacy of
arrangements for colleagues to raise concerns,
in confidence, about possible wrongdoings
in financial reporting or any other matter. To
formally approve any changes to the reporting
arrangements for colleagues to raise concerns,
following a recommendation from Audit
Committee. To routinely receive reports (if any)
from Audit Committee regarding any reports for
concern that has been received from colleagues
and to ensure that arrangements are in place for the
proportionate and independent investigation of
such matters and appropriate follow up action.
■
The Society’s Defined Benefit Pension Scheme:
the consent of the Board is required to amend the
Pension Scheme’s Trust Deed and Rules; and the
Board approves of the appointment/removal of
Society nominated Trustees.
Board changes in 2025
Appointments
Karen McDonagh Reynolds joined the Board as a Non-
Executive Director in April 2025. Karen has a wealth of
experience with over two decades of senior technology
and operational leadership. Aligning to the Group’s
ethos, Karen supports the Society’s inclusive culture
and is an advocate for inclusive leadership. She has a
passion for supporting mid-career professionals and
championing women in technology careers.
Chris Keay was appointed as an Executive Director
on the Board in September 2025. Chris joined the
Society in 2018 and is a valued member of the Executive
Committee as the Group’s Chief Risk Officer. With
nearly four decades of experience in the financial
services sector, Chris brings to the Board a vast
experience in regulation, risk and operations.
Richard Gabbertas was appointed to the Board as a
Non-Executive Director in December 2025. Richard
previously worked at KPMG for over 40 years, 25 of
them in financial services. Having led KPMG’s regional
financial services practice, Richard now brings his in-
depth financial services experience to the Board as a
Non-Executive Director of the Society.
Resignations
In addition to welcoming new members to the Board,
the following resignations from the Board took place
over 2025:
■
David Samper (Chief Financial Officer)
resigned on 31 March 2025.
■
Michele Faull (Non-Executive Director)
resigned on 23 April 2025.
■
Amanda Shepherd (Chief Operations Officer)
resigned on 22 August 2025.
■
Stuart Miller (Chief Commercial Officer)
resigned on 9 September 2025.
■
Moorad Choudhry (Non-Executive Director)
resigned on 30 November 2025.
Following the resignation of David Samper as Chief
Financial Officer, we welcomed Paul Astruc to the
Executive Committee, as Interim Chief Financial Officer.
Paul was a strong interim appointment with over three
decades of experience in the banking and building
society sector. Paul left the Society in December 2025.
As announced in September 2025, we are pleased
to appoint Andrew Conroy into the permanent role
of Chief Financial Officer. Andrew joined the Society
on 2 February 2026. He was appointed to the Board
on 2 February 2026 and will be standing for election
at the 2026 Annual General Meeting. Andrew has
extensive experience across the financial services
sector, including prior leadership and senior roles at
other building societies. More details regarding Andrew
Conroy can be found in the Our Directors section.
Directors standing for election or re-election at
the 2026 Annual General Meeting (AGM)
All of the Society’s Directors are standing for either
election or re-election at the AGM, with the
exception of:
■
Chris Keay who will be retiring as the Chief Risk
Officer and an Executive Director at the end of
March 2026; and
■
Anne Shiels and Bryce Glover will be stepping
down as Non-Executive Directors at the 2026 AGM
having served their tenure on the Board.
Andrew Conroy will be standing for election at the
2026 AGM.
The biographies of all the Directors standing for
election or re-election are detailed in the Our Directors
section of the Annual Report and Accounts and provide
further details of how the Board members’ skills and
experience contribute to delivery of a long-term and
sustainable Society.
Copies of the Terms of Engagement for all the Society’s
Directors are available on request, and at the AGM.
Management information
The Chair is responsible for ensuring that the Directors
receive accurate, timely and clear information to enable
the Board to discharge its duties effectively. The
Board meet at least 10 times per year, at appropriate
times during the financial reporting period. Board
Directors receive meeting packs in advance of each
Board meeting. Management information is provided
to Directors throughout the year and the content of
the management information is regularly assessed to
ensure it remains relevant to the Society’s operations
and business model. The Board has an annual Board
agenda planner to ensure that all key areas are covered
in a timely manner during the year and sufficient time is
set aside at each meeting to ensure that constructive
discussion and challenge can take place.
All Directors have access to independent professional
advice, if required, and also access to the services of
the Group Secretary.
Board performance reviews
The Board recognise the importance of reflecting
on the performance of the Board, its committees,
the Chair and individual Directors. This is undertaken
through both formal and rigorous annual internal
reviews and through externally facilitated reviews.
In 2025 an internal Board performance review
was undertaken in the form of a survey which was
completed by all Directors. The detailed results and
feedback were presented to the Board in March 2025,
which included:
■
the skills mix of the Board is considered strong by
our Directors. It was recognised across the Board
the importance to continuously improve and
enhance the succession planning;
■
the Directors recognise the importance of
modelling the Society’s behaviours and to lead by
example in this area; and
■
the Chair scored highly in the review in allowing
everyone the opportunity to contribute or
challenge and ensuring sufficient time is given to
key matters.
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The changes to the composition of the Board in 2025
are outlined earlier in this report. Through strong
recruitment and succession planning we have ensured
that there continues to be a strong skills mix on the
Board. Further details of the Directors’ skills and
experience can be found in the Our Directors section of
the Annual Report and Accounts.
An action plan was further reported to the Board in
June 2025 to ensure that areas of improvement and
enhancement were tracked and monitored by the
Board. Following feedback within the review for the
inclusion of more strategic discussions within Board
meetings, changes have been implemented on the
Board agenda to ensure that there is a clear focus on
strategic matters for Board meetings. Enhancement
to Board reporting has been undertaken over 2025
so that there is continuous improvement in the
quality of strategic reporting to the Board. The Board
has continued to demonstrate its commitment to
exercising good behaviours. At the start of each Board
meeting the Directors consider ‘how they will operate’
during the meeting and at the end of each meeting the
Directors reflect on how well this was executed.
The Society undertook an external performance review
of Board committees and Subsidiary Companies in
2025. The review was undertaken by Bvalco, an external,
independent provider of Board performance reviews.
Scoping meetings for the review were undertaken with
the Group Chair, Group Chief Executive and the Chair
of each Board committee. The review was undertaken
by survey questions, face-to-face interviews, review
of committee packs and observation of committee
meetings. Bvalco presented their key findings to the
Board in June 2025, including:
■
each committee was found to be functioning
well with mostly consistent views of the relative
effectiveness of each;
■
committees are chaired well with good evidence
of effective relationships between Executives and
committee Chairs; and
■
there is a continuing need to improve on the quality
of papers coming in to the committees.
The Nomination and Governance Committee have
fully considered the feedback and findings of the
Bvalco report. Notwithstanding the positive findings
of the report, as outlined above, an action plan has
been approved by the Nominations and Governance
Committee to support the continuous enhancements
to the performance of the Board committees.
The Board, having regard to the Code, recognise the
importance of conducting external performance
reviews of the Board. The Board will be commissioning
an externally facilitated performance review of the
Board in 2026.
In compliance with the Code, Non-Executive Directors
hold the Executive Directors to account against agreed
performance objectives. As part of this scrutiny,
throughout 2025 the Chair, James Ramsbotham, met
separately with the Non-Executive Directors without
the Executive Directors present. The conclusions of the
scrutiny undertaken by the Non-Executive Directors
concluded that all Executive Directors were fulfilling
their duties and performing against their agreed
performance objectives.
Board Committees
The Board delegates certain matters to Board
Committees which comprise of Non-Executive
Directors members who have the most relevant
experience to consider those matters delegated by
the Board. The Board Committee meetings are also
attended by the relevant Executive Directors in an
advisory capacity. The Chair of each Board
Committee reports to the Board at a subsequent Board
meeting on matters discussed at each Committee
meeting to ensure that all Board members have
Committee oversight.
Audit
Committee
Group Risk
Committee
Group Board
Remuneration
Committee
Nominations &
Governance
Committee
The roles and responsibilities of each Board Committee
are set out in their individual Terms of Reference, which
are reviewed on an annual basis. Terms of Reference
for the Audit Committee, Group Risk Committee,
Remuneration Committee and Nominations and
Governance Committee are included on the Society’s
website (https://www.newcastle.co.uk/who-we-are/
our-governance/our-committees).
Details of the Committee performance reviews
undertaken in 2025 is set out above in the Board
Performance Reviews section.
Information concerning attendances at the meetings
is detailed in the Board and Board Committee
Membership Attendance Record section of this report.
Audit Committee
Details of the Audit Committee are contained in the
Audit Committee Report. Through the work of the Audit
Committee and Internal Audit Services during 2025, the
Directors have carried out a review of the Group’s risk
management and internal control systems, covering all
material controls, including financial, operational and
compliance controls.
Group Risk Committee
Details of the Group Risk Committee are contained in
the Risk Management Report.
Remuneration Committee
Details of the Remuneration Committee are contained
in the Remuneration Committee Report.
Nominations and Governance Committee
(Nominations Committee)
The current Members of the Nominations Committee
are James Ramsbotham (Committee Chair), Adam
Bennett, Rory Campbell and Anne Shiels. The
Nominations Committee is supported by the Chief
Executive and the Chief People Officer, who attend the
meetings in an advisory capacity only. Rory Campbell
is the Board representative from the Nominations
Committee who sits on the Society’s Diversity, Equity
and Inclusion Steering Committee.
The Nominations Committee operates to a rolling
agenda to ensure it discharges its full responsibilities. In
2025 it met on five occasions.
The Committee’s overarching purpose is:
■
to assist the Chair in keeping the composition and
succession of the Board, its committees and the
Group’s subsidiary company Boards under review;
■
to lead in the appointments process for
nominations to the Society Board and its Senior
Management appointments;
■
to review the Board’s governance arrangements
and make recommendations to the Board to
ensure governance arrangements are consistent
with best practice; and
■
to oversee the implementation of the Society’s
Diversity, Equity and Inclusion policy, its objectives
and linkage to Group strategy and Purpose.
An explanation of the work of the Nominations
Committee is set out below.
Recruitment process for appointments to
the Board
The Nominations Committee follows a stringent
recruitment process when making appointments to the
Board. This process is tailored to meet the requirements
of each particular vacancy and the method of attracting
candidates is adapted depending on the nature of the
skills required for the vacancy. External consultants
and advisers are normally utilised to ensure there is
a robust list of suitable candidates with which to fill
a vacancy. Board appointments must be ratified by
the full Board following the Nominations Committee
recruitment process.
Under the Code, open advertising and/or an external
search consultancy should generally be used for
the appointment of Non-Executive Directors. Miles
Advisory (an independent, external recruitment firm)
assisted the Nominations Committee in the recruitment
of Moorad Choudry, who was appointed to the Board
as a Non-Executive Director on 2 January 2025. Miles
Advisory also assisted the Nominations Committee in
the recruitment of Karen McDonagh Reynolds, who was
appointed to the Board as a Non-Executive Director on
23 April 2025. Other than advising the Society on the
recruitment of Directors, Miles Advisory have no other
connection with the Society or any individual Director
on the Board. Richard Gabbertas joined the Society
following a recruitment exercise for Non-Executive
Director with Warren Partners (an independent, external
recruitment firm). Warren Partners have no other
connection with the Society or any individual Director
on the Board.
When a new Director is appointed to the Board, the
Financial Conduct Authority and Prudential Regulation
Authority have the right, for certain key roles, to
carry out formal Significant Influence Function (SIF)
interviews in order that the Director becomes an
Approved Person.
All Directors have been issued with Service Agreements,
Role Descriptions and Terms of Engagement (for
Non-Executive Directors) to ensure that they all
fully understand and comply with their roles and the
responsibilities of being a Director of the Society.
Succession planning
The Board is committed to ensuring that the
composition of the Board meets the needs of the
Society, Members and other stakeholders for the
effective delivery of the Group strategy and to ensure
long-term sustainable success. The Nominations
Committee supports the Board with effective
succession planning by giving full consideration to
succession planning on a regular basis. The Committee
ensures that the challenges and opportunities facing
the Society are taken into account when considering
what skills, experience and expertise are needed on the
Board in the future.
As part of the Group’s succession programme, the
Board were delighted to welcome Karen McDonagh
Reynolds and Richard Gabbertas to the Board in 2025.
Karen has extensive experience in senior technology
and operational leadership which enhanced the
Board’s technology expertise. Richard brings a wealth
of in-depth financial services experience to the Board
and as a member of the Audit Committee and Group
Risk Committee.
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Diversity of the Board
The Code states that Boards and its committees
should have a combination of skills, experience and
knowledge. The Board recognises and embraces the
benefits of having a diverse Board which utilises a range
of factors including skills, industry experience, socio-
economic background, race, ethnic origin, gender,
other characteristics, experience and qualities.
To support the Board with having regard to the Code,
the Board adopted a Board Composition Statement in
2025 which can be found on the Society’s website on
the Corporate Governance webpage at
www.newcastle.co.uk/who-we-are/our-governance/
corporate-governance.
The Board Composition Statement sets out the
Group’s aspirations for Board diversity. The Board are
committed to those aspirations, however, no candidate
for Board membership shall be discriminated against on
the basis of gender, race, ethnic origin, disability, sexual
orientation, religion, age, socio-economic background
or any other characteristic. All appointments to the
Board are on merit.
The Society strives to meet the following aspirations,
where possible:
(a)
a minimum of 40% female representation on
the Board;
(b)
no less than one female in the role of either Chair,
Senior Independent Director, Chief Executive or
Chief Financial Officer; and
(c)
a minimum of one Board Director drawn from an
ethnic diverse background.
In regard to the ratios, at 31 December 2025:
(a)
two (20%) of the Board Directors are women
(2024: three female Directors (25%) on the Board);
(b)
there are no females within the role of Chair,
Senior Independent Director, Chief Executive or
Chief Financial Officer (2024: no females in these
roles); and
(c)
one member of the Board is from an ethnically
diverse background (2024: one Director from
ethnically diverse background).
Whilst all appointments to the Board shall be based on
merit assessed against objective criteria, the Board
recognise that the aspirations set out in the Board
Composition Statement are not being fulfilled. The
Board will continue to consider the aspirations when
undertaking succession planning.
Further details of gender diversity statistics across the
Group can be found in the Strategic Report.
Election or re-election to the Board
All Directors are required to seek election or re-election
at the forthcoming Annual General Meeting (AGM), to be
held on 28 April 2026.
Non-Executive Directors are usually expected to serve
more than one three-year term, subject to satisfactory
performance evaluations and re-election by Members.
Only in exceptional circumstances would Non-
Executive Directors be able to seek re-election when
they have served nine years on the Board. Nominations
Committee has in place a risk-based succession plan to
monitor this on a regular basis.
Independence of Directors
The Terms of Engagement for Non-Executive Directors
require that they declare to the Society any other
external interests and appointments. Details of the
Directors’ external appointments are set out in the
Annual Business Statement.
The Nominations Committee carries out an annual
review of the independence of Non-Executive
Directors against the circumstances set out in the
Code. Following the review undertaken by Nominations
Committee in January 2026, the Committee were
satisfied that all Non-Executive Directors, including the
Chair, were considered to be independent; this was
subsequently agreed by the Board.
Conflicts of interests
Directors must adhere to the Society’s Conflicts of
Interest Policy which is reviewed annually to ensure
that any potential or actual conflicts of interests
are identified and managed effectively. The Group
Secretary maintains a register of all other directorships
and interests of the Directors to ensure the Board has
good governance arrangements in place and that the
Board has effective oversight.
The Nominations Committee and Board review the
registers at least annually to ensure that all declarations
remain acceptable.
Time commitments
It is expected that all Non-Executive Directors are able
to devote sufficient time to undertake their directorship
role effectively. Time commitments of all other external
appointments and interests are considered as part
of the recruitment process of all appointments to the
Board to ensure that the successful candidate will have
sufficient time to undertake the role.
Following appointment, Nominations Committee
continue to regularly review time commitments for
all Non-Executive Directors, including requests from
a Non-Executive Director to take any new external
appointments and when considering the composition
of Board Committees.
Following the review of other commitments,
Nominations Committee were satisfied that all
Directors have sufficient time to properly discharge
their duties as Directors of the Society.
Assessment of Directors
All Directors are subject to a formal appraisal of their
performance on an annual basis. The Chair conducted
the appraisals of the Chief Executive and Non-
Executive Directors, the Senior Independent
Director conducted the appraisal of the Chair and
the Chief Executive conducted the appraisals of the
Executive Directors.
Skills and continuous development
All Directors are required to follow a process of
continuous development to ensure their skills and
experience meet the needs of the Society and the
regulatory environment in which we operate. The
training and development plans of Non-Executive
Directors are reviewed at least annually during their
performance appraisal.
Nominations Committee oversees the ongoing
training and development of Non-Executive Directors
including a formal induction programme for newly
appointed Directors. The Chief Executive oversees the
programme for Executive Directors.
In order to ensure that Nominations Committee
discharges its duties in this area effectively, a Board
skills matrix and a training menu for Non-Executive
Directors is in place.
During 2025, the Board received a number of internal
training sessions on the specific topics and areas
of interest to ensure that they maintain a process of
continuous professional development. In addition to
internal training sessions, the Board have also attended
external training courses, such as those provided by the
Building Societies Association.
Relations with Members
The views of Members are very important to the
Board. This section sets out how we engage with
Members. Further details can also be found in the
Strategic Report.
Member engagement is at the heart of the Group’s
strategy and the Society develops relationships with
Members in a number of different ways. The Annual
General Meeting is an important way for Members, as
owners of the Society, to use their vote to register their
views and it is also an important way for all Members to
meet with the Board, receive business updates and to
ask questions directly to the Directors. Voting can be
undertaken either online, by post or by attending the
meeting in person which will take place on
28 April 2026.
Member events are an invaluable opportunity for Board
members and Executive leaders to hear feedback
from Members. We have held six member listening
events over 2025 which were attended by a more
than 130 members. The listening events provided an
opportunity for a number of colleagues from across the
business, including Board members and the Executive
team, to meet with Members for in-depth discussions
in a relaxed environment to understand more about
their challenges, experiences and priorities and what
Members would like to see from us.
As well as engaging with the Board at the events,
Members can also contact committee Chairs via the
Group Secretary if they wish to do so. We have an
online customer satisfaction feedback process which
is regularly reviewed by the Chief Executive, Executive
team and Senior Managers.
Being a mutual society, the interests of Members
are already at the heart of the Group’s strategy and
Purpose and are a key focus for Board discussions and
decision making. The Financial Conduct Authority’s
Consumer Duty principles further support the five pillars
of the strategy. Rory Campbell, Non-Executive Director,
is the Consumer Duty Champion and in 2025, the Board
approved its Consumer Duty Annual Assessment,
where the Board concluded that it was satisfied, we are
complying with the Consumer Duty and the business
strategy complied with the obligations under the Duty.
Relations with colleagues
The Code sets out the responsibility for a Board to
have appropriate workforce policies and practices,
which reinforce a healthy culture. Being one of the five
pillars of the Group’s strategy, we ‘aim to deliver a great
place to work where people are empowered to realise
their potential.’ This pillar ensures that the wellbeing of
colleagues is at the forefront of the Group’s Purpose
and is a key component of Board discussions and
decision-making.
To support colleagues, we have a number of networks
within the Group including the Diversity, Equity and
Inclusion Network, LGBTQ+ Network, Women in
Leadership Network, Menopause Network, RACE
Network, Parent and Carers Network and Disability
Network. The networks have been imperative in shaping
policies and practices across the organisation. The
Board recognises the strength of embracing different
views, experiences and perspectives.
The Society has a Colleague Forum, chaired by a
member of the Executive team. The forum, consisting of
colleagues from across all areas of the Group, supports
leaders in the delivery of key organisational and people
matters and is focused on creating a great colleague
experience for all.
The Board recognise that speaking up is a vital
component of a healthy culture and is key to us being
a Purpose-led organisation. The Society has in place
effective whistleblowing arrangements to ensure
colleagues are able to raise concerns in a safe and
confidential manner so that all concerns can be fully
investigated and any appropriate action is taken. The
Group Whistleblowing Policy is reviewed annually each
year by Board. The Whistleblowing Champion on the
Board is Mick Thompson (Non-Executive Director and
Chair of the Audit Committee).
Further details of the Group’s people strategy are set
out within the Strategic Report.
Culture
The Code requires the Board to create a culture which
aligns corporate values with strategy and to assess
how the Society generates and preserves value over
the long-term. As a Purpose-led Society, we expect all
colleagues to embrace the Society’s Purpose, values
and behaviours. The Board is responsible for assessing
and monitoring the culture of the Society, and the
Board oversees and sets the tone for the culture, values
and behaviours of the Group.
Following on the significant culture journey undertaken
across 2024 with all colleagues, the Board have
continued to monitor how the ‘Be Curious’; ‘Be
Courageous’; ‘Be Collaborative’; ‘Be Efficient’; and ‘Be
Accountable’ behaviours are embedded across the
Group. As a Purpose-led Society, the Board provides
clear leadership to ensure that all policies, practices
and behaviours are aligned to the Group’s Purpose,
values and strategy and the Board lead by example by
demonstrating those behaviours. The Board monitors
culture in a number of ways throughout the year,
receiving a range of management information reported
to Board at regular intervals.
The Board use a third-party agency to organise
surveys and capture comments made by colleagues,
in confidence, which are then acted upon by Senior
Management. To enable the Board to assess and
monitor culture, it has been agreed that culture will be
formally reviewed by the Board at regular intervals and
the Board regularly considers how the desired culture is
embedded across the Society.
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Newcastle Strategic Solutions Limited (NSSL)
NSSL is a wholly owned subsidiary company of
Newcastle Building Society, whose principal activity
is the provision of specialised savings management
solutions and IT services.
The NSSL Board comprises of James Ramsbotham
(Chair of NSSL Board and Non-Executive Director),
Bryce Glover (Non-Executive Director), Karen
McDonagh Reynolds (Non-Executive Director), Nick
Young (NSSL CEO) and Brad Nicholls (Director of
Strategic Finance).
The main responsibilities of the NSSL Board are:
■
to oversee the strategic direction of NSSL ensuring
this is consistent with the Society’s agreed
strategic plan;
■
to evaluate and monitor the financial and
operational performance of NSSL against
pre-determined objectives, which includes
assessing performance in terms of contract
contribution, profitability, efficiencies, risk,
compliance and development of the savings
management proposition;
■
to ensure that appropriate mechanisms are in
place to inform the Society’s Board about the
performance of NSSL and any key issues identified;
■
to ensure that NSSL complies with all relevant
legislation, including the General Data Protection
Regulation and associated data protection
legislation and the appropriate regulations relating
to NSSL activities;
■
to establish and review a risk appetite statement for
NSSL, and to review, at least annually, the position
of NSSL against that risk appetite statement;
■
to ensure that an annual review of service
resilience is conducted and that there is ongoing
development to enhance resilience;
■
to approve the NSSL budget on an annual basis
(prior to inclusion in the Group budget which is
approved by the Society’s Board);
■
to approve the NSSL statutory accounts;
■
to consider and act upon the findings of any
external/internal audits or reviews;
■
to ensure that information assets are protected
sufficiently that their confidentiality, integrity
and availability are maintained in line with the
ISO27001 standard along with company and client
requirements; and
■
to ensure that a formal evaluation of the
effectiveness of the NSSL Board is undertaken on
an annual basis.
Further details of the activities of NSSL are given in the
Strategic Report.
Newcastle Financial Advisers Limited (NFAL)
NFAL is a wholly owned subsidiary of Newcastle Building
Society which offers financial advice on investments,
pensions, life and protection insurance, and inheritance
tax planning. NFAL is an appointed representative of
The Openwork Partnership, a trading style of Openwork
Limited which is authorised and regulated by the
Financial Conduct Authority.
The NFAL Board comprises of Andrew Haigh (Chair
of NFAL Board and Newcastle Building Society Chief
Executive), Anne Shiels (Non-Executive Director) and
Iain Lightfoot (Managing Director of NFAL).
The main responsibilities of the NFAL Board are:
■
to oversee the strategic direction of NFAL ensuring
this is consistent with the Society’s agreed
strategic plan;
■
to evaluate and monitor the performance of
NFAL against the objectives set, which includes
assessing performance in terms of sales quality,
customer satisfaction and outcomes,
complaints, risk and compliance oversight
(including consideration of the aspects that are
specifically the responsibility of Openwork Limited)
and profitability;
■
to review the performance of NFAL in terms
of financial results including profitability, risk
management and customer outcomes;
■
to review and approve the NFAL variable
remuneration scheme ensuring that quality
and customer outcomes are central to
performance assessment;
■
to review, at least annually, the reputational and
consumer risks associated with NFAL and the
controls in place in respect of this risk. The review
will be presented to the NFAL Board in the first
instance and ratified by the Society’s Group
Risk Committee;
■
to ensure that NFAL complies with all relevant
legislation including the General Data Protection
Regulation and associated data protection
legislation, and the appropriate regulations relating
to NFAL activities;
■
to approve the NFAL budget on an annual basis
(prior to inclusion in the Group budget which is
approved by the Society’s Board);
■
to approve the NFAL statutory accounts;
■
to receive the minutes of strategic partner
governance meetings and to be made aware
of any changes to the framework for managing
relationships with strategic partners;
■
to consider and act upon the findings of any
external/internal audits or reviews and make
suitable recommendations as appropriate; and
■
to ensure that a formal evaluation of the
effectiveness of the NFAL Board is undertaken on
an annual basis.
Board, Committee and Subsidiary Company membership attendance record 2025
The table below sets out the number of meetings attended by Directors during 2025. The number in brackets represents
the maximum number of meetings that the Director was eligible to attend as a member.
In addition to the scheduled meetings as set out in the Board meeting table below, the Board held two strategy days in
2025 to discuss the future direction of the Society.
Annual General Meeting (AGM)
The AGM provides an opportunity for Members to
question the Board on the resolutions to be proposed
at the meeting, the Annual Report and Accounts, and on
other aspects of the Society’s business. The resolutions
to be proposed at the meeting are set out in the Notice
of AGM which can be found in the Member Booklet
within the AGM pack.
All Members who are eligible to vote at the AGM are
encouraged to participate. Members will be able to
vote either in person at the meeting or by using their
proxy form. Votes may also be submitted online and for
each vote placed online at the 2026 AGM, the Society
will be donating £1 to the Newcastle Building Society
Community Fund at the Community Foundation.
All votes are counted by independent scrutineers.
As soon as practicable after the AGM, full details
of the results of the voting are placed on the
Society’s website.
On behalf of the Board
James Ramsbotham
Chair
5 March 2026
1.
Moorad Choudhry resigned from the Board 30 November 2025 (appointed 2 January 2025)
2.
Michele Faull resigned from the Board on 23 April 2025
3.
Richard Gabbertas joined the Board on 1 December 2025
4.
Chris Keay joined the Board on 5 September 2025
5.
Karen McDonagh Reynolds joined the Board on 23 April 2025
6.
Stuart Miller resigned from the Board 9 September 2025
7.
David Samper resigned from the Board 31 March 2025
8.
Amanda Shepherd resigned from the Board 22 August 2025
Director
Board
Audit
Committee
Group Risk
Committee
Remuneration
Committee
Nominations
Committee
NSSL
NFAL
Adam Bennett
12 (13)
4 (4)
5 (5)
Rory Campbell
12 (13)
4 (4)
5 (5)
Moorad Choudhry ¹
9 (11)
1 (1)
4 (4)
Michele Faull
²
4(4)
1 (1)
2 (2)
Richard Gabbertas ³
2(2)
1 (1)
Bryce Glover
12 (13)
3 (4)
3 (3)
5 (6)
Andrew Haigh
13 (13)
6 (6)
Chris Keay ⁴
5 (5)
Karen McDonagh
Reynolds ⁵
9 (9)
4 (4)
Stuart Miller ⁶
8 (8)
1 (1)
4 (4)
James Ramsbotham
13 (13)
5 (5)
6 (6)
David Samper ⁷
3 (3)
Amanda Shepherd ⁸
7 (7)
3 (4)
Anne Shiels
13 (13)
3 (3)
4 (4)
2 (2)
6 (6)
Mick Thompson
13 (13)
5 (5)
3 (3)
4 (4)
74
75
Audit Committee
Members of the Audit Committee at 31 December
2025 were:
Mick Thompson (Committee Chair), Bryce Glover and
Richard Gabbertas (appointed to the Committee on
1 December 2025).
Karen McDonagh Reynolds was
appointed to the Committee in January 2026.
During the year, there were changes to the
membership of the Audit Committee. The Board and
the Audit Committee have ensured that appropriate
governance processes were in place and that the
Audit Committee continued to operate effectively
throughout the period.
The Audit Committee’s extensive experience and
qualifications are detailed in the Our Directors
section of the Annual Report and Accounts. The Audit
Committee has combined financial sector experience,
and their competence remains considerable and wide-
ranging with specific relevance to the Group’s core
building society activities and commercial subsidiaries.
At least one member of the Audit Committee meets the
requirements of the UK Corporate Governance Code
to have significant recent, relevant financial experience.
The Audit Committee members were selected for
appointment by recommendation of the Society’s
Nominations Committee in consultation with the Audit
Committee Chair.
The Report of the Directors on Corporate Governance
sets out the process for reviews of the effectiveness
of Board committees. During the year a review was
undertaken by Bvalco, an external, independent
provider of Board performance reviews, which
concluded each committee of the Board, including the
Audit Committee, was found to be functioning
well and the Audit Committee is satisfied it has
operated effectively throughout the year. Further
information is found in the Report of the Directors on
Corporate Governance.
Audit Committee meetings:
The Audit Committee meets at least four times each
year, coinciding with key dates in the Group’s financial
reporting calendar, following a rolling schedule of
items for discussion, agreed and reviewed on an
ongoing basis. Meetings are attended by Audit
Committee members with other regular attendees at
meetings including the Chief Executive, Chief Financial
Officer, Chief Risk Officer, Chief Internal Auditor and
a representative of the External Auditor, Deloitte LLP,
as well as other management, as the Committee feels
is appropriate and necessary. For details of Audit
Committee meeting attendance, see the Board,
Committee and Subsidiary Company membership
attendance record in the Report of the Directors on
Corporate Governance.
As a general rule, the Audit Committee formally invites
the External Auditor and the Chief Internal Auditor to
meet the Audit Committee without Senior Management
present at least once a year. These meetings cover
matters relating to the Audit Committee’s terms of
reference and any issues arising from audits. The Chair
and Chief Internal Auditor also meet outside of the Audit
Committee on a regular basis.
Key roles and responsibilities as delegated by
the Board:
The Audit Committee’s responsibilities are delegated
from the Board and details of the delegated
responsibilities are available on the Society’s website
www.newcastle.co.uk/who-we-are/our-governance/
our-committees. All Board members have access to
minutes from Audit Committee meetings, and the Chair
of the Audit Committee updates the Board at every
meeting on recent Audit Committee activity.
The main function of the Audit Committee is to assist
the Board in fulfilling its oversight responsibilities,
specifically the ongoing review, monitoring and
assessment of the following areas:
Financial reporting:
The Audit Committee’s primary role regarding
financial reporting is to monitor the integrity of the
Group’s financial statements, including the half-
yearly financial information and the Annual Report
and Accounts, and any other formal announcements
relating to the Group’s financial performance, and
to monitor the statutory audit of the annual and
consolidated accounts.
This responsibility is discharged through:
■
review of half-yearly and year end announcements,
the Annual Report and Accounts, Summary
Financial Statement and Pillar 3 disclosures,
covering their clarity, completeness and
compliance with relevant accounting standards
and other regulatory and legal requirements;
■
reporting to the Board on the consistency and
appropriateness of critical accounting policies and
any changes thereto, considering the views of the
External Auditor;
■
review and challenge of significant financial
reporting judgements, estimates and the actions
and judgements of management;
■
review and challenge of accounting disclosures
to ensure as a whole they are fair, balanced and
understandable and in accordance with relevant
disclosure requirements;
■
advice to the Board on whether the Annual Report
and Accounts, taken as a whole, are fair, balanced
and understandable and provide the information
necessary for Members to assess the performance,
strategy and business model of the Group;
■
review of any correspondence from regulators in
relation to financial reporting;
■
review of the going concern assessment and
adoption of the going concern basis of accounting
on a six-monthly basis, and review of the going
concern and long-term viability assessment on an
annual basis;
■
evaluating the risks to the quality and effectiveness
of the financial reporting process, especially in light
of the External Auditor’s communications with the
Audit Committee; and
■
review and monitoring of management’s
responsiveness to the External Auditor’s findings
and recommendations.
Audit Committee Report
In 2025, the main areas of significant financial reporting
considered by the Audit Committee were as follows:
■
IFRS 9 provisioning:
The Audit Committee
maintains oversight and challenge of the
key model inputs driving the Group’s IFRS 9
provisioning models, with particular focus paid
towards the Group’s forward looking macro-
economic forecast inputs. These inputs are the key
judgements in calculating the provision.
The Model Risk Committee, a sub-committee of
the Group Risk Committee makes non-binding
recommendations on the Group’s IFRS 9 scenarios
(base, upside, downside and stress), scenario
inputs and scenario weightings that are used within
the provisioning models.
The Audit Committee has reviewed the
appropriateness of management judgement
applied to the IFRS 9 provisions and the impact of
key assumptions in the Group’s IFRS 9 provisioning
models, as well as the IFRS 9 related disclosures
within the half-yearly financial information and
Annual Report and Accounts. The Audit Committee
noted the impact of any small post model
adjustments recommended by management.
For 2025 these related to the potential impact
of risks to securities pledged from the impact of
climate change, agreeing the appropriateness
of these post model adjustments and the related
disclosures made in the Annual Report and
Accounts, as well as the release of the post model
adjustments held in prior years in respect of fire
safety and cladding risk and affordability.
The Audit Committee has concluded that the
IFRS 9 residential provisions are appropriate
and reasonable
In addition, the Audit Committee maintains
oversight and challenge over the commercial
property provisions and is satisfied that the
estimates, judgements and methodologies
applied to the commercial property
provisions relating to legacy assets are appropriate
and reasonable.
■
Equity release accounting and valuation:
In
respect of the accounting and valuation of
the legacy equity release portfolios, the Audit
Committee reviews and challenges the key model
inputs. Specifically, this includes the assessment of
the discount rate applied to projected cash flows
and the assumptions underpinning the valuation of
the no negative equity guarantee, such as future
property price growth and volatility.
The Audit Committee has evaluated the
methodology and assumptions employed by
management in establishing an appropriate
discount rate and has scrutinised the supporting
documentation, with particular attention given
to the rate applied to the Spanish equity release
portfolios. It was noted that limited market data is
available to inform this assessment, necessitating
the application of management judgement.
Taking into account the unique characteristics
of the equity release loan portfolios, alongside
broader macroeconomic indicators, the
Audit Committee is satisfied that the inputs,
assumptions, and methodologies used are
appropriate, and therefore considers the
resulting valuation of the equity release portfolios
to be reasonable.
■
Hedge accounting:
The Audit Committee is
appraised of the Group’s derivative and hedge
accounting position and strategy and agrees
the accounting policy for hedging, including
disclosures in the Annual Report and Accounts.
■
Securitisation accounting and valuation of
associated derivative financial instruments:
In relation to the new securitisation issuance
during the year through Hadrian Funding 2025-
1 PLC, the Audit Committee has reviewed and
challenged the accounting treatment and the
valuation methodology applied to the associated
derivative financial instruments, which are
classified as level 3 within the IFRS 13 fair value
hierarchy. This included a detailed assessment
of the assumptions and estimates underpinning
the valuation methodology. The Audit Committee
considered the derecognition criteria under IFRS
9 in respect of the mortgages used as collateral in
the issuance, including management’s assessment
of the transfer of risks and rewards. The Audit
Committee also considered the appropriateness
of the methodologies adopted by management,
including the rationale for key inputs and the
robustness of supporting documentation, as
well as review of associated disclosures in the
Annual Report and Accounts. The Committee is
satisfied that the accounting treatment, as well
as the valuation methodology and associated
assumptions and estimates, are appropriate.
■
Going concern and long-term viability
assessment:
Preparing the Annual Report and
Accounts under the going concern assumption
requires the Board and Audit Committee to
be satisfied that the Group and Society will
stay in business for at least 12 months from the
date the Accounts are signed. In addition, the
Report and Accounts contain a statement that
the Group and Society are considered viable
within its Directors’ Report. As a result, a detailed
assessment of the Group’s and Society’s viability
over the next three years is reviewed by the Audit
Committee, which considers the Group’s and
Society's business operations, business planning,
business management and risk management. The
assessment also includes forecasts and stress
testing of long-term liquidity, capital resources
and capital strategy. The Audit Committee
concluded that the adoption of the going concern
basis to prepare the Accounts is appropriate and
considers the Group and Society viable over the
next three years.
76
77
■
The Audit Committee considers matters raised
by the External Auditor
and concluded there
were no uncorrected adjustments in isolation or in
aggregate that were material to the Annual Report
and Accounts.
Having undertaken the above responsibilities and
considerations throughout the Group’s 2025 financial
year, as well as the Audit Committee being satisfied
that the significant financial reporting judgements and
estimates are appropriate and suitably disclosed in
the Annual Report and Accounts, the Audit Committee
recommended to the Board that approval be given to
the audited Annual Report and Accounts and Summary
Financial Statement as at 31 December 2025.
Internal control and risk management:
The Audit Committee works closely with the Group Risk
Committee to ensure that management and colleagues
take appropriate responsibility for departmental,
business unit and subsidiary risk mitigation and internal
control. The Audit Committee also reviews Internal Audit
Services and management reports on the effectiveness
of systems for internal control and risk management
across the Group.
Further details of risk management activities are given
in the Risk Management Report.
The Audit Committee is responsible for:
■
review of the scope and effectiveness of the
Group’s internal controls and risk management
systems, including those for ensuring compliance
with the regulatory environment in which the
Group operates;
■
review of the Group’s resolution pack
arrangements and oversight of the Group’s
recovery plan self-assessment; and
■
review and approval of the statements to be
included in the Annual Report and Accounts
concerning internal controls and risk management.
The Group’s Internal Audit Services forms a core
component of the Group’s risk management and
internal control process.
During the year, the Audit Committee, through Internal
Audit Services and from other management reports,
reviewed the scope and effectiveness of the Group’s
internal controls. The coverage of the reviews in 2025
included reviewing certain controls in operation for
lending, savings, information technology and cyber
security, prudential and conduct risk, finance, risk
management, regulatory compliance and reporting and
strategic change initiatives.
Internal Audit Services engaged the services of Ernst
& Young LLP, DCR Partners Limited and KPMG LLP
during 2025 for co-sourced internal audits to provide
specialist expert input and promote knowledge transfer
to Internal Audit Services.
Internal Audit Services represents the Audit
Committee’s primary available resource; however, the
Audit Committee retains the authority to obtain outside
legal or independent professional advice as it sees
fit. Reports from the Chief Risk Officer, Internal Audit
Services, the External Auditor and Senior Management
provide input on key risks, uncertainties and controls
directly to the Audit Committee.
Internal Audit Services:
The Audit Committee is responsible for monitoring and
reviewing the effectiveness of Internal Audit Services
in the context of the Group’s risk management and
for ensuring that professional standards are applied,
and that resource is adequate in terms of number,
skills, knowledge and standing within the Group to
execute its responsibilities in an independent and
objective manner. This review includes assessment of
the Chief Internal Auditor with respect to appointment,
remuneration, performance evaluation and assessment
of their objectivity and independence.
A formal internal review of the qualification and
effectiveness of Internal Audit Services is
undertaken by the Audit Committee annually and most
recently in July 2025, which concluded positively,
confirming that Internal Audit Services met its
responsibilities effectively.
Additionally, and in accordance with good practice,
the Audit Committee requires an external effectiveness
review of Internal Audit Services at least every five years.
A review was carried out during 2024 by an external
firm which concluded that Internal Audit Services was
operating effectively and conforms to the standards
expected by the Institute of Internal Auditors. The next
external review is planned for 2029.
The Audit Committee approves and reviews the internal
audit strategy, work programme and results, and
ensures Internal Audit Services maintains sufficient
access to the Board, management and the books
and records of the Society and its subsidiaries. This
oversight allows the Audit Committee to monitor and
assess the role and effectiveness of Internal Audit
Services in the overall context of the Group’s internal
control framework, ensures appropriate management
responsiveness to audit findings and recommendations
given and promotes open communication between the
Group’s Risk, Compliance, Finance, and Internal Audit
functions and the External Auditor.
External audit:
The Audit Committee is responsible for overseeing the
Group’s relationship with the External Auditor, Deloitte
LLP. This role extends to:
■
appointment, reappointment, removal and
assessment of independence, objectivity and
effectiveness of the External Auditor;
■
approval of terms and remuneration in respect of
audit services provided;
■
annual approval of the Group’s policy on the use of
the External Auditor for non-audit work as well as
any non-audit work to be performed by the External
Auditor; and
■
consideration of audit quality, including reports by
the Financial Reporting Council (FRC) Audit Quality
Review team.
The Audit Committee annually assesses the
qualifications, expertise and resources of the External
Auditor, seeking reassurance that the External Auditor
and their staff have no family, financial, employment,
investment or business relationships with the Group
that are considered to impact their independence.
The External Auditor communicates their formal
independence annually and appraises the Audit
Committee of policies, processes and monitoring in
place for maintaining their independence. The Audit
Committee seeks annual feedback from internal
stakeholders to facilitate a robust assessment of the
effectiveness of the External Auditor.
Prior to an external audit engagement, the Audit
Committee discusses the nature and scope of the
audit. It reviews findings of the External Auditor’s
work and assesses the effectiveness of the audit
process. This assessment reviews whether the External
Auditor has met the agreed audit plan, considers the
robustness and perceptiveness of the External Auditor
in responding to questions from the Audit Committee
and obtains feedback about the conduct of the audit
from key people involved.
The Audit Committee ensures that non-audit services
provided by the External Auditor will not adversely
impact the independence and objectivity of the audit
firm in performing their duties. A formal policy on the
use of the External Auditor, aligned to the FRC ethical
standard, for non-audit work is reviewed annually.
The External Auditor undertook a small number of non-
audit assignments during the year including review
of the Interim Financial Report. The fees paid to the
External Auditor for audit and non-audit services are set
out in the Administrative Expenses note to the Annual
Report and Accounts. The ratio of non-audit fees to
audit fees in 2025 was 0.08:1 (2024: 0.29:1).
Whistleblowing:
The Audit Committee reviews the Group’s procedures
for detecting fraud and policies related to its prevention
and detection, including whistleblowing. This includes
ensuring that arrangements are in place by which
colleagues, in confidence, may raise concerns about
possible improprieties ensuring that arrangements are
in place for independent investigation and appropriate
follow-up action. These could be in matters of financial
reporting, financial control or any other matters. The
outcome of the review is reported to the Board.
On behalf of the Board
Mick Thompson
Chair of the Audit Committee
5 March 2026
79
78
Remuneration Committee Report
Annual statement from the Chair of the Remuneration Committee
Introduction
I am pleased to share the Directors’ Remuneration
Report, on behalf of the Remuneration Committee ‘the
Committee’, which details the Group’s approach to
pay, incentives and benefits for the period 1 January to
31 December 2025. It sets out the Remuneration Policy
and remuneration details for the Group’s Executive and
Non-Executive Directors, is aligned with our broader
business strategy, is in adherence with the Regulators’
Remuneration Code and the disclosure requirements
arising under the Capital Requirements Directive IV
(CRD IV) and has regard to the principles of the UK
Corporate Governance Code relating to remuneration.
The Remuneration Committee
The Committee is comprised solely of Non-Executive
Directors who have no personal financial interest in
the recommendations:
The Chair of the Board, Chief Executive, Chief People
Officer and Head of Reward (except for items relating
to their own remuneration) also attend meetings but are
not members of the Committee.
Our Purpose-led reward approach – the
decisions of the Remuneration Committee
in 2025
Our Purpose, connecting our communities with a
better financial future, continues to underpin every
decision we make, including how we recognise and
reward our colleagues, leaders, and Board members.
The Remuneration Committee’s role is to ensure that
our approach to reward remains fair, transparent, and
aligned to the long-term success of the Society, our
Members, and our communities.
Reward guided by fairness, sustainability
and change
2025 was another year of significant change, both
within the Society and across the external environment.
While inflationary pressures have eased compared to
prior years, many households continue to experience
the lasting effects of higher costs, and competition
for skilled talent remains strong. Internally, we have
continued to evolve our structure and operating model
to ensure the Society is positioned for sustainable
success, with the right people, capabilities, and
leadership in place to deliver our strategic priorities.
In this context, the Committee’s focus has been to
balance affordability and prudence with fairness and
competitiveness. Our 2025 pay review approach
continued to prioritise colleagues in lower-paid roles,
reflecting the ongoing cost-of-living pressures and
our commitment to maintaining Real Living Wage
accreditation. This differentiated approach ensures
that colleagues across all levels are fairly rewarded for
their contribution, while enabling us to retain and attract
the talent needed to deliver for our Members.
Embedding Purpose through total reward
During 2025, we continued to strengthen our total
reward and wellbeing offering to ensure it reflects our
Purpose and values. Following the major enhancements
to family-friendly policies introduced in 2024, including
equalising parental leave for all parents regardless
of gender or route to parenthood, our focus this year
has been on embedding these changes and ensuring
colleagues and leaders are confident in applying them.
Feedback has been overwhelmingly positive, and
uptake has continued to increase.
Our accreditation as both a Living Wage and Living
Pension Employer remains a point of pride and a
demonstration of our long-term commitment to
financial wellbeing. During 2025, we extended our
colleague financial education programme with
further sessions on pensions, savings, and managing
household finances. Engagement levels have remained
strong, and more colleagues have chosen to increase
their pension contributions; a positive reflection of
increased awareness and confidence in planning for
the future.
Executive and Director remuneration in respect
of 2025
The Committee’s responsibility is to ensure that
remuneration for the Executives and Directors remains
appropriate, performance-linked, and aligned to
the Society’s Purpose, strategy, and regulatory
expectations. Executive pay outcomes for 2025
were assessed against individual and organisational
performance, as well as external market benchmarks,
and remained broadly consistent with those awarded
to the wider workforce.
Bonus outcomes for the year were determined against
a balanced scorecard of financial and non-financial
measures including profit, lending, funding, customer
satisfaction, and colleague engagement. The Society
delivered a solid performance despite ongoing cost
challenges and the need to invest in change and
transformation. The Committee concluded that bonus
outcomes fairly reflected this balanced performance
and were awarded in line with policy.
As in previous years, 50% of Executive bonuses
remain deferred and subject to malus and clawback for
up to three years. This ensures alignment with
long-term performance, our risk framework, and the
Society’s Purpose.
Looking ahead
As we look forward to 2026, the Committee’s focus
remains on ensuring our reward framework continues
to support the Society’s strategic priorities and
Purpose; by maintaining fairness and competitiveness,
supporting colleagues’ financial wellbeing, and
ensuring we have the right structure, capability, and
leadership in place to succeed. Through continued
investment in our people, and by applying fair and
responsible reward practices, we will remain well
positioned to attract, retain and motivate the talent
needed to deliver sustainable success for our Members
and communities.
Directors’ Remuneration Policy
Policy aims and principles
The Group’s policy for remunerating Directors is
designed to provide fair and competitive remuneration
packages that attract, retain and reward Executives,
including Executive Directors, to deliver business
objectives in support of the Society’s strategy, while
providing value for Members.
In designing the Directors’ Remuneration Policy, the
following key principles have been applied:
■
the policy is clearly linked to and influenced by our
Purpose, strategic plan, objectives and values and
serves the interests of all key stakeholders;
■
policy, process and practice are consistent with
and promote effective risk management in line
with the Group’s risk appetite statement and
detailed policies;
■
basic pay and total remuneration are set at a fair,
affordable, reasonable and competitive level
to attract and retain the appropriate calibre of
people;
■
the approach to pay and total remuneration is
inclusive and equitable, supporting wider diversity
and inclusion aims;
■
the approach to pay satisfies all regulatory
requirements and good, responsible corporate
governance practice;
■
remuneration arrangements embed our culture and
drive correct behaviours;
■
remuneration arrangements are transparent
and fair, reflecting individual responsibilities and
performance; and
■
remuneration arrangements are straightforward to
understand, communicate and administer.
Key changes to the Directors’ Remuneration
Policy for 2026
The Committee has recently reviewed the Directors’
Remuneration Policy for the upcoming year and has
determined that it remains robust, appropriate and
aligned to our Purpose. A recent review of the policy
resulted in an update to the malus and clawback
provisions to strengthen providing the business with a
broader and more robust range of remedial powers.
Directors’ service agreements and
notice periods
Executive Directors are employed on service
agreements which can be terminated by either the
Society or the Director giving six months’ notice.
Non-Executive Directors do not have service
agreements. Non-Executive Directors are appointed
for an initial three-year term. They will generally be
expected to serve more than one three-year term, but
not longer than nine years in total, unless in exceptional
circumstances and after approval by the Board.
All of the Society’s Directors volunteer for
annual re-election.
Policy on termination pay
The Committee aims to treat departing Executive
Directors fairly, taking into account the circumstances
of their departure, but is always careful to ensure that
the interests of Members are considered and that
there are no rewards for failure. Executive Directors are
entitled to be paid their basic salary and contractual
benefits (including pension contributions) during their
notice period. The Society has the discretion to pay
these as a lump sum in lieu of notice. The rules of the
Executive Bonus Scheme set out the treatment for an
individual who ceases to be a colleague or Director of
the Society.
Rory Campbell
Non-Executive Director (Chair)
Mick Thompson
Non-Executive Director
& Chair of Audit Committee
Anne Shiels
Non-Executive Director
80
81
How elements support
our strategy
Operation
Maximum
potential value
Performance conditions
and assessment
Basic salary
Supports the attraction
and retention of Executive
Directors, reflecting their
individual roles, skills and
contribution and ensuring
internal pay equity
(ensuring colleagues
within similar roles are
compensated in a
similar way).
Basic salary reflects
the size of the role and
responsibilities, individual
performance (assessed
annually) and the skills
and experience of the
individual. In setting
appropriate salary levels,
the Committee takes into
account data for similar
roles in comparable
organisations as
determined by the Group
Job Evaluation Policy. The
Society aims to position
Executive Directors
competitively within
the reference group.
Consideration is also given
to internal pay equity.
Increases to base salary
are determined annually
by the Committee taking
into account:
■
individual
performance;
■
the scope of the role;
■
pay levels of
comparable
organisations; and
■
pay increases
elsewhere in
the Group.
Individual performance
is taken into account
when considering base
increases, as well as
affordability and
the performance of
the Group. Increases
are approved by the
Committee having been
proposed by the Chair
(for Chief Executive)
and Chief Executive (for
other Executives).
Pension
Supports attraction and
retention of Executive
Directors at a cost that can
be controlled by
the Society.
Generally, the Society
contributes to a defined
contribution pension
scheme for Executive
Directors. The contribution
can instead be paid in cash
(which is excluded from
bonus calculations)
if the Executive Director
so chooses.
Up to 9% of basic salary,
which is consistent with
the benefit available to the
wider workforce.
None applicable.
Benefits
Supports attraction and
retention of Executive
Directors; and provides
a competitive level
of benefits to assist
Executive Directors to
carry out their
roles effectively.
A number of benefits are
provided to Executive
Directors, including car
allowance, private medical
insurance, life insurance,
health screening and
permanent health
insurance. The Committee
reviews benefits offered
and may make changes,
for example, to reflect
market practice or the
needs of the business.
The Society offers all
colleagues the option
to participate in a salary
sacrifice scheme in order
to make use of current
incentives and encourage
use of
electric vehicles.
The Society chooses
to invest in the cost of
providing benefits
which may vary from year
to year.
None applicable.
How elements support
our strategy
Operation
Maximum
potential value
Performance conditions
and assessment
Executive Bonus
Scheme*
Rewards performance
within the context of
achieving corporate goals
and objectives as set out
in the corporate strategy.
Supports attraction
and retention of
Executive Directors.
Supports the
development of a high
performance culture.
Based on a number of
performance measures
and targets linked to
the delivery of
corporate strategy.
Measures include
financial, customer,
people and
personal objectives.
Targets are set annually
and payments are made
at the discretion of the
Committee.
Payments are made in
cash in instalments over a
three year period.
The maximum potential
bonus opportunity is 75%
of base salary. On target
bonus opportunity is 50%
of base salary.
Performance against pre-
determined objectives
will be measured by
the Committee on
an annual basis and
discretion may be applied
under exceptional
circumstances.
Personal performance
must be judged to have at
least met expectations for
any payment to be made
from the scheme.
Bonus levels take
affordability into account
together with specific
performance measures
which are set at
the beginning of each
financial year.
A financial gateway exists
to ensure the financial
viability of the bonus
scheme. For the 2025
scheme this was a
profit gateway.
82
83
Remuneration for Executive Directors
The table below shows the elements of remuneration for Executive Directors and the way they operate. These elements
would be expected to apply equally to any new Executive Directors appointed in the future.
*As noted above, the Committee has complete discretion to make payment under the Executive Bonus Scheme and
also has discretion to amend or remove that scheme where necessary to ensure the arrangements continue to meet the
Committee’s overriding remuneration principles.
Year
Salary
or fees
Taxable
benefits
Annual
bonus
(Note 1)
Pension contributions to
defined contribution scheme
(Notes 2,3,4 and 5)
Total
contractual
benefits
Executive Directors
£000
£000
£000
£000
£000
AS Haigh
2025
527
61
257
-
845
2024
504
59
181
-
744
DA Samper (Stepped down 31
March 2025 - Note 6)
2025
91
11
-
-
102
2024
333
42
-
-
375
S Miller (Stepped down 9
September 2025 - Note 7)
2025
311
40
-
-
351
2024
296
39
106
-
441
AD Shepherd (Stepped down 22
August 2025 - Note 8)
2025
237
28
-
-
265
2024
139
18
49
-
206
CJ Keay
(Appointed 5 September 2025)
2025
80
3
115
7
205
Total for Executive Directors
2025
1,246
143
372
7
1,768
2024
1,272
158
336
-
1,766
Non-Executive Directors
BP Glover
2025
76
-
-
-
76
2024
79
-
-
-
79
A Laverack
(Business name: Anne Shiels)
2025
64
-
-
-
64
2024
70
-
-
-
70
MR Thompson (Note 9)
2025
96
-
-
-
96
2024
93
-
-
-
93
GA Bennett
2025
68
-
-
-
68
2024
65
-
-
-
65
S Lynn
(Stepped down 24 April 2024)
2024
18
-
-
-
18
MJ Faull
(Stepped down 23 April 2025)
2025
17
-
-
-
17
2024
52
-
-
-
52
JDA Ramsbotham
2025
127
-
-
-
127
2024
118
-
-
-
118
RTS Campbell
2025
63
-
-
-
63
2024
52
-
-
-
52
K McDonagh Reynolds
(Appointed 23 April 2025)
2025
41
-
-
-
41
M Choudhry (Appointed 2
January 2025, stepped down 30
November 2025)
2025
53
-
-
-
53
RK Gabbertas (Appointed 1
December 2025)
2025
5
-
-
-
5
Total for Non-Executive
Directors
2025
610
-
-
-
610
2024
547
-
-
-
547
Total for all Directors
2025
1,856
143
372
7
2,378
2024
1,819
158
336
-
2,313
Notes to the table
1.
During 2025 the Executive Directors participated in the
Group’s annual Executive Bonus Scheme. A proportion of
the Executive bonus payment is deferred and is payable
in future years as shown in the Executive Bonus Payment
table overleaf.
2.
Mr AS Haigh has elected to take his pension contribution
amounting to £47,453 (2024: £45,360) as a cash
payment. He is liable for his own tax and national insurance
contributions on this payment.
3.
Mr DA Samper has elected to take his pension
contribution amounting to £7,575 (2024: £29,948) as a
cash payment. He is liable for his own tax and national
insurance contributions on this payment.
4.
Mr S Miller has elected to take his pension contribution
amounting to £28,013 (2024: £26,663) as a cash payment.
He is liable for his own tax and national insurance
contributions on this payment.
5.
Mrs AD Shepherd has elected to take her pension
contribution amounting to £19,927 (2024: £12,525) as a
cash payment. She is liable for her own tax and national
insurance contributions on this payment.
6.
Upon Mr D Samper ceasing to be a Director and leaving
the Group, a payment of £324,101 was made to him. This
was calculated by reference to the agreed terms of their
employment contract. The payment is in addition to
the amounts disclosed in the table. Under the scheme
rules, Mr D Samper is not entitled to any deferred bonus
payments due in future years. He therefore will not receive
the deferred bonus amount that had been expected for
payment in future years (2026: £24,155).
7.
Upon Mr S Miller ceasing to be a Director on 9 September
2025 and following the end of his contract of
employment on 29 January 2026, under the scheme rules,
he is not entitled to any deferred bonus payments due in
future years. He therefore will not receive the deferred
amount of £74,546 relating to his 2023 and 2024 bonus
that had been expected for payment in future years
(2026: £47,996 and 2027: £26,550).
8.
Upon Mrs A Shepherd ceasing to be a Director and
leaving the Group, a payment of £203,105 was made to
her, including a £14,016 redundancy payment. This was
calculated by reference to the agreed terms of their
employment contract. The payment is in addition to the
amounts disclosed in the table. Mrs A Shepherd retained
entitlement to accrued bonus deferrals of £24,518 (2026:
£12,259 and 2027: £12,259) under the contractual terms
of her redundancy but is not eligible for a bonus payment
under the 2025 scheme.
9.
Mr M Thompson received £20,550 (2024: £19,613) in
relation to chairing the Newcastle Building Society
Pension and Assurance Scheme Board which is included
in the figures presented in the table.
Chief Executive remuneration
The Chief Executive is the Group’s most highly paid
colleague, and no colleague earns more than any
Executive Director.
Mr A Haigh received a 4.5% pay rise on base salary
in April 2025. This increase is an outcome of the
independent review of Executive reward, undertaken by
the Committee’s reward advisors Willis Towers Watson
and was in line with the increases in the wider workforce.
Chief Executive Officer (CEO) remuneration
The Companies (Miscellaneous Reporting) Regulations
2018 requires the publication of the ratio of the CEO’s
single figure remuneration. We have chosen to use
the Government’s preferred methodology (option
A), which determines the total full-time equivalent
total remuneration for all colleagues for the relevant
financial year, and compares the 25th, median and 75th
percentiles against the CEO’s single figure.
Quartile
Base
salary
£
Total pay
and
benefis
£
Ratio to
CEO
2025
25th
25,459
29,459
29:1
50th
28,289
32,688
26:1
75th
43,540
52,253
16:1
2024
25th
24,434
28,843
26:1
50th
29,158
33,433
22:1
75th
43,734
52,154
14:1
2023
25th
22,729
25,848
27:1
50th
28,113
32,761
21:1
75th
40,620
48,946
14:1
2022
25th
22,316
26,347
28:1
50th
27,882
33,187
22:1
75th
39,328
46,062
16:1
2021
25th
20,623
22,438
26:1
50th
25,987
29,087
20:1
75th
36,773
42,329
14:1
Directors’ emoluments (Audited)
The total remuneration received by Executive Directors is shown below in the following table. The information has been
audited and shows remuneration for the years ended 31 December 2024 and 31 December 2025 as required under
the Building Societies (Accounts and Related Provisions) Regulations 1998. There is a requirement under Rule 14 of the
Society’s Rules to have deposits to the value of not less than £1,000 in a Society share account in order to qualify as a
Director. This means all Directors are Members of the Society. There are no requirements for a Director to own shares in
the Society’s subsidiary companies.
Details of other Board positions held by the Group’s Directors outside of the Group are shown in the Annual Business
Statement. None of the current Executive Directors retained any remuneration as a result of their non-Society positions.
The table below has been audited as it forms part of the financial statements.
84
85
Remuneration of Non-Executive Directors
A separate Non-Executive Director Remuneration Committee reviews and approves the fees of Non-Executive
Directors which are then ratified by the Board. Membership of the Non-Executive Remuneration Committee consists
of the Chair of the Board, Chief Executive and Chief Financial Officer and is attended by the Chair of the Remuneration
Committee and Chief People Officer. Remuneration for the Chair of the Board is recommended by the Chief Executive
to the Remuneration Committee for approval and subsequent ratification by the Board.
Element
Approach
Basic fees
Reviewed annually, based on time commitment and responsibility required by Board and
Board Committee meetings. The review takes into account fees paid by comparable
financial services organisations. The fee currently paid is £54,350 (2024: £52,500) for
Non-Executive Directors and £130,000 (2024: £119,700) for the Board Chair.
Additional
fees
Additional fees are payable for additional responsibilities, such as Committee Chair,
Chair or Non-Executive Director of a subsidiary business or for being the Senior
Independent Director. Fees range from £5,600 to £22,350 (2024: £5,400 to £21,600)
depending on time commitments required.
Other items
Non-Executive Directors are not eligible to participate in any form of performance pay
and do not receive pensions or other benefits in kind.
Executive
Director
Bonus deferred from
Bonus payable in 2026
£'000
Bonus payable in 2027
£'000
Bonus payable in 2028
£'000
Total deferred bonus
£'000
Andrew Haigh
2023
37
-
-
37
2024
45
45
-
90
2025
129
64
64
257
Total
211
109
64
384
Amanda Shepherd
2024
12
12
-
24
Total
12
12
-
24
Chris Keay
2025
57
29
29
115
Total
57
29
29
115
Total
280
150
93
523
Consideration of remuneration for colleagues
who are not Directors - Code Staff and
Executives who are not Directors
In addition to setting the remuneration of the Executive
Directors, the Committee approves the Remuneration
Policy for Senior Managers who have a material
impact on the Society’s risk profile (Code Staff). The
Committee also reviews recommendations from the
Chief Executive for approval of the remuneration of
other Executives.
The Group’s colleagues
All colleagues receive basic salary, benefits and
pension consistent with market practice and are
eligible to participate in one of the Group’s Corporate
Bonus Schemes. When setting salary increases for
Executive Directors, the Committee considers the level
of salary increases across the Group.
No colleague consultation on Executive Director
remuneration has been undertaken.
The ‘Sharing in our Success’ Bonus Scheme ensures
that each colleague below Executive level also has
the correct mix of base and variable pay to reward and
incentivise the performance required to deliver the
ambitious strategic plans of the Society.
The metrics and rules of the ‘Sharing in our Success’
Bonus Scheme are broadly in line with the Executive
Bonus Scheme. The Committee approved payments
of the 2025 ‘Sharing in our Success’ Bonus, in line with
the scheme rules. The relative levels of bonus payment
from the scheme were similar, as a percentage of the
maximum award, to those awarded under the
Executive scheme.
Summary of the remuneration of Material Risk Takers
Remuneration Code Staff or Material Risk Takers are currently defined as Senior Management, control functions and any
colleague receiving total remuneration that takes them into the same remuneration bracket as Senior Management, or
whose professional activities have a material impact on the Group’s risk profile. The table below shows the aggregate
remuneration for Code Staff in relation to their services to the Society and Group.
Category
Year
Number of
colleagues
Salary or Fees
£'000
Other taxable
benefits
£'000
Variable
remuneration
(Note 1) £'000
Total
remuneration
£000
Executive
Directors
2025
5
1,246
150
372
1,768
2024
4
1,272
158
336
1,766
Other Senior
Management
2025
6
1,281
181
440
1,902
2024
5
870
110
295
1,275
Other material
risk takers
2025
18
1,829
231
230
2,290
2024
18
1,891
268
367
2,526
Total
2025
29
4,356
562
1,042
5,960
2024
27
4,033
536
998
5,567
1.
Variable remuneration reflects participation in the Executive Bonus Scheme
for Executive Directors and other
members of the Executive Committee and the Corporate Bonus Scheme for all other Code Staff.
Annual Executive Bonus
The Executive Bonus Scheme is paid in three parts,
with the first payment of 50% in the year after the bonus
is earned and the remainder over two equal payments
in the following two years. This allows the Committee
to review whether the payment remains appropriate
and in line with strategy and Purpose, providing the
ability to reduce or cancel the payment in cases
such as, but not limited to, significant failures in risk
management, material errors or the Society’s
financial underperformance.
The Executive Bonus Scheme is dependent on
performance, measured against personal
objectives as well as financial and non-financial
performance indicators.
The overall level of Executive bonus payments for 2025
were therefore 47.7% of salary.
The rules of the Executive Bonus Scheme determine
that under most circumstances no bonus is payable to
Executives who resign from the business. This applies to
bonus payments from the current year and any unpaid
deferred elements from prior years.
The bonus has been awarded in line with the rules of the
scheme and against the performance metrics agreed at
the beginning of the year.
Payments and deferred payments under the Executive
Bonus Scheme are shown in the table below.
86
87
Executive bonus
Consideration of Member views
The Society seeks the views of the Society’s Members
on its Remuneration Policy and practices via our Annual
General Meeting process. For a number of years, the
Committee has invited Members to vote on the annual
Remuneration Report, and Members have always voted
in favour.
The Directors’ Remuneration Report was last voted
on in April 2025. Member approval was given to the 31
December 2024 Directors’ Remuneration Report
(94% approval with 15,463 votes for, 1,061 against and
281 withheld).
The Remuneration Committee
The Committee is responsible for the oversight and
governance of the Group’s overall compliance with the
Remuneration Code.
The Committee’s main objectives are:
■
to ensure that fair and competitive remuneration
packages are in place, in line with market rates,
that attract, retain and reward the Executive and
Senior Management for delivering stated business
objectives in support of the Group’s Strategy and
Purpose, ensuring a forward-looking approach to
keep pace with the Society whilst providing value
for Members, stakeholders and communities;
■
to ensure compliance with the Regulators’
Remuneration Code through at least annual review
and to ensure the Remuneration Policy is consistent
with regulatory requirements and the Group’s
financial situation and future prospects;
■
to determine and agree with the Board the
framework for Executive and Senior Management
remuneration and conditions of employment;
■
to approve the salaries, and any salary adjustments,
variable pay awards and payments, for Executive
and Material Risk Takers and to approve the terms
of the annual pay review for all colleagues;
■
approve the design of any variable remuneration
schemes and approve the total annual payments
under such schemes;
■
to approve the Remuneration Policy Statement and
Remuneration Committee Reports in the Annual
Report and Accounts and Summary Financial
Statements, and the remuneration section of the
Pillar 3 disclosures;
■
to approve service agreements, terms and
conditions for the appointment of Executive
Directors; and
■
to consider and make recommendation to the
Board on the general framework of colleague
bonus schemes.
The Board believes remuneration should be sufficient
to attract, retain and motivate colleagues and Senior
Managers to continue to run the Group successfully and
in line with stated aims and Purpose. The Remuneration
Policy, therefore, focuses on rewarding colleagues and
Executives in line with the achievement of the Group’s
goals set out in the strategic plan and corporate key
performance indicators, thus ensuring long-term value
for money for Members.
The Remuneration Committee operates within the
terms of reference agreed by the Board. The terms
of reference are reviewed annually and were last
reviewed in June 2025. A review of the effectiveness
of the Committee was also undertaken during 2025
covering areas including performance, membership,
management information and administration of
the Committee.
During the year, the Committee met four times, and
activities included:
■
overseeing compliance of the Group’s approach
to remuneration against the requirements of the
Regulators’ Remuneration Code;
■
considering and agreeing pay and benefits for
Executive Directors, Executives, Material Risk
Takers and the Chair;
■
overseeing remuneration and benefits matters
across the Group;
■
reviewing and benchmarking the level of pay for
both colleagues and Executives;
■
determining the level and approach to annual pay
review for all colleagues;
■
agreeing bonus metrics for the coming
financial year;
■
reviewing the performance for the full year and
approving the level of Executive and Corporate
Bonus to be paid based on achievement of
various financial and non-financial key
performance measures;
■
agreeing changes to remuneration policies
and practice;
■
reviewing latest market practice to determine
strategic reward focus for the coming years;
■
considering the disclosure requirements for
the Remuneration Report including Pillar 3
disclosures; and
■
approving the Directors’ Remuneration Report
External advice received
During the year, Willis Towers Watson were engaged to
assist the Committee by reviewing the Group’s Director
and Executive level remuneration and benchmarking it
against the external market. The Committee is
satisfied that the advice received is objective and
independent, with Willis Towers Watson being a
reputable firm with no other ties to the Group, its
Directors or Senior Management.
The fee for the advice was £25,334 (2024: £15,636).
On behalf of the Board
Rory Campbell
Chair of the Remuneration Committee
5 March 2026
Every
Member,
colleague,
branch, and
partnership
plays a role in
delivering our
Purpose
88
89
Independent Auditors Report to the Members of Newcastle
Building Society
Report on the audit of the financial statements
1. Opinion
In our opinion the financial statements of Newcastle
Building Society (the ‘Society’) and its subsidiaries
(the ‘Group’):
■
give a true and fair view of the state of the Group’s
and of the Society’s affairs as at 31 December 2025
and of the Group’s and the Society’s income and
expenditure for the year then ended;
■
have been properly prepared in accordance with
United Kingdom adopted international accounting
standards; and
■
have been prepared in accordance with the
requirements of the Building Societies Act 1986.
We have audited the financial statements
which comprise:
■
the Group and Society income statements;
■
the Group and Society statements of
comprehensive income;
■
the Group and Society statements of
financial position;
■
the Group and Society statements of movements
in members’ interests;
■
the Group and Society cash flow statements; and
■
the related notes 1 to 43.
The financial reporting framework that has been
applied in their preparation is applicable law and United
Kingdom international accounting standards.
2. 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 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 (the
‘FRC’s’) Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
The non-audit services provided to the Group and
the Society for the year are disclosed in note 6 to the
financial statements. We confirm that that we have
not provided any non-audit services prohibited by the
FRC’s Ethical Standard to the Group or the Society.
We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for
our opinion.
4. Conclusions relating to going concern
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:
■
obtaining an understanding of relevant controls
around the directors’ going concern assessment;
■
assessing the Group’s and Society’s
compliance with regulation including capital and
liquidity requirements;
■
involving prudential risk specialists in assessing
the information supporting the liquidity and capital
forecasts, including the stress testing and reverse
stress testing performed by the directors;
■
assessing the assumptions such as estimated
future cash flows in the context of current and
forecast macroeconomic conditions, capital
and liquidity, used in the forecasts prepared by
the directors;
■
assessing historical accuracy of forecasts
prepared by the directors; and
■
assessing the appropriateness of the going
concern disclosures in the financial statements.
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 of at least
twelve months from when the financial statements are
authorised for issue.
Our responsibilities and the responsibilities of the
directors with respect to going concern are described
in the relevant sections of this report.
Key audit matters
The key audit matters that we identified in the current year were:
■
Fair value of equity release mortgages; and
■
Expected credit loss (ECL) allowance on residential lending
The key audit matters identified above are consistent with the prior year.
Materiality
The materiality that we used for the Group financial statements was £3.4m which was
determined on the basis of 1.0% of net assets.
Scoping
All components of the Group are operated centrally and all audit work was performed
centrally by the Group audit engagement team. This provided 99% coverage of revenue,
profit before tax and net assets of the Group.
Significant changes in our
approach
We included a new component entity within the period, Hadrian Funding 2025-1 PLC, a
securitisation entity within the scope of our audit, given the size and nature of the entity,
and the judgement made over consolidation into the Group financial statements.
3. Summary of our audit approach
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91
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, 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 forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
description
The Group accounts for its legacy portfolio of equity release mortgages (“ERMs”) at
fair value through profit and loss under IFRS 9, determining fair value in accordance with
IFRS 13.
The ERMs had a carrying value at 31 December 2025 of £162.9m (2024: £171.6m), including
£137.4m (2024: £146.7m) located in the UK and £25.5m (2024: £24.9m) located in Spain.
The fair value of the ERMs is determined using a discounted cash flow model and is reliant
upon several unobservable and judgemental inputs.
Our key audit matter relates to the risk of management bias, and therefore the potential
risk of fraud, in determining the estimate of the discount rates used and future UK house
price (HPI) assumptions used within the fair value model used for the UK ERM portfolio and
the impact these assumptions have on the modelling of the no negative equity guarantee.
This also includes consideration of repayment profiles and the credit risk associated with
the assets.
The Group’s disclosure of the ERMs is detailed within note 13 and note 32. The associated
accounting policies are detailed on page 109 with detail about critical accounting
judgements in applying accounting policies and key sources of estimation uncertainty on
page 114. The Audit Committee’s consideration of the matter is described on page 77.
How the scope of our
audit responded to the
key audit matter
We obtained an understanding of the relevant controls over the fair valuation of
ERM portfolios.
We challenged the valuation methodology for the ERM portfolios by:
■
involving our valuation specialists in the review and assessment of the
appropriateness of changes made to the HPI functionality within fair value model
mechanics in the period;
■
involving our valuation specialists in our assessment of the rates used to discount the
future cash flows to present value, by independently determining a reasonable range
of discount rates through utilising external data and taking into account the forecast
repayment profiles associated with the Group’s borrowers and credit risks related to
the assets;
■
involving our economics specialists to assess the future HPI forecast assumptions
used; this was done by benchmarking to external information and assessing internal
consistency with the assumptions used in other modelling by the Group;
■
assessing the appropriateness of the other elements inherent in the valuation of the
underlying loan assets, such as no negative equity guarantees provided by the Group,
with reference to trends in historical behavioural experience and by assessing the
completeness and accuracy of the data used for a sample of loans.
■
challenging the appropriateness of the assumptions in light of current market factors;
■
performing a ‘stand back’ assessment as to whether the fair value of the ERM portfolio
determined by the Group using each of the individually assessed judgemental inputs,
resulted in a reasonable outcome when combined in aggregate through the ERM
model; and
■
assessing the appropriateness of disclosures relating to the ERM portfolio, the
Group’s methodology for determining fair value, and the estimation uncertainty in
respect of the most significant accounting estimates.
Key observations
Based on the work performed, we concluded that the Group’s valuation methodology
of the UK ERM portfolio was in line with the accounting standards and that each of the
assumptions, as well as the overall valuation, were within a reasonable range.
5.1
Fair value of equity release mortgages
5.2
Expected credit loss (ECL) allowance on residential lending
Key audit matter
description
Under IFRS 9, the Group is required to determine a provision for the expected credit
loss (‘ECL’) on loans measured at amortised cost. Estimating expected credit losses
requires judgement and estimation on assumptions relating to customer default rates,
likelihood of repossession, future property values, forced sale discounts and
indicators of significant increases in credit risk. These assumptions are informed using
historical behaviour and experience through different economic cycles as well as credit
bureau data.
The Group held £5.0m (2024: £5.2m) of impairment provisions at year-end in accordance
with IFRS 9 against its Prime and buy-to-let residential loans and advances to customers
of £5,350.3m (2024: £4,906.3m).
The Group applies four macro-economic scenarios when determining the ECL
calculation: a central outlook, a downside, a severe downside and a growth scenario.
The selection and probability weighting of relevant macro-economic scenarios is
judgemental and has a significant impact on the ECL calculation.
We have identified the selection of macro-economic assumptions relating to the house
price index and unemployment as a key audit matter; it is highly judgemental and has
a significant impact on the ECL calculation. There exists a risk of bias, and therefore a
potential risk of fraud, in selecting the macro-economic scenarios applied in the
IFRS 9 model.
The Group’s loan loss provision balances are detailed within note 39. The associated
accounting policies are detailed on pages 109-110 with detail about critical accounting
judgements in applying accounting policies and key sources of estimation uncertainty on
page 114. The Group’s consideration of the effect of the future economic environment is
disclosed in note 38. The Audit Committee’s consideration of the matter is described on
page 77.
How the scope of our
audit responded to the
key audit matter
We obtained an understanding of the relevant controls over the loan impairment
provisioning process. This included assessment of the data flows used within the models,
and the level of challenge at the Model Risk Committee in respect of the assumption and
methods used to determine these accounting estimates.
We challenged the impairment provisions on residential mortgages by:
■
involving our credit risk specialists to assess the compliance of the modelling
approach and methodology with the requirements of IFRS 9;
■
involving our credit risk specialists to assess whether the documented modelled
approach was implemented in practice and if there had been any changes to the
model since our review in the prior period;
■
involving our economics specialist to challenge the Group’s consideration of
the future economic environment by assessing the Group’s approach as well as
comparing the Group’s weighted macroeconomic scenarios to publicly available
data from peer organisations, regulators and economic commentators;
■
evaluating the level of provisions held compared to the low levels of historical
loss data;
■
assessing, using publicly available data, whether the combination of management’s
modelled downside and alternative downside scenarios appropriately captured
credit risk relating to the future economic environment;
■
reconciling the mortgage book to the general ledger and substantively tested a
sample of loans to assess whether the data used in the provision calculation was
complete and accurate; and
■
assessing the appropriateness of disclosures relating to loan loss provisions, and the
estimation uncertainty in respect of the most significant accounting estimates.
Key observations
Based on the work performed, we concluded that the Group’s ECL applied to the
residential mortgage book is reasonable.
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6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in
planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Society financial statements
Materiality
£3.4m (2024: £2.7m)
£3.2m (2024: £2.4m)
Basis for determining
materiality
1.0% (2024: 0.8%) of the Group’s
net assets
1.0% (2024: 0.8%) of the Society’s net
assets Society materiality is capped at 95%
(2024: 95%) of Group materiality
Key observations
In determining materiality we considered a range of benchmarks. The overall capital base
is a key focus for the Group’s and Society’s members and regulators.
Net assets are also a more stable metric in comparison to profit before tax. Therefore,
net assets (consisting of reserves and subscribed capital) are considered the most
appropriate base on which to determine materiality.
Net Assets £353m
Group Materiality
£3.4m
Component
performance
materiality range
£0.7m to £2.2m
Audit Committee
reporting threshold
£0.17m
Net Assets
Group materiality
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected
and undetected misstatements exceed the materiality for the financial statements as a whole.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would
report to the Committee all audit differences in excess
of £170k (2024: £135k), as well as differences below
that threshold that, in our view, warranted reporting
on qualitative grounds. We also report to the Audit
Committee on disclosure matters that we identified
when assessing the overall presentation of the
financial statements.
7. An overview of the scope of our audit
7.1. Identification and scoping o
f components
Our Group audit was scoped by obtaining an
understanding of the Group and its environment,
including Group-wide controls, and assessing the risks
of material misstatement at the Group level.
We identified components at the individual entity level.
All components of the Group are operated centrally
and all audit work was performed centrally by the
Group audit engagement team. We identified four
components (2024: three components) where we
performed an audit of the entire financial information.
This provided 99% (2024: 99%) coverage of revenue,
profit before tax and net assets of the Group.
The component performance materiality range used
for determining the level of audit procedures to be
performed ranged from £0.7m to £2.2m (2024: £0.2m
to £1.7m).
At the Group level, we also tested the
consolidation process.
Group financial statements
Society financial statements
Performance materiality
70% (2024: 70%) of Group materiality
70% (2024: 70%) of Society materiality
Basis and rationale
for determining
performance materiality
In determining performance materiality, we considered the following factors:
■
the quality of the control environment and that we consider it appropriate to rely on
controls over a number of business processes; and
■
the nature, volume and size of misstatements in the previous audit.
7.2. Our consideration of the control environment
Our approach in relation to Group’s business cycles
We relied on relevant automated and manual controls
over the following business cycles that operate on the
Group’s core operating system:
■
Residential mortgage lending (loans and advances
to customers and interest income); and
■
Saving accounts (due to members and
interest payable).
We did not rely on controls over the operating systems
that were brought into the Group through the merger
with Manchester Building Society.
We also obtained an understanding of controls that
relate to our identified significant audit risks. The
Internal Audit Committee’s assessment of the Group’s
internal control environment is set out on page 78.
Our approach in relation to Group’s IT systems
We relied on controls over the following IT systems
as being key to the financial reporting processes in
the Group:
■
Core mortgage (lending) system;
■
Core savings (deposits) system;
■
Underlying databases for the above system, as
applicable; and
■
The accounting system, WorkDay
Together with IT specialists, we tested the general IT
controls related to these systems. Where relevant,
we reviewed service auditor reports obtained by the
Group in respect of these systems to assess for any
contradictory information. We were able to rely on
these controls as originally planned.
7.3. Our consideration of climate-related risks
In planning our audit, we made enquiries of
management to understand the extent of the
potential impact of climate change risk on the Group’s
financial statements.
As disclosed in note 1, the directors concluded
that there was no material impact on the financial
statements. Our evaluation of this conclusion included
performing enhanced risk assessment procedures over
the key judgements and estimates in areas where we
considered that there was greatest potential for climate
change impact. This was principally in relation to the
loan loss provisions.
We also considered the consistency of the climate
change disclosures included in the Strategic Report
with the financial statements and our knowledge from
our audit.
8. 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.
Our opinion on the financial statements does not
cover the other information and, except to the extent
otherwise explicitly stated in our 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 this other information, we are required
to report that fact.
We have nothing to report in this regard.
9. Responsibilities of directors
As explained more fully in the directors’ responsibilities
statement, 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 the 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 have no realistic
alternative but to do so.
10. 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 the aggregate,
they could reasonably be expected to influence the
economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities for the audit
of the financial statements is located on the FRC’s
website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
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95
11. Extent to which 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
above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities,
including fraud is detailed below.
11.1. Identifying and assessing potential risks
related to irregularities
In identifying and assessing risks of material
misstatement in respect of irregularities, including fraud
and non-compliance with laws and regulations, we
considered the following:
■
the nature of the industry and sector, control
environment and business performance including
the design of the Group’s remuneration policies,
key drivers for directors’ remuneration, bonus levels
and performance targets;
■
results of our enquiries of management, internal
audit, the directors and the Audit Committee about
their own identification and assessment of the risks
of irregularities, including those that are specific to
the Group’s sector;
■
any matters we identified having obtained and
reviewed the Group’s documentation of their
policies and procedures relating to:
identifying, evaluating and complying with laws
and regulations and whether they were aware of
any instances of non-compliance;
detecting and responding to the risks of fraud and
whether they have knowledge of any actual,
suspected or alleged fraud;
the internal controls established to mitigate
risks of fraud or non-compliance with laws
and regulations;
■
the matters discussed among the audit
engagement team and relevant internal specialists,
including tax, financial instruments, valuations,
pensions, IT, economics, real estate, credit risk and
prudential risk specialists regarding how and where
fraud might occur in the financial statements and
any potential indicators of fraud.
As a result of these procedures, we considered the
opportunities and incentives that may exist within
the organisation for fraud and identified the
greatest potential for fraud in the following areas:
fair value of equity release mortgages and ECL
allowance on residential lending. In common with
all audits under ISAs (UK), we are also required to
perform specific procedures to respond to the risk of
management override.
We also obtained an understanding of the legal and
regulatory frameworks that the Group operates in,
focusing on provisions of those laws and regulations
that had a direct effect on the determination of material
amounts and disclosures in the financial statements.
The key laws and regulations we considered in this
context included the Building Societies Act 1986 for the
Society and the UK Companies Act for the subsidiaries.
In addition, we considered provisions of other laws
and regulations that do not have a direct effect on the
financial statements but compliance with which may
be fundamental to the Group’s ability to operate or to
avoid a material penalty. These included the regulations
set by the Prudential Regulatory Authority (PRA) relating
to the regulatory capital and liquidity requirements.
11.2. Audit response to risks identified
As a result of performing the above, we identified
the fair value of equity release mortgages and ECL
allowance on residential lending as key audit matters
related to the potential risk of fraud. The key audit
matters section of our report explains the matters in
more detail and also describes the specific procedures
we performed in response to those key audit matters.
In addition to the above our procedures to respond to
risks identified included the following:
■
reviewing the financial statement disclosures and
testing to supporting documentation to assess
compliance with provisions of relevant laws and
regulations described as having a direct effect on
the financial statements;
■
enquiring of management, the audit committee
and legal counsel concerning actual and potential
litigation and claims;
■
performing analytical procedures to identify
any unusual or unexpected relationships that
may indicate risks of material misstatement due
to fraud;
■
reading minutes of meetings of those charged with
governance, reviewing internal audit reports and
reviewing correspondence with the PRA, Financial
Conduct Authority (FCA) and HMRC; and
■
in addressing the risk of fraud through
management override of controls, testing the
appropriateness of journal entries and other
adjustments; assessing whether the judgements
made in making accounting estimates are
indicative of a potential bias; and evaluating the
business rationale of any significant transactions
that are unusual or outside the normal course
of business.
We also communicated relevant identified laws and
regulations and potential fraud risks to all
engagement team members including internal
specialists, and remained alert to any indications of
fraud or non-compliance with laws and regulations
throughout the audit.
Report on other legal and
regulatory requirements
12. Opinions on other matters prescribed by the
Building Societies Act 1986
In our opinion, based on the work undertaken in the
course of the audit:
■
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.
In the light of the knowledge and understanding of the
Group and the Society and their environment obtained
in the course of the audit, we have not identified any
material misstatements in the directors’ report.
13. Opinion on other matter prescribed by the
Capital Requirements (Country-by-Country
Reporting) Regulations 2013
In our opinion the information given in note 43 to the
financial statements for the financial year ended 31
December 2025 has been properly prepared, in all
material respects, in accordance with the Capital
Requirements (Country-by Country Reporting)
Regulations 2013.
14. Matters on which we are required to report
by exception
14.1. Adequacy of explanations received and
accounting records
Under the Building Societies Act 1986 we are required to
report to you if, in our opinion:
■
adequate accounting records have not been kept
by the Society; or
■
the Society’s financial statements are not in
agreement with the accounting records and
returns; or
■
we have not received all the information and
explanations and access to documents we require
for our audit.
We have nothing to report in respect of these matters.
15. Other matters which we are required
to address
15.1. Auditor tenure
Following the recommendation of the Audit
Committee, we were appointed by the Society’s
members at the Annual General Meeting on 28 April
2021 to audit the financial statements for the year
ending 31 December 2021 and subsequent financial
periods. The period of total uninterrupted engagement
including previous renewals and reappointments of
the firm is five years, covering the years ending 31
December 2021 to 31 December 2025.
15.2. Consistency of the audit report with the
additional report to the Audit Committee
Our audit opinion is consistent with the additional
report to the Audit Committee we are required to
provide in accordance with ISAs (UK).
16. 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.
David Heaton (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Manchester, United Kingdom
5 March 2026
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97
Financial
Statements
Connecting
our
communities
with a better
financial future
99
98
The notes on page 106 to 177 form part of these Accounts.
The notes on page 106 to 177 form part of these Accounts.
Statements of Comprehensive Income
for the year ended 31 December 2025
Group
Society
2025
2024
2025
2024
Note
£m
£m
£m
£m
Interest receivable and similar income
Interest income calculated using effective interest rate
2
319.7
294.7
Interest income recognised in respect of mortgages held at fair value
2
11.2
11.4
Net income on derivatives hedging mortgage assets
2
17.9
30.7
Total interest receivable and similar income
2
348.8
336.8
Interest payable and similar charges
3
(233.7 )
(243.8 )
(245.9)
(243.0)
Net interest income
102.9
93.8
Other income
4
18.3
14.2
Other charges
4
(0.6 )
(0.2 )
(0.5)
(0.2)
Fair value gains less losses on financial instruments and hedge accounting
37
(6.5 )
(7.9)
5.3
Income from dividends
4
1.4
1.6
Total operating income
114.2
114.7
Administrative expenses
6
(124.3 )
(111.1 )
(83.8)
(78.1)
Depreciation and amortisation
16, 17
(8.4 )
(7.6 )
(2.9)
(2.5)
Operating profit before impairments and provisions
27.5
34.1
Impairment reversals on loans and advances to customers
12
0.6
2.3
(Loss) / gain on disposal of non-current assets
(0.2 )
0.4
-
Provisions for liabilities and charges
24
(1.3 )
(21.0 )
(0.9)
(20.7)
Profit for the year before taxation
27.6
15.7
Taxation (expense) / credit
8
(4.6 )
(7.0)
2.3
Profit after taxation for the financial year
20.6
18.0
Group
Society
2025
2024
2025
2024
Note
£m
£m
£m
£m
Profit for the financial year
20.6
18.0
Other comprehensive income
Items that may be reclassified to Income Statement:
Cash flow hedges
Fair value movements recognised in equity
37
(3.8 )
(3.8)
7.1
Amounts transferred to the Income Statement
37
(2.7 )
(2.1 )
(2.7)
(2.1)
Tax on net amounts recognised in equity
37
(1.3 )
1.6
(1.3)
Financial assets measured at fair value through other comprehensive income
Fair value movements recognised in equity
(0.4 )
0.1
(0.4)
Tax on net amounts recognised in equity
-
0.2
Total items that may be reclassified to the Income Statement
(4.8 )
(4.8)
3.5
Items that will not be reclassified to Income Statement:
Remeasurement of retirement benefit obligation
19
0.4
-
Total comprehensive income for the financial year
16.2
21.5
100
101
Income Statements
for the year ended 31 December 2025
Balance Sheets
as at 31 December 2025
These accounts were approved by the Board of Directors on 5 March 2026 and signed on its behalf by
Andrew Haigh
Chief Executive
Group
Society
2025
2024
2025
2024
ASSETS
Note
£m
£m
£m
£m
Cash and balances with the Bank of England
177.3
451.5
Loans and advances to credit institutions
10
97.5
85.1
Debt securities
11
859.2
602.3
Derivative financial instruments
35
12.7
47.9
Loans and advances to customers
12
5,712.9
5,287.8
Deemed loan asset
14
5.7
14.7
Fair value adjustments for hedged risk
37
(21.9 )
16.6
(21.9)
Other assets
20
4.6
13.0
Current tax assets
5.8
3.1
Investments
15
47.4
42.7
Intangible assets
16
4.1
1.5
Property, plant and equipment
17
18.5
15.6
Deferred tax assets
18
8.1
8.4
Total assets
6,970.4
6,551.7
LIABILITIES
Due to Members
21
5,882.7
5,432.7
Fair value adjustments for hedged risk
37
1.6
-
Due to other customers
163.8
241.0
Deposits from credit institutions
158.9
417.6
Debt securities in issue
22
-
-
Derivative financial instruments
35
40.3
29.4
Deemed loan liability
14
294.2
-
Other liabilities
23
21.3
26.2
Provisions for liabilities
24
2.2
11.2
Deferred tax liabilities
18
1.9
-
Subordinated liabilities
25
19.6
20.2
Subscribed capital
26
34.7
34.8
Total liabilities
6,621.2
6,213.1
Reserves
349.2
338.6
Total Members’ interest, equity and liabilities
6,970.4
6,551.7
Statements of Movements in Members’ Interests
for the year ended 31 December 2025
Group
General
reserve
Fair value
through other
comprehensive
income
Cash flow
hedge reserve
Other equity
instruments
Total
reserves
£m
£m
£m
£m
£m
At 1 January 2025
Profit for the year
Other comprehensive income
Net movement in fair value through other comprehensive income
Net movement in cash flow hedge reserve
(4.9 )
(4.9 )
Remeasurement of retirement benefit obligation
Total other comprehensive income
(4.9 )
(4.4 )
Total comprehensive income
(4.9 )
Distribution to Additional Tier 1 capital holders
(5.6 )
(5.6 )
At 31 December 2025
Group
General
reserve
Fair value
through other
comprehensive
income
Cash flow
hedge reserve
Other equity
instruments
Total
reserves
£m
£m
£m
£m
£m
At 1 January 2024
Profit for the year
Additional Tier 1 capital issued
(0.9 )
Other comprehensive income
Net movement in fair value through other comprehensive income
(0.2 )
(0.2 )
Net movement in cash flow hedge reserve
Total other comprehensive income
(0.2 )
Total comprehensive income
(0.2 )
At 31 December 2024
The notes on page 106 to 177 form part of these Accounts.
The notes on page 106 to 177 form part of these Accounts.
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103
Statements of Movements in Members’ Interests
for the year ended 31 December 2025
Society
General
reserve
Fair value
through other
comprehensive
income
Cash flow
hedge reserve
Other equity
instruments
Total
reserves
£m
£m
£m
£m
£m
At 1 January 2025
293.3
0.2
5.1
40.0
338.6
Profit for the year
20.6
-
-
-
20.6
Other comprehensive income
Net movement in fair value through other comprehensive income
-
0.1
-
-
0.1
Net movement in cash flow hedge reserve
-
-
(4.9)
-
(4.9)
Remeasurement of defined benefit obligation
0.4
-
-
-
0.4
Total other comprehensive income
0.4
0.1
(4.9)
-
(4.4)
Total comprehensive income
21.0
0.1
(4.9)
-
16.2
Distribution to Additional Tier 1 capital holders
(5.6)
-
-
-
(5.6)
At 31 December 2025
308.7
0.3
0.2
40.0
349.2
Society
General
reserve
Fair value
through other
comprehensive
income
Cash flow
hedge reserve
Other equity
instruments
Total reserves
£m
£m
£m
£m
£m
At 1 January 2024
276.2
0.4
1.4
-
278.0
Profit for the year
18.0
-
-
-
18.0
Additional Tier 1 capital issued
(0.9)
-
-
40.0
39.1
Other comprehensive income
Net movement in fair value through other comprehensive income
-
(0.2)
-
-
(0.2)
Net movement in cash flow hedge reserve
-
-
3.7
-
3.7
Total other comprehensive income
-
(0.2)
3.7
-
3.5
Total comprehensive income
17.1
(0.2)
3.7
40.0
60.6
At 31 December 2024
293.3
0.2
5.1
40.0
338.6
Cash Flow Statements
for the year ended 31 December 2025
Group
Society
2025
2024
2025
2024
Note
£m
£m
£m
£m
Net cash flows from operating activities
29
(282.5 )
(110.6 )
(306.5)
(117.0)
Corporation tax paid
(5.0 )
(2.9 )
(5.0)
(2.9)
Cash flows from operating activities
(287.5 )
(113.5 )
(311.5)
(119.9)
Cash flows flows from investing activities
Purchase of property, plant and equipment
(6.5 )
(4.7 )
(5.0)
(2.8)
Purchase of intangible assets
(2.5 )
(4.6 )
(0.1)
(0.5)
Sale of property, plant and equipment
1.4
-
Aquisition of trade and assets
(0.2 )
(0.1 )
-
(0.1)
Additional loans to subsidiary undertakings
15
-
(1.3)
Repayment of loans to subsidiary undertakings
15
-
0.3
Purchase of debt securities
11
(432.2 )
(475.6 )
(432.2)
(475.6)
Sale and maturity of debt securities
11
182.0
485.4
Net cash flows from investing activities
(258.0 )
(253.9)
5.4
Cash flows from financing activities
Interest paid on subscribed capital and subordinated liabilities
29
(5.9 )
(4.3 )
(5.9)
(4.3)
Interest paid on debt securities in issue
29
(6.3 )
-
-
Distribution to Additional Tier 1 capital holders
(5.6 )
(5.6)
-
Proceeds on issue of subordinated liabilities
-
19.8
Proceeds on issue of debt securities in issue
-
-
Principal repayments of debt securities in issue
(27.0 )
-
-
Payments on deemed loan
303.9
(1.3)
Proceeds of Additional Tier 1 capital
-
39.1
Capital and interest payments for lease arrangements
29
(1.5 )
(2.3 )
(1.5)
(2.3)
Net cash flows from financing activities
290.9
51.0
Net decrease in cash and cash equivalents
(242.5 )
(60.8 )
(274.5)
(63.5)
Cash and cash equivalents at start of year
456.0
519.5
Cash and cash equivalents at end of year
29
181.5
456.0
The notes on page 106 to 177 form part of these Accounts.
The notes on page 106 to 177 form part of these Accounts.
104
105
Notes to the Accounts for the year ended 31 December 2025
106
107
adopted in the UK and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC)
and in accordance with the Building Societies Act 1986 and the Building Societies (Accounts and Related Provisions)
The financial statements have been prepared on the historical cost basis, as modified by the revaluation of certain
financial instruments measured at fair value at the end of each reporting period. The Directors’ going concern review
considered the Group’s and Society’s forecasts, including different possible scenarios based on possible internal and
external developments and arising risks. Together with regular stress testing, the forecasts show that the Group and
Society will be able to maintain adequate levels of both liquidity and capital for at least the next 12 months while meeting
After making enquiries, the Directors are therefore satisfied that both the Group and the Society has adequate
resources to continue in business for at least the next 12 months and therefore it is appropriate to adopt the going
concern basis of accounting in preparing these financial statements. The Directors have concluded that there are no
material uncertainties that may cast significant doubt upon the Group and Society’s ability to continue to apply the
going concern basis of accounting.
figures in the financial statements are rounded to the nearest hundreds of thousands of pound Sterling (£0.0m), unless
otherwise stated.
The ultimate controlling party and parent to the Group is Newcastle Building Society
The Group Accounts include the results of the Society, its subsidiary undertakings and other entities which it is deemed
to control, all of which have accounting periods ending 31 December. Subsidiaries and other controlled entities are
entities over which the Society has the power to control financial and operating policies so as to obtain benefits from
their activities. Subsidiaries are consolidated from the date on which control is transferred to the Group and are
deconsolidated from the date that control ceases. Upon consolidation, inter-company transactions, balances and
unrealised gains or losses on transactions are eliminated. The accounting policies of subsidiaries are consistent with
Securitisations
The Group securitises mortgage loans by transferring the beneficial ownership of a mortgage pool to a Special Purpose
Vehicle (SPV), which issues debt secured on the transferred mortgage loans. The Society is deemed to control the SPV,
and therefore the SPV is fully consolidated into the Group accounts under IFRS 10, Consolidated Financial Statements.
Since the Society is entitled to any residual profits or losses of the SPV, it retains substantively all risks and rewards of
holding the mortgage loans. As a result, the transfer of the beneficial ownership of the mortgage loans to the SPV does
not meet the criteria for derecognising the mortgages from the Society’s Balance Sheet under IFRS 9, Financial
Instruments. The Society therefore continues to recognise the securitised mortgage loans on its Balance Sheet. The
proceeds received by the Society from the transfer of the mortgage pool are accounted for as a deemed loan from the
SPV. Any loan notes retained by the Society are netted off the deemed loan.
The transaction includes an interest rate hedging structure to the effect that the mortgage cash flows transferred to the
SPV are based on a floating interest rate.
Interest receivable and interest payable for all interest bearing financial instruments are recognised within ‘Interest
receivable and similar income’ and ‘Interest payable and similar charges’ in the consolidated Income Statements, using
the effective interest rate method (EIRM).
EIRM is used to calculate the amortised cost of financial instruments and to recognise interest receivable or payable
over the relevant period. The effective interest rate is the rate that exactly discounts estimated cash flows (excluding
credit losses) to zero, through the expected life of the instrument. In calculating the effective interest rate, all
contractual terms of the financial instrument are taken into account. Historical and forecast mortgage redemption data
Fees and commissions relating to originating loans and advances to customers are deferred and spread using the EIRM
and included in interest income. Other fees and commissions are recognised as ‘Other income’ on the accruals basis as
Other income
Other income relates to income from contracts with customers recognised under IFRS 15, Revenue from Contracts with
Customers. Revenue is measured as the fair value of consideration specified in the contract with a customer. The Group
recognises revenue at both point in time and over time depending on the nature of the performance obligations in the
contract with the customer.
Savings management services and savings management project and change services
Savings management services and savings management project and change services are provided by the Society’s
subsidiary, Newcastle Strategic Solutions Limited (NSSL).
Significant work may be required to implement the requirements of a new customer, to implement changes required by
existing customers or to decommission NSSL’s services. Revenue relating to such services are recognised as savings
management project and change services and is recognised over time. Each contractual milestone being a
performance obligation has a corresponding transaction price
which represents the portion of the service provided to
the customer.
Revenue for savings management services is recognised over time in discrete monthly amounts which are calculated
based on actual work completed in the relevant month. The amount of revenue recognised for ongoing savings
management is spread evenly throughout the contractual term, consistent with the pattern of transfer of the service to
the customer. Where the Group is reimbursed for certain external costs incurred on behalf of clients, the company acts
as agent with the costs contractually directed by the clients.
IT services
NSSL provide managed IT services to the Group and external customers, which includes managed IT solutions for
savings management and client account systems, and data storage services. The amount of revenue recognised for
savings management systems and data storage services is spread evenly throughout the contractual term, recognised
on a monthly basis, consistent with the pattern of transfer of the service to the customer. The amount of revenue
recognised for client account systems is calculated based on the actual asset balance held by a customer in the
relevant month.
Regulated advice services
Regulated advice services are provided by the Society’s subsidiary, Newcastle Financial Advisers Limited (NFAL). All
services derive from NFAL’s principal activity, the provision of financial planning services, and include regulated advice,
ongoing advice, and life protection plans. NFAL is an appointed representative of Openwork Limited and provides
services on behalf of Openwork Limited. For the purposes of IFRS 15, Openwork Limited is the sole customer of NFAL
and all consideration for the services provided by NFAL is received from Openwork Limited.
Revenue for regulated advice and protection plans is recognised when confirmation of the investment or plan is
received by Openwork Limited, and the service is complete. Revenue for ongoing advice is recognised on a straight-
line basis at the end of each month the service is in place. Consideration for regulated advice and protection plans is
calculated using contractually stated and agreed rates, on an ad valorem basis for regulated advice, and dependent
upon specific product lines for protection plans. Consideration for ongoing service is calculated on an annual basis as a
percentage of an investment portfolio.
Third party services
Third party services are provided by the Society through its branch network and online. The Society introduces
customers to third parties who provide mortgage related services such as conveyancing. The Society is the principal
in the relationship with each third party provider and has no contractual relationship for the third party service with
the customer.
The service provided of introducing or referring customers to a third party is complete once the third party provider has
agreed a sale with the customer. Revenue is recognised when cash is received, which in all instances is in line with, or
shortly after, completion of the contract in line with contractual payment terms. Consideration for all services is
calculated based on discrete, and contractually agreed, transaction prices which are noted as a commission amount to
the Society. All payments received relate to performance completed up to the invoice date.
All services
Due to the nature of services provided, IFRS 15 is more material to NSSL and NFAL than to the Society. Details of
transactions which are not material to the Group, but are material to the individual subsidiaries, can be found in the
specific subsidiary’s annual report and accounts.
The transaction prices for all services provided by the Group are calculated using contractually stated and agreed rates.
There are no elements of variable consideration, no significant payment terms and no critical judgements in allocating
the transaction price. There is little judgement in the recognition of this revenue as transaction prices are agreed
108
109
In accordance with IFRS 9 the Group classifies its financial assets into the following categories:
Financial assets held at amortised cost
Under IFRS 9, assets may be held at amortised cost, where the assets contractual cash flows reflect solely payments of
principal and interest on the principal amount outstanding (SPPI) and the business model is to hold the asset to collect
the contractual cash flows. In this case, income is recognised under the EIRM.
In assessing the business model applicable to its financial assets, the Group has considered how financial asset
performance is evaluated and reported to senior management, the key risks affecting this performance, how these are
managed, and how managers of the business are compensated in respect of asset performance.
Loans and advances to customers
The Group’s mortgage lending, other than equity release mortgages, meets the definition of SPPI as the Group
originates the mortgages with the intention to hold the asset until maturity, collecting contractual cash flows. Mortgage
assets are recognised on the Balance Sheet as ‘loans and advances to customers’. Interest is recognised in accordance
with the EIRM.
Loans and advances to credit institutions
The Group’s non-mortgage lending, typically loans and advances to credit institutions, is similarly undertaken with a
view to recovery of contractual cash flows and with interest charged that meets the SPPI requirements.
Cash
The Group’s cash balances, where interest generative, are held to collect contractual interest flows and to ensure
appropriate liquidity is available to meet the Group’s liabilities as they fall due.
Trade receivables
The Group’s trade receivables, held within other assets on the Balance Sheet, whether due from third parties or intra-
group companies, are held to collect the contractual cash balances as they fall due. The Group does not engage in debt
factoring activities.
Financial assets held at fair value through other comprehensive income
Under IFRS 9, where the contractual cash flow characteristics of an asset reflect SPPI, an asset may be classified as ‘fair
value through other comprehensive income’ (FVOCI), where the assets are held to collect contractual cash flows or to
sell. In this case, the fair value of the asset is recognised on the Balance Sheet, whilst the fair value movement is
recognised in ‘other comprehensive income’. Interest received on these assets continues to be recognised in the
Income Statement using the EIRM.
Debt securities
The Group holds a portfolio of debt securities for liquidity management purposes, primarily consisting of covered
bonds, residential mortgage-backed securities (RMBS), supranational bonds, treasury bills and government gilts. These
instruments meet the definition of SPPI but may be sold if liquidity is required. They are therefore held at FVOCI.
fit and loss
Under IFRS 9, where the contractual cash flow characteristics of an asset do not reflect SPPI, or where assets are neither
held for sale or to collect contractual cash flows, the asset is classified at ‘fair value through profit or loss’ (FVTPL), with
fair value movements recognised through the Income Statement.
The Group holds derivative financial instruments to hedge its exposures relating to interest rates and foreign exchange
rates. Derivative financial instruments are recognised at fair value on the date the derivative contract is entered into and
subsequently re-measured at their fair value with changes in fair value being recognised in the Income Statement. In
accordance with the Group’s Treasury Policy and the Building Societies Act 1986, the Group does not hold or issue
derivative financial instruments for trading purposes. The need for credit valuation adjustments is considered in the
Derivative financial instruments may be designated in formal accounting hedge relationships. At the Balance Sheet
date, this included micro fair value hedges accounted for under IFRS 9, and portfolio macro fair value hedges accounted
for under IAS 39, Financial Instruments: Recognition and Measurement.
The fair value of the hedged risk is included on the Balance Sheet under the heading ‘fair value adjustments for hedged
risk’. Any gain or loss arising from hedge ineffectiveness is recognised immediately in the Income Statement in the ‘fair
value gains less losses on financial instruments and hedge accounting’ line.
Micro fair value hedges are assessed before the hedge is incepted and regularly thereafter, ensuring there continues to
be an economic relationship between the hedged item and the hedging derivative and that value changes are not
primarily due to credit risk, as required by IFRS 9.
The hedge effectiveness of macro hedges is assessed both pro- and retrospectively. In accordance with IAS 39 only
highly effective hedges are incepted or continued.
When a hedging instrument is terminated or no longer meets the criteria for hedge accounting, and the underlying asset
or liability remains on the Balance Sheet, hedge accounting is discontinued. Cumulative hedge adjustments are
Cash flow hedge accounting
Derivatives may also be designated into formal cash flow hedge relationships under IFRS 9. The effective portion of
changes in the fair value of designated derivatives are recognised in ‘other comprehensive income’ and accumulated in
the cash flow hedging reserve, limited to the cumulative change in fair value of the hedged item from inception of the
hedge. The gain or loss relating to the ineffective portion is recognised immediately in the Income Statement and is
included in the 'fair value gains less losses on financial instruments and hedge accounting' line item.
Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to the
Income Statement in the periods when the hedged item affects profit or loss and are included in the 'fair value gains less
losses on financial instruments and hedge accounting' line. This transfer does not affect other comprehensive income.
Furthermore, if the Group expects that some or all of the loss accumulated in the cash flow hedging reserve will not be
recovered in the future, that amount is immediately reclassified to the Income Statement.
The Group discontinues cash flow hedge accounting only when the hedging relationship (or a part thereof) ceases to
meet the qualifying criteria. This includes instances when the hedging instrument expires or is sold, terminated or
exercised. The discontinuation is accounted for prospectively. Any gain or loss recognised in other comprehensive
income and accumulated in cash flow hedge reserve at that time remains in equity and is reclassified to profit or loss
when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss
accumulated in the cash flow hedge reserve is reclassified immediately to profit or loss and is included in the 'fair value
The Group’s equity release mortgage assets contractual cash flows are not solely payments of principal and interest
and are therefore classified as fair value through profit and loss (FVTPL). Assets classified as FVTPL are initially
recognised at fair value with any subsequent changes in fair value recognised immediately in the Income Statement.
The fair value is the present value of the forecast contractual cash flows less the value of the no-negative equity
guarantee, which is calculated using an option pricing model, discounted using a suitable market rate at the reporting
date. Inputs are market driven, or where no market driven data is available, are based on management judgement
informed by observable data to the greatest extent possible. Interest on equity release mortgages is recognised in
accordance with the EIRM, based on contractual interest rates or market interest rates as at the time of the loan’s
acquisition where applicable.
Included in the equity release mortgage assets is a fixed reversion book. For this book, the repayment amount is
determined at mortgage completion, but the timing of redemption is uncertain. Interest on fixed reversion loans is
The Group has financial assets and liabilities for which there is a practical right to offset the recognised amounts, and
which are settled net in practice. However, the netting arrangements do not result in an offset of balance sheet assets
and liabilities for accounting purposes as the right to offset is not unconditional in all circumstances. There are no
For the purpose of the Cash Flow Statements, ‘cash and cash equivalents’ comprises cash in hand, balances with the
Bank of England, loans and advances to credit institutions available on demand or with original maturities of three
months or less and debt securities with a maturity period of three months or less i.e. highly liquid assets readily
convertible into cash. For operational purposes, the Group’s debt security portfolio is maintained for liquidity purposes
with the assets therein demonstrably convertible into cash regardless of maturity. The Group does not include
encumbered assets in its cash and cash equivalents.
The Group does not consider the timing of derivative collateral inflows to be sufficiently reliably estimated to include
Loss allowances for expected credit losses are recognised on all financial assets held at either amortised cost or FVOCI,
with loss allowances recognised in the Income Statement.
Under IFRS 9, the Group conducts a forward-looking assessment of impairment. Expected credit losses are recognised
across applicable financial assets based on whether there has been a significant increase in credit risk since the asset’s
origination. Internal provisioning models are used to determine expected credit losses for each individual asset, based
on four different economic scenarios (base, upside, downside and stressed downside). The four scenarios are assigned
a probability weighting to determine the loss allowance recognised. Where an asset has not seen a significant increase
in credit risk since its origination (‘stage 1 assets’), 12 month expected credit losses are recognised as a loss allowance.
These are the portion of lifetime expected credit losses that result from default events on the asset expected within the
12 months after the reporting date.
Where an asset has seen a significant increase in credit risk since origination, but there is no objective evidence of
impairment at the reporting date (‘stage 2 assets’), lifetime expected credit losses are recognised.
110
111
Where an asset has seen significant increase in credit risk since origination and there is objective evidence of
impairment at the reporting date (‘stage 3 assets’), lifetime expected credit losses are recognised and interest income
is to be calculated against the net carrying amount of the financial asset, rather than the gross amount.
Where lifetime probabilities of default are not available on acquired books, the Group uses comparable customer credit
ratings and loan to value information to assess a suitable provision for that lending.
Definition of default
A loan is considered to be in default and is allocated to stage 3 if the loan is in more than three months arrears, is in
possession, certain forbearance measures have been granted or meets internal “unlikely to pay” criteria such as
bankruptcy. Loans can move between stages subject to a curing period once the loan no longer meets the criteria for
its staging.
Residential and buy-to-let mortgages
Significant increase in credit risk since origination
At the application stage, a prospective borrower’s credit risk is assessed. The Group does not lend to customers who
are determined as high risk but will lend to customers who can fall under a range of application scores - based on a wide
variety of factors including affordability, credit history and committed monthly spend. A borrower’s application score
gives a quantified assessment of borrower risk – a risk score. On a quarterly basis, the Group receives borrower credit
scores. This data is mapped internally to a new borrower risk score – allowing continuous assessment of the movement
in borrower risk since origination. The Group apply the below criteria when assessing whether there has been a
significant increase in credit risk for residential and buy-to-let mortgages:
Stage 1 borrowers:
■
Risk score is suitably consistent between origination date and reported date.
Stage 2 borrowers:
■
Risk score increases past pre-defined internal thresholds but has not defaulted; or
■
Have fallen into more than one month arrears.
Stage 3 borrowers:
■
Have defaulted (assessed against a range of internal qualitative and quantitative criteria); or
■
Have fallen into more than three months arrears.
Commercial and other legacy books
Significant increase in credit risk since origination
An assessment of the risk of loss against the Group’s legacy mortgage books is carried out on a case-by-case basis,
with the exception of serviced apartments that are assessed using a similar methodology as residential lending. Across
the highest risk exposures, this includes the annual completion of a tailored risk grade scorecard designed to
encompass the key characteristics contributing to underlying risk. Each of the scorecard risks are weighted to provide a
final weighted risk score for the loan, which categorises the loan in terms of likelihood of failure in a moderate or severe
recessionary scenario. The risks that carry the highest weightings relate to tenant failure and serviceability. Due to the
low number of remaining commercial borrowers, all borrowers are closely monitored. All payments due are monitored
on a real-time basis. In the event of a late payment, the position is reviewed immediately and appropriate action taken.
The Group apply the below criteria when assessing whether there has been a significant increase in credit risk for
commercial and legacy mortgages:
Stage 1 borrowers:
■
Risk score is suitably consistent between origination date and reported date.
Stage 2 borrowers:
■
Risk score increases past pre-defined internal thresholds, or where the commercial lending department flags that
credit risk has increased significantly, but a borrower has not otherwise defaulted; or
■
Have fallen into more than one month arrears.
Stage 3 borrowers:
■
Have defaulted (assessed against a range of internal qualitative and quantitative criteria); or
■
Have fallen into more than three months arrears.
Purchased or originated credit impaired (POCI)
Loans that are either purchased or originated credit impaired (POCI) are classified as stage 3 assets at initial recognition
and cannot be transferred to stage 1 or 2 even if the credit quality of these assets improves. The Group has a portfolio of
loans acquired as part of the Manchester Building Society’s transfer of engagements that meets this definition. Any
change in the credit quality of the asset at each reporting date is reflected in the Income Statement.
Modifications
The Group grants forbearance to commercial borrowers in the form of extending the loan term on maturity, capitalising
arrears as part of a wider exercise to get a borrower back on track with a revised debt repayment plan and adjusting the
interest rate to aid serviceability particularly where a fixed rate has expired. Generally, the Group expects commercial
investment loans to be repaid on maturity given the stated strategy of winding down the portfolio, but the Group will
grant forbearance when this is also in the best interests of the Group, e.g. providing the borrower with more time to sell
the security property following a tenant renewal. The Group occasionally grants forbearance to other borrowers (in
similar forms to commercial) where this is expected to improve the ultimate recovery on loans advanced.
The requirement to grant forbearance is considered an objective indicator that an asset has suffered a significant
increase in credit risk since origination. As such, while forbearance may mitigate a selection of the Group’s other
indications of default, the granting of forbearance will not result in a preferential staging (Stage 1 or 2) being applied to
any forborne asset. While benefitting from any revised terms that forbearance may bring, an asset is not able to move to
a lower staging. Only once forbearance has been lifted can an asset qualify for a reduced staging with the Group
operating a six month curing policy: deferring the reduction in staging until a six month period has passed in which no
other indicators of default or heightened credit risk have presented themselves.
Other assets
The Group has elected to take advantage of IFRS 9's practical expedient when assessing the accounting impairment
applied to its trade receivables. Lifetime expected credit losses are therefore provided against all trade receivables. A
provisions matrix approach, where provisions against receivables are calculated as an increasing percentage of the
receivable balance, rising as receivables fall further overdue, has been adopted.
Assessment of the appropriate provision percentages has been made in line with the Group’s historic trade receivable
recovery. Where appropriate, forward-looking views to recovery are also incorporated.
All financial liabilities are initially measured at fair value, being the issue proceeds, net of premia, discounts and
transaction costs incurred.
Derivative financial liabilities remain accounted for at fair value on the Balance Sheet date. Hedged risk fair value
adjustments are also held on the Balance Sheet at fair value. The remaining Group financial liabilities including shares,
deposits, Permanent Interest Bearing Shares (subscribed capital) and subordinated loan notes and are subsequently
Investments in subsidiaries
Investments in subsidiaries are held on the Balance Sheet at cost less impairment, for cost of shares and amortised cost
for loans to subsidiaries. Investments in subsidiaries are assessed for impairment on an annual basis.
Property, equipment and intangible assets
Intangible assets relate to computer software purchased from third parties, development costs for internally generated
software, and customer lists acquired from third parties. An intangible asset is recognised to the extent it is probable
that expected future economic benefits will flow from it and the costs can be measured reliably.
Assets, are met, the expenditure directly attributable to a project is capitalised. Any expenditure related to
development of internally generated software that does not meet these criteria is recognised in the Income Statement
Computer software and development costs are initially recognised at cost, which includes the original purchase price
of the asset and the costs directly attributable to acquiring the asset and bringing it into working condition for its
intended use. Customer lists are initially recognised at fair value. Subsequently, intangible assets are recognised at their
initial value less accumulated amortisation and any provisions for impairment.
Amortisation of intangible assets commences when they are ready for their intended use and is provided at rates
calculated to write down the assets to their estimated residual values over the course of their anticipated useful lives, on
the following bases:
Computer software |
- 5 to 7 years |
Development costs |
- 5 to 7 years |
Customer lists |
- 5 to 7 years |
At each Balance Sheet date, the Group reviews the carrying value of its intangible assets to determine whether there is
any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable value of
the asset is estimated to determine the extent of the impairment loss (if any). If the recoverable value of an asset is
estimated to be less than the current carrying value, the carrying value of the asset is reduced to its recoverable value.
Where an impairment loss subsequently reverses, the carrying value of the asset is increased to the revised estimate of
Software as a service (SaaS)
A SaaS arrangement is a type of cloud computing in which the supplier provides the customer with access to application
software residing on the supplier’s infrastructure. These arrangements can include other services, such as technical
support, implementation and data migration. The customer typically pays a fee on a periodic basis and implementation
costs may be incurred at the inception of the arrangement.
112
113
Where the Group enters into a SaaS arrangement, the Group recognises a software asset only if such an intangible asset
or a software lease is received at commencement of the arrangement, otherwise, the arrangement is accounted for as a
service contract.
When accounting for a SaaS arrangement as a service contract, fees paid by the Group are spread over the period to
which they relate. Implementation costs associated with configuration and customisation of the software are
prepaid over the contractual period where they relate to configuration or customisation services performed by the
software supplier (or its agent) and where the services received are not distinct from the right to receive access to the
supplier’s software.
All other costs associated with implementation, including internal time and resources, are expensed to the Income
Statement as incurred.
Freehold property and equipment are stated at cost less accumulated depreciation and any provisions for impairment.
Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working
condition for its intended use.
write down the assets to their estimated residual values over the course of their anticipated useful lives, on the
following bases:
Freehold buildings
■
2% per annum, straight line
Equipment, fixtures and fittings and motor vehicles
Refurbishment expenditure:
■
6.67% to 10% per annum, straight line
Equipment, fixtures and fittings:
■
10% per annum, straight line
Motor vehicles:
■
20% per annum, straight line
Computer equipment:
■
20% to 33% per annum, straight line
Gains and losses on disposals are determined by comparing the net disposal proceeds with the carrying amount of the
Leased property and equipment is accounted for in accordance with IFRS 16, Leases. The standard requires the lessee
to recognise a right of use asset and a corresponding liability on the Balance Sheet for all leases, with the exception of
short-term leases or leases of a low value asset. The liability is initially measured by discounting variable and fixed lease
payments, as well as other payments inherent to the lease, to its present value. Where possible, the discount rate used is
the rate implicit in the lease. However, where this cannot be readily determined, the Group’s incremental borrowing rate
is used. The incremental borrowing rate is set using the Society’s base funding cost and the costs of any asset buffers
required. The right of use asset is initially measured at cost, including the amount of the initial measurement of the lease
liability, any lease payments made before the commencement date of the lease, less any incentives received, any initial
direct costs and any restoration costs. Where a change to lease payments is agreed, the lease liability is re-measured,
and a corresponding adjustment is made to the right of use asset.
Leasehold buildings are depreciated on the following basis:
Leasehold with terms greater than 50 years:
■
2% per annum, straight line
Other leasehold buildings:
■
over the term of the lease
Interest charged on the lease liability is calculated based on the rate used as the discount factor to calculate the lease
Impairments of property and equipment
At each Balance Sheet date, the Group reviews the carrying value of its property and equipment to determine whether
there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable
value of the asset is estimated to determine the extent of the impairment loss (if any). If the recoverable value of an asset
is estimated to be less than the current carrying value, the carrying value of the asset is reduced to its recoverable value.
Where an impairment loss subsequently reverses, the carrying value of the asset is increased to the revised estimate of
its recoverable value.
Corporation tax is charged on profits adjusted for tax purposes. Deferred tax on temporary differences arising between
the tax bases and carrying amounts of assets and liabilities is provided in full, using the liability method. Deferred tax is
determined using tax rates (and laws) that have been enacted or substantially enacted by the Balance Sheet date and
that are expected to apply when the related deferred income tax asset is realised, or the deferred income tax liability is
settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available
The Society operates a defined contribution scheme on behalf of Executive Directors and colleagues. For the defined
contribution scheme, contributions are charged to the Income Statements, as they become payable, in accordance
with the rules of the scheme.
The Society historically operated a defined benefit scheme; this was closed to future accrual from 30 November 2010
and was funded by contributions partly from colleagues and partly from the Society at rates determined by an
independent actuary. These contributions are invested separately from the Group’s assets.
Under IAS 19, Employee Benefits, the defined benefit scheme assets are measured at bid value at each Balance Sheet
date, and the obligations are measured by an independent actuary using the projected unit valuation method,
discounted using a high quality corporate bond rate.
The Group does not recognise IAS 19 pensions surpluses on its Balance Sheet as the Society does not have an
unconditional contractual right to benefit economically from the surplus. IAS 19 pension deficits are recognised
immediately with relevant actuarial re-measurements recognised in the Statement of Comprehensive Income. IAS 19
A provision is recognised when 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. The amount recognised as a provision is the best estimate of the net
present value of the consideration required to settle the obligation, taking into account the risks and uncertainties
surrounding the obligation.
Contingent liabilities have not been recognised. A contingent liability is a possible obligation which is not probable or
not reliably measurable.
Contingent assets have not been recognised. A contingent asset is a possible asset that arises from past events and
The operating segments disclosed in note 9 are those used in the Group’s management and internal reporting
structures (for the chief operating decision maker) in accordance with IFRS 8, Operating Segments. No segment
information is presented on geographical lines, because substantially all of the Group’s activities are in the
Equity instruments
Equity instruments issued by the Group are Additional Tier 1 (AT 1) instruments. Financial instruments are classified as
equity instruments where the contractual arrangements with the instrument holder do not result in the Group having a
present obligation to deliver cash, another financial asset or a variable number of equity instruments. The proceeds of
the issuance of AT 1 instruments are included in reserves in ‘other equity instruments’, with the costs of issuance included
in the general reserves. Distributions to holders of equity instruments are recognised when they become irrevocable
and are deducted from the general reserve.
Accounting developments
Standards relevant to these Annual Accounts that are mandatory for the first time for the financial year beginning 1
Developments and standards issued but not yet effective
There are a number of new or amended standards which become effective in 2026 and beyond. Early adoption is
permitted, but the Group does not intend to adopt the standards before their mandatory date. The new and updated
accounting standards listed below are not expected to have a significant impact on the Annual Accounts.
■
Amendments to the Classification and Measurement of Financial Instruments – Amendments to IFRS 9, Financial
Instruments and IFRS 7, Financial Instruments are effective from 1 January 2026.
■
IFRS 19 Subsidiaries without Public Accountability: Disclosures, effective from 1 January 2027.
IFRS 18, Presentation and Disclosure in Financial Statements
IFRS 18, Presentation and Disclosure in Financial Statements was issued in April 2024 replacing the existing requirements
under IAS 1, Presentation of Financial Statements, and introduces a revised structure and presentation of the financial
statements, including:
■
The requirement to present three defined categories in the statement of profit or loss: operating, investing,
and financing.
■
New requirements for disaggregation of information in the notes to improve comparability and transparency.
114
115
■
Additional disclosures about management-defined performance measures when presented in the
financial statements.
IFRS 18 is effective for annual reporting periods beginning on or after 1 January 2027, with early application permitted.
The Group has not early adopted the standard.
The Group is currently assessing the impact of IFRS 18 on its financial reporting and expects that the adoption of IFRS 18
will result in changes to the presentation of its Income Statement and related disclosures but does not anticipate the
standard to have an impact on the financial position or performance of the Group or any change to the underlying
recognition or measurement criteria currently applied to the Group Financial Statements.
The Group has to make judgements in applying its accounting policies, which affect the amounts recognised in the
Annual Accounts. These judgements are based on management’s best knowledge, but the eventual outcome may
differ from them. In addition, estimates and assumptions are made that could affect the reported amounts of
assets and liabilities within the following year. The most significant areas where judgements and estimates are made are
as follows.
Estimates
Fair value of the equity release mortgage assets
The valuation of the Group’s equity release mortgage assets depends on a range of assumptions, including the most
appropriate discount rate and property price growth rates and volatility. Key assumptions and sensitivity analysis are
outlined in note 32.
Impairment of financial assets
The impairment of mortgage assets is determined by a weighted average of the expected credit losses of four different
possible economic scenarios. Each scenario is based on a range of assumptions, including property price growth rates
and unemployment rates. The scenario weightings are based on management’s current expectation about the future
probability of each economic scenario. Further detail and sensitivity analysis are provided in notes 38 to 40.
Defined benefit pension scheme
In estimating the value of the pension scheme surplus or deficit, management rely on a range of assumptions including
the most appropriate discount rate and mortality rates, inflation, take up of the Pension Increase Exchange offer and
future salary increases. The Board receives independent external advice from actuarial consultants in arriving at the
scheme assumptions, which are outlined together with sensitivity analysis in note 19.
In addition, the Society is aware of the 2023 ruling in the Virgin Media vs NTL Pension Trustee legal case and subsequent
Court of Appeal ruling published in July 2024. The UK government announced on 5 June 2025 that legislation will be
introduced enabling retrospective actuarial certification to validate historic amendments. While this legislative solution
is anticipated to remove the requirement for provisions related to void benefit changes, neither the timing nor precise
scope are confirmed. Until enacted, there remains uncertainty as to whether the judgements will result in additional
liabilities for UK pension schemes and the Society cannot be certain of the potential implications (if any) and therefore a
sufficiently reliable estimate of any effect on the obligation cannot be made, however it is possible that the defined
benefit pension obligation could be increased. Further detail is found in note 19.
Judgements
Fair value of derivatives and financial assets
Fair values of derivatives and financial assets are determined in line with the three level valuation hierarchy as defined
within IFRS 13, Fair Value Measurement. Judgement can be required to determine the classification of valuations into the
different levels. Further detail is provided in note 32.
Impairment of financial assets
The modelling of impairment of mortgage assets includes a range of management judgements, including the Society’s
definition of default, significant increase in credit risk and the use of post model adjustments. Further detail is provided
in note 38.
Securitised assets
Management has judged in relation to securitised assets that the transfer of the beneficial interest in the loans
transferred from the Society to the Group’s SPV entities does not result in a transfer of the risks and rewards in relation to
these loans. Therefore, the transfer of the beneficial interest is not recognised as a sale by the Society, and the loans
continue to be recognised within the Society’s Statement of Financial Position, with the proceeds received from the
transfer accounted for as a deemed loan repayable to the SPV. Further detail is provided in note 14.
Impact of climate change
The Group has considered the impact of climate change on the valuation of the assets and liabilities held on its Balance
Sheet and assessed that its impact is immaterial to the current balance sheet position when considering the potential
physical and transitional risks to the Group’s operations. A post model adjustment in relation to the impact of climate
change on expected credit loss on loans and advances to customers has been recognised. Further detail is provided in
Group | Society | |||
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
On financial assets held at amortised cost: | ||||
On loans fully secured on residential property | 249.2 | 220.5 | 249.1 | 220.4 |
On other loans and advances: | ||||
To subsidiary undertakings | - | - | 2.4 | 2.3 |
Other | 0.4 | 1.4 | 18.0 | 9.0 |
On other liquid assets | 18.0 | 32.3 | 16.9 | 31.5 |
On financial assets held at Fair Value Through Other Comprehensive Income: | ||||
On debt securities | 33.3 | 31.5 | 33.3 | 31.5 |
On financial assets held at Fair Value Through Profit or Loss: | ||||
Interest recognised in respect of mortgages held at fair value | 11.2 | 11.4 | 11.2 | 11.4 |
Net income on derivatives hedging assets | 23.0 | 38.6 | 17.9 | 30.7 |
335.1 | 335.7 | 348.8 | 336.8 | |
Interest receivable and other income includes £13.6m (2024: £5.3m) from fixed income securities. Other than £1.5m
(2024: £2.0m) generated on loans originated in Spain and £2.4m (2024: £1.6m) interest income on supranational bonds,
Group | Society | |||
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
On financial liabilities held at amortised cost: | ||||
On amounts due to Members | 201.8 | 205.0 | 201.8 | 205.0 |
On subscribed capital | 3.4 | 3.4 | 3.4 | 3.4 |
On subordinated liabilities | 2.6 | 1.3 | 2.6 | 1.3 |
On deposits and other borrowings | 24.7 | 32.5 | 36.9 | 31.7 |
On finance leases | 0.4 | 0.3 | 0.4 | 0.3 |
232.9 | 242.5 | 245.1 | 241.7 | |
On financial liabilities held at Fair Value Through Profit or Loss: | ||||
Net expense on derivatives hedging liabilities | 0.8 | 1.3 | 0.8 | 1.3 |
233.7 | 243.8 | 245.9 | 243.0 | |
116
117
Group | Society | ||||
2025 | 2024 | 2025 | 2024 | ||
Note | £m | £m | £m | £m | |
Other income | |||||
Savings management income | 51.0 | 47.3 | - | - | |
Regulated advice services | 8.7 | 6.8 | - | - | |
Fee and commission income | 0.9 | 1.8 | 0.9 | 1.8 | |
Income recognised under IFRS 15 | 5 | 60.6 | 55.9 | 0.9 | 1.8 |
Other operating income | 0.1 | 0.2 | 17.4 | 12.4 | |
60.7 | 56.1 | 18.3 | 14.2 | ||
Other income includes income from contracts with customers of £60.6m (2024: £55.9m) which is recognised under
IFRS 15. Further detail is included in note 5.
Group | Society | |||
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Other charges | ||||
Fee and commission expense | 0.6 | 0.2 | 0.5 | 0.2 |
Group | Society | |||
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Dividend income | ||||
Received from equity investments | 1.1 | 0.2 | - | - |
Received from subsidiary undertakings | - | - | 1.4 | 1.6 |
1.1 | 0.2 | 1.4 | 1.6 | |
1. Disaggregation of revenue from contracts with customers
The Group and Society derive revenue from the transfer of services at a point in time and over time in the following
business segments and service areas, excluding intragroup income.
Group | Society | |||
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Solutions Business | ||||
Savings management services recognised over time | 48.9 | 45.6 | - | - |
Savings management project and change services recognised over time | 1.6 | 1.5 | - | - |
IT services recognised over time | 0.5 | 0.2 | - | - |
51.0 | 47.3 | - | - | |
Member Business | ||||
Regulated advice services recognised at a point in time | 3.4 | 2.6 | - | - |
Regulated advice services recognised over time | 5.3 | 4.2 | - | - |
Third party services recognised at a point in time | 0.8 | 1.7 | 0.8 | 1.7 |
Other services recognised over time | 0.1 | 0.1 | 0.1 | 0.1 |
9.6 | 8.6 | 0.9 | 1.8 | |
Total revenue from contracts with customers | 60.6 | 55.9 | 0.9 | 1.8 |
In accordance with IFRS 8 the Group reports the following segments: Member business and Solutions business. The
‘Solutions’ business segment (also referred to as Newcastle Strategic Solutions) provides business to business services
through people, processes and technology; for more detail on the reportable segments, see note 9. When the Group
prepares financial information for management, it disaggregates revenue by segment and service type.
Details of intercompany income for the Society are included in note 30.
2. Unsatisfied long-term service contracts
The following table shows partially unsatisfied performance obligations resulting from fixed-price long-term contracts
at 31 December 2025 where the contract ends after the balance sheet date:
Group | Solutions | |||
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Aggregate amount of transaction price allocated to long-term savings | ||||
| management projects | 4.9 | 2.6 | 5.9 | 5.0 |
Aggregate amount of transaction price allocated to long-term IT services | 0.1 | 0.7 | 0.1 | 0.7 |
5.0 | 3.3 | 6.0 | 5.7 | |
In relation to savings management contracts, the Group expects to recognise approximately £1.7m of the unearned
amount in 2026, and £3.2m thereafter. In relation to IT contracts, the Group expects to recognise approximately £0.1m
of the unearned amount in 2026.
3. Assets and liabilities related to contracts with customers
118
119
Group | Society | ||||
2025 | 2024 | 2025 | 2024 | ||
Note | £m | £m | £m | £m | |
Staff costs: | |||||
Wages and salaries | 67.9 | 63.2 | 33.2 | 44.3 | |
Social security costs | 8.8 | 6.9 | 4.3 | 3.5 | |
Pension costs for defined contribution scheme | 9.7 | 8.9 | 4.7 | 4.6 | |
Short term leases for land and buildings: | |||||
Payable to third parties | 17 | - | 0.1 | - | 0.1 |
Other administrative expenses | 37.3 | 29.4 | 41.0 | 23.0 | |
IT transformation costs | 0.6 | 2.6 | 0.6 | 2.6 | |
124.3 | 111.1 | 83.8 | 78.1 | ||
During the year the Group reviewed its allocation of internal staff costs, resulting in a reallocation of staff costs from the
Society to Solutions, as well as a reallocation between staff costs and other administrative expenses within the Society.
Had the same approach been applied in the prior period 2024, staff costs for the Society as shown in the table above
would have decreased by £12.8m with a corresponding increase in other administrative expenses within the Society
only, and staff costs for the Group would have decreased by £1.6m with a corresponding increase in other administrative
expenses. There is no impact on total administrative expenses of the Group or profit for the period.
Directors’ emoluments are disclosed in the Remuneration Committee Report. Total Directors’ emoluments for 2025
amount to £2.4m (2024: £2.3m).
The Group's key management personnel are the Group's Material Risk Takers, the compensation of which is included
within the Remuneration Committee Report and totals £6.0m (2024: £5.6m).
included in other administrative expenses.
Group | Society | |||
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Fees payable to the Society's auditors for the audit of Society and | ||||
| consolidated financial statements | 0.8 | 0.8 | 0.8 | 0.8 |
Fees payable for the audit of subsidiaries | 0.1 | 0.1 | - | - |
Fees payable for other audit related assurance services | 0.1 | 0.1 | 0.1 | 0.1 |
Fees payable for non-audit services | - | 0.1 | - | 0.1 |
1.0 | 1.1 | 0.9 | 1.0 | |
Other audit related assurance services primarily consist of the half year review, interim profit verifications and client
money assurance engagements.
Group | Society | |||
2025 | 2024 | 2025 | 2024 | |
Full time | 1,508 | 1,468 | 604 | 604 |
Part time | 304 | 305 | 164 | 163 |
1,812 | 1,773 | 768 | 767 | |
Head Office | 1,569 | 1,539 | 556 | 562 |
Branch | 243 | 234 | 212 | 205 |
1,812 | 1,773 | 768 | 767 | |
Group | Society | ||||
Note | 2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | ||
Current tax | |||||
Current year | 1.5 | 1.9 | 2.7 | 0.8 | |
Adjustments in respect of previous years | (0.5) | (0.9) | 0.5 | (0.7) | |
Total current tax | 1.0 | 1.0 | 3.2 | 0.1 | |
Deferred tax | |||||
Current year | 3.0 | (2.0) | 3.0 | (2.3) | |
Adjustments in respect of prior years | 0.6 | 0.2 | 0.8 | (0.1) | |
Total deferred tax | 18 | 3.6 | (1.8) | 3.8 | (2.4) |
Total taxation expense / (credit) in Income Statements | 4.6 | (0.8) | 7.0 | (2.3) | |
Analysis of taxation for the year
The tax on the Group and Society profit before taxation differs from the theoretical amount that would arise using the tax
rate applicable to profits as follows:
Group | Society | |||
Analysis of taxation expense for the year | 2025 | 2024 | 2025 | 2024 |
£m | £m | £m | £m | |
Profit for the year before taxation | 22.6 | 15.7 | 27.6 | 15.7 |
Profit before taxation at the standard rate of corporation tax in the UK of | ||||
| 25.00% (2024: 25.00%) | 5.7 | 3.9 | 6.9 | 3.9 |
Effects of: | ||||
Non-taxable dividend income received | (0.3) | - | (0.4) | (0.4) |
Expenses not deductible for tax | 0.8 | 0.7 | 0.8 | 0.1 |
Distributions to Additional Tier 1 capital holders allowable deductions | (1.4) | - | (1.4) | - |
Transfer pricing adjustment | - | - | (0.2) | (0.7) |
Timing differences | (0.2) | - | - | - |
Recognition of deferred tax asset* | - | (4.0) | - | (4.0) |
Non-taxable income | (0.1) | (0.7) | - | (0.4) |
Adjustments in respect of prior years | 0.1 | (0.7) | 1.3 | (0.8) |
4.6 | (0.8) | 7.0 | (2.3) | |
*Section 4(4) of The Mutual Societies (Transfers of Business) (Tax) Regulations 2009, which governs the tax treatment of building society mergers was
updated during 2024. The change allowed for post-April 2017 tax losses to be available for set off within merged building societies and resulted in
post-April 2017 tax losses within Manchester Building Society being able to be utilised within the Newcastle Building Society Group. This resulted in a
recognition of £4.0m of deferred tax assets in 2024.
Factors affecting future tax charges
The Society has brought forward trading losses for tax purposes which are expected to affect future taxable profits. See
The chief operating decision maker has been identified as the Board of Directors ("the Board"). The Board reviews the
Group’s internal reporting in order to assess performance and allocate resources. Management has determined the
operating segments based on these reports.
Following the management approach of IFRS 8, Operating Segments are reported in accordance with the internal
reporting provided to the Board. The Operating Segments used by the Group meet the definition of a reportable
segment under IFRS 8.
The ‘Member business’ segment provides mortgage, savings, investment and insurance products to Members and
customers. The ‘Solutions business’ segment (also referred to as Newcastle Strategic Solutions) provides business to
business services through people, processes and technology. The Board assesses performance based on profit before
tax after the allocation of all central costs. Operating profit before impairments and provisions is also assessed as this
provides information on underlying business performance.
Income and directly attributable costs are allocated to each segment and support costs are apportioned, based on
direct salary costs and detailed allocations by budget holders.
Year to 31 December 2025
Member |
Solutions |
Consolidation |
||
Business |
Business |
adjustments |
Total |
|
£m |
£m |
£m |
£m |
|
Net interest income / (expense) |
103.8 |
(2.4) |
- |
101.4 |
Other income and charges |
26.6 |
71.3 |
(36.7) |
61.2 |
Fair value gains less losses on financial instruments and hedge accounting |
(6.5) |
- |
- |
(6.5) |
Administrative expenses |
(92.3) |
(68.7) |
36.7 |
(124.3) |
Depreciation and amortisation |
(3.0) |
(5.4) |
- |
(8.4) |
Operating profit / (loss) before impairments and provisions |
28.6 |
(5.2) |
- |
23.4 |
Impairment reversals on loans and advances to customers |
0.7 |
- |
- |
0.7 |
Provisions for liabilities and charges |
(0.9) |
(0.4) |
- |
(1.3) |
Profit / (loss) on disposal of non current assets |
0.4 |
(0.6) |
- |
(0.2) |
Profit / (loss) before taxation |
28.8 |
(6.2) |
- |
22.6 |
Taxation expense |
(4.6) |
|||
Profit after taxation for the financial period |
18.0 |
Amounts relating to consolidation adjustments include the elimination of intra-group transactions such as
intercompany fees.
Year to 31 December 2024
Member |
Solutions |
Consolidation |
||
Business |
Business |
adjustments |
Total |
|
Restated |
Restated |
Restated |
Restated |
|
£m |
£m |
£m |
£m |
|
Net interest income / (expense) |
94.0 |
(2.1) |
- |
91.9 |
Other income and charges |
20.5 |
65.1 |
(29.5) |
56.1 |
Fair value gains less losses on financial instruments and hedge accounting |
4.9 |
- |
- |
4.9 |
Administrative expenses |
(83.2) |
(57.4) |
29.5 |
(111.1) |
Depreciation and amortisation |
(2.6) |
(5.0) |
- |
(7.6) |
Operating profit before impairments and provisions |
33.6 |
0.6 |
- |
34.2 |
Impairment reversals on loans and advances to customers |
2.5 |
- |
- |
2.5 |
Provisions for liabilities and charges |
(20.7) |
(0.3) |
- |
(21.0) |
Profit before taxation |
15.4 |
0.3 |
- |
15.7 |
Taxation credit |
0.8 |
|||
Profit after taxation for the financial period |
16.5 |
During the year the Group revised its segmental reporting structure to present the Member and Solutions segments
excluding intra-group eliminations and consolidation adjustments to better reflect the performance of the individual
segments, consistent with management reporting. Comparative information for 2024 has been restated on a
consistent basis to reflect this revised presentation. The restatement has no impact on the Group's consolidated results
Repayable from the date of the Balance Sheet in the ordinary course of business as follows:
Group |
Society |
|||
2025 |
2024 |
2025 |
2024 |
|
£m |
£m |
£m |
£m |
|
On demand |
53.2 |
21.6 |
4.5 |
4.9 |
In not more than 3 months |
93.0 |
80.2 |
93.0 |
80.2 |
146.2 |
101.8 |
97.5 |
85.1 |
|
There are no provisions held against loans and advances to credit institutions (2024: £nil). Included within loans and
120
121
122
123
Group & Society |
||
2025 |
2024 |
|
Movement in transferable debt securities |
£m |
£m |
At 1 January |
602.3 |
615.0 |
Additions |
432.2 |
475.6 |
Disposals |
(5.0) |
(42.2) |
Maturities |
(177.0) |
(443.2) |
Movement in fair value |
6.7 |
(2.9) |
At 31 December |
859.2 |
602.3 |
Transferable debt securities |
||
Issued by UK Government - listed |
325.3 |
252.6 |
Issued by other borrowers - listed |
533.9 |
349.7 |
859.2 |
602.3 |
|
Securities issued by other borrowers are AAA rated holdings of residential mortgage-backed securities, covered bonds
and supranational bonds.
The Directors consider that the primary purpose of holding securities is to comply with prudential requirements. All
transferrable debt securities are held with the intention of use on a continuing basis in the Group’s activities. They are
designated by management on initial recognition as assets held at fair value with changes recognised in other
comprehensive income.
There are no provisions held against debt securities (2024: £nil).
In addition to the securities above, the Society has retained debt security notes issued by Tyne Funding No.1 PLC and
Hadrian Funding 2025-1 PLC, entities controlled by the Group. These are presented net of the deemed loans from the
Loans and advances to customers
Group |
Society |
|||
2025 |
2024 |
2025 |
2024 |
|
£m |
£m |
£m |
£m |
|
Loans fully secured on residential property |
5,687.5 |
5,259.3 |
5,686.2 |
5,257.7 |
Loans fully secured on land |
21.0 |
26.7 |
21.0 |
26.7 |
Other loans |
0.9 |
1.0 |
0.9 |
1.1 |
Gross loans and advances |
5,709.4 |
5,287.0 |
5,708.1 |
5,285.5 |
Allowance for losses on loans and advances |
(6.3) |
(6.6) |
(6.4) |
(6.6) |
Micro fair value hedge adjustments |
2.9 |
2.2 |
2.9 |
2.2 |
Effective interest rate adjustments |
7.7 |
6.5 |
7.7 |
6.5 |
Fair value adjustments |
0.5 |
0.2 |
0.6 |
0.2 |
5,714.2 |
5,289.3 |
5,712.9 |
5,287.8 |
|
At 31 December 2025 the Group had €29.3m of loans denominated in Euros (2024: €30.1m) with a carrying value of
£25.5m (2024: £24.9m).
Effective interest rate adjustments include a £0.9m liability relating to the fair value discount applied to acquired credit
impaired books (2024: £1.5m).
Impairment provisions for loans and advances to customers
Loans fully |
|||
secured on |
Loans fully |
||
residential |
secured on |
||
property |
land |
Total |
|
Group |
£m |
£m |
£m |
Balance at 1 January 2025 |
4.3 |
2.3 |
6.6 |
Credit for the year |
- |
(0.7) |
(0.7) |
Utilised during the year |
0.4 |
- |
0.4 |
4.7 |
1.6 |
6.3 |
Balance at 31 December 2025
Loans fully |
|||
secured on |
Loans fully |
||
residential |
secured on |
||
property |
land |
Total |
|
Group |
£m |
£m |
£m |
Balance at 1 January 2024 |
6.2 |
1.4 |
7.6 |
(Credit) / charge for the year |
(1.9) |
0.9 |
(1.0) |
Balance at 31 December 2024 |
4.3 |
2.3 |
6.6 |
124
125
Loans fully |
|||
secured on |
Loans fully |
||
residential |
secured on |
||
property |
land |
Total |
|
Society |
£m |
£m |
£m |
Balance at 1 January 2025 |
4.3 |
2.3 |
6.6 |
Charge / (credit) for the year |
0.1 |
(0.7) |
(0.6) |
Utilised during the year |
0.4 |
- |
0.4 |
Balance at 31 December 2025 |
4.8 |
1.6 |
6.4 |
Loans fully |
|||
secured on |
Loans fully |
||
residential |
secured on |
||
property |
land |
Total |
|
Society |
£m |
£m |
£m |
Balance at 1 January 2024 |
6.0 |
1.4 |
7.4 |
(Credit) / charge for the year |
(1.7) |
0.9 |
(0.8) |
Balance at 31 December 2024 |
4.3 |
2.3 |
6.6 |
Equity release mortgage assets denominated in £
Included in loans and advances to customers secured on residential property is a balance of £137.4m (2024: £146.7m)
relating to equity release mortgages secured on properties in the UK.
Equity release mortgage assets denominated in €
Included in loans and advances to customers secured on residential property is a balance of £25.5m (2024: £24.9m)
relating to equity release mortgages secured on properties in Spain. This book was acquired as part of the transfer of
engagements from Manchester Building Society.
Equity release mortgages are held at fair value through profit or loss. Details on the balances and valuation of the equity
release portfolio are included in notes 13 and 32.
Loans and advances to customers - securitisation
In 2021, the Society transferred beneficial ownership of a pool of mortgages of £282.7m to Tyne Funding No.1 PLC and
during the year, transferred beneficial ownership of a pool of mortgages of £711.4m to Hadrian Funding 2025-1 PLC, the
Group’s securitisation vehicles.
The Society continues to be exposed to all risk and rewards of ownership of these mortgages, and therefore the
mortgages continue to be recognised on the Society’s Balance Sheet. See note 14 for details.
Loans and advances to customers - write offs
There were £0.4m loans and advances to customers written off during the period (2024: £nil).
Further details of the Group’s provisioning methodology is given in note 38 and detailed analysis of expected credit
The Group’s equity release mortgage assets are accounted for as fair value through profit or loss. The mortgages were
advanced as indeterminate length fixed interest rate contracts, to be repaid in full at maturity through sale of the
mortgaged properties. Most equity release contracts contain a no-negative-equity guarantee; that is, where the value
of a mortgaged property at the point of sale falls short of the contractual amount due to the Group, the shortfall is
written off. Equity release mortgages are presented at fair value on the Balance Sheet as part of the Group’s loans and
advances to customers.
| Group and Society |
||||||
| 2025 |
2024 |
|||||
Gross |
Fair value |
Gross |
Fair value |
|||
mortgage |
Fair value |
presented on |
mortgage |
Fair value |
presented on |
|
balances |
adjustment |
Balance Sheet |
balances |
adjustment |
Balance Sheet |
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Denominated in £ |
137.5 |
(0.1) |
137.4 |
143.8 |
2.9 |
146.7 |
Denominated in € |
42.0 |
(16.5) |
25.5 |
40.7 |
(15.8) |
24.9 |
Total |
179.5 |
(16.6) |
162.9 |
184.5 |
(12.9) |
171.6 |
The gross mortgage balances above reflect the Group’s maximum pre collateral exposure to credit risk at 31 December.
The Group typically expects its equity release mortgages to be repaid through sale of the underlying properties.
Property collateral of £289.5m (2024: £323.6m) is held against the Group’s equity release exposures denominated in
Sterling. By their nature, equity release mortgages are not considered to hold a pre-determined maturity date.
At 31 December 2025 the Group had €48.1m (2024: €49.2m) of equity release mortgages denominated in Euros,
against which €53.5m (2024: €54.2m) collateral is held.
The fair value is the present value of the forecast portfolio cash flows less the value of the no-negative equity guarantee,
which is calculated using an option pricing model. See note 32 for details of the movement in the fair value adjustment.
Against equity release assets, the following income and charges have been recognised through the Income Statement:
Group and Society |
||
2025 |
2024 |
|
£m |
£m |
|
Interest income |
11.2 |
11.4 |
Fair value change |
(1.3) |
(5.8) |
The Group recognises interest income on a per asset basis using the effective interest rate method. The gross mortgage
balances, as presented above, reflect the amortised cost of the Group’s equity release mortgages. Changes in the fair
value are included in the Income Statement within fair value gains less losses on financial instruments, further details are
given in note 32.
For fixed reversion contracts, the effective interest rate is considered to be the rate implicit in the mortgage contract.
The balances recognised in respect of fixed reversion mortgages included in the total above are as follows:
Group and Society |
||
2025 |
2024 |
|
£m |
£m |
|
Reversion value |
4.6 |
9.2 |
Book value |
6.2 |
7.3 |
Interest income |
0.3 |
0.5 |
The Group’s equity release books are closed to new entrants with limited further advances available to existing
126
127
In 2021, the Society securitised a pool of mortgage loans with a book value of £282.7m, by transferring their beneficial
ownership at net book value to Tyne Funding No.1 PLC. Tyne Funding No. 1 PLC issued debt securities (loan notes) with a
total value of £282.7m secured on the transferred mortgage loans.
During the year, the Society securitised a pool of mortgages with a book value of £711.4m, by transferring their beneficial
ownership at net book value to Hadrian Funding 2025-1 PLC. Hadrian Funding 2025-1 PLC issued loan notes with a total
value of £711.4m secured on the transferred mortgage loans.
All loan notes issued by Tyne Funding No.1 PLC (£282.7m) were purchased and retained by the Society and £361.4m of
loan notes issued by Hadrian Funding 2025-1 PLC have been purchased and retained by the Society. The retained loan
notes are available as security for repurchase agreements with the Bank of England or third parties. Since the securitised
mortgage loans do not meet the criteria for de-recognition from the Society’s Balance Sheet, they continue to be held
on the Society’s Balance Sheet. The consideration received from Tyne Funding No.1 PLC and Hadrian Funding 2025-1
PLC is accounted for as a deemed loan. As permissible under IFRS 9, the Society has elected to present the deemed
loan net of the loan notes issued, as the loan notes constitute essentially the same asset as the transferred mortgages
and presenting them gross results effectively in presenting the same assets twice on the Society’s Balance Sheet. The
carrying value of the notes reduces as coupons are paid on a quarterly basis whilst the consideration received for
transfer of mortgages is repaid on a daily basis.
The deemed loan asset presented on the Balance Sheet consists of the following items:
| Society |
||
2025 |
2024 |
|
Deemed loan asset in respect of Tyne Funding |
£m |
£m |
Retained loan notes |
152.6 |
190.2 |
Consideration received for transfer of mortgages |
(146.4) |
(183.6) |
Net value of derivatives integral to transaction |
(0.5) |
8.1 |
5.7 |
14.7 |
|
The deemed loan liability presented on the Balance Sheet consists of the following items:
Society |
||
2025 |
2024 |
|
Deemed loan liability in respect of Hadrian Funding |
£m |
£m |
Retained loan notes |
341.1 |
- |
Consideration received for transfer of mortgages |
(644.8) |
- |
Net value of derivatives integral to transaction |
(0.3) |
- |
Subordinated loan to the SPV integral to the transaction |
9.8 |
- |
(294.2) |
- |
|
At the Balance Sheet date, the securitised mortgage loans transferred to Tyne Funding No.1 PLC had a book value of
£146.4m (2024: £183.6m) and the securitised mortgage loans transferred to Hadrian Funding 2025-1 PLC had a book
value of £644.8m.
Class A notes issued by Tyne Funding No. 1 PLC have a coupon rate of SONIA + 58bps and a call date of 25 November
2026; class A notes issued by Hadrian Funding 2025-1 PLC have a coupon rate of SONIA + 50bps and a call date of 20
May 2030.
In the Group Accounts, any derivatives associated with the transaction are presented gross in assets and liabilities within
Group |
Society |
|||
2025 |
2024 |
2025 |
2024 |
|
£m |
£m |
£m |
£m |
|
Equities |
1.4 |
1.6 |
0.2 |
0.1 |
Investment in subsidiary undertakings |
- |
- |
47.2 |
42.6 |
1.4 |
1.6 |
47.4 |
42.7 |
|
Investments in equities
Equity investments for the Group relate to Newcastle Financial Advisers’ holding in units in Openwork LLP, a network of
independent financial advisers, under the licence of which it operates. Equity investments are held at fair value through
profit or loss.
Society |
Shares |
Loans |
Total |
£m |
£m |
£m |
|
Cost |
|||
At 1 January 2025 |
5.9 |
36.7 |
42.6 |
Additions |
- |
4.6 |
4.6 |
Capital contribution |
10.0 |
(10.0) |
- |
Balance at 31 December 2025 |
15.9 |
31.3 |
47.2 |
Provisions |
|||
At 1 January 2025 and 31 December 2025 |
- |
- |
- |
Net book amount at 31 December 2025 |
15.9 |
31.3 |
47.2 |
Society |
Shares |
Loans |
Total |
£m |
£m |
£m |
|
Cost |
|||
At 1 January 2024 |
5.9 |
35.7 |
41.6 |
Additions |
- |
1.3 |
1.3 |
Repayments received |
- |
(0.3) |
(0.3) |
Balance at 31 December 2024 |
5.9 |
36.7 |
42.6 |
Provisions |
|||
At 1 January 2024 and 31 December 2024 |
- |
- |
- |
Net book amount at 31 December 2024 |
5.9 |
36.7 |
42.6 |
128
129
During the year the Society waived £10m of loans due from its subsidiary undertakings, reducing the loan amounts in the
table above. The amount waived is recognised as a capital contribution from the Society to the subsidiary undertaking
and is recognised in the above tables as investment in subsidiary undertaking; shares.
The Society directly holds 100% of the issued ordinary share capital of all its subsidiary undertakings.
The Directors believe that the carrying value of the investments in subsidiary undertakings is supported by their
underlying net assets.
Name of principal subsidiary undertakings |
Principal activity |
Newcastle Financial Advisers Limited |
Provision of financial services |
Newcastle Mortgage Loans (Jersey) Limited |
Mortgage lending |
Newcastle Strategic Solutions Limited |
Provision of specialised savings management and IT services |
MBS (Mortgages) Limited |
Mortgage lending |
Newcastle Mortgage Loans (Jersey) Limited is incorporated and operates in Jersey. All of the other subsidiary
undertakings are incorporated in England and Wales and operate in the United Kingdom. The registered address for
these entities is: 1 Cobalt Park Way, Wallsend, NE28 9EJ.
MBS (Mortgages) Limited and Newcastle Financial Advisers Limited are entitled to audit exemption under section 479a
of the Companies Act 2006 and no Members have required them to obtain an audit of their accounts.
Further information on transactions between Group entities can be found in Note 30 Related Parties.
During the year, the Society received dividends from subsidiary undertakings totalling £1.4m (2024: £1.6m) which were
Other controlled entities
The following entity is deemed to be controlled by the Society. Although the Society does not have a controlling
shareholding, it has the right of variable returns from the entity and is able to influence these returns. In substance, the
entity is therefore no different than if it was wholly owned by the Society. As a result, it is consolidated into the Group
accounts. The carrying value of the entity in the Society’s Balance Sheet is £nil.
Tyne Funding No.1 PLC
Tyne Funding No.1 PLC was incorporated on 30 September 2021. It is a Special Purpose Vehicle to facilitate the
securitisation of a mortgage pool previously owned by the Society, see note 14 for details. The entity’s financial period
end is 31 December. Its registered office is: 1 Bartholomew Lane, London, EC2N 2AX.
Hadrian Funding 2025-1 PLC
Hadrian Funding 2025-1 PLC was incorporated on 30 January 2025. It is a Special Purpose Vehicle to facilitate the
securitisation of a mortgage pool previously owned by the Society, see note 14 for details. The entity’s financial period
Group
Internally |
Internally |
||||
developed |
development |
||||
Purchased |
software: work |
software: in |
Acquired |
||
software |
in progress |
use |
customer lists |
Total |
|
Cost |
£m |
£m |
£m |
£m |
£m |
At 1 January 2025 |
11.5 |
2.3 |
14.1 |
0.7 |
28.6 |
Additions |
0.1 |
2.4 |
- |
0.2 |
2.7 |
Transfers |
- |
(3.5) |
3.5 |
- |
- |
Disposals |
(0.8) |
- |
(1.1) |
- |
(1.9) |
At 31 December 2025 |
10.8 |
1.2 |
16.5 |
0.9 |
29.4 |
Accumulated depreciation |
|||||
At 1 January 2025 |
8.7 |
- |
5.6 |
0.5 |
14.8 |
Charge for the year |
1.0 |
- |
3.1 |
0.1 |
4.2 |
Disposals |
(0.6) |
- |
(0.7) |
- |
(1.3) |
At 31 December 2025 |
9.1 |
- |
8.0 |
0.6 |
17.7 |
Net book amount 31 December 2025 |
1.7 |
1.2 |
8.5 |
0.3 |
11.7 |
Group
Internally |
|||||
developed |
Internally |
||||
Purchased |
software: work |
development |
Acquired |
||
software |
in progress |
software: in use |
customer lists |
Total |
|
Cost |
£m |
£m |
£m |
£m |
£m |
At 1 January 2024 |
12.7 |
3.1 |
9.5 |
0.4 |
25.7 |
Additions |
0.5 |
3.8 |
- |
0.3 |
4.6 |
Transfers |
- |
(4.6) |
4.6 |
- |
- |
Disposals |
(1.7) |
- |
- |
- |
(1.7) |
At 31 December 2024 |
11.5 |
2.3 |
14.1 |
0.7 |
28.6 |
Accumulated depreciation |
|||||
At 1 January 2024 |
9.3 |
- |
3.2 |
0.4 |
12.9 |
Charge for the year |
1.1 |
- |
2.4 |
0.1 |
3.6 |
Disposals |
(1.7) |
- |
- |
- |
(1.7) |
At 31 December 2024 |
8.7 |
- |
5.6 |
0.5 |
14.8 |
Net book amount 31 December 2024 |
2.8 |
2.3 |
8.5 |
0.2 |
13.8 |
130
131
Society
Internally |
Internally |
||||
developed |
development |
||||
Purchased |
software: work |
software: in |
Acquired |
||
software |
in progress |
use |
customer lists |
Total |
|
Cost |
£m |
£m |
£m |
£m |
£m |
At 1 January 2025 |
2.8 |
- |
- |
- |
2.8 |
Additions |
3.1 |
- |
- |
- |
3.1 |
Transfers |
- |
- |
- |
- |
- |
Disposals |
(0.2) |
- |
- |
- |
(0.2) |
At 31 December 2025 |
5.7 |
- |
- |
- |
5.7 |
Accumulated depreciation |
|||||
At 1 January 2025 |
1.3 |
- |
- |
- |
1.3 |
Charge for the year |
0.5 |
- |
- |
- |
0.5 |
Disposals |
(0.2) |
- |
- |
- |
(0.2) |
At 31 December 2025 |
1.6 |
- |
- |
- |
1.6 |
Net book amount 31 December 2025 |
4.1 |
- |
- |
- |
4.1 |
Society
Internally |
|||||
developed |
Internally |
||||
Purchased |
software: work |
development |
Acquired |
||
software |
in progress |
software: in use |
customer lists |
Total |
|
Cost |
£m |
£m |
£m |
£m |
£m |
At 1 January 2024 |
4.0 |
- |
- |
- |
4.0 |
Additions |
0.5 |
- |
- |
- |
0.5 |
Disposals |
(1.7) |
- |
- |
- |
(1.7) |
At 31 December 2024 |
2.8 |
- |
- |
- |
2.8 |
Accumulated depreciation |
|||||
At 1 January 2024 |
2.7 |
- |
- |
- |
2.7 |
Charge for the year |
0.3 |
- |
- |
- |
0.3 |
Disposals |
(1.7) |
- |
- |
- |
(1.7) |
At 31 December 2024 |
1.3 |
- |
- |
- |
1.3 |
Net book amount 31 December 2024 |
1.5 |
- |
- |
- |
1.5 |
Purchased software
Purchased software relates to IT systems purchased from external providers, with a useful economic life longer than
one year.
Internally developed software
Internally developed software relates to capitalised staff costs for developing new IT systems or enhancing the
functionality of existing ones. The software is either used by the Group or licenses are sold to third parties. Internally
developed software assets are classified as work in progress until the software is ready to use. Once it is ready to use, it
is reclassified as internally developed software in use and amortised over its useful economic life.
Acquired customer lists
Acquired customer lists relate to customer lists acquired by Newcastle Financial Advisers. During the year, the customer
list of Orchard Financial Consulting Limited was acquired and integrated into Newcastle Financial Advisors. In 2024, the
Equipment, |
|||||
Group |
fixtures, |
||||
Freehold |
Leasehold land |
fittings and |
Investment |
||
buildings |
and buildings |
motor vehicles |
property |
Total |
|
Cost |
£m |
£m |
£m |
£m |
£m |
At 1 January 2025 |
3.1 |
28.5 |
26.7 |
0.7 |
59.0 |
Additions |
- |
0.9 |
6.5 |
- |
7.4 |
Lease remeasurement |
- |
0.1 |
- |
- |
0.1 |
Disposals |
(0.6) |
(1.7) |
(1.1) |
(0.7) |
(4.1) |
At 31 December 2025 |
2.5 |
27.8 |
32.1 |
- |
62.4 |
Accumulated depreciation |
|||||
At 1 January 2025 |
1.1 |
7.8 |
15.5 |
0.6 |
25.0 |
Charge for the year |
- |
1.6 |
2.6 |
- |
4.2 |
Disposals |
(0.2) |
(1.7) |
(0.9) |
(0.6) |
(3.4) |
At 31 December 2025 |
0.9 |
7.7 |
17.2 |
- |
25.8 |
1.6 |
20.1 |
14.9 |
- |
36.6 |
Net book amount 31 December 2025
Equipment, |
|||||
Group |
fixtures, fittings |
||||
Freehold |
Leasehold land |
and motor |
Investment |
||
buildings |
and buildings |
vehicles |
property |
Total |
|
Cost |
£m |
£m |
£m |
£m |
£m |
At 1 January 2024 |
3.1 |
26.7 |
29.0 |
1.1 |
59.9 |
Additions |
- |
2.1 |
4.7 |
- |
6.8 |
Lease remeasurement |
- |
(0.3) |
- |
- |
(0.3) |
Disposals |
- |
- |
(7.0) |
(0.4) |
(7.4) |
At 31 December 2024 |
3.1 |
28.5 |
26.7 |
0.7 |
59.0 |
Accumulated depreciation |
|||||
At 1 January 2024 |
1.1 |
6.3 |
20.0 |
1.0 |
28.4 |
Charge for the year |
- |
1.6 |
2.4 |
- |
4.0 |
Impairment |
- |
(0.1) |
- |
- |
(0.1) |
Disposals |
- |
- |
(6.9) |
(0.4) |
(7.3) |
At 31 December 2024 |
1.1 |
7.8 |
15.5 |
0.6 |
25.0 |
Net book amount 31 December 2024 |
2.0 |
20.7 |
11.2 |
0.1 |
34.0 |
132
133
Equipment, | |||||
Society | fixtures, | ||||
Freehold | Leasehold land | fittings and | Investment | ||
buildings | and buildings | motor vehicles | property | Total | |
Cost | £m | £m | £m | £m | £m |
At 1 January 2025 | 3.1 | 13.6 | 14.2 | 0.7 | 31.6 |
Additions | - | 0.8 | 5.0 | - | 5.8 |
Lease remeasurement | - | 0.1 | - | - | 0.1 |
Disposals | (0.6) | (1.7) | (0.9) | (0.7) | (3.9) |
At 31 December 2025 | 2.5 | 12.8 | 18.3 | - | 33.6 |
Accumulated depreciation | |||||
At 1 January 2025 | 1.2 | 6.0 | 8.2 | 0.6 | 16.0 |
Charge for the year | - | 1.3 | 1.1 | - | 2.4 |
Disposals | (0.2) | (1.7) | (0.8) | (0.6) | (3.3) |
At 31 December 2025 | 1.0 | 5.6 | 8.5 | - | 15.1 |
Net book amount 31 December 2025 | 1.5 | 7.2 | 9.8 | - | 18.5 |
Equipment, | |||||
Society | fixtures, fittings | ||||
Freehold | Leasehold land | and motor | Investment | ||
buildings | and buildings | vehicles | property | Total | |
Cost | £m | £m | £m | £m | £m |
At 1 January 2024 | 3.1 | 11.8 | 15.3 | 1.1 | 31.3 |
Additions | - | 2.1 | 2.9 | - | 5.0 |
Lease remeasurement | - | (0.3) | - | - | (0.3) |
Disposals | - | - | (4.0) | (0.4) | (4.4) |
At 31 December 2024 | 3.1 | 13.6 | 14.2 | 0.7 | 31.6 |
Accumulated depreciation | |||||
At 1 January 2024 | 1.1 | 4.8 | 11.4 | 1.0 | 18.3 |
Charge for the year | 0.1 | 1.3 | 0.8 | - | 2.2 |
Impairment | - | (0.1) | - | - | (0.1) |
Disposals | - | - | (4.0) | (0.4) | (4.4) |
At 31 December 2024 | 1.2 | 6.0 | 8.2 | 0.6 | 16.0 |
Net book amount 31 December 2024 | 1.9 | 7.6 | 6.0 | 0.1 | 15.6 |
The right of use assets recognised for branch and operational property leases is included in the table above as
‘Leasehold land and buildings’. The corresponding lease liability is included in note 23, Other liabilities.
Lease liabilities are expected to amortise as follows:
Group | Society | |||
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Within one year | 0.9 | 1.1 | 0.9 | 1.1 |
In one to five year | 2.6 | 3.0 | 2.6 | 3.0 |
In more than five years | 4.2 | 3.4 | 4.2 | 3.4 |
7.7 | 7.5 | 7.7 | 7.5 | |
The following charges are included in the Income Statement in respect right of use asset leases:
Note | Group | Society | |||
2025 | 2024 | 2025 | 2024 | ||
£m | £m | £m | £m | ||
Depreciation of right of use assets included in administrative | |||||
| expenses | 1.3 | 1.2 | 1.3 | 1.2 | |
Interest charges on lease liabilities | 29 | 0.4 | 0.3 | 0.4 | 0.3 |
Expenses relating to short term and low value leases included | |||||
| in administrative expenses - payable to third parties | 6 | - | 0.1 | - | 0.1 |
1.7 | 1.6 | 1.7 | 1.6 | ||
There is no expense recognised in the Income Statement in respect of variable lease payments that are not included in
the measurement of the lease liabilities. The carrying value of lease liabilities is approximately the fair value of the lease
134
135
The movement on the deferred tax account is shown below.
Group |
Society |
|||
2025 |
2024 |
2025 |
2024 |
|
£m |
£m |
£m |
£m |
|
At 1 January |
6.8 |
5.8 |
8.4 |
7.0 |
Income Statement expense |
(3.0) |
2.0 |
(3.0) |
2.3 |
Prior year adjustment |
(0.6) |
(0.2) |
(0.8) |
0.1 |
Credited on items recognised in equity |
1.6 |
(1.1) |
1.6 |
(1.1) |
Other |
(0.1) |
0.3 |
- |
0.1 |
At 31 December |
4.7 |
6.8 |
6.2 |
8.4 |
Deferred tax assets |
||||
Deferred tax asset to be recovered in less than 12 months |
0.7 |
0.3 |
1.0 |
0.3 |
Deferred tax asset to be recovered in more than 12 months |
7.5 |
8.1 |
7.1 |
8.1 |
8.2 |
8.4 |
8.1 |
8.4 |
|
Deferred tax liabilities |
||||
Deferred tax liabilities to be recovered in less than 12 months |
- |
(0.2) |
- |
- |
Deferred tax liabilities to be recovered in more than 12 months |
(3.5) |
(1.4) |
(1.9) |
- |
(3.5) |
(1.6) |
(1.9) |
- |
|
Charge to |
Other |
|||
Group |
Income |
Comprehensive |
||
2024 |
Statement |
Income |
2025 |
|
£m |
£m |
£m |
£m |
|
Trading losses |
5.8 |
(1.4) |
- |
4.4 |
Temporary timing differences |
(1.2) |
(1.5) |
- |
(2.7) |
Adjustments relating to historic changes in accounting policies |
4.2 |
(0.8) |
- |
3.4 |
Equity investments held at fair value through the income statement |
(0.3) |
- |
- |
(0.3) |
Cash flow hedge accounting held at fair value through other comprehensive |
||||
| income |
(1.7) |
- |
1.6 |
(0.1) |
6.8 |
(3.7) |
1.6 |
4.7 |
Charge to |
Other |
|||
Society |
Income |
Comprehensive |
||
2024 |
Statement |
Income |
2025 |
|
£m |
£m |
£m |
£m |
|
Trading losses |
5.8 |
(1.4) |
- |
4.4 |
Temporary timing differences |
- |
(1.6) |
- |
(1.6) |
Adjustments relating to historic changes in accounting policies |
4.3 |
(0.8) |
- |
3.5 |
Cash flow hedge accounting held at fair value through other comprehensive |
||||
| income |
(1.7) |
- |
1.6 |
(0.1) |
8.4 |
(3.8) |
1.6 |
6.2 |
Adjustments relating to historic changes in accounting policies unwind over a period of 10 years from the change in
accounting policy. Deferred tax arising from losses acquired through the transfer of engagements from Manchester
Building Society are unwound as taxable profits allocatable to Manchester Building Society’s trade is generated.
Deferred tax adjustments arising on fair value adjustments arising as a result of the transfer of engagements with
Manchester Building Society are unwound over a period of six years from the merger date. No changes to the rate of
corporation tax have been announced.
In the prior year, Section 4(4) of The Mutual Societies (Transfers of Business) (Tax) Regulations 2009, which governs the
tax treatment of building society mergers, was updated and allowed for post-April 2017 tax losses to be available for set
off within merged building societies. The amendment took effect from May 2024 and resulted in post-April 2017 tax
losses within Manchester Building Society being able to be utilised within the Group. This resulted in a recognition of
£4.0m of deferred tax assets in the Society’s Balance Sheet in 2024.
Unrecognised deferred tax assets
The following table summarises the unrecognised deferred tax assets.
Group |
Society |
|||
2025 |
2024 |
2025 |
2024 |
|
£m |
£m |
£m |
£m |
|
Unrecognised deferred tax assets |
2.0 |
2.0 |
- |
- |
MBS (Mortgages) Limited, a 100% owned subsidiary of the Society acquired as part of the merger with Manchester
Building Society, has deferred tax losses of £8.0m, corresponding to an unrecognised deferred tax asset of £2.0m. The
Society has not recognised any deferred tax assets relating to this subsidiary, as it is not currently profitable, and future
profits that the tax losses could be offset against are not currently considered sufficiently certain to justify the
136
137
Group and Society pension schemes
The Society operates a UK registered trust-based pension scheme, Newcastle Building Society Pension and Assurance
Scheme (the Scheme) that provides defined benefits. The Scheme was closed to new entrants in 2000 and closed to
the future accrual of benefits in 2010. Pension benefits are linked to the members’ final pensionable salaries and service
at their retirement (or date of leaving if earlier).
The Trustees of the Scheme are responsible for running the Scheme in accordance with the Scheme’s Trust Deed and
Rules, which sets out their powers. The Trustees of the Scheme are required to act in the best interests of the
beneficiaries of the Scheme. There is a requirement that at least one-third of the Trustees are nominated by the
members of the Scheme.
There are two categories of pension scheme members:
■
Deferred members: current and former employees of the Society who are not in receipt of a Scheme pension; and
■
Pensioner members: former employees of the Society who are in receipt of Scheme pension.
The defined benefit obligation is valued by projecting the best estimate of future benefit obligations (allowing for
revaluation to retirement for deferred members and annual pension increases for all members) and then discounting to
the Balance Sheet date. Some benefits receive increases linked to inflation (subject to a cap of no more than 5% pa).
The valuation method used is known as the Projected Unit Method.
The approximate overall duration of the Scheme’s defined benefit obligation at 31 December 2025 was 11 years (2024: 11
years).
Future funding obligation
The Trustees are required to carry out an actuarial valuation every 3 years. The last actuarial valuation of the Scheme was
performed by the Scheme Actuary for the Trustees at 30 June 2022, with the latest valuation at 30 June 2025 being
underway. The 2022 valuation revealed the Scheme had no funding deficit relative to the Scheme’s statutory funding
objective and so no deficit reduction contributions are payable. However, the Society has agreed to pay contributions
of £300k per annum in respect of Scheme expenses and levies. The Society does not recognise a surplus for the
reasons set out in Note 1.
Assumptions
The results of the actuarial valuation at 30 June 2022 have been updated to 31 December 2025 by a qualified
independent actuary. The assumptions used for the IAS 19, Employment Benefits, year end valuation are as follows:
Significant actuarial assumptions |
2025 |
2024 |
Discount rate |
5.55% |
5.50% |
RPI Inflation |
2.85% |
3.15% |
CPI Inflation: |
||
Before 2030 |
RPI less 1.0% pa |
RPI less 1.0% pa |
From 2030 |
RPI less 0.2% pa |
RPI less 0.0% pa |
Mortality assumptions |
||
S3PMA / S3PFA |
S3PMA/S3PFA |
|
Mortality (post-retirement) |
CMI_2024 [1.25%] |
CMI_2023 [1.25%] |
Other actuarial assumptions |
||
RPI pension increases: |
||
RPI max 5% pa |
2.80% |
3.05% |
RPI min 3%, max 5% pa |
3.45% |
- |
Pension increases in deferment |
2.05% |
2.65% |
Life expectancies (in years) |
||
For an individual aged 62 |
||
Male |
24.6 years |
24.0 years |
Female |
27.1 years |
26.7 years |
At 62 for an individual aged 42 in 2025 |
||
Male |
26.0 years |
25.4 years |
Female |
28.5 years |
28.1 years |
Risks
Through the Scheme, the Society is exposed to a number of risks:
■
Asset volatility: The Scheme’s defined benefit obligation is calculated using a discount rate set with reference to
corporate bond yields, however the Scheme invests in some growth assets. These assets are expected to
outperform corporate bonds in the long term but provide volatility and risk in the short term.
■
Changes in bond yields: A decrease in corporate bond yields would increase the Scheme’s defined benefit
obligations. The Scheme invests in Liability Driven Investments (LDI) assets, which are designed to offset the impact
of changes to market yields. Changes in bond yields are therefore not expected to be a significant source of
Balance Sheet volatility other than significant changes in credit spreads.
■
Inflation risks: A significant proportion of the Scheme’s defined benefit obligation is linked to inflation, therefore
higher inflation will result in a higher defined benefit obligation (subject to the appropriate caps in place), although
the Scheme’s LDI holding is expected to offset the impact of inflation rate changes.
■
Mortality risk: If Scheme members live longer than expected, the Scheme’s benefits will need to be paid for longer,
increasing the Scheme’s defined benefit obligation.
The Trustees and Society manage risks in the Scheme through the following strategies:
■
Diversification: Investments are well diversified, such that the failure of any single investment would not have a
material impact on the overall level of assets.
■
Investment strategy: The Trustees are required to review their investment strategy on a regular basis.
■
LDI: The Scheme invests in LDI assets, whose long-term investment returns are expected to partially hedge interest
rate and inflation rate movements.
■
Pension increase exchange: The Trustees currently offer retiring members an option to exchange future pension
increases for a higher immediate pension. This has reduced the Scheme liabilities for retired members who have
already taken up the option and, based upon the assumption of future take up, for deferred members who will retire
in future.
The sensitivity of the defined benefit obligation to the assumptions used are shown below; the sensitivities applied
represent reasonably possible changes in key actuarial assumptions.
Change in defined benefit |
Change in defined benefit |
||
Sensitivity Analysis |
Change in assumption |
obligations (%) |
obligations (£m) |
Assumptions |
|||
Discount rate |
+/- 0.5% pa |
-5 / +5 |
(3.3) / 3.3 |
Inflation |
+/- 0.5% pa |
+2 / -2 |
1.3 / (1.3) |
Assumed life expectancy |
+/- 1 year |
+3 / -3 |
2.0 / (2.0) |
Limitations of the sensitivity analysis
These calculations provide an approximate guide to the sensitivity of results and may not be as accurate as a full
valuation carried out on these assumptions. Each assumption change is considered in isolation, which in practice is
unlikely to occur, as changes in some of the assumptions are correlated.
Asset class at market value
The assets of the Scheme were invested as follows:
Asset class at market value |
2025 |
2024 |
% |
% |
|
Equities |
13.0 |
12.0 |
Diversified growth funds |
12.0 |
11.0 |
Corporate bonds |
28.0 |
29.0 |
Fixed interest and index linked gilts |
46.0 |
45.0 |
Annuities |
- |
1.0 |
Cash |
1.0 |
2.0 |
Total |
100.0 |
100.0 |
Actual return on assets over the period |
3.8 |
(3.4) |
All assets listed above are held as Legal and General Pooled Investment Vehicles with the exception of the small amount
in the Trustees bank account. The multi asset class consists of a single diversified fund with underlying assets of equities,
bonds, commodities and listed infrastructure, property, private equity and global real estate companies.
138
139
Reconciliations to the Balance Sheet | 2025 | 2024 |
£m | £m | |
Total value of assets | 66.8 | 68.1 |
Present value of defined benefit obligations | (64.9) | (64.2) |
Funded status | 1.9 | 3.9 |
Adjustment in respect of minimum funding requirement | (1.9) | (3.9) |
Pension asset recognised in the Balance Sheet before allowance for deferred tax | - | - |
Analysis of changes in the value of the defined benefit obligation over the period | 2025 | 2024 |
£m | £m | |
Value of defined benefit obligations at start of the period | 64.2 | 71.9 |
Interest cost | 3.8 | 3.2 |
Past service cost | 0.4 | - |
Benefits paid | (4.3) | (4.1) |
Actuarial losses / (gains): experience differing from that assumed | 1.0 | (0.4) |
Actuarial losses / (gains): changes in demographic assumptions | 1.4 | (0.1) |
Actuarial gains: changes in financial assumptions | (1.6) | (6.3) |
64.9 | 64.2 |
Value of defined benefit obligation at end of period
Analysis of changes in the value of the Scheme assets over the period | 2025 | 2024 |
£m | £m | |
Market value of assets at start of period | 68.1 | 76.2 |
Interest income | 3.6 | 3.4 |
Actual return on assets less interest | 0.2 | (6.8) |
Employer contributions | 0.3 | 0.3 |
Benefits paid | (4.3) | (4.1) |
Administration costs | (1.1) | (0.9) |
Market value of assets at end of period | 66.8 | 68.1 |
Amount recognised in Income Statements | 2025 | 2024 |
£m | £m | |
Administration costs | 0.3 | 0.3 |
Past service cost | 0.4 | - |
Amount charged to Income Statement | 0.7 | 0.3 |
Amount recognised in Other Comprehensive Income | 2025 | 2024 |
£m | £m | |
Actuarial losses on defined benefit obligation | (0.8) | 6.8 |
Actual return on assets less interest | 0.2 | (7.4) |
Limit on recognition of assets less interest | 1.0 | 0.6 |
Amounts recognised in Statement of Comprehensive Income | 0.4 | - |
The total administration costs, including current service costs, incurred during the year totalled £1.1m (2024: £0.9m), of
which £0.3m (2024: £0.3m) was paid for by the Society and therefore recognised in the Society’s Income Statement.
The remaining £0.8m (2024: £0.6m) was met from a surplus in the Scheme assets. As the Scheme’s surplus is not
recognised on the Society’s Balance Sheet, this balance does not impact the Society’s financial statements.
Insured members
The pension obligation for some members of the Scheme is insured by a third party. The pension liability relating to
insured members and the corresponding insurance assets in respect of these members always net to £nil. At 30 June
2025 (being the latest data available), they were estimated to be £0.3m (2024: £0.4m). They have no effect on any
primary financial statement. The pension liability and pension asset have been presented including the insured pension
liability and related insurance asset (previously presented net).
Virgin Media Limited v NTL Pension Trustees II Limited
The Society is aware of the 2023 ruling in the Virgin Media vs NTL Pension Trustee legal case and subsequent Court of
Appeal ruling published in July 2024. The UK government announced on 5 June 2025 that legislation will be introduced
enabling retrospective actuarial certification to validate historic amendments. While this legislative solution is
anticipated to remove the requirement for provisions related to void benefit changes, neither the timing nor precise
scope are confirmed. Until enacted, there remains significant uncertainty as to whether the judgements will result in
additional liabilities for UK pension schemes and as outlined in note 1, the Society cannot be certain of the potential
implications (if any) and therefore a sufficiently reliable estimate of any effect on the obligation cannot be made,
Group | Society | |||
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Receivable from subsidiary undertakings | - | - | 0.9 | 8.9 |
Prepayments and accrued income | 12.9 | 11.5 | 3.4 | 3.6 |
Other receivables | 4.9 | 5.5 | 0.3 | 0.5 |
17.8 | 17.0 | 4.6 | 13.0 | |
Group and Society | ||
2025 | 2024 | |
£m | £m | |
Held by individuals | 5,882.6 | 5,432.6 |
Other shares | 0.1 | 0.1 |
5,882.7 | 5,432.7 | |
Group | ||
2025 | 2024 | |
£m | £m | |
Residential mortgage backed securities | 323.4 | - |
The underlying security for the residential mortgage backed securities (RMBS) is certain loans and advances
to customers.
In July 2025 the Group issued £711.4m of RMBS through its special purpose vehicle Hadrian Funding 2025-1 PLC, of
140
141
Group | Society | |||
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Amounts payable to subsidiary undertakings | - | - | 3.7 | 9.0 |
Lease liabilities | 7.7 | 7.5 | 7.7 | 7.5 |
Other creditors | 6.0 | 3.7 | 3.5 | 2.1 |
Accruals and deferred income | 10.2 | 11.4 | 6.4 | 7.6 |
23.9 | 22.6 | 21.3 | 26.2 | |
Group | Society | |||
2025 | 2024 | 2025 | 2024 | |
£m | £m | £m | £m | |
Opening provision at 1 January | 11.2 | 0.6 | 11.2 | 0.5 |
New provisions for the year | 2.3 | 22.2 | 1.9 | 21.9 |
Amounts utilised / transferred during the year | (11.3) | (11.6) | (10.9) | (11.2) |
Closing provision at 31 December | 2.2 | 11.2 | 2.2 | 11.2 |
During 2024 the Group committed to providing voluntary financial support to help customers whose trusts were
affected by the actions and subsequent collapse of Philips Trust. The support offered was entirely voluntary and there is
no legal or regulatory requirement to provide financial support. A provision of £21.2m was recognised during 2024 in
respect of this.
During the year, payments of £9.3m have been made to affected customers (2024: £10.1m). Included within amounts
utilised during the 12 months to 31 December 2025 is £0.2m of costs incurred in respect of the administration of the
scheme (2024: £0.6m).
In addition, £1.0m has been received from the administrators of Philips Trust during the year from the recoveries made
from Philips Trust investments (2024: £1.2m). The amounts received as recoveries from the administrators are
recognised within ‘Provisions for liabilities and charges’ within the Income Statement but does not reduce the provision
for liabilities amount held on the Balance Sheet, in line with accounting standards.
At 31 December 2025, the remaining provision being held in respect of the support scheme was £1.0m.
Included within new provisions for the year was £2.1m of costs relating to termination benefits associated with an
ongoing review and deployment of the new Group target operating model (2024: £0.9m). At 31 December 2025 £0.2m
of these costs remain within provisions for liabilities (2024: £nil).
Included within the remaining £1.2m of provisions is an estimate of £0.5m of the costs of potential consumer
Group and Society | ||
2025 | 2024 | |
£m | £m | |
Fixed rate subordinated notes 2034 – 12.25% | 19.6 | 20.2 |
All subordinated liabilities are denominated in Sterling. Coupons are paid on a fixed basis semi-annually.
In June 2024, £20.0m of callable subordinated loan notes were issued by the Group, with a maturity date of September
2034 and an optional call date of September 2029.
The notes rank behind all other creditors of the Society and the claims of shareholding Members, other than holders of
Group and Society | ||
2025 | 2024 | |
Presented as liabilities | £m | £m |
12.625% permanent interest bearing shares | 10.0 | 10.0 |
10.750% permanent interest bearing shares | 10.0 | 10.0 |
6.750% permanent interest bearing shares | 9.6 | 9.6 |
8.000% permanent interest bearing shares | 5.1 | 5.2 |
34.7 | 34.8 | |
The 12.625%, 10.750% and 8.000% subscribed capital issues were issued for an indeterminate period and are only
repayable in the event of the winding up of the Society. The 6.750% subscribed capital issue has a call date of April 2030
at the discretion of the Society. The Society’s permanent interest bearing shares (PIBS) rank equally with each other. The
6.750% and 8.000% PIBS were acquired from Manchester Building Society on merger and have notional values of £10m
and £5m respectively.
On winding up or dissolution of the Society, the claims of holders of the PIBS rank behind all other creditors of the
Society including the claims of shareholding members for both principal and interest. The holders of PIBS are not
entitled to any surplus upon winding up or final dissolution of the Society. Where the PIBS have no fixed maturity, they
are classified as financial liabilities as their terms do not grant the Directors discretion to avoid the payment of interest,
as the only instance where interest could not be paid on the instruments would be where capital levels are insufficient to
In 2024 the Society issued £40m of perpetual contingent convertible additional tier 1 (AT 1) capital securities.
These AT 1 instruments pay a fully discretionary, non-cumulative fixed coupon at an initial rate of 14% per annum. The rate
will reset on 6 June 2030 and every five years thereafter. Coupons are paid semi-annually in June and December and are
treated as distributions to the instrument holders and so will be recognised directly in the Society’s general reserve.
During the year £5.6m distributions were made to instrument holders (2024: £nil).
The instruments are perpetual, having no fixed maturity date and are repayable at the option of the Society. If the
applicable Common Equity Tier 1 ratio for the Group falls below 7%, they convert to core capital deferred shares (CCDS)
at the rate of one CCDS for every £67 of AT 1 instrument held.
On winding up or dissolution of the Society, the AT 1 instruments rank junior to all other creditors of the Society including
subordinated liabilities and the claims of shareholding Members for both principal and interest. The holders are not
The Society has no capital commitments for the acquisition of property, plant, and equipment at 31 December 2025
(2024: £2.2m). Commitments in respect of leases classified as short term or small under IFRS 16, Leases are disclosed in
note 17.
In addition, since 2012 the Society has provided a commitment that liabilities arising from Newcastle Financial Advisers’
current banking arrangements with a financial institution are met. There are no outstanding liabilities arising from this
arrangement (2024: £nil).
Furthermore, there are a small number of legacy Newcastle Strategic Solutions client contracts that include a parental
guarantee from the Society to guarantee payment of sums owed by Newcastle Strategic Solutions to the client set out
under the contract.
The Society has also committed to provide mortgage loans at the Balance Sheet date that have not yet completed
as follows:
Group and Society | ||
2025 | 2024 | |
£m | £m | |
Irrevocable undrawn committed loan facilities | 348.5 | 291.2 |
142
143
Group |
Society |
|||
2025 |
2024 |
2025 |
2024 |
|
Reconciliation of profit before taxation to net cash flows from operating |
||||
activities |
£m |
£m |
£m |
£m |
Profit before taxation |
22.6 |
15.7 |
27.6 |
15.7 |
Depreciation and amortisation |
8.4 |
7.6 |
2.9 |
2.5 |
Movement in fair value of derivative financial instruments |
51.0 |
(30.9) |
42.3 |
(32.5) |
Interest charge on subscribed capital and subordinated liabilities |
6.0 |
4.7 |
6.0 |
4.7 |
Interest charge / (credit) for finance lease arrangements |
0.4 |
(0.3) |
0.4 |
(0.3) |
Interest charge for debt securities in issue |
8.0 |
- |
- |
- |
Loss / (gain) on disposal of non-current assets |
0.2 |
- |
(0.4) |
- |
Net cash flows before changes in operating assets and liabilities |
96.6 |
(3.2) |
78.8 |
(9.9) |
Increase in loans and advances to customers |
(428.3) |
(429.5) |
(428.5) |
(431.0) |
(Increase) / decrease in fair value adjustments for hedged risk |
(36.9) |
8.7 |
(36.9) |
8.7 |
(Increase) / decrease in cash collateral pledged |
(12.7) |
6.7 |
(12.7) |
6.7 |
Decrease in cash ratio deposits |
- |
14.5 |
- |
14.5 |
Increase in shares |
450.0 |
418.4 |
450.0 |
418.4 |
| Decrease in amounts due to other customers and deposits from credit |
(335.9) |
(142.4) |
(335.9) |
(142.4) |
institutions |
||||
(Increase) / decrease in other assets, prepayments and accrued income |
(0.8) |
3.2 |
(0.5) |
(2.3) |
Increase / (decrease) in other liabilities |
1.0 |
(0.2) |
(5.1) |
6.1 |
(Decrease) / increase in provisions for liabilities |
(9.0) |
10.6 |
(9.0) |
10.7 |
Other non-cash movements |
(6.5) |
2.6 |
(6.7) |
3.5 |
Net cash flows from operating activities |
(282.5) |
(110.6) |
(306.5) |
(117.0) |
Reconciliation from Balance Sheet to Cash and cash equivalents |
||||
Cash and cash equivalents |
||||
Cash and balances with the Bank of England |
177.3 |
451.5 |
177.3 |
451.5 |
Loans and advances to banks repayable on demand |
52.9 |
21.2 |
4.2 |
4.5 |
At 31 December |
230.2 |
472.7 |
181.5 |
456.0 |
Cash and cash equivalents comprise cash in hand, balances with the Bank of England, loans and advances to credit
institutions available on demand or with original maturities of three months or less and investment securities with a
Changes of liabilities arising from financing liabilities in the year were as follows:
GROUP |
SOCIETY |
|||
2025 |
2024 |
2025 |
2024 |
|
£m |
£m |
£m |
£m |
|
Subordinated liabilities and subscribed capital |
||||
At 1 January |
55.7 |
35.2 |
55.7 |
35.2 |
Cash movements: |
||||
Interest payments |
(5.9) |
(4.0) |
(5.9) |
(4.0) |
Proceeds from issuance |
- |
19.8 |
- |
19.8 |
Non cash movements: |
||||
Accrued interest |
6.0 |
4.7 |
6.0 |
4.7 |
At 31 December |
55.8 |
55.7 |
55.8 |
55.7 |
Lease liabilities |
||||
At 1 January |
7.2 |
7.7 |
7.2 |
7.7 |
Cash movements: |
||||
Capital repayments |
(1.1) |
(2.3) |
(1.1) |
(2.3) |
Interest payments |
(0.4) |
(0.3) |
(0.4) |
(0.3) |
Non cash movements: |
||||
Interest charge |
0.4 |
0.3 |
0.4 |
0.3 |
New leases |
1.3 |
2.1 |
1.3 |
2.1 |
Dilapidations |
0.4 |
- |
0.4 |
- |
Lease remeasurement* |
- |
(0.3) |
- |
(0.3) |
Lease disposal |
(0.1) |
- |
(0.1) |
- |
At 31 December |
7.7 |
7.2 |
7.7 |
7.2 |
Debt securities in issue |
||||
At 1 January |
- |
- |
- |
- |
Cash movements: |
||||
Proceeds from issuance |
349.3 |
- |
- |
- |
Principal repayments |
(27.0) |
- |
- |
- |
Interest payments |
(6.3) |
- |
- |
- |
Non cash movements: |
||||
Interest charge |
8.0 |
- |
- |
- |
Issue costs |
(0.6) |
- |
- |
- |
At 31 December |
323.4 |
- |
- |
- |
* Lease remeasurements relate to changes in the contractual lease payments due being reflected in the lease liability.
Opening and closing balance sheet positions include applicable accrued interest. The Group's financing liabilities (lease
liabilities, subordinated liabilities, subscribed capital and debt securities in issue) are held on Balance Sheet at their
amortised cost under IFRS 9, except for leases which are held at amortised cost under IFRS 16 and are denominated in
Sterling. Accordingly, the accounting value of the Group's financing liabilities has not been impacted by changes in fair
144
145
The Group is controlled by Newcastle Building Society which is registered in England and Wales and operates in the
United Kingdom. See note 15 for further details of subsidiary undertakings.
Transactions with Directors and their close family members
Directors and their close family members have entered into the following transactions with Newcastle Building Society
in the normal course of business.
Group and Society |
||
2025 |
2024 |
|
£000 |
£000 |
|
Loans to Directors and close family members |
33 |
43 |
Deposits and investments held by Directors and their close family members |
510 |
559 |
Loans to Directors and close family members are made on normal commercial terms and a register of them is available
for inspection at the Principal Office for a period of 15 days up to and including the Annual General Meeting.
Amounts deposited by Directors and members of their close families earn interest on the same terms and conditions
applicable to other customers. There were no other transactions with Directors or their close family members during
2025 or 2024.
Termination payments for key management personnel
During the year, the following termination payments were made to key management personnel. The Group's key
management personnel are the Group's Material Risk Takers.
Group and Society |
||
2025 |
2024 |
|
£000 |
£000 |
|
Termination payments |
728 |
253 |
Transactions with other Group undertakings
The Society receives managed IT, property and business support services from Newcastle Strategic Solutions, a wholly
owned subsidiary of the Society. The Society provides financial and administrative services to Newcastle Strategic
Solutions and Newcastle Financial Advisers.
During the year, the following transactions were carried out with related parties:
(a) Sales of financial and administrative services
Society |
||
2025 |
2024 |
|
£000 |
£000 |
|
Newcastle Financial Advisers Limited |
1,465 |
- |
Newcastle Strategic Solutions Limited |
14,878 |
11,774 |
Sales of services are negotiated with related parties on commercial terms.
(b) Purchases of services
Business Support Services
Society |
||
2025 |
2024 |
|
£000 |
£000 |
|
Newcastle Strategic Solutions Limited |
14,426 |
17,758 |
Purchased services are negotiated with related parties on commercial terms.
At 31 December 2025 the following unsecured trading balances remained outstanding with related parties:
(c) Outstanding balances
Amounts owed to Society |
Amounts owed by Society |
|||
2025 |
2024 |
2025 |
2024 |
|
£000 |
£000 |
£000 |
£000 |
|
Newcastle Strategic Solutions Limited |
857 |
7,097 |
1,726 |
4,287 |
Newcastle Financial Advisers Limited |
- |
- |
303 |
1,530 |
Newcastle Mortgage Loans (Jersey) Limited |
- |
12 |
72 |
- |
MBS (Mortgages) Limited |
- |
46 |
1,648 |
1,461 |
At 31 December 2025 the following borrowings and cash deposits remained outstanding with related parties:
(d) Borrowings
/ cash deposits
Amounts borrowed from Society |
Amounts deposited with Society |
|||
2025 |
2024 |
2025 |
2024 |
|
£000 |
£000 |
£000 |
£000 |
|
Newcastle Strategic Solutions Limited |
28,588 |
33,940 |
- |
- |
Newcastle Mortgage Loans (Jersey) Limited |
150 |
122 |
- |
- |
Tyne Funding No.1 plc |
2,544 |
2,544 |
- |
- |
Hadrian Funding 2025-1 PLC |
9,828 |
- |
||
Interest paid to Society |
Interest paid by Society |
|||
2025 |
2024 |
2025 |
2024 |
|
£000 |
£000 |
£000 |
£000 |
|
Newcastle Strategic Solutions Limited |
2,355 |
2,292 |
- |
- |
Newcastle Mortgage Loans (Jersey) Limited |
14 |
46 |
- |
- |
Tyne Funding No.1 plc |
13 |
13 |
- |
- |
Hadrian Funding 2025-1 PLC |
25 |
- |
||
The loan from the Society to Newcastle Strategic Solutions is made up of three tranches, each on a rolling basis. The
interest rate on the loans is the Society’s standard variable rate (SVR) +1% and SVR -2%.
The loan between the Society and Newcastle Mortgage Loans (Jersey) Limited has an interest rate of SONIA +0.12% and
will mature when the company’s underlying mortgage book redeems.
The loans to Tyne Funding No.1 Plc have an interest rate of 0.5%. The loans are subordinate to all other obligations of
Tyne Funding No.1 Plc and are repayable at the maturity of the notes detailed in Note 14.
The loans to Hadrian Funding 2025-1 PLC have an interest rate of 0.5%. The loans are subordinate to all other obligations
of Hadrian Funding 2025-1 PLC and are repayable at the maturity of the notes detailed in Note 14. The loan to Hadrian
146
147
The following table analyses the financial assets and liabilities in the Balance Sheet by the class of financial instrument to
which they are assigned and by the measurement basis. Detail on the classifications of financial assets and liabilities are
found in note 1.
Group at 31 December 2025 |
Amortised cost |
FVOCI |
FVTPL |
Total |
|
Note |
£m |
£m |
£m |
£m |
|
Financial assets |
|||||
Cash in hand and balances with the Bank of England |
177.3 |
- |
- |
177.3 |
|
Loans and advances to credit institutions* |
10 |
146.2 |
- |
- |
146.2 |
Debt securities |
11 |
- |
859.2 |
- |
859.2 |
Derivative financial instruments |
35 |
- |
- |
16.9 |
16.9 |
Loans and advances to customers |
12 |
5,551.3 |
- |
162.9 |
5,714.2 |
Investments |
15 |
- |
- |
1.4 |
1.4 |
Other assets, of which financial |
20 |
4.9 |
- |
- |
4.9 |
Total financial assets |
5,879.7 |
859.2 |
181.2 |
6,920.1 |
|
Financial liabilities |
|||||
Due to Members |
21 |
5,882.7 |
- |
- |
5,882.7 |
Due to other customers |
163.8 |
- |
- |
163.8 |
|
Amounts owed to credit insitutions |
158.9 |
- |
- |
158.9 |
|
Debt securities in issue |
22 |
323.4 |
- |
- |
323.4 |
Derivative financial instruments |
35 |
- |
- |
44.5 |
44.5 |
Subordinated liabilities |
25 |
19.6 |
- |
- |
19.6 |
Subscribed capital |
26 |
34.7 |
- |
- |
34.7 |
Other liabilities, of which financial |
23 |
9.7 |
9.7 |
||
Total financial liabilities |
6,592.8 |
- |
44.5 |
6,637.3 |
*Loans and advances to credit institutions includes £48.7m (2024: £16.7m) in cash held by the Society’s subsidiary entities.
Group at 31 December 2024 |
Amortised cost |
FVOCI |
FVTPL |
Total |
|
Note |
£m |
£m |
£m |
£m |
|
Financial assets |
|||||
Cash in hand and balances with the Bank of England |
451.5 |
- |
- |
451.5 |
|
Loans and advances to credit institutions* |
10 |
101.8 |
- |
- |
101.8 |
Debt securities |
11 |
- |
602.3 |
- |
602.3 |
Derivative financial instruments |
35 |
- |
- |
56.6 |
56.6 |
Loans and advances to customers |
12 |
5,117.7 |
- |
171.6 |
5,289.3 |
Investments |
15 |
- |
- |
1.6 |
1.6 |
Other assets, of which financial |
20 |
5.2 |
- |
- |
5.2 |
Total financial assets |
5,676.2 |
602.3 |
229.8 |
6,508.3 |
|
Financial liabilities |
|||||
Due to Members |
21 |
5,432.7 |
- |
- |
5,432.7 |
Due to other customers |
241.0 |
- |
- |
241.0 |
|
Deposits from credit institutions |
417.6 |
- |
- |
417.6 |
|
Derivative financial instruments |
35 |
- |
- |
29.4 |
29.4 |
Subordinated liabilities |
25 |
20.2 |
- |
- |
20.2 |
Subscribed capital |
26 |
34.8 |
- |
- |
34.8 |
Other liabilities, of which financial |
23 |
9.0 |
- |
- |
9.0 |
Total financial liabilities |
6,155.3 |
- |
29.4 |
6,184.7 |
All of the Group’s FVTPL financial assets and liabilities are mandatorily measured at fair value under IFRS 9. The Group has
not elected to hold any financial assets or liabilities at FVTPL under IFRS 9 that could otherwise have been held at
amortised cost or at FVOCI. The Group has not reclassified any financial assets during the year.
148
149
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing
parties in an arm’s length transaction.
For assets held at fair value, the following table summarises the basis for measuring the fair value, using the three levels
defined in IFRS 13, Fair Value Measurement:
2025 |
2024 |
||
Financial assets |
Level |
£m |
£m |
Debt securities at FVOCI |
1 |
859.2 |
602.3 |
Listed equity investments |
1 |
0.2 |
0.1 |
Derivative financial instruments |
2 |
12.7 |
47.9 |
Derivative financial instruments |
3 |
4.2 |
8.7 |
Unlisted equity investments |
3 |
1.2 |
1.5 |
Loans and advances to customers held at fair value |
3 |
162.9 |
171.6 |
Financial liabilities |
|||
Derivative financial instruments |
2 |
40.3 |
20.6 |
Derivative financial instruments |
3 |
4.2 |
8.8 |
Level 1:
Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2:
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly
(i.e. as price) or indirectly (i.e. derived from prices).
Level 3:
Mortgage assets held at fair value through profit or loss
The Group’s equity release mortgage assets are accounted for as fair value through profit or loss.
The fair value of the equity release portfolio is calculated using a model that estimates the future cash flows expected from
the portfolio. The timing of those cash flows are determined with reference to mortality tables overlaid by expected
prepayments. The model discounts these cash flows to their present value, using a discount rate based on interest rates
for new equity release mortgages available at the Balance Sheet date, adjusted for the specific characteristics of the
Society’s portfolio. The model further calculates a value for the ‘no-negative equity guarantee’ provided to the customer
using an option pricing method.
The valuation uses a number of inputs which require estimation, such as mortality and prepayment rates, discount rate,
property price volatility and the haircut applied to individual sales prices.
The key estimates used in the model and the basis of estimation are summarised below:
Assumption |
Basis of estimation |
| Discount rate |
Interest rates for equity release mortgages available at the Balance Sheet date, |
adjusted for speci fic characteristics o f the Society’s portfolio |
|
Long-term property price growth |
Analysis of historic long-term property price growth |
Sales discount on collateral |
Analysis of historic sales discounts |
Property price volatility |
Analysis of historic property price volatility and third party research |
At 31 December 2025 the fair value of the equity release mortgage assets was £162.9m (2024: £171.6m). The sensitivity of
this value to the estimates shown above is as follows:
31 December |
31 December |
||
2025 |
2024 |
||
(Decrease) / |
(Decrease) / |
||
Assumption |
Change in |
increase in fair |
increase in fair |
assumption |
value |
value |
|
£m |
£m |
||
Discount rate |
+/- 1% |
(8.8) / 9.8 |
(9.6) / 10.8 |
Long term property price growth |
+/- 2% |
3.4 / (3.8) |
4.0 / (4.8) |
Sales discount on collateral |
+/- 2.5% |
(1.5) / 1.3 |
(1.5) / 1.5 |
Property price volatility |
+/- 3% |
(3.7) / 3.4 |
(2.9) / 2.9 |
The following table provides a reconciliation of the equity release portfolio’s opening and closing fair value.
2025 |
2024 |
|
£m |
£m |
|
At 1 January |
171.6 |
188.4 |
Interest accrued |
8.8 |
12.2 |
Redemptions |
(18.1) |
(21.8) |
Changes in economic assumptions - recorded in profit and loss |
3.5 |
- |
Changes in discount rate – recorded in profit and loss |
(4.2) |
(6.0) |
Changes in exchange rates – recorded in profit and loss |
1.3 |
(1.2) |
At 31 December |
162.9 |
171.6 |
The Society hedges fair value movements on the equity release portfolio due to market interest rate movements using
interest rate swaps. There was a reduction in fair value adjustment on the equity release portfolio during the year of
£1.3m, with the remaining movements being due to movements in loan balances. The value of interest rate swaps
decreased by £0.6m, resulting in a net loss of £1.9m in the year included in the Income Statement.
Derivative financial instruments
The Group’s securitisation programme involves the transfer of beneficial ownership of pools of mortgage loans to the
securitisation Special Purpose Vehicles which are controlled by the Society. The transaction creates interest rate risk in
the Society and Special Purpose Vehicles, which is hedged with balance guarantee swaps traded with external
counterparties. The notional of the balance guarantee swaps adjusts to match the outstanding balance of the
transferred mortgage loans as the mortgage loans are repaid by the borrower.
The fair value of the balance guarantee swaps is calculated using a model that estimates the future cash flows from the
swaps. The timing and amount of those cash flows are uncertain but are estimated with reference to expected
prepayments of the mortgages, retention rates of maturing mortgages and future expected interest rates applied to
the retained mortgages, to determine the future expected notional profile of the mortgages within the pools used as
collateral for the securitisation. The model applies the overnight indexed swap yield curve to discount these cash flows
to their present value. The model further calculates a value for the optionality inherent in the adjustable notional profile
of the balance guarantee swaps applying an option pricing method.
The key estimates used in the model and the basis of estimation are summarised below:
Assumption |
Basis of estimation |
Prepayments |
Analysis of historic customer behaviour |
Retention rate |
Analysis of historic customer behaviour |
Future mortgage interest rates |
Analysis of historic mortgage and swap rates |
Interest rate volatility |
Analysis of historic interest rate volatility |
150
151
At 31 December 2025 the fair value of the balance guarantee swaps in respect of the Group’s securitisation issuances
was £4.2m (2024: £8.8m). The sensitivity of this value to the estimates shown above is as follows:
31 December | 31 December | ||
2025 | 2024 | ||
(Decrease) / | (Decrease) / | ||
Assumption | Change in | Increase in fair | increase in fair |
assumption | value | value | |
£m | £m | ||
Prepayments | +/- 5% | (0.1) / 0.3 | (0.2) / 0.2 |
Retention rate | +/- 10% | 0.2 / (0.1) | 0.3 / (0.2) |
Future mortgage interest rates | +/- 0.1% | (0.9) / 1.0 | - |
Interest rate volatility | +/- 3% | 0.2 / (0.2) | - |
The following table provides a reconciliation of the balance guarantee swaps opening and closing fair value.
2025 | 2024 | |
£m | £m | |
At 1 January | 8.8 | 10.3 |
Interest accrued | 0.1 | (0.2) |
Changes in fair value | (4.7) | (1.3) |
At 31 December | 4.2 | 8.8 |
The interest rate swaps in place for the securitisation issuances are back-to-back swaps, where by equal and opposite
swaps are traded between the SPV and the external counterparty and between the Society and the external
counterparty. Therefore, for the above sensitivities, there would be an equal and opposite movement in the fair value of
33. Fair value of assets held at amortised cost
The following table summarises the carrying amounts and fair values of those financial assets and liabilities not
presented on the Group’s or Society's Balance Sheets at their fair value. These assets and liabilities are held at values
reflecting their intended use. In all cases, this is via collection of contractual amounts due and not through disposal. This
is deemed to also reflect their best use. If the Group's intended use of an asset or liability changes, the accounting
adopted for the item is revisited for reclassification. The carrying values below reflect the Group's maximum exposure to
counterparty credit risk.
Group | Carrying value | Fair value | ||||
2025 | 2024 | 2025 | 2024 | |||
Financial assets | Note | Level* | £m | £m | £m | £m |
Cash and balances with the Bank of England | 1 | 177.3 | 451.5 | 177.3 | 451.5 | |
Loans and advances to credit institutions | 10 | 1 | 146.2 | 101.8 | 146.2 | 101.8 |
Loans and advances to customers | 12 | 3 | 5,551.3 | 5,117.7 | 5,571.2 | 5,095.3 |
Other assets, of which financial | 3 | 4.9 | 5.2 | 4.9 | 5.2 | |
Financial liabilities | ||||||
Due to Members | 21 | 3 | 5,882.7 | 5,432.7 | 5,888.0 | 5,435.4 |
Due to other customers | 3 | 163.8 | 241.0 | 163.8 | 241.0 | |
Deposits from credit institutions | 3 | 158.9 | 417.6 | 158.9 | 417.9 | |
Debt securities in issue | 22 | 1 | 323.4 | - | 323.4 | - |
Subordinated liabilities | 25 | 1 | 19.6 | 20.2 | 22.9 | 20.9 |
Subscribed capital | 26 | 1 | 34.7 | 34.8 | 50.1 | 48.2 |
Other liabilities, of which financial | 3 | 9.7 | 9.0 | 9.7 | 9.0 | |
*Levels are defined in note 32.
The Group does not trade in financial instruments for speculative purposes. Against level 3 assets there is no
expectation that a deferred gain or loss on initial recognition will be recognised in future periods: the transaction price at
inception is considered to reflect an appropriate day one fair value. For short term receivables and payables within other
assets and other liabilities, the carrying value of amounts due and owed is considered to approximate the fair value of
the amounts due and owed. IFRS 9 based impairment allowances against other assets are not material. There were no
gains or losses arising from financial assets or liabilities held at amortised cost.
Cash and balances with the Bank of England
The fair value of floating rate and overnight deposits is their carrying amount.
Loans and advances to credit institutions
The fair value of floating rate and overnight deposits is their carrying amount. The fair value of fixed interest bearing
deposits is based on discounted cash flows using prevailing money-market interest rates for debts with similar
credit risk and remaining maturity.
Loans and advances to customers
Loans and advances to customers are net of provisions for impairment. The estimated fair value of loans and advances
represents the discounted amount of estimated future cash flows expected to be received. Expected cash flows are
discounted at current market rates to determine fair value.
Due to Members and due to other customers
The fair value of shares and balances due to other customers represents the discounted amount of estimated future
cash flows paid to Members and other customers.
Deposits from credit institutions
The estimated fair value of deposits with no stated maturity, which includes non-interest bearing deposits, is the amount
repayable on demand. The estimated fair value of fixed interest-bearing deposits and other borrowings without market
price is based on discounted cash flows using interest rates for new debts with similar remaining maturity.
Debt securities in issue
The fair value of the Group’s debt securities in issue is calculated based on public market prices on the Balance
Sheet date.
Subordinated liabilities and subscribed capital
The fair value of subordinated liabilities and subscribed capital is calculated based on public market prices on the
The table below presents the impact of interest rate shocks on the Group’s economic value, including the Groups
hedging positions. The shocks calculate the impact on the discounted present value of future cash flows via changing
the yield curve by a fixed amount across all future points. The adverse economic value impact (EVE) shock is a parallel
shock up, resulting in a reduction in market value of £18.4m. This is largely due to the exclusion of the Group's general
reserves in these shocks; typically, the Group offsets fixed mortgages against the general reserves to manage interest
income volatility and to protect against margin compression as rates fall. The remainder of the reduction is due to timing
differences of hedging fixed rate mortgages and savings at a tranche level.
2025 | 2024 | |||
+2.5% | -2.5% | +2.5% | -2.5% | |
Economic value impact At 31 December | (18.4) | 16.8 | (17.0) | 15.2 |
The EVE results throughout 2025 remained below the outlier test threshold set by the regulator.
Please see notes 35 and 37 for details about instruments used for managing interest rate risk.
152
153
The Group uses interest rate swaps to hedge against interest rate risk and forward contracts to manage foreign
exchange risk. Offsetting collateral is pledged and received in line with underlying Credit Support Annexes (CSA) with
the Group's financial counterparties. The table below shows the fair value of the Group’s and Society’s derivative
portfolios, and the collateral pledged/received against these.
Group as at 31 December 2025 |
||||
Master netting |
Financial |
|||
Gross amount |
arrangements |
collateral |
Net amount |
|
£m |
£m |
£m |
£m |
|
Financial assets |
||||
Derivative assets |
16.9 |
(12.7) |
(1.3) |
2.9 |
Financial liabilities |
||||
Derivative liabilities |
(44.5) |
12.7 |
28.6 |
(3.2) |
Group as at 31 December 2024 |
||||
Master netting |
Financial |
|||
Gross amount |
arrangements |
collateral |
Net amount |
|
£m |
£m |
£m |
£m |
|
Financial assets |
||||
Derivative assets |
56.6 |
(18.2) |
(29.5) |
8.9 |
Financial liabilities |
||||
Derivative liabilities |
(29.4) |
18.2 |
10.8 |
(0.4) |
Society as at 31 December 2025 |
||||
Master netting |
Financial |
|||
Gross amount |
arrangements |
collateral |
Net amount |
|
£m |
£m |
£m |
£m |
|
Financial assets |
||||
Derivative assets |
12.7 |
(12.7) |
- |
- |
Financial liabilities |
||||
Derivative liabilities |
(40.3) |
12.7 |
25.6 |
(2.0) |
Society as at 31 December 2024 |
||||
Master netting |
Financial |
|||
Gross amount |
arrangements |
collateral |
Net amount |
|
£m |
£m |
£m |
£m |
|
Financial assets |
||||
Derivative assets |
47.9 |
(18.2) |
(29.5) |
0.2 |
Financial liabilities |
||||
Derivative liabilities |
(29.4) |
18.2 |
10.8 |
(0.4) |
Cash collateral is posted and received on a daily basis to minimise the Group’s and the counterparty’s exposure to
counterparty credit risk. Collateral posted is measured against counterparty mark-to-market values and may not reflect
the Group's internal valuation of its financial instruments.
The Group has entered into International Swaps and Derivatives Association (ISDA) Master agreements with financial
counterparties in line with standard industry practice. Netting agreements contained within are not alone considered
sufficient to satisfy the offsetting criteria of IAS 32. The netting agreements are intended to protect the Group against
fair value loss in the unlikely future event of counterparty default.
The Group has continued to make use of the London Clearing House (LCH), minimising its exposure to non-LCH
counterparties. The protected manner of LCH collateral placements mitigates counterparty credit risk with respect to
collateral that would otherwise be pledged to non-centralised derivative counterparties.
Financial collateral of £63.9m (2024: £68.9m) has been placed with LCH with respect to 'initial margin': an amount
calculated by central counterparties to protect against potential future exposures that could arise from valuation
changes. This is in addition to the 'variation margin', covering LCH's current net exposure to the Group. The Group's
collateral pledged against initial margin requirements is not included in the collateral column above, but it is included in
note 36.
The Group has two one way collateralisation swap agreements as part of the securitisation programmes, the exposure
under these agreements is £1.7m (2024: £8.7m). The remaining under collateralisation of £2.0m (2024: over
collateralisation of £0.9m) relates to initial bilateral margin, changes in the valuation since the last margin call, minimum
transfer amounts and differences between internal valuations used for reporting purposes and counterparty valuations
which collateral is based on.
Where the Group holds multiple financial assets and liabilities with a single counterparty, and a master netting
agreement is in effect, the net fair value exposure for each counterparty is calculated. Net exposures placed with
counterparties are consolidated into the financial asset’s disclosure above, net exposures received from counterparties
Certain financial assets have been utilised as collateral to support the wholesale funding initiatives of the Group and are
used as security for funding with the Bank of England or other third parties. Alternatively, assets may be used as
collateral in line with Credit Support Annexes relating to derivatives, as detailed in note 35. Assets that are used for such
purposes are classified as encumbered and cannot be used for other purposes.
The following table provides an overview of the Group’s encumbered and unencumbered financial assets.
2025 |
2024 |
|||
Group |
Encumbered |
Unencumbered |
Encumbered |
Unencumbered |
£m |
£m |
£m |
£m |
|
Cash and balances with the Bank of England |
- |
177.3 |
- |
451.5 |
Loans and advances to credit institutions |
93.3 |
52.9 |
80.9 |
20.9 |
Debt securities |
140.0 |
719.2 |
- |
602.3 |
Loans and advances to customers* |
1,283.4 |
4,430.8 |
773.3 |
4,516.0 |
Derivative financial instruments |
- |
16.9 |
- |
56.6 |
Other assets |
- |
98.1 |
- |
54.7 |
Total |
1,516.7 |
5,495.2 |
854.2 |
5,702.0 |
*£791.3m of encumbered loans and advances to customers relate to mortgage assets used as a security in the Group’s securitisation programmes. Loan
notes secured on these mortgage assets totalling £490.3m (2024: £190.2m) have been retained by the Group, as outlined in note 14. These notes are not
presented on the Group Balance sheet and are unencumbered; £396.2m of these loan notes are available as securities to the Group and could be used
154
155
The Group is exposed to interest rate risk across its fixed interest rate financial assets and liabilities.
The Society’s core business is to provide mortgage and savings products to its customers and Members. Deposits by
Members fund the Society’s mortgage lending, with the Society paying an interest charge in return for deposited funds,
while borrowers pay an interest charge to the Society in return for the funds they have borrowed.
Mortgage contracts attracting a fixed rate of interest are typically the most popular of the Society’s mortgage offerings,
with a fixed rate usually agreed for a term of two to five years. By contrast, most of the Society’s deposits are made
under short term agreements, with deposits often repayable ‘on demand’. This introduces ‘interest rate risk’ to the
Society’s business, as when market-wide interest rates move, the return received on mortgage assets adjusts more
slowly than the return paid on Member deposits.
To address this risk, the Society enters into interest rate swap agreements with external counterparties. These contracts
protect against interest rate risk by ‘swapping’ a portion of the Society’s fixed interest rate exposure to a variable rate:
the Society agrees to pay a fixed rate to a financial counterparty for a period of time in exchange for receipt of a variable
interest rate against a notional balance. The resulting variable interest income received matches the Society’s variable
interest expense, locking in interest margin.
Derivative financial instruments, including interest rate swaps, are held at fair value. The fair value changes when market
interest rates change, with this change reflected in the Income Statement. However, most of the fixed rate exposures
that the interest rate swaps are used to hedge are held at amortised cost as required by accounting standards, and thus
their value on the Society’s Balance Sheet does not change in line with market interest rates. The Society applies fair
value hedge accounting and cash flow hedge accounting to address this mismatch. Hedge accounting allows the
Society to post an adjustment for the value change in the hedged risk; and the movement of this adjustment is reflected
in the Income Statement. If the hedge is effective, the adjustment in relation to the swaps’ fair value change and the
hedged risks’ fair value change net off.
The Society also uses swap contracts in order to hedge exposures that are not yet on its Balance Sheet, for example
fixed rate mortgages that have been offered but have not yet completed. To avoid volatility in the Society’s Income
Statement as a result of this hedging activity, the Society utilises cash flow hedge accounting.
Cash flow hedge accounting allows fair value adjustments to derivatives designated in a cash flow hedge to be posted
through Other Comprehensive Income rather than the Income Statement to the extent the hedge is effective. Hedge
effectiveness is measured by comparing the derivative fair value movement to that of a hypothetical derivative
representing the hedged risk. The fair value movement represented in Other Comprehensive Income is restricted to the
cumulative fair value movement of the hypothetical derivative. Hedge ineffectiveness is recognised in the Income
Statement where fair value movements in the hedging instrument exceed those in the hypothetical derivative.
The Society makes use of the following different types of accounting hedges:
■
The hedged item in a fair value micro hedge is a specific mortgage contract or a specific group of such contracts. It
could also be a specified treasury asset (e.g. a fixed rate gilt) or treasury liability.
■
The hedged item in a fair value macro hedge is a defined portion of a mortgage or savings book, but this portion is
re-designated on a regular basis to reflect changes in the hedged portfolio, such as mortgage prepayments or new
mortgage contracts.
■
The hedged item in a cashflow hedge is usually a forecast floating rate liability, such as Term Funding Scheme or
future securitisation funding. This is primarily used to hedge wholesale funding that will economically hedge the
mortgage pipeline and swaps that have been transacted during the month. These swaps are designated into a
macro fair value hedge at the beginning of the month following the drawdown of hedged loans.
The Society enters into derivative contracts for hedging purposes only. However, not all interest rate swaps may be
designated in accounting hedge relationships. This could be the case if the hedged item is held at fair value, and there is
therefore no mismatch to be addressed by hedge accounting, or if the restrictive accounting rules do not allow for a
hedge to be designated or make it impractical to do so.
The Society uses foreign exchange forwards to protect against foreign exchange risk by fixing the exchange rate on a
portion of the Society’s Euro exposure. These foreign exchange forwards are not designated in accounting hedge
relationships. There is no mismatch to be addressed by hedge accounting as the Society’s euro-denominated equity
release book is held at fair value.
Maturity analysis of hedging instruments
The maturity profile of the Group’s hedging instruments at 31 December 2025 is as follows:
Between 3 and |
Between 1 and |
||||
Up to 3 months |
12 months |
5 years |
Over 5 years |
Total |
|
Interest rate swaps designated in macro fair value hedge relationships |
|||||
Nominal amount |
- |
1,354.5 |
2,786.0 |
56.8 |
4,197.3 |
Average fixed interest rate |
- |
3.56% |
3.66% |
3.68% |
3.63% |
Fair value of assets |
- |
4.1 |
6.2 |
0.3 |
10.6 |
Fair value of liabilities |
- |
(2.3) |
(18.9) |
(0.3) |
(21.5) |
Interest rate swaps designated in cashflow hedge relationships |
|||||
Nominal amount |
- |
- |
182.5 |
76.3 |
258.8 |
Average fixed interest rate |
- |
- |
3.51% |
3.63% |
3.54% |
Fair value of assets |
- |
- |
- |
0.2 |
0.2 |
Fair value of liabilities |
- |
- |
(0.3) |
(0.2) |
(0.5) |
Interest rate swaps designated in micro fair value hedge relationships |
|||||
Nominal amount |
5.0 |
12.5 |
286.7 |
131.1 |
435.3 |
Average fixed interest rate |
3.85% |
1.71% |
3.76% |
4.23% |
3.84% |
Fair value of assets |
- |
0.3 |
0.1 |
- |
0.4 |
Fair value of liabilities |
- |
- |
(2.4) |
(4.5) |
(6.9) |
Interest rate swaps utilised in securitisations |
|||||
Nominal amount |
- |
137.4 |
- |
616.9 |
754.3 |
Average fixed interest rate |
- |
1.54% |
- |
4.53% |
3.99% |
Nominal liability amount |
- |
137.4 |
- |
616.9 |
754.3 |
Average fixed interest rate |
- |
1.49% |
- |
4.51% |
3.96% |
Fair value of assets |
- |
3.0 |
- |
1.2 |
4.2 |
Fair value of liabilities |
- |
(3.0) |
- |
(1.2) |
(4.2) |
Interest rate swaps in economic hedge relationships but not designated in accounting hedge relationships |
|||||
Nominal amount |
346.4 |
805.0 |
146.5 |
163.2 |
1,461.1 |
Average fixed interest rate |
3.80% |
3.95% |
3.53% |
4.83% |
3.97% |
Fair value of assets |
0.7 |
0.8 |
- |
- |
1.5 |
Fair value of liabilities |
- |
(0.1) |
- |
(11.2) |
(11.3) |
Total interest rate swaps |
|||||
Nominal amount |
351.4 |
2,446.8 |
3,401.7 |
1,661.2 |
7,861.1 |
Average fixed interest rate |
1.53% |
2.15% |
2.89% |
4.18% |
3.79% |
Fair value of assets |
0.7 |
8.2 |
6.3 |
1.7 |
16.9 |
Fair value of liabilities |
- |
(5.4) |
(21.6) |
(17.4) |
(44.4) |
Foreign exchange forwards in economic hedge relationships but not designated in accounting hedge relationships |
|||||
Nominal amount |
9.9 |
15.1 |
- |
- |
25.0 |
Average GBP/EUR exchange rate |
1.155 |
1.138 |
- |
- |
1.145 |
Fair value of assets |
- |
- |
- |
- |
- |
Fair value of liabilities |
(0.1) |
- |
- |
- |
(0.1) |
156
157
The maturity profile of the Group’s hedging instruments at 31 December 2024 is as follows:
Between 3 and | Between 1 and | ||||
Up to 3 months | 12 months | 5 years | Over 5 years | Total | |
Interest rate swaps designated in macro fair value hedge relationships | |||||
Nominal amount | - | 827.9 | 2,051.6 | 28.0 | 2,907.5 |
Average fixed interest rate | - | 4.26% | 3.42% | 3.63% | 3.66% |
Fair value of assets | - | 3.7 | 36.6 | 0.8 | 41.1 |
Fair value of liabilities | - | (0.6) | (4.0) | (0.1) | (4.7) |
Interest rate swaps designated in cashflow hedge relationships | |||||
Nominal amount | - | - | 191.0 | 106.5 | 297.5 |
Average fixed interest rate | - | - | 3.77% | 3.73% | 3.75% |
Fair value of assets | - | - | 1.7 | 1.3 | 3.0 |
Fair value of liabilities | - | - | - | - | - |
Interest rate swaps designated in micro fair value hedge relationships | |||||
Nominal amount | - | 47.9 | 172.9 | 136.7 | 357.5 |
Average fixed interest rate | - | 3.16% | 3.70% | 4.25% | 3.84% |
Fair value of assets | - | 0.4 | 1.8 | 0.4 | 2.6 |
Fair value of liabilities | - | - | (0.2) | (3.8) | (4.0) |
Interest rate swaps utilised in securitisations | |||||
Nominal amount | - | - | - | 162.1 | 162.1 |
Average fixed interest rate | - | - | - | 1.54% | 1.54% |
Nominal liability amount | - | - | - | 162.1 | 162.1 |
Average fixed interest rate | - | - | - | 1.49% | 1.49% |
Fair value of assets | - | - | - | 8.7 | 8.7 |
Fair value of liabilities | - | - | - | (8.8) | (8.8) |
Interest rate swaps in economic hedge relationships but not designated in accounting hedge relationships | |||||
Nominal amount | 287.5 | 60.0 | 208.5 | 175.5 | 731.5 |
Average fixed interest rate | 4.80% | 4.56% | 4.21% | 4.80% | 4.61% |
Fair value of assets | 0.4 | - | 0.3 | 0.1 | 0.8 |
Fair value of liabilities | (0.5) | - | - | (11.4) | (11.9) |
Total interest rate swaps | |||||
Nominal amount | 287.5 | 935.8 | 2,624.0 | 770.9 | 4,618.2 |
Average fixed interest rate | 0.96% | 2.39% | 3.02% | 3.59% | 3.48% |
Fair value of assets | 0.4 | 4.1 | 40.4 | 11.3 | 56.2 |
Fair value of liabilities | (0.5) | (0.6) | (4.2) | (24.1) | (29.4) |
Foreign exchange forwards in economic hedge relationships but not designated in accounting hedge relationships | |||||
Nominal amount | 11.1 | 16.6 | - | - | 27.7 |
Average GBP / EUR exchange rate | 1.17 | 1.19 | - | - | 1.2 |
Fair value of assets | 0.3 | 0.1 | - | - | 0.4 |
Fair value of liabilities | - | - | - | - | - |
Swap assets and liabilities are held at their fair value on Balance Sheet as derivative financial instruments.
Summary of hedged items in designated hedge relationships
Fair value hedges | 2025 | 2024 | ||||||
Carrying amount of | Accumulated | Change in fair | Carrying amount of | Accumulated | Change in fair | |||
Interest rate risk | hedged items | amount of | value of hedged | hedged items | amount of | value of hedged | ||
fair value | items in the | fair value | items in the | |||||
adjustments | year used for | adjustments | year used for | |||||
on the hedged | ineffectiveness | on the hedged | ineffectiveness | |||||
Assets | Liabilities | item | measurement | Assets | Liabilities | item | measurement | |
£m | £m | £m | £m | £m | £m | £m | £m | |
Fixed rate mortgages | 3,417.1 | - | 16.6 | 37.8 | 2,289.6 | - | (21.9) | (11.5) |
Fixed rate customer | ||||||||
| deposits | - | 766.1 | (1.6) | (1.6) | - | 716.3 | - | - |
Fixed rate customer | ||||||||
loans individually | 109.3 | - | 2.9 | 0.7 | 118.0 | - | 2.2 | (7.1) |
hedged | ||||||||
Fixed rate FVOCI debt | ||||||||
| instruments | 372.5 | - | 2.0 | 3.6 | 239.3 | - | (1.6) | (3.7) |
Cash flow hedges | 2025 | 2024 | ||||
Interest rate risk | Change in fair | Cash flow hedge reserve | Change in fair | Cash flow hedge reserve | ||
value of hedged | value of hedged | |||||
item in the year | item in the year | |||||
used for hedge | used for hedge | |||||
ineffectiveness | Discontined | ineffectiveness | Discontined | |||
measurement | Continuing hedges | hedges | measurement | Continuing hedges | hedges | |
£m | £m | £m | £m | £m | £m | |
Gross floating rate | ||||||
liabilities* | 3.8 | (0.3) | 0.6 | (7.1) | 2.3 | 4.6 |
Cash flow hedges | 2025 | 2024 | ||||||
Interest rate risk | Reclassified to Income | Effective | Reclassified to Income | |||||
Hedge | Effective portion | Statement | Hedge | portion | Statement | |||
ineffectivness | recognised | ineffectivness | recognised | |||||
recognised | in other | Net | Non- | recognised | in other | Non- | ||
in Income | comprehensive | interest | interest | in Income | comprehensive | Net interest | interest | |
Statement | income | income | income | Statement | income | income | income | |
£m | £m | £m | £m | £m | £m | £m | £m | |
Gross floating rate | ||||||||
liabilities* | - | (3.8) | - | 2.7 | - | 7.1 | - | 2.1 |
* Highly probable future cash flows arising from loans and advances to customers
158
159
Hedge ineffectiveness
By design, the Society’s hedges are expected to be economically effective, with notional balances, durations and rates
on interest rate swaps agreed only where they are expected to be a good fit to the same characteristics of the
underlying assets that are to be hedged. Hedge ineffectiveness can nonetheless arise from early asset repayments,
imperfectly matched key terms, differences in the timing of cash flows of hedged items and hedging instruments,
different interest rate curves applied to discount the hedged items and hedging instruments and the effect of changes
in counterparties’ credit risk on the fair values of hedging instruments. The table below provides details of the hedge
ineffectiveness during the year.
2025 |
2024 |
|
£m |
£m |
|
(Losses) / gains on micro hedging accounting |
||
Interest rate swaps |
(4.6) |
10.6 |
Mortgage assets (loans and advances to customers) |
4.3 |
(10.8) |
(Losses) / gains on cashflow hedge accounting |
||
Interest rate swaps |
(3.8) |
7.1 |
Floating rate liabilities |
6.5 |
(5.0) |
(Losses) / gains on macro hedging accounting |
||
Interest rate swaps |
(40.7) |
6.7 |
Fair value adjustment for hedged risk on mortgages and savings |
36.2 |
(11.5) |
Total ineffectiveness recognised in the Income Statement |
(2.1) |
(2.9) |
Hedging gains and losses are recognised in the Income Statement within 'gains less losses on financial instruments and
hedge accounting’. There were no unexpected sources of hedge ineffectiveness during the year.
Fair value gains less losses on financial instruments and hedge accounting recognised in the
income statement
Group |
Society |
|||
2025 |
2024 |
2025 |
2024 |
|
£m |
£m |
£m |
£m |
|
Fair value movement on loans and advances to customers held at FVTPL |
(1.3) |
(5.8) |
(1.3) |
(5.8) |
Fair value movement on derivative financial instruments in economic |
||||
relationship with loans and advances to customers held at FVTPL but not in |
(0.6) |
10.7 |
(0.6) |
10.7 |
accounting hedge relationships |
||||
Interest expense on derivative financial instruments in economic relationship |
||||
with loans and advances to customers held at FVTPL but not in accounting |
(1.3) |
- |
(1.3) |
- |
hedge relationships |
||||
| Fair value movement on derivative financial instruments in other economic but |
(1.1) |
3.3 |
(2.6) |
3.3 |
not in accounting hedge relationships |
||||
Hedge ineffectiveness on accounting hedges |
(2.1) |
(2.9) |
(2.1) |
(2.9) |
Revaluation of investments |
(0.1) |
(0.4) |
- |
- |
Fair value gains less losses on financial instruments and hedge accounting |
(6.5) |
4.9 |
(7.9) |
5.3 |
Cash flow hedging reserve
Group and Society |
||
2025 |
2024 |
|
£m |
£m |
|
Balance at 1 January |
5.1 |
1.4 |
Reclassification of hedging losses to Income Statement |
(2.0) |
(2.1) |
Reclassification of hedging gains to income statement for which the hedged future cashflows are no longer |
||
| expected to occur |
(0.7) |
- |
Fair value changes recognised in equity |
(3.8) |
7.1 |
Deferred tax on cash flow hedges |
1.6 |
(1.3) |
Balance at 31 December |
0.2 |
5.1 |
Credit risk is the risk that a customer or counterparty is unable to honour their repayment of obligations as they fall due.
The credit risk to which the Group is exposed is described in the Risk Management Report.
The Group’s policy with respect to accounting for impairment of financial assets is given in Note 1. This note describes
the practical application of this policy.
The Group Risk Committee maintain oversight of the Credit Risk Committee. The Credit Risk Committee is responsible
for the monitoring of the Group’s exposure to credit risk. Model Risk Committee is charged with oversight of the Group’s
IFRS 9 models and assessment and approval of its key model inputs.
Credit risk mainly arises from commercial and customer loans and advances and loan commitments arising from lending
activities but also arises from the Group's investment in debt securities and exposure to third party (financial and
non-financial) debtors.
Provisioning methodology
The Group monitors its lending in two tranches, Prime residential and buy-to-let lending which is in line with current
lending policies and legacy lending which includes lending to housing associations, credit impaired lending, other
commercial and legacy books.
Impairment calculation
The Group calculates for each mortgage exposure a forward view as to how likely that mortgage is to default at some
point over its expected life. For stage 1 assets, the Group provides for losses resulting from events that may occur in the
following 12 months. For stage 2 and stage 3 assets, the Group provides for losses that may occur at any time in the life
of the mortgage.
12 months and lifetime expected credit losses are calculated by the Group as the discrete losses that would likely be
incurred (considering mortgage exposure against the expected sale value of the mortgaged property) if a mortgage
defaulted on any of a large range of future dates. Each discrete provision needs to be assigned a probability of default
weighting in order to calculate one overall lifetime expected credit loss. As such, a continuous forward view to the
probability of default is calculated.
Prime residential and buy-to-let
Key impairment model inputs, assumptions and estimation techniques
The Group calculates its probability of default (PD) as follows:
■
The Group has undertaken a detailed assessment of more than 12 years of its internal credit risk data to determine
the core factors that lead to borrower default.
■
Default indicators identified include granting of forbearance, evidence of mortgage fraud, borrowers falling into
more than 3 months arrears, borrower insolvency or bankruptcy and voluntary repossession of property. These are
used in the staging assessment above to assist in the classification of borrowers as stage 1, stage 2 or stage 3.
■
The Group’s assessment also considers wider patterns of default, analysing historic borrower defaults by their
maturity (how long a mortgage had been held by the Group), vintage (during which original time period the Group
lent to a borrower) and considering exogenous factors in play at the time of default (external factors including the
interest rate environment, unemployment rates, UK (nominal) GDP and house price index).
■
The exogenous, maturity and vintage (EMV) factors are used to derive point in time and forward-looking probability
of default curves: projecting historical information about defaults suffered under known ‘EMV conditions’ forward in
combination with the Group forward views on the wider macroeconomic environment (as this will influence the
forward view on how exogenous factors may develop over time). In combination, these curves form the Group’s
forward-looking probability of default curve, as calculated under the EMV model.
The Group calculates its exposure at default (EAD) as follows:
■
The Group projects mortgage balances forward to give an estimate of each borrower’s mortgage balance over
time. This factors in forecast interest additions and expected borrower payments alongside an estimate of the value
of each borrower’s property collateral throughout a long-term forecast. An adjustment is made to uplift the Group’s
exposure to borrowers to simulate a typical borrower default of 3 missed monthly payments plus typical fees
associated with arrears.
■
The output is a per-mortgage forward projection of mortgage balances.
The Group calculates its expected loss given default (LGD) as follows:
■
The Group calculates a per-mortgage LGD, an estimate of the proportion of each mortgage loan exposure that is
believed to be at risk if the borrower defaults on their obligation to repay the outstanding capital and interest and
the property is subsequently possessed and sold.
■
LGD is calculated as the probability of possession given the default of a borrower (PPD) which estimates the
likelihood of possession following default multiplied by the expected shortfall on each mortgage: an estimation of
the difference between the exposure at default (as discussed above) and the sale price of the property, net of
relevant sales costs.
160
161
The Group calculates expected credit loss provisions as PD * EAD * LGD:
■
The Group calculates a final provision for each mortgage as the probability of default multiplied by the amount the
Group expects to lose in the event of a default.
■
As discussed above, this is not static or a point in time loss: the Group calculates PD, EAD and LGD across a
continuous forward planning horizon. The final provision number is not a singular PD*EAD*LGD, it reflects the
discounted overall expected loss that could be incurred over the life of each mortgage: a weighted average of
multiple possible future loss events.
Multiple economic scenarios
IFRS 9 expects more than one scenario to be considered when calculating expected credit losses. The Group applies
this principle by assessing the provisions required under four separate macroeconomic forecasts. These
macroeconomic forecasts feed into the exogenous component of the Group’s EMV models.
The Group runs:
■
Base scenario: uses as a reference the average HM Treasury short term forecast for the UK economy for the first 2
years and then the medium term forecasts for 2026 onwards.
■
Upside scenario: uses as a reference the most positive HM Treasury short and medium term forecasts for the
UK economy.
■
Downside scenario: uses the most negative short and medium term HM treasury forecasts.
■
Stress scenario: a severely negative scenario, developed with reference to the Bank of England’s annual concurrent
stress test scenarios for the largest UK banks and building societies.
The Group’s final expected credit losses are the losses calculated under each discrete scenario, multiplied by a
likelihood factor, or scenario weighting. The weightings at 31 December 2025 were as follows:
Scenario weightings | Upside | Base | Downside | Stress |
2025 | 10% | 40% | 40% | 10% |
2024 | 10% | 40% | 40% | 10% |
Key macroeconomic information
The Group considers the following to be the key macroeconomic and forward view inputs to its impairment models:
■
UK unemployment rate
■
UK house price index
■
UK household income
■
Bank of England base rate
■
UK nominal gross domestic product
The Group’s assessments as to which variables are key has not changed in the current year. Quarterly updates to the
variables themselves to reflect the most recent market information have been reflected in the Group’s
impairment results.
Changes to Economic scenarios
Against the uncertainty in the UK economy, the Group have developed new economic scenarios for the credit loss
provision model, using the most recent industry data, forecasts and benchmarks available at the time of development.
The Group’s IFRS 9 model is most sensitive to forecasted house price growth and unemployment, which are
summarised below.
| 31 December 2025 | |||||||
Scenario | Economic measure | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 |
| Upside | Unemployment rate, % | 4.6 | 4.1 | 3.7 | 3.6 | 3.6 | 3.9 |
House price growth, % pa | 3.6 | 3.6 | 5.5 | 7.6 | 6.5 | 6.7 | |
| Base | Unemployment rate, % | 4.7 | 5.0 | 4.9 | 4.8 | 4.7 | 4.7 |
House price growth, % pa | 3.0 | 1.7 | 2.6 | 3.1 | 3.8 | 3.0 | |
| Downside | Unemployment rate, % | 5.3 | 6.3 | 6.8 | 6.7 | 6.4 | 6.5 |
House price growth, % pa | - | (5.2) | (1.8) | 1.9 | 7.0 | 2.7 | |
| Severe downside | Unemployment rate, % | 6.0 | 6.7 | 7.4 | 7.3 | 7.0 | 7.0 |
House price growth, % pa | (1.2) | (8.5) | (4.8) | (0.4) | 7.3 | 1.1 | |
| Weighted* | Unemployment rate, % | 5.1 | 5.6 | 5.8 | 5.7 | 5.5 | 5.6 |
House price growth, % pa | 1.5 | (1.9) | 0.4 | 2.7 | 5.7 | 3.0 | |
31 December 2024 | |||||||
Scenario | Economic measure | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 |
Upside | Unemployment rate, % | 4.2 | 3.5 | 3.1 | 3.0 | 3.1 | 3.1 |
House price growth, % pa | 2.2 | 4.2 | 4.2 | 4.4 | 4.1 | 4.1 | |
Base | Unemployment rate, % | 4.2 | 4.4 | 4.4 | 4.3 | 4.1 | 4.1 |
House price growth, % pa | 1.7 | 2.3 | 2.0 | 2.6 | 2.7 | 2.7 | |
Downside | Unemployment rate, % | 4.5 | 6.4 | 6.9 | 6.6 | 6.3 | 6.3 |
House price growth, % pa | 1.7 | (3.3) | (7.1) | (3.6) | 3.5 | 3.5 | |
Severe downside | Unemployment rate, % | 4.5 | 7.9 | 9.7 | 8.2 | 7.4 | 7.4 |
House price growth, % pa | (0.4) | (12.6) | (11.5) | (2.5) | 2.7 | 2.7 | |
Weighted* | Unemployment rate, % | 4.4 | 5.4 | 5.8 | 5.5 | 5.2 | 5.2 |
House price growth, % pa | 1.5 | (1.2) | (2.7) | (0.2) | 3.1 | 3.1 | |
*Expected credit losses are calculated for each loan in each scenario and then probability weighted, so the weighted figure presented above is for
illustrative purposes only.
162
163
Post model adjustments
The Group recognises post model adjustments when it identifies risks which are not addressed by its core impairment
model. Emerging risks are regularly considered by the Group Risk Committee and if necessary, a post model adjustment
is recognised. During the year post model adjustments in relation to fire safety and cladding risk and affordability were
removed; the risks associated with these matters do not materially increase the risk of losses (2024: £0.3m and
£0.6m, respectively).
Climate change
There have been no observed climate change related defaults and therefore no identifiable increases in credit risk. A
post model adjustment of £0.2m (2024: £0.1m) has been recognised for the risk of losses from reduction in property
values that are most at risk due to climate change.
Commercial and other legacy books
Commercial and other legacy books are managed by the commercial lending department and includes properties
secured on commercial property, buy-to-let customers which would now be outside of the Group’s lending policy and
loans secured on serviced apartments.
Impairment calculation and key impairment model inputs
The calculation used to determine the provisions for legacy mortgage contracts is similar to that used for the prime
residential book. Provisions are determined as probability of default (PD) * exposure at default (EAD) * loss given default
(LGD). Please see explanations of each of these terms above.
The main difference between the prime residential and the legacy books consists in the way model inputs are
determined. Due to the nature and the small size of the legacy books, the most significant model inputs are determined
manually on a mortgage-by-mortgage basis or for small groups of mortgages.
For each mortgage contract, the Group applies its specific knowledge of the customer and the property on an
individual basis, as well as its understanding of the sector to determine a forward view as to how likely that mortgage is
to default at some point over its expected life for stage 2 mortgages, or due to events occurring in the following 12
months in the case of stage 1 accounts.
Loss given default is calculated based on a sector specific discount to the property’s current indexed valuation. The
discount reflects management’s confidence about the sector’s prospects in the current and projected future
economic environment. The valuation takes into account the individual property’s circumstance and the local
market conditions.
Economic scenarios
The provisions booked in respect of legacy books are based on four economic scenarios, consistent with those
scenarios used for residential provisioning.
The impairment provision is most sensitive to the borrower specific probability of default and the sector or property
specific discount to indexed valuations at the time of disposal.
Future legacy property prices are highly uncertain and depend on the future prosperity of the UK in general, the
individual sector the property can be used for, local economic conditions, the remaining duration of the current lease
agreement, and the strength of the current tenant.
For loans secured on legacy lending properties, the following (increases) / reductions to valuations were applied:
| 31 December 2025 |
||||
Sector |
Upside |
Base |
Downside |
Stress |
Retail |
10% |
20% |
30% |
60% |
Leisure |
40% |
50% |
55% |
65% |
Residential |
0% |
0% |
7-10% |
14-17% |
Serviced apartments |
(6%) |
15% |
30% |
60% |
| 31 December 2024 |
||||
Sector |
Upside |
Base |
Downside |
Stress |
Retail |
10% |
20% |
30% |
60% |
Leisure |
40% |
50% |
55% |
65% |
Residential |
1% |
1% |
14-17% |
27-29% |
Serviced apartments |
(6%) |
15% |
30% |
60% |
Housing associations
Loans to housing associations are monitored with a range of management information used to assess the Group’s
ongoing exposure (which, while of extremely high credit quality remains of significant size). An open dialogue is
maintained with borrowers, with the Group appraised of their status, financial results and position, and numerous other
financial and risk metrics. Lending is contingent on compliance with a number of financial commitments and covenants.
The Group actively monitors for potential breaches of contractual positions.
Housing associations are historically a nil loss, nil default sector and are widely considered to be Government backed in
the case of financial stress. Housing association exposures have proven to be of the lowest credit risk throughout a
volatile and extended recession period. The Group has no internal history of loss to draw on with respect to housing
association exposures and cannot supplement its own data with loss data of its peers.
The combined effect of a well collateralised set of exposures, in an environment where the demand for housing is only
increasing, with no history of default on the part of any borrower and a sincere expectation that any theoretical default
would be addressed by the jurisdictional Government, leads to a conclusion that no material impairment of housing
association exposures is plausibly expected.
Purchased or originated credit impaired (POCI)
It is not the Group’s practice to acquire or originate POCI assets, the POCI assets held arose on the transfer of
engagement from Manchester Building Society in 2023.
Debt securities
The Group monitors the external credit ratings applied to its debt security investments on a daily basis.
The Group’s debt security holdings are all of investment grade or higher. The Group has therefore assessed that the
credit risk on its debt security exposures has not increased significantly since initial recognition.
The Treasury Risk department runs very severe annual stressed scenarios over the residential mortgage backed
securities (RMBS). The Group’s policy to allow only investment grade and senior secured exposures leaves the Group
highly insensitive to stressed scenarios as the waterfall structure of RMBS payments ensures continued receipt of
contractual cash flows even through significantly stressed scenarios.
The Group’s covered bond exposures are similarly resilient: the Group is only exposed to regulated UK covered bonds
with the regulations providing for the full segregation of covered bond asset pools from the bond issuer. The regulations
introduce numerous investor protections including mandatory over-collateralisation, an extensive initial application
164
165
Quantitative impairment impact
Loss allowance |
Increases due |
Decreases |
Transition |
Changes in |
Loss allowance |
|
Reconciliation table |
at 1 January |
to orgination |
due to |
between |
credit risk |
at 31 December |
2025 |
and acquisition |
derecognition |
stages |
2025 |
||
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Prime residential |
||||||
Stage 1 |
498.6 |
243.3 |
(90.8) |
715.9 |
(787.8) |
579.2 |
Stage 2 |
2,534.5 |
775.5 |
(221.0) |
(727.6) |
(434.7) |
1,926.7 |
Stage 3 |
1,751.0 |
34.6 |
(132.6) |
11.7 |
773.6 |
2,438.3 |
Total |
4,784.1 |
1,053.4 |
(444.4) |
- |
(448.9) |
4,944.2 |
Buy-to-let |
||||||
Stage 1 |
29.5 |
7.1 |
(10.1) |
27.1 |
(26.7) |
26.9 |
Stage 2 |
218.9 |
16.4 |
(8.2) |
6.8 |
(184.5) |
49.4 |
Stage 3 |
141.0 |
- |
(93.0) |
(33.9) |
8.4 |
22.5 |
Total |
389.4 |
23.5 |
(111.3) |
- |
(202.8) |
98.8 |
Legacy lending |
||||||
Stage 1 |
20.0 |
- |
(2.8) |
99.1 |
(102.8) |
13.5 |
Stage 2 |
449.2 |
- |
(1.5) |
(99.8) |
(113.2) |
234.7 |
Stage 3 |
1,003.8 |
- |
(133.2) |
0.7 |
210.5 |
1,081.8 |
Total |
1,473.0 |
- |
(137.5) |
- |
(5.5) |
1,330.0 |
Purchased credit impaired lending |
||||||
Stage 1 |
- |
- |
- |
- |
- |
- |
Stage 2 |
- |
- |
- |
- |
- |
- |
Stage 3 |
- |
- |
- |
- |
(98.7) |
(98.7) |
Total |
- |
- |
- |
- |
(98.7) |
(98.7) |
Housing association |
||||||
Stage 1 |
- |
- |
- |
- |
- |
- |
Stage 2 |
- |
- |
- |
- |
- |
- |
Stage 3 |
- |
- |
- |
- |
- |
- |
Total |
- |
- |
- |
- |
- |
- |
| Total |
||||||
Stage 1 |
548.1 |
250.4 |
(103.7) |
842.1 |
(917.3) |
619.6 |
Stage 2 |
3,202.6 |
791.9 |
(230.7) |
(820.6) |
(732.4) |
2,210.8 |
Stage 3 |
2,895.8 |
34.6 |
(358.8) |
(21.5) |
893.8 |
3,443.9 |
Total |
6,646.5 |
1,076.9 |
(693.2) |
- |
(755.9) |
6,274.3 |
Provisions of less than £0.1m (2024: provisions of £0.2m) above relate to loans and advances to customers made by a subsidiary company, secured on
prime residential property.
Gross |
Increases due |
Decreases |
Transition |
Gross |
|
Reconciliation table |
exposure at 1 |
to orgination |
due to |
between |
exposure at |
January 2025 |
and acquisition |
derecognition |
stages |
31 December |
|
2025 |
|||||
£m |
£m |
£m |
£m |
£m |
|
Prime residential |
|||||
Stage 1 |
3,798.4 |
942.5 |
(600.1) |
121.2 |
4,262.0 |
Stage 2 |
655.2 |
192.3 |
(55.0) |
(140.6) |
651.9 |
Stage 3 |
68.0 |
0.7 |
(11.8) |
19.4 |
76.3 |
Total |
4,521.6 |
1,135.5 |
(666.9) |
- |
4,990.2 |
Buy-to-let |
|||||
Stage 1 |
300.0 |
30.5 |
(53.1) |
42.0 |
319.4 |
Stage 2 |
78.8 |
4.9 |
(3.7) |
(42.5) |
37.5 |
Stage 3 |
5.9 |
- |
(3.2) |
0.5 |
3.2 |
Total |
384.7 |
35.4 |
(60.0) |
- |
360.1 |
Legacy lending |
|||||
Stage 1 |
19.2 |
- |
(3.4) |
0.3 |
16.1 |
Stage 2 |
3.7 |
- |
(0.1) |
(0.5) |
3.1 |
Stage 3 |
1.7 |
- |
(0.3) |
0.2 |
1.6 |
Total |
24.6 |
- |
(3.8) |
- |
20.8 |
Purchased credit impaired lending |
|||||
Stage 1 |
- |
- |
- |
- |
- |
Stage 2 |
- |
- |
- |
- |
- |
Stage 3 |
5.3 |
- |
(1.2) |
- |
4.1 |
Total |
5.3 |
- |
(1.2) |
- |
4.1 |
Housing association |
|||||
Stage 1 |
179.2 |
- |
(7.9) |
- |
171.3 |
Stage 2 |
- |
- |
- |
- |
- |
Stage 3 |
- |
- |
- |
- |
- |
Total |
179.2 |
- |
(7.9) |
- |
171.3 |
Total |
|||||
Stage 1 |
4,296.8 |
973.0 |
(664.5) |
163.5 |
4,768.8 |
Stage 2 |
737.7 |
197.2 |
(58.8) |
(183.6) |
692.5 |
Stage 3 |
80.9 |
0.7 |
(16.5) |
20.1 |
85.2 |
Total |
5,115.4 |
1,170.9 |
(739.8) |
- |
5,546.5 |
166
167
Transition | Loss allowance | |||||
| Reconciliation table | Loss allowance | Increases due | Decreases | between | at 31 December | |
at 1 January | to orgination | due to | stages | Changes in | 2024 | |
2024 | and acquisition | derecognition | Restated* | credit risk | Restated* | |
£000 | £000 | £000 | £000 | £000 | £000 | |
Prime residential | ||||||
Stage 1 | 705.6 | 273.5 | (267.5) | 939.2 | (1,152.2) | 498.6 |
Stage 2 | 3,224.3 | 890.4 | (239.9) | (982.1) | (358.2) | 2,534.5 |
Stage 3 | 1,261.1 | 190.9 | (100.4) | 42.9 | 356.5 | 1,751.0 |
Total | 5,191.0 | 1,354.8 | (607.8) | - | (1,153.9) | 4,784.1 |
Buy-to-let | ||||||
Stage 1 | 114.8 | 45.4 | (36.9) | (54.5) | (39.3) | 29.5 |
Stage 2 | 301.4 | 31.9 | (7.2) | 56.8 | (164.0) | 218.9 |
Stage 3 | 225.7 | - | (197.4) | (2.3) | 115.0 | 141.0 |
Total | 641.9 | 77.3 | (241.5) | - | (88.3) | 389.4 |
Legacy lending | ||||||
Stage 1 | 95.5 | - | (80.6) | 86.3 | (81.2) | 20.0 |
Stage 2 | 1,114.9 | - | (292.8) | (86.3) | (286.6) | 449.2 |
Stage 3 | 343.6 | 575.4 | (1.5) | - | 86.3 | 1,003.8 |
Total | 1,554.0 | 575.4 | (374.9) | - | (281.5) | 1,473.0 |
Purchased credit impaired lending | ||||||
Stage 1 | - | - | - | - | - | - |
Stage 2 | - | - | - | - | - | - |
Stage 3 | 244.7 | - | (26.8) | - | (217.9) | - |
Total | 244.7 | - | (26.8) | - | (217.9) | - |
Housing association | ||||||
Stage 1 | - | - | - | - | - | - |
Stage 2 | - | - | - | - | - | - |
Stage 3 | - | - | - | - | - | - |
Total | - | - | - | - | - | - |
Total | ||||||
Stage 1 | 915.9 | 318.9 | (385.0) | 971.0 | (1,272.7) | 548.1 |
Stage 2 | 4,640.6 | 922.3 | (539.9) | (1,011.6) | (808.8) | 3,202.6 |
Stage 3 | 2,075.1 | 766.3 | (326.1) | 40.6 | 339.9 | 2,895.8 |
Total | 7,631.6 | 2,007.5 | (1,251.0) | - | (1,741.6) | 6,646.5 |
*The above balances have been re-presented since 31 December 2024 due to a misallocation of post model adjustments between the different stages.
This results in a decrease in prime residential stage 1 loss allowances of £221,000, with a corresponding increase to prime residential stage 2 loss
allowances and a decrease in buy-to-let stage 1 loss allowances of £95,700 with a corresponding increase to buy-to-let stage 2 loss allowances. There is
no impact on the total loss allowance.
Decreases | Transition | Gross exposure | |||
Reconciliation table | Gross exposure | Increases due | due to | between | at 31 December |
at 1 January | to orgination | derecognition | stages | 2024 | |
2024 | and acquisition | Restated (1) | Restated (2) | Restated | |
£m | £m | £m | £m | £m | |
Prime residential | |||||
Stage 1 | 3,248.4 | 922.1 | (539.8) | 167.7 | 3,798.4 |
Stage 2 | 720.8 | 171.2 | (47.4) | (189.4) | 655.2 |
Stage 3 | 50.6 | 2.9 | (7.2) | 21.7 | 68.0 |
Total | 4,019.8 | 1,096.2 | (594.4) | - | 4,521.6 |
Buy-to-let | |||||
Stage 1 | 292.6 | 40.4 | (53.2) | 20.2 | 300.0 |
Stage 2 | 90.4 | 10.0 | (1.4) | (20.2) | 78.8 |
Stage 3 | 6.6 | - | (0.7) | - | 5.9 |
Total | 389.6 | 50.4 | (55.3) | - | 384.7 |
Legacy lending | |||||
Stage 1 | 27.4 | - | (9.8) | 1.6 | 19.2 |
Stage 2 | 6.9 | - | (1.6) | (1.6) | 3.7 |
Stage 3 | 1.0 | 0.7 | - | - | 1.7 |
Total | 35.3 | 0.7 | (11.4) | - | 24.6 |
Purchased credit impaired lending | |||||
Stage 1 | - | - | - | - | - |
Stage 2 | - | - | - | - | - |
Stage 3 | 7.7 | - | (2.4) | - | 5.3 |
Total | 7.7 | - | (2.4) | - | 5.3 |
Housing association | |||||
Stage 1 | 211.9 | - | (32.7) | - | 179.2 |
Stage 2 | - | - | - | - | - |
Stage 3 | - | - | - | - | - |
Total | 211.9 | - | (32.7) | - | 179.2 |
Total | |||||
Stage 1 | 3,780.3 | 962.5 | (635.5) | 189.5 | 4,296.8 |
Stage 2 | 818.1 | 181.2 | (50.4) | (211.2) | 737.7 |
Stage 3 | 65.9 | 3.6 | (10.3) | 21.7 | 80.9 |
Total | 4,664.3 | 1,147.3 | (696.2) | - | 5,115.4 |
1.
The above balances have been re-presented since 31 December 2024 to reclassify £1.9m of gross loan balances in
legacy lending and prime residential mortgages, resulting in a £1.9m decrease to prime residential stage 1
mortgages and a corresponding increase to stage 1 legacy lending mortgages. There is no impact on total gross
mortgage balances.
2.
The above balances have been re-presented since 31 December 2024 due to a misallocation of post model
adjustments between the different stages. This results in an increase in prime residential stage 1 mortgages of
£226.3m with a corresponding decrease to prime residential stage 2 mortgages and an increase in buy-to-let stage
1 mortgages of £50.7m with a corresponding decrease to buy-to-let stage 2 mortgages. There is no impact on the
total gross mortgage balances.
The gross carrying values above reflect the Group’s maximum exposure to credit risk at 31 December 2025 and 31
December 2024 without taking into account any collateral held or provisions made against expected loss.
There has been no material movement in loss allowances held against other financial assets during 2025. Debt securities
held remain of very high credit quality at 31 December 2025 and the Group is not exposed to any significant value or
volume of overdue trade receivables.
168
169
Risk exposures by credit grade for residential lending
Across the Group’s prime residential and buy-to-let mortgage exposures, provisions may be disaggregated by detailed
probability of default ranges as follows:
2025 |
Exposure |
Provision |
Provision coverage ratio |
||||||
Lifetime PD % |
Stage 1 |
Stage 2 |
Stage 3 |
Stage 1 |
Stage 2 |
Stage 3 |
Stage 1 |
Stage 2 |
Stage 3 |
£m |
£m |
£m |
£000 |
£000 |
£000 |
% |
% |
% |
|
0.0% - 1.0% |
44.4 |
- |
- |
0.3 |
- |
- |
- |
- |
- |
1.0% - 2.0% |
1,874.2 |
0.2 |
- |
131.5 |
- |
- |
0.01 |
- |
- |
2.0% - 3.0% |
1,746.0 |
0.1 |
- |
305.5 |
- |
- |
0.02 |
- |
- |
3.0% - 4.0% |
147.7 |
0.1 |
- |
3.1 |
- |
- |
- |
- |
- |
4.0% - 5.0% |
517.1 |
- |
- |
124.7 |
- |
- |
0.02 |
- |
- |
5.0% - 6.0% |
17.8 |
0.1 |
- |
0.6 |
- |
- |
- |
- |
- |
6.0% - 7.0% |
4.3 |
0.6 |
- |
- |
- |
- |
- |
- |
- |
7.0% - 8.0% |
1.9 |
0.3 |
- |
- |
- |
- |
- |
- |
- |
8.0% - 9.0% |
5.6 |
5.3 |
- |
0.6 |
0.7 |
- |
0.01 |
0.01 |
- |
9.0% - 10.0% |
6.5 |
21.7 |
- |
0.1 |
1.0 |
- |
- |
- |
- |
10.0% - 100.0% |
186.8 |
654.8 |
69.6 |
139.1 |
1,972.4 |
2,084.1 |
0.07 |
0.30 |
2.99 |
Total |
4,552.3 |
683.2 |
69.6 |
705.5 |
1,974.1 |
2,084.1 |
0.02 |
0.29 |
2.99 |
The table above excludes gross mortgage balances of £45.2m with a provision of £0.3m for which no lifetime probability of default is available. This
includes £43.0m of mortgages originating in Manchester Building Society, for which probability of default bands were estimated based on external
credit data.
2024 |
Exposure |
Provision |
Provision coverage ratio |
||||||
Lifetime PD % |
Stage 1 |
Stage 2 |
Stage 3 |
Stage 1 |
Stage 2 |
Stage 3 |
Stage 1 |
Stage 2 |
Stage 3 |
Restated (1) |
Restated (1) |
Restated (2) |
Restated (2) |
Restated |
Restated |
||||
£m |
£m |
£m |
£000 |
£000 |
£000 |
% |
% |
% |
|
0.0% - 1.0% |
48.8 |
0.5 |
- |
0.3 |
0.9 |
- |
- |
0.18 |
- |
1.0% - 2.0% |
1,713.4 |
41.9 |
- |
112.5 |
77.6 |
- |
0.01 |
0.19 |
- |
2.0% - 3.0% |
1,582.9 |
55.5 |
- |
184.2 |
116.8 |
- |
0.01 |
0.21 |
- |
3.0% - 4.0% |
132.4 |
10.0 |
- |
7.2 |
9.1 |
- |
0.01 |
0.09 |
- |
4.0% - 5.0% |
422.6 |
24.1 |
- |
111.5 |
77.7 |
- |
0.03 |
0.32 |
- |
5.0% - 6.0% |
3.4 |
- |
- |
0.1 |
- |
- |
- |
- |
- |
6.0% - 7.0% |
2.9 |
0.3 |
- |
0.1 |
- |
- |
- |
- |
- |
7.0% - 8.0% |
5.6 |
0.3 |
- |
- |
- |
- |
- |
- |
- |
8.0% - 9.0% |
4.0 |
6.3 |
- |
0.1 |
2.3 |
- |
- |
0.04 |
- |
9.0% - 10.0% |
12.1 |
23.0 |
- |
1.5 |
12.6 |
- |
0.01 |
0.05 |
- |
10.0% - 100.0% |
135.9 |
564.6 |
58.3 |
110.0 |
2,456.4 |
1,216.5 |
0.08 |
0.44 |
2.09 |
Total |
4,064.0 |
726.5 |
58.3 |
527.5 |
2,753.4 |
1,216.5 |
0.01 |
0.38 |
2.09 |
1.
The above balances have been re-presented since 31 December 2024 to reclassify gross mortgage balances between stages, resulting in a £275.1m
increase in stage 1 gross mortgage balance and a £277.0m decrease in stage 2 gross mortgage balances.
2.
The above balances have been re-presented since 31 December 2024 to reclassify provisions between stages, resulting in a £317,000 decrease in
stage 1 provisions and a corresponding decrease in stage 2 provisions.
The provision coverage ratios for stage 1 and stage 2 have been restated following the above re-presentations.
The table above excludes gross mortgage balances of £57.5m, with a provision of £0.7m for which no lifetime probability of default is available. This
includes £52.0m of mortgages originating in Manchester Building Society, for which probability of default bands were estimated based on external
credit data.
Lifetime probability of default indicates the percentage change that a loan will trigger any of the stage 3 indicators, as
detailed above, over the life of the loan and does not alone indicate a likeliness that the default will result in any
significant loss to the Group.
The comparatively small provisions coverage reflects the capacity for property collateral to effectively mitigate the
Group’s ultimate exposure to loss.
Provisions against other financial assets are not considered to be sufficiently material to warrant further
detailed analysis.
Provisions against commercial and legacy buy-to-let mortgages are not presented by risk grade as legacy exposures
are assessed for impairment on an individual basis by the commercial lending department.
Sensitivity of the credit loss provisions to key assumptions
The Group’s residential and buy-to-let mortgage provisions are most sensitive to forecasted house price growth and
unemployment rates. A 5% increase / decrease to house price growth assumptions over the next two years would result
in a £0.2m / £(0.3)m decrease / increase on the residential and buy-to-let provisions balances at 31 December 2025. A
2% increase / decrease to unemployment rate assumptions over the next two years would have a £0.2m / £(0.2)m
increase / decrease on the residential and buy-to-let provisions balances at 31 December 2025.
The Group’s mortgage provisions reflect probability weighted scenarios run across its mortgage books and are
sensitive to the probabilities applied accordingly. Provisions are most sensitive to increases in the downside and stress
scenarios probabilities; the tables below outline the sensitivity of the credit loss provisions to 100% weighted
economic scenarios:
2025 |
Residential and |
|
buy-to-let |
Legacy lending |
|
£m |
£m |
|
Actual |
5.0 |
1.2 |
Upside |
2.8 |
0.8 |
Base |
3.7 |
1.1 |
Downside |
5.7 |
1.3 |
Stress |
7.6 |
1.9 |
2024 |
Residential and |
|
buy-to-let |
Legacy lending |
|
£m |
£m |
|
Actual |
5.2 |
1.4 |
Upside |
2.9 |
0.6 |
Base |
3.5 |
1.1 |
Downside |
5.8 |
1.6 |
Stress |
10.0 |
2.4 |
Equity release portfolio
The Group’s equity release portfolio is accounted for at fair value. Its fair value includes any allowances for credit risk.
Further information on the fair value of the equity release portfolio, including sensitivity analysis is included in notes 13
170
171
40. Credit quality
The Group's mortgage lending is all secured with a first charge registered against the collateral property. This includes
the Group’s equity release mortgages. The average loan to value of the Group's loan portfolios at 31 December 2025 is
68.1% (2024: 67.7%) as detailed in the Strategic Report. Quarterly regional Halifax House Price Index data is used to
monitor the value of residential collateral. The contractual capacity to recover defaulted mortgage contracts through
the sale of property collateral acts significantly to reduce the Group’s risk of loss.
The credit quality of the Group's residential loans is considered to be excellent with the loans continuing to perform and
arrears being below industry averages. At 31 December 2025 there were 45 loans in 12 months arrears or more with
balances of £8.9m (2024: 42 loans totalling £4.3m).
The percentage of mortgages in arrears by 3 months or more remains at low levels for 2025. Overall, by number of loans
in arrears we have seen a decrease of 0.11% to 0.83%, and by balance we have seen an increase of 0.02% to 0.86%.
The Group's non-impaired commercial loan assets are also considered to be of a good credit quality.
Further specifics by type of mortgage lending are as follows:
Prime residential mortgage book
The prime residential mortgage book consists of traditional residential loans. No sub-prime or self-certification lending
has been undertaken.
2024 | 2024 | |||
2025 | 2025 | Restated | Restated | |
Loan to value (indexed) | £m | % | £m | % |
<70% | 2,698.7 | 54.2 | 2,555.1 | 56.4 |
70% - <80% | 880.4 | 17.6 | 758.2 | 16.8 |
80% - <90% | 1,004.8 | 20.1 | 802.9 | 17.8 |
>90% | 406.3 | 8.1 | 405.4 | 9.0 |
4,990.2 | 100.0 | 4,521.6 | 100.0 |
2024 | 2024 | |||
2025 | 2025 | Restated | Restated | |
Payment status | £m | % | £m | % |
Not past due | 4,896.5 | 98.1 | 4,446.1 | 98.3 |
Past due up to 3 months | 47.8 | 1.0 | 41.1 | 0.9 |
3 to 6 months past due | 16.6 | 0.3 | 18.0 | 0.4 |
Over 6 months past due | 26.8 | 0.5 | 15.5 | 0.3 |
In possession | 2.5 | 0.1 | 0.9 | 0.1 |
4,990.2 | 100.0 | 4,521.6 | 100.0 |
*The above balances have been re-presented since 31 December 2024 to reclassify £1.9m of gross loan balances in legacy lending and prime residential
mortgages, resulting in a £1.9m decrease to prime residential mortgages and a corresponding increase to legacy lending mortgages. There is no impact
on total gross mortgage balances.
The Group continued to experience a low level of possessions on residential loans and Law of Property Act (LPA) receiver
appointments. At the end of 2025 the Group had 16 prime residential properties in possession or subject to LPA
receivership (2024: five possession properties).
Against past due and possession cases, £178.6m (2024: £152.4m) collateral is held. No loans that would be past due or
impaired have had their terms renegotiated.
The Group offers a range of forbearance measures to customers such as payment breaks and reductions, transfers to
interest only products and other support. The Group granted forbearance against 154 residential loans in 2025 (2024:
168), with no alteration made to the contractual rates of interest and balances totalling £27.4m at 31 December 2025
(2024: £27.2m), this did not lead to any modification gain or loss a result of short-term forbearance granted. Provisions
of £0.4m (2024: £0.7m) are held against residential mortgages that were granted forbearance during the year.
The increase in indexed loan to value in the prime residential mortgage book is due to reductions in house prices since
the origination of the mortgages.
Retail buy-to-let mortgage book
The retail buy-to-let (BTL) mortgage book consists of buy-to-let to individuals <£1m.
2025 | 2025 | 2024 | 2024 | |
Loan to value (indexed) | £m | % | £m | % |
<70% | 266.1 | 73.9 | 300.8 | 78.2 |
70% - <80% | 82.1 | 22.8 | 72.9 | 18.9 |
80% - <90% | 11.7 | 3.2 | 10.0 | 2.6 |
>90% | 0.2 | 0.1 | 1.0 | 0.3 |
360.1 | 100.0 | 384.7 | 100.0 |
2025 | 2025 | 2024 | 2024 | |
Payment status | £m | % | £m | % |
Not past due | 354.1 | 98.3 | 377.3 | 98.0 |
Past due up to 3 months | 4.1 | 1.1 | 4.2 | 1.1 |
3 to 6 months past due | 0.6 | 0.2 | 0.6 | 0.2 |
Over 6 months past due | 1.3 | 0.4 | 2.4 | 0.6 |
In possession / LPA receivership | - | - | 0.2 | 0.1 |
360.1 | 100.0 | 384.7 | 100.0 |
At the end of 2025 the Group had no BTL possession properties or poperties whose exposure was being managed by a
Law of Property Act receiver (2024: one).
Against past due and possession cases, £11.4m (2024: £16.8m) collateral is held.
No loans that would be past due or impaired have had their terms renegotiated.
The Group offers a range of forbearance measures to customers such as payment breaks and reductions, transfers to
interest only products and other support. The Group granted forbearance against three retail BTL loans in 2025 (2024:
five loans). With no alteration made to the contractual rates of interest and balances totalling £0.9m at 31 December
2025 (2024: £1.3m) leading to no modification gain or loss recorded as a result of short-term forbearance granted. No
provisions are held against BTL mortgages that were granted forbearance during the year (2024: £nil).
Equity release mortgages denominated in £
The below analysis shows gross loan balances of equity release mortgage lending excluding fair value adjustments.
2025 | 2025 | 2024 | 2024 | |
Loan to value (indexed) | £m | % | £m | % |
<70% | 127.4 | 92.6 | 135.7 | 94.4 |
70% - <80% | 6.4 | 4.7 | 4.4 | 3.1 |
80% - <90% | 2.1 | 1.5 | 1.5 | 1.0 |
>90% | 1.6 | 1.2 | 2.2 | 1.5 |
137.5 | 100.0 | 143.8 | 100.0 |
2025 | 2025 | 2024 | 2024 | |
Payment status | £m | % | £m | % |
Not past due | 136.7 | 99.4 | 143.5 | 99.8 |
Over 6 months past due | 0.4 | 0.3 | - | - |
In possession / LPA receivership | 0.4 | 0.3 | 0.3 | 0.2 |
137.5 | 100.0 | 143.8 | 100.0 |
At the end of 2025 the Group had three possession properties in relation to equity release mortgages (2024: three).
172
173
Equity release mortgages denominated in €
The below analysis shows gross loan balances of equity release mortgage lending excluding fair value adjustments.
2025 | 2025 | 2024 | 2024 | |
Loan to value (indexed) | €m | % | €m | % |
<70% | 4.0 | 9.5 | 3.4 | 8.4 |
70% - <80% | 5.5 | 13.1 | 4.9 | 12.0 |
80% - <90% | 7.6 | 18.1 | 5.2 | 12.8 |
>90% | 24.9 | 59.3 | 27.2 | 66.8 |
42.0 | 100.0 | 40.7 | 100.0 |
2025 | 2025 | 2024 | 2024 | |
Payment status | €m | % | €m | % |
Not past due | 42.0 | 100.0 | 40.7 | 100.0 |
42.0 | 100.0 | 40.7 | 100.0 |
Legacy lending books
The legacy lending books comprises the following:
| 2025 | 2025 | 2024 | 2024 | |
| Restated* | Restated* | |||
| Legacy Lending | £m | % | £m | % |
Commercial property | 3.5 | 1.8 | 3.9 | 1.9 |
Serviced apartments | 12.5 | 6.3 | 13.9 | 6.7 |
Legacy buy-to-let | 3.9 | 2.0 | 5.8 | 2.8 |
Policy loans | 0.9 | 0.5 | 1.0 | 0.5 |
20.8 | 10.6 | 24.6 | 11.9 | |
Purchased credit impaired | 4.1 | 2.1 | 5.3 | 2.5 |
Loans to housing associations | 171.3 | 87.3 | 179.2 | 85.6 |
196.2 | 100.0 | 209.1 | 100.0 |
*These balances have been re-presented to reclassify £1.9m of gross loan balances, as outlined on page 167.
Legacy Lending | 2025 | 2025 | 2024 | 2024 |
Restated* | Restated* | |||
| Loan to value (indexed) | £m | % | £m | % |
<70% | 9.0 | 43.3 | 12.2 | 49.6 |
70% - <80% | 6.9 | 33.1 | 7.4 | 30.1 |
80% - <90% | 3.9 | 18.8 | 5.0 | 20.3 |
>90% | 1.0 | 4.8 | - | - |
20.8 | 100.0 | 24.6 | 100.0 |
2025 | 2025 | 2024 | 2024 | |
Restated* | Restated* | |||
Payment status | £m | % | £m | % |
Not past due | 19.8 | 95.2 | 23.7 | 96.4 |
Past due up to 3 months | - | - | 0.4 | 1.6 |
LPA receivership | 1.0 | 4.8 | 0.5 | 2.0 |
20.8 | 100.0 | 24.6 | 100.0 |
*These balances have been re-presented to reclassify £1.9m of gross loan balances, as outlined on page 167.
2025 | 2025 | 2024 | 2024 | |
Restated* | Restated* | |||
| Diversification by industry type | £m | % | £m | % |
Hotel / leisure | 0.2 | 1.0 | 1.3 | 5.3 |
Specialist buy-to-let | 3.9 | 18.8 | 5.8 | 23.6 |
Serviced Apartments | 12.5 | 60.0 | 13.9 | 56.5 |
Other | 4.2 | 20.2 | 3.6 | 14.6 |
20.8 | 100.0 | 24.6 | 100.0 |
*These balances have been re-presented to reclassify £1.9m of gross loan balances, as outlined on page 167.
At 31 December 2025, the Group had £1.0m of legacy lending loans in arrears of 3 months or more (2024: £0.9m). No
loan that would be past due or impaired had their terms renegotiated.
The Group had three legacy loans in possession or subject to LPA receivership at the end of 2025 (2024: two).
The Group did not grant forbearance against any loans secured on property in 2025 (2024: none).
Loans to housing associations
2025 | 2025 | 2024 | 2024 | |
Loan to value (indexed) | £m | % | £m | % |
<70% | 82.6 | 48.2 | 66.9 | 37.3 |
70% - <80% | 88.7 | 51.8 | 112.3 | 62.7 |
171.3 | 100.0 | 179.2 | 100.0 |
Loans to housing associations are secured on residential property. No housing association loans are past due
or impaired.
174
175
Purchased or originated credit impaired loans (POCI)
The below analysis shows the status of the Group’s POCI loans and how they are distributed across loan to value bands.
2025 |
2025 |
2024 |
2024 |
|
£m |
% |
£m |
% |
|
Gross exposure |
7.8 |
100.0 |
7.4 |
100.0 |
Fair value adjustment |
(3.7) |
(47.3) |
(2.1) |
(28.4) |
4.1 |
52.7 |
5.3 |
71.6 |
2025 |
2025 |
2024 |
2024 |
|
Loan to value (indexed) |
£m |
% |
£m |
% |
<70% |
1.7 |
41.5 |
2.8 |
52.8 |
70% - <80% |
0.1 |
2.4 |
- |
- |
80% - <90% |
1.5 |
36.6 |
1.4 |
26.4 |
>90% |
0.8 |
19.5 |
1.1 |
20.8 |
4.1 |
100.0 |
5.3 |
100.0 |
2025 |
2025 |
2024 |
2024 |
|
Payment status |
£m |
% |
£m |
% |
Not past due |
1.6 |
39.0 |
2.2 |
41.5 |
3 to 6 months past due |
- |
- |
0.1 |
1.9 |
Over 6 months past due |
1.8 |
43.9 |
1.8 |
34.0 |
In possession / LPA receivership |
0.7 |
17.1 |
1.2 |
22.6 |
4.1 |
100.0 |
5.3 |
100.0 |
The Group had two POCI loans in possession or subject to LPA receivership at the end of 2025 (2024: two).
POCI loans relate to legacy residential and commercial lending which was acquired credit impaired as part of the
merger with Manchester Building Society.
Geographical split of lending
The table below provides a breakdown of the geographic concentration of the Group’s prime residential and buy-to-let
mortgage portfolios at 31 December 2025. The Group’s mortgage portfolio is diversified across the UK.
Prime |
||||
Residential |
Buy-to-let |
Total |
Total |
|
Region |
£m |
£m |
£m |
% |
North East |
494.7 |
7.5 |
502.2 |
9.4 |
East of England |
413.5 |
39.8 |
453.3 |
8.5 |
East Midlands |
351.0 |
14.4 |
365.4 |
6.8 |
Northern Ireland |
1.4 |
0.1 |
1.5 |
- |
North West |
580.9 |
21.1 |
602.0 |
11.3 |
Scotland |
558.5 |
7.8 |
566.3 |
10.6 |
South East |
668.9 |
66.8 |
735.7 |
13.7 |
South West |
414.3 |
22.5 |
436.8 |
8.2 |
Wales |
168.4 |
6.5 |
174.9 |
3.3 |
West Midlands |
372.3 |
16.8 |
389.1 |
7.3 |
Yorkshire |
422.7 |
12.0 |
434.7 |
8.1 |
London |
539.4 |
144.8 |
684.2 |
12.7 |
Other |
4.2 |
- |
4.2 |
0.1 |
Total |
4,990.2 |
360.1 |
5,350.3 |
100.00 |
Liquidity risk is the risk that the Group has insufficient funds to meet its obligations as they fall due. This risk is managed
on a Group basis (including all subsidiary entities) with day-to-day responsibility delegated to the Group’s Treasury
department with oversight by the Assets and Liabilities Committee, the Group Risk Committee and the Board.
Management of Liquidity risk
The Group ensures it holds sufficient quality and quantity of liquidity to remain liquid after a severe but plausible stress.
In addition, it assesses its liquidity position and risks through an annual Internal Liquidity Adequacy Assessment Process
(ILAAP) in line with regulatory requirements. Cash flow forecasts are used to forecast liquidity, ensuring future
compliance with limits set by the Board. Wherever appropriate, the Group ensures it takes any necessary steps to
ensure it has access to any available Bank of England Schemes designed to support financial institutions.
Liquidity resources
The Group’s liquidity resources include funds in cash accounts held in the Bank of England reserve account and other
easily marketable assets and contingent liquidity. The Group monitors the requirements of the Liquidity Coverage Ratio
(LCR), which measures unencumbered high quality liquid assets as a percentage of net cash outflows over a 30 day
stress period, on a weekly basis for compliance against the regulatory minimum of 100%. At 31 December 2025 the LCR
was 180% (2024: 229%).
Contractual maturity profile of financial assets and liability
The table below analyses the contractual cash flows of financial assets and financial liabilities based on the remaining
contractual life to the maturity date. The contractual maturity will differ to actual payments; for example, most on
demand customer deposits will be repaid later than the earliest date on which repayment can be requested and
mortgages may be repaid ahead of their contractual maturity.
At 31 December 2025 |
Repayable on |
More than 5 |
||||
demand |
Up to 3 months |
3-12 months |
1-5 years |
years |
Total |
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Assets |
||||||
Cash and balances with the Bank of England |
177.3 |
- |
- |
- |
- |
177.3 |
Loans and advances to credit institutions |
146.2 |
- |
- |
- |
- |
146.2 |
Debt securities |
- |
17.5 |
38.3 |
744.4 |
59.0 |
859.2 |
Derivative financial instruments |
- |
0.7 |
8.1 |
6.4 |
1.7 |
16.9 |
Loans and advances to customers |
- |
17.8 |
17.9 |
247.5 |
5,431.0 |
5,714.2 |
Other financial assets |
- |
4.9 |
- |
- |
- |
4.9 |
Total financial assets |
323.5 |
40.9 |
64.3 |
998.3 |
5,491.7 |
6,918.7 |
Liabilities |
||||||
Due to Members |
5,172.1 |
167.5 |
381.5 |
161.3 |
0.3 |
5,882.7 |
Due to other customers |
87.5 |
47.2 |
27.1 |
2.0 |
- |
163.8 |
Deposits from credit institutions |
1.4 |
40.1 |
117.4 |
- |
- |
158.9 |
Derivative financial instruments |
- |
0.1 |
5.4 |
21.5 |
17.5 |
44.5 |
Debt securities in issue |
- |
1.7 |
- |
- |
321.7 |
323.4 |
Other financial liabilities |
- |
2.2 |
0.7 |
2.6 |
4.2 |
9.7 |
Total financial liabilities |
5,261.0 |
258.8 |
532.1 |
187.4 |
343.7 |
6,583.0 |
Net liquidity gap (contractual) |
(4,937.5) |
(217.9) |
(467.8) |
810.9 |
5,148.0 |
335.7 |
176
177
At 31 December 2024 | Repayable on | More than 5 | ||||
demand | Up to 3 months | 3-12 months | 1-5 years | years | Total | |
£m | £m | £m | £m | £m | £m | |
Assets | ||||||
Cash and balances with the Bank of England | 451.5 | - | - | - | - | 451.5 |
Loans and advances to credit institutions | 101.8 | - | - | - | - | 101.8 |
Debt securities | - | 36.1 | 95.8 | 426.3 | 44.1 | 602.3 |
Derivative financial instruments | - | 0.7 | 4.2 | 40.5 | 11.2 | 56.6 |
Loans and advances to customers | - | 12.9 | 45.3 | 260.3 | 4,970.8 | 5,289.3 |
Other financial assets | - | 4.3 | 0.6 | 0.3 | - | 5.2 |
Total financial assets | 553.3 | 54.0 | 145.9 | 727.4 | 5,026.1 | 6,506.7 |
Liabilities | ||||||
Due to Members | 4,728.4 | 152.7 | 378.2 | 173.4 | - | 5,432.7 |
Due to other customers | 131.7 | 78.0 | 30.3 | 1.0 | - | 241.0 |
Deposits from credit institutions | 31.0 | 100.8 | 285.8 | - | - | 417.6 |
Derivative financial instruments | - | 0.5 | 0.7 | 4.1 | 24.1 | 29.4 |
Other financial liabilities | - | 1.8 | 0.8 | 3.0 | 3.4 | 9.0 |
Total financial liabilities | 4,891.1 | 333.8 | 695.8 | 181.5 | 27.5 | 6,129.7 |
Net liquidity gap (contractual) | (4,337.8) | (279.8) | (549.9) | 545.9 | 4,998.6 | 377.0 |
Capital risk is the risk that the Group is or becomes inadequately capitalised to address the risks to which it is exposed.
Management of Capital
The Group’s policy is to maintain a strong capital base to maintain Member, creditor and market confidence and to
sustain the future growth of the Group. The Group has complied with all externally imposed capital requirements and
internally set limits throughout the year.
Day to day capital management is delegated to the Chief Financial Officer with oversight by the Assets and Liabilities
Committee, the Group Risk Committee and the Board.
The Group assesses its capital position and risks regularly. Capital planning is an integrated part of business planning
and capital forecasts and scenario analysis are performed regularly as part of business as usual.
An Internal Capital Adequacy Assessment Process (ICAAP) is produced in line with regulatory requirements. The ICAAP
considers the key capital risks and the amount of capital it should retain. These requirements are assessed against the
current position and throughout any forward planning. The Prudential Regulation Authority sets and monitors capital
requirements for the Group. Capital adequacy is measured by comparing both current and forecast capital resources to
capital requirements.
Capital stress testing is also performed as part of the ICAAP and makes sure that the Group is resilient to a range of
stresses, assessing whether capital requirements would be met under severe but plausible stress scenarios and
considers what mitigating actions are available to management. The Society’s Recovery Plan details management
actions that could be taken in case of unexpected capital shortfalls and stresses. The Recovery Plan is tested and
updated regularly.
For more information on how the Group is meeting its objectives for managing capital, see the capital section of the
The reporting obligations set out in Article 89 of the European Union’s Capital Requirements Directive IV (CRD IV) have
been implemented in the UK by the Capital Requirements (Country-by-Country Reporting) Regulations.
Newcastle Building Society is the largest building society in the North East and the 7th largest in the UK with assets of
£7.0 billion (2024: £6.6 billion).
As a mutual organisation, the Society’s primary focus is its Members, and it aims to provide mortgage and savings
products supported by excellent customer service. Additionally, the Society offers financial advice, as an appointed
representative of Openwork, through Newcastle Financial Advisers. Outsourcing of financial services and information
technology services are provided through Newcastle Strategic Solutions.
The consolidated financial statements of the Newcastle Building Society Group include the audited results of the
Society and its subsidiary undertakings. The consolidated entities, their principal activities and countries of
incorporation, are detailed in Note 15 to the Annual Report and Accounts.
Basis of preparation
a) Country
All of the consolidated entities were incorporated in the United Kingdom, with the exception of Newcastle Mortgage
Loans (Jersey) Limited, which is incorporated and operates with no employees in Jersey.
b) Total operating income and profit be
fore taxation
Total operating income and profit before taxation are compiled from the Newcastle Building Society Group
consolidated financial statements for the year ended 31 December 2025, which are prepared in accordance with
International Financial Reporting Standards (IFRS). Total operating income represents the sum of the Group's net
interest income, other income, other charges and gains less losses on financial instruments and hedge accounting.
Group total operating income was £156.1m (2024: £152.9m), the proportion not arising from UK-based activity is not
considered material for the purpose of this disclosure.
c) Corporation tax paid
Corporation tax paid represents the net cash taxes paid to the tax authority, HMRC, during 2025. Corporation tax
paid is reported on a cash basis and will normally differ from the tax expense recorded for accounting purposes
due to:
■
Timing differences in the accrual of tax charge. The Group makes quarterly payments on account to HMRC.
Payments are made in July, October, January, and April. As the Group's accounting year runs from January to
December, payments made in any financial year will not align with tax due in that financial year.
■
The Society brought forward into 2025 tax losses from previous years that were used to extinguish a portion of its
taxable profits in 2025.
■
Other differences between when income and expenses are accounted for under IFRSs and when they
become taxable.
During 2025 the Group paid £5.0m in corporation tax (2024: £2.9m).
d) Full-time equivalent employees
The average number of Group full time equivalent employees was 1,716.2 (2024: 1,671.4) all of which were employed in
the UK.
e) Group profit be
fore taxation
Group profit before taxation was £22.6m (2024: £15.7m) with a tax charge of £4.6m (2024: £0.8m tax credit). The
Other
Information
Our branch
network
provides
free-to-use
community
rooms
179
178
1. Statutory percentages
2. Other percentages
Annual Business Statement
for the year ended 31 December 2025
2025
Statutory
%
%
Lending limit
1.72
25.00
Funding limit
9.89
50.00
2025
2024
As a percentage of shares and borrowings:
%
%
Gross capital
6.57
6.57
Free capital
5.79
5.78
Liquid assets
18.11
18.97
Result for the year as a percentage of mean total assets
0.27
0.26
Management expenses as a presentage of mean total assets
1.96
1.86
The above percentages have been calculated in accordance with the provisions of the Building Societies Act 1986.
Lending limit is calculated excluding fair value adjustments for derivative values.
The lending limit measures the proportion of business assets not in the form of loans secured on residential property.
Business assets are the total assets of the Group plus allowances for losses on loans and advances less liquid assets,
investment properties and property, plant and equipment as shown in the Group Balance Sheet.
The funding limit measures the proportion of shares and borrowings not in the form of shares held by individuals.
The statutory limits are as laid down under the Building Societies Act 1986 and ensure that the principal purpose of a
building society is that of making loans which are fully secured on residential property and are funded substantially by
its Members.
The above percentages have been prepared from the Annual Accounts.
Gross capital represents the aggregate of the general reserve, FVOCI reserve, cash flow hedge reserve, other equity
reserves, subordinated liabilities and subscribed capital.
Free capital represents gross capital less property, plant and equipment and investment property.
Liquid assets are as shown in the Group Balance Sheets and includes collateral.
Shares and borrowings represent the total of shares, amounts owed to credit institutions and amounts owed t
other customers.
Management expenses represent the aggregate of administrative expenses and depreciation and includes expenses
relation to the Group’s Solutions business.
Mean total assets are the average of the 2025 and 2024 total assets.
Directors' other directorships and other interests
Directors at 31 December 2025
Date of Birth
Date of Appointment
Business Occupation
George Adam Bennett
MA
10/02/1961
24/04/2019
Non-Executive Director
Other Directorships:
Darkwood Croft Management Company Ltd, MAM Properties Limited, MBS (Mortgages) Ltd
Rory Tristan Sebastian Campbell
24/04/1978
01/06/2024
Non-Executive Director
Other Directorships:
Ignite Consulting Trustee Ltd, New Vantage Consulting Ltd
Other interests:
Visiting Fellow of Nottingham Business School, Fellow of The Royal Society for the Encouragement of
Arts, Manufactures and Commerce, Deloitte LLP- client of New Vantage Consulting Ltd
Richard Kenneth Gabbertas
MA,FCA
01/08/1959
01/12/2025
Non-Executive Director
Other Directorships:
Arbuthnot Banking Group PLC, Arbuthnot Latham & Co Ltd
Bryce Paul Glover
LLB, ACIB
03/07/1960
11/08/2017
Company Director
Other Directorships:
Newcastle Strategic Solutions Ltd, Advance Mortgage Funding Ltd, First Complete Ltd, Personal Touch
Financial Services Ltd, Tenetlime Ltd, United Trust Bank Ltd
Andrew Scott Haigh
BSc
26/01/1963
27/01/2014
Building Society Chief Executive Officer
Other Directorships:
Newcastle Financial Advisers Ltd, North East Chamber of Commerce
Christopher John Keay
21/01/1968
05/09/2025
Building Society Chief Risk Officer
Other Directorships:
Newcastle Mortgage Loans (Jersey) Ltd
Other interests:
Treasurer of Redesdale Education Trust
Karen McDonagh Reynolds
12/07/1972
23/04/2025
Non- Executive Director
Other Directorships:
Newcastle Strategic Solutions Ltd
Anne Laverick
BA
(Business Name: Anne Shiels)
08/06/1961
07/07/2017
Non-Executive Director
Other Directorships:
Newcastle Financial Advisers Ltd, Anne Shiels Consulting Ltd
Other interests:
Member of the Infantry Training (Catterick) Advisory Board
James David Alexander Ramsbotham
CBE, DL
30/08/1959
22/01/2018
Non-Executive Director
Other Directorships:
Newcastle Strategic Solutions Ltd, High Doctor Pasture Caravan Park Ltd, Altruism Ltd, Willan Trustee Ltd
Other interests:
170 Tachbrook Street Management Ltd (Company Secretary), Gillian Dickinson Trust (Trustee),
Sunderland University (Pro Chancellor), Durham Cathedral Finance Committee (Lay Member), Durham
Cathedral Nominations Committee (Lay Member), The Rifles (Honorary Colonel), Gateshead Citizens
Advice (Patron), Foundation of Light (Trustee & Vice Chair), Deputy Lieutenant for The County Durham
Lord Lieutenancy, Lay Canon of Durham Cathedral (Honorary Role)
Michael Roger Thompson
BA, FCA
11/10/1961
29/01/2019
Non-Executive Director
Other Directorships:
Atlas Cloud Ltd, Newcastle United Foundation, The Clinkard Group Ltd, Clinkard Holdings Ltd,
NorthStandard Ltd, NorthStandard EU Designated Activity Company, Tyne and Wear Building
Preservation Trust Ltd
Other interests:
Newcastle Building Society Pension & Assurance Scheme (Trustee and Chair), Greggs Foundation
(Trustee), The Charles Urie Peat Prize Fund (Trustee), Regional Treasurer of Lord’s Taverners Charity
Documents may be served on any of the Directors c/o Addleshaw Goddard LLP, One St Peter's Square, Manchester M2
3DE. The Executive Directors have service contracts which can be terminated at any time by the Society on six months’
notice. The Executive Directors’ service contracts were entered into on the dates of their appointment, with the
exception Andrew Haigh who previously held the role of Chief Operating Officer before his appointment to the role of
Chief Executive on 1 May 2015 and Christopher Keay who has held the role of Chief Risk Officer before his appointment
to Board in September 2025. There are no contracts for Non-Executive Directors and no compensatory terms for loss
of office.
Principal office
Society’s principal office is 1 Cobalt Park Way, Wallsend, NE28 9EJ.
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Gross capital
The aggregate of the general reserve, FVOCI reserve,
cash flow hedge reserve, other equity reserves,
subordinated liabilities and subscribed capital.
Impaired loans
Loans where an event has occurred which indicates the
Group does not expect to collect all the contractual
cash flows due, or expects to collect them later than
they are contractually due.
Individual Capital Guidance (ICG)
Guidance from the PRA on the minimum level of capital
that must be held.
Individual Liquidity Guidance (ILG)
Guidance from the PRA on the minimum quantity of a
firm’s liquidity resources and the firm’s funding profile.
Interest rate risk
The risk that the value of the Society’s net assets or
net interest income falls as a result of a change in
interest rates.
Internal Capital Adequacy Assessment
Process (ICAAP)
The Group’s own assessment of the levels of capital
that it needs to hold in respect of the risks it faces
under a business as usual scenario and a variety of
stress scenarios.
Internal Liquidity Adequacy Assessment
Process (ILAAP)
The Group’s internal assessment of the liquidity levels
needed to meet its regulatory liquidity requirements.
Legacy mortgage portfolios
Mortgage loan books where the Group has ceased new
lending and is winding down exposures.
Lending limit
Measures the proportion of business assets not in the
form of loans fully secured on residential property.
Leverage ratio
A Basel III ratio which measures Tier 1 capital against
total on and off balance sheet assets.
Liquid assets
The total of cash in hand and balances with the Bank of
England, loans and advances to credit institutions and
debt securities.
Liquidity Coverage Ratio (LCR)
A Basel III measure of the amount of highly-liquid assets
against cash outflows over a 30 day period.
Liquidity risk
The risk that the Group does not have sufficient financial
resources to meet its obligations as they fall due, or will
have to do so at an excessive cost. This risk arises from
mismatches in the timing of cash inflows and outflows.
Loan-to-value ratio (LTV)
A ratio which expresses the amount of a mortgage as a
percentage of the value of the property. The Group
calculates UK residential mortgage LTV on an indexed
basis (the value of the property is updated on a
quarterly basis) to reflect changes in house prices.
Loans and advances to credit institutions
Treasury investments purchased with credit institutions.
Management expenses
Management expenses represent administrative
expense and depreciation. The management expense
ratio is management expenses expressed as a
percentage of mean total assets.
Market risk
The risk that movements in market risk factors, including
re-pricing of assets and liabilities and the imperfect
matching of interest rates between different asset and
liability types, may adversely impact the Society.
Mean total assets
Represents the amount produced by halving the
aggregate of total assets at the beginning and end of
the financial year.
Member
A person who has a qualifying share investment or a
mortgage loan with the Society.
Net interest income
The difference between interest received on assets and
interest paid on liabilities.
Non-Executive Director
A Member of the Society’s Board who does not form
part of the executive management team. They are not
an employee of the Society.
Operational risk
The risk of loss arising from inadequate or failed
internal processes, people and systems or from
external events.
Other lending
Loans and advances secured on traded
endowment policies.
Past due
Loans on which payments are overdue including those
on which partial payments are being made.
Permanent Interest Bearing Shares (PIBS)
Unsecured, deferred shares that are a form of capital.
PIBS rank behind the claims of all subordinated debt
holders, depositors, payables and investing Members
of Newcastle Building Society.
Prime
Prime mortgages are those granted to the most credit
worthy category of residential borrowers.
Prudential Regulation Authority (PRA)
Part of the Bank of England and responsible for the
prudential regulation and supervision of banks,
building societies, credit unions, insurers and major
investment firms.
Regulators’ Remuneration Code
The Dual-regulated firms Remuneration Code (SYSC
19D) sets out the standards and policies that dual-
regulated firms must meet when setting pay and
bonuses for their staff.
Glossary
Set out below are the definitions of the terms used
within the Annual Report and Accounts to assist the
reader and to facilitate comparison with other
financial institutions:
Arrears
A customer is in arrears when they are behind in their
mortgage payments. A customer is 3 months in
arrears when they have missed the equivalent of 3
mortgage payments.
Administrative expenses
Expenses incurred in running the day to day activities of
the Society including staff, property, marketing and
technology costs.
AT 1 (Additional Tier 1) instruments
Instruments issued to capital and are perpetual,
meaning they have no maturity date, and investors are
not paid back the principal amount.
Basel II
The second of the Basel Accords, issued by the Basel
Committee on Banking supervision, which defines the
methods by which firms should calculate their
regulatory capital requirements to retain enough capital
to protect the financial system against unexpected
losses. Basel II became law in the EU Capital
Requirements Directive, and was implemented in the
UK via the PRA Handbook.
Basel III
The third of the Basel Accords, issued by the Basel
Committee on Banking supervision, which are a long-
term package of changes that will strengthen
regulatory requirements for capital and liquidity.
Buy-to-let (BTL)
A mortgage designed to support customers purchasing
an investment property to let out.
Capital Requirements Directive (CRD IV)
The EU legislative package covering prudential rules for
banks, building societies and investment firms. CRD IV
is made up of the Capital Requirements Directive and
Capital Requirements Regulations, it is designed to
implement the Basel III Accord across the EU.
Commercial lending / mortgage
Loans secured on commercial property.
Common Equity Tier 1 capital
Defined by the PRA as general reserves or qualifying
capital instruments which for the Society is the
accumulation of retained profits.
Common Equity Tier 1 ratio
Common Equity Tier 1 capital as a percentage of risk
weighted assets.
Contractual maturity
The final payment date of a loan or other financial
instrument, at which point all the remaining outstanding
principal and interest is due to be paid.
Covered bonds
Debt securities backed by a portfolio of mortgages
that is segregated from the issuer’s other on-balance
sheet assets solely for the benefit of the holders of the
covered bonds.
Credit risk
The risk that a customer or counterparty is unable to
honour their repayment obligations as they fall due.
Debt securities
Assets representing certificates of indebtedness of
credit institutions, public bodies or other undertakings
excluding central banks.
Derivative financial instruments
A derivative financial instrument is a type of financial
instrument (or an agreement between two parties) that
has a value based on the underlying asset, index or
reference rate it is linked to. The Group uses derivative
financial instruments to hedge its exposures to interest
rate risk.
Effective interest rate method (EIRM)
The method used to measure the carrying value of a
financial asset or a liability and to allocate associated
interest income or expense over the relevant period.
Fair value
Fair value is the amount for which an asset could
be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm’s
length transaction.
Financed Emissions
The indirect greenhouse gas emissions attributable to
the properties which the Group’s lending is secured on.
Financial Conduct Authority (FCA)
FCA regulates the conduct of financial firms providing
services to consumers and maintains the integrity of the
UK’s financial markets.
Financial Services Compensation
Scheme (FSCS)
The UK’s compensation fund of last resort for
customers of authorised financial services firms. The
FSCS may pay compensation to customers if a firm is
unable, or likely to be unable, to pay claims against it,
usually because it has stopped trading or has been
declared in default. The FSCS is funded by the financial
services industry. Every firm authorised by the PRA is
obliged to pay an annual levy, which goes towards
running costs and compensation payments.
Forbearance
A term generally applied to arrangements which are
provided to support mortgage customers experiencing
financial difficulties. An example of this would be a
temporary reduction in mortgage payments.
Free capital
Represents gross capital less property, plant and
equipment and investment property.
Funding limit
Measures the proportion of shares and borrowings not
in the form of shares held by individuals.
Gilts
These are bonds issued by certain national
governments. The Group only classifies debt securities
issued by the Bank of England as Gilts.
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Renegotiated loans
Loans are classed as renegotiated with the customer’s
consent, when their terms have changed during the
year. Loans and advances are generally renegotiated
either as part of an ongoing customer relationship or in
response to an adverse change in the circumstances of
the borrower.
Repo
Short to medium-term funding agreements which allow
a borrower to sell a financial asset, such as Government
bonds, as security for cash. As part of the agreement
the borrower agrees to repurchase the security at a
later date. For the party selling the security (and
agreeing to repurchase it in the future) it is a repo; for
the party on the other end of the transaction (buying the
security and agreeing to sell in the future), it is a reverse
repurchase agreement or reverse repo.
Residential mortgage backed securities (RMBS)
Asset backed securities that represent interests in
residential mortgages. Investors in these securities
have the right to cash received from future mortgage
payments (interest and principal).
Residential loans
Residential loans are secured against
residential property.
Risk appetite
The articulation of the level of risk that the Group is
willing to take (or not take) in order to safeguard the
interests of the Society’s Members whilst achieving
business objectives.
Risk-weighted assets (RWA)
The value of assets, after adjustment under
Basel II rules, to reflect the degree of risk they
represent. The Society measures RWA using the
standardised approach.
Shares
Funds deposited by a person in a retail savings account
with the Society. Such funds are recorded as liabilities
for the Society.
Shares and borrowings
The total of shares, amounts owed to credit institutions,
amounts owed to other customers and debt securities
in issue, including accrued interest.
Solutions
A subsidiary of the Society that offers business to
business services through people, process and
innovative application of technology. Services include
complete systems for smaller societies and white-
labelled savings management for a range of banks and
building societies.
Solvency ratio
The ratio of total capital to total risk weighted assets.
Subordinated debt / liabilities
A form of Tier 2 capital that is unsecured and ranks
behind the claims of all depositors, creditors, and
investing Members (other than holders of PIBS).
Tier 1 capital
Tier 1 capital is divided into Common Equity Tier 1 and
other Tier 1 capital. Common Equity Tier 1 capital
comprises general reserves from retained profits.
Other regulatory adjustments may be made for the
purposes of capital adequacy. Under the
grandfathering rules of Basel III qualifying capital
instruments such as PIBS can be included in other Tier 1
capital (i.e. not Common Equity Tier 1) transferring to Tier
2 over the grandfathering period.
Tier 2 capital
Comprises the Group’s qualifying subordinated debt
and collective impairment allowance (for exposures
treated on a Basel II standardised basis).
Wholesale funding
The total of deposits from banks, amounts owed to
other customers and debt securities in issue.
Our Locations
Alnwick
28 Bondgate Within
NE66 1TD
(01665) 603 344
Ashington
10 Station Road
NE63 9UJ
(01670) 815 919
Barnard Castle
25 Market Place
DL12 8NE
(01833) 600 100
Berwick
12 Hide Hill
TD15 1AB
(01289) 306 417
Bishop Auckland
15 Newgate Street
DL14 7HG
(01388) 433 001
Carlisle
65 English Street
CA3 8JU
(01228) 524 518
Chester-le-Street
42 Front Street
DH3 3BG
(0191) 388 5266
Consett
19/21 Middle Street
DH8 5QP
(01207) 502 636
Cramlington
34/35 Craster Court
NE23 6UT
(01670) 735 813
Darlington
7/8 Horsemarket
DL1 5PW
(01325) 383 656
Durham
73/75 Saddler Street
DH1 3NP
(0191) 384 3182
Gateshead
12 Ellison Walk,
NE8 1BF
(0191) 477 2547
Gosforth
105/107 High Street
NE3 1HA
(0191) 285 5965
Hartlepool
133/135 York Road
TS26 9DR
(01429) 233 014
Hawes
Hawes Community Office
DL8 3RA
(01969) 600 333
Hexham
1-2 Beaumont Street
NE46 3LZ
(01434) 605 106
Knaresborough
40 Market Place
HG5 8AG
(01423) 648 750
Middlesbrough
38 Linthorpe Road
TS1 1RJ
(01642) 243 617
Morpeth
14 Market Place
NE61 1HG
(01670) 514 702
Newcastle
155 - 159 Grainger St
NE1 5AE
(0191) 261 4940
North Shields
YMCA North Tyneside
Church Way
NE29 0AB
(0191) 259 5286
Penrith
12 Market Square
CA11 7BX
(01768) 862 888
Pickering
16 Market Place
YO18 7AE
(01751) 202 030
Ponteland
23 Broadway
NE20 9PW
(01661) 821 828
South Shields
Unit 3-5 Denmark Centre
NE33 2LR
(0191) 454 0407
Stokesley
36 High Street
TS9 5DQ
(01642) 711 742
Sunderland
14 Waterloo Place
SR1 3HT
(0191) 565 0464
West Denton
15 Denton Park Centre
NE5 2QZ
(0191) 267 5038
Whickham
28 Front Street
NE16 4DT
(0191) 488 1766
Whitley Bay
303 Whitley Road
NE26 2HU
(0191) 252 0642
Wooler
The Cheviot Centre
NE71 6BL
(01668) 260 360
Yarm
41 The High Street
TS15 9BH
(01642) 785 985
King Street
74 King Street
M2 4NJ
(0161) 870 1200
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1 Cobalt Park Way, Wallsend, NE28 9EJ
0191 244 2000
Manchester Building Society is a trading
name of Newcastle Building Society
Manchester .co.uk
Newcastle.co.uk